Ohio Couple Charged With $70 Million Ponzi Scheme

An Ohio husband and wife face criminal and civil actions on charges that they operated a massive Ponzi and pyramid scheme that is believed to have taken in at least $70 million from nearly 500 victims.  An indictment returned by an Ohio federal grand jury charges William M. Apostelos and his wife Connie M. Apostelos a/k/a Connie Coleman, with dozens of fraud charges.  Each was charged with 1 count of conspiracy to commit mail and wire fraud, eight counts of mail fraud, 13 counts of wire fraud, two counts of money laundering, and one count of theft or embezzlement from employee benefit plan.  In a parallel action, the Securities and Exchange Commission filed a civil enforcement action accusing William Apostelos - but not his wife - of multiple violations of federal securities laws.  The SEC complaint did name Connie Apostelos as a relief defendant and alleged that she had received over $7 million in ill-gotten gains from the scheme.  The charges come almost exactly one year after a FBI agent submitted an affidavit in support of a civil forfeiture action against the couple detailing the alleged Ponzi scheme.  

The allegations first surfaced after several doctors submitted an involuntary bankruptcy petition against William Apostelos.  According to declarations submitted by the doctors, each was solicited to invest with Apostelos as far back as 2011 with the promise of high returns in a short period of time.  While one investor was told that Apostelos could offer such lucrative rates of return through short-term loans and success in daytrading stocks, Apostelos also held himself out as a successful real estate investor and securities investor.  Investors were solicited through several companies operated by Apostelos, including:

• Apostelos Enterprises, Inc.;
• Coleman Capital, Inc.;
• Midwest Green Resources, LLC;
• WMA Enterprises, LLC;
• Silver Bridle Racing, LLC; and 
• OVO Wealth Management, LLC. 

According to the doctors that filed the involuntary bankruptcy petition, Apostelos would execute a promissory note in their favor that memorialized their investment.  These promissory notes carried varying rates of return, with one doctor submitting a declaration indicating that they held five promissory notes totaling nearly $1.5 million with annual rates of return ranging from 7% to 50%.  In total, the three doctors alone stated that they had invested more than $5 million with Apostelos.

Federal Forfeiture Action and FBI Affidavit Make Similar Allegations

Several weeks after the involuntary bankruptcy was filed against William Apostelos, the United States filed an action seeking civil forfeiture of two Ohio properties on the basis that they are traceable to money laundering and wire fraud offenses.  One of the properties is owned by Coleman Capital, while the other is titled in the name of Steven C. Scudder, Trustee of the WMA Trust - a trust believed to be owned by William Apostelos.  

In support of the United States's forfeiture allegations, the affidavit of FBI Special Agent Michael Bush (the "Bush Affidavit") was submitted.  Concluding that the accused individuals and their business operations have been involved in operating a pyramid scheme over the past few years, the Bush Affidavit makes a detailed set of findings.

The Bush Affidavit stated that Apostelos's entities have "reported very little income and more often significant losses" since 2010, and also that Apostelos and his wife have "had no legitimate source of income since 2010." Rather, the "sole source of income has been stolen from the funds investor unknowingly placed into the pyramid scheme."  Apostelos and his wife allegedly diverted investor funds to support a lavish lifestyle that included the purchase of luxury automobiles and spending of as much as $35,000 per month towards a horse racing hobby.  According to Bush's forensic analysis, more than $32 million was deposited into accounts controlled by Apostelos from November 2012 to May 2014, while an estimated $28 million was paid as returns to earlier investors.

The Bush Affidavit also detailed the pitches that were made to various investors.  For example, one investor was told that his $395,000 investment would be used to purchase an Ohio farm that would be quickly resold at a tidy profit.  While the investment came due in late 2013, the victim did not receive his investment back and instead received various excuses including that the bank made errors negotiating the funds.  In another example, a victim was told that his $100,000 investment would be used to invest in stocks through a TD Ameritrade account.  The victim was told that his account had incurred more than $150,000 in gains through timely investments in several stocks, and was provided a TD Ameritrade website where he could track his investment under the name "Mountaineer."  However, the Bush Affidavit indicated that the TD Ameritrade website provided to the victim was not a real trading account, but instead a training account program that did not trade real money.

Scheme Collapses

On October 29, 2014, agents from multiple federal and state agencies executed federal search warrants at multiple locations tied to Apostelos and his entities.  Authorities seized a number of bank accounts, cash, jewelry, and vehicles that included a 2008 BMW M3 Convertible, a 2012 Lincoln Navigator, a 2012 Ford F350 Pickup, and a 2012 Lexus LS 460.  Additionally, officers seized a race horse named Baryshnikov owned by William and Connie Apostelos.  

If convicted of all charges, the Aposteloses could potentially face decades in prison.

The Bush Affidavit is below:

Bush Affidavit by jmaglich1

Florida Woman Gets 9-Year Sentence For $25 Million Ponzi Scheme

A Florida woman whose company promised weekly returns of up to 50% will spend the next nine years in prison after pleading guilty to running an elaborate Ponzi scheme.  Jenifer Hoffman, 51, pleaded guilty earlier this year to charges of conspiracy to commit wire fraud and filing a false tax return.  She is the last of three defendants to be sentenced for their role in Assured Capital Consultants ("ACC"), with co-defendant John Boschert receiving a nine-year sentence and co-defendant Bryan Zuzga receiving a six-year sentence.  Hoffman was also ordered to pay $10.6 million in restitution to defrauded victims.

Hoffman and Boschert operated ACC, telling investors that they could expect fantastic weekly returns of up to 50% through an offshore confidential trading program that purportedly invested in lots of medium-term notes.  Potential investors were told that the notes were safe and guaranteed, and that their funds were protected in an ACC escrow account that was controlled by escrow agent and attorney Zuzga.  Investors were also provided with supporting bank documentation and a verification letter notarized by Zuzga which purportedly demonstrated that ACC had $500 million in an account at a Panamanian bank.  In total, more than 100 investors entrusted at least $25 million on these promises.

However, the investment program described by Hoffman and Buschert was pure fiction.  Zuzga was not an attorney, nor did ACC have $500 million at a Panamanian bank.  Instead, ACC was a classic Ponzi scheme that paid "returns" to old investors through investments by new investors.  The Securities and Exchange Commission filed a civil enforcement action against the trio in September 2013, and criminal charges followed a year later.  Boschert was sentenced to a nine-year term in June, while Zuzga received his six-year sentence in September.  

Victim losses are estimated at approximately $10 million.  Both Hoffman and Buschert have had their homes forfeited and sold towards their restitution obligations, with the sales bringing in nearly $900,000 for victims. 

Stanford's Appeal Denied; 110-Year Sentence Stands

A federal appeals court denied Allen Stanford's appeal of his 110-year sentence, adding a finishing touch to a shocking fall from grace for the billionaire-turned-indigent and confirming that the notorious conman will not be eligible for release until April 17, 2105.  The decision by the U.S. Court of Appeals for the Fifth Circuit comes just over a year after Stanford filed a 299-page brief advancing no less than fifteen grounds for vacating his 2012 convictions on thirteen fraud counts, including that the U.S. lacked jurisdiction to prosecute him and that Stanford was denied a fair trial. The government filed a sharply-worded response urging the denial of Stanford's appeal.  Stanford's last remaining hope is to petition the U.S. Supreme Court for certiorari.  

Stanford masterminded a $7 billion Ponzi scheme that purported to offer above-average returns through the sale of supposedly-safe certificates of deposit ("CD's").  The scheme spanned several decades, and attributed its ability to pay the unusually-high returns to Stanford's unique investment strategy.  However, the operation was nothing more than a massive Ponzi scheme that ranks second only to Bernard Madoff's infamous scheme.  Stanford used investor funds for a variety of unauthorized purposes, including funding a cricket team and making millions of dollars in personal loans.  Stanford was convicted and received a 110-year sentence in June 2012.  He appealed his sentence in October 2014.

The Fifth Circuit addressed and denied ten grounds on appeal.  The Court ruled that (1) the government had jurisdiction to prosecute Stanford; (2) the indictment was sufficient and not defective; (3) Stanford's motion for continuance was properly denied given his mental competency and substantial legal team; (4) the court-appointed receiver's sale and liquidation of assets during the proceedings did not trigger the double jeopardy clause; (5) the district court properly denied Stanford's motion for suppression of materials obtained by the government from the receiver; (6) the court's jury instructions defining the word 'scheme' and 'CDO' were proper; (7) ample record and testimonial evidence supported the sentencing enhancements present in his presentencing report; (8) the district court did not err in finding Stanford competent and that no evidence existed to demonstrate that the district court was partial to the government; (9) no cumulative error existed; and (10) no Brady claims existed.

Previous Ponzitracker coverage of the Stanford scheme is here.

A copy of the Fifth Circuit's opinion is below:

Stanford Appeal Order

After Arrest In Peru, Suspected $65 Million Ponzi Scheme Mastermind Finally Extradited

Fifteen years after he fled the United States as regulators closed in on his suspected massive Ponzi scheme, an Ohio man is due back in federal court later this week as his extradition is completed following his 2013 arrest in Peru. Eric Bartoli, 61, has been wanted by the Federal Bureau of Investigation since 2003 on charges he masterminded a massive Ponzi scheme that took in at least $65 million from victims. Bartoli was arrested by Peruvian police nearly two years ago in Lima, Peru, following a request by U.S. authorities for his extradition and after CNBC featured Bartoli on "American Greed: The Fugitives." Bartoli faces an October 2003 indictment on charges of money laundering, securities fraud, wire fraud, conspiracy and attempted tax evasion. Additional charges are also likely as a result of Bartoli's decision to flee.

Sometime in 1995, Bartoli created the Cyprus Funds, Inc. ("Cyprus Funds") as an open-ended mutual fund that purportedly would invest throughout Latin America and the United States. Cyprus was advertised to potential investors as a safe and conservative investment that would provide a constant stream of steady returns. In total, Bartoli would raise more than $65 million from approximately 800 investors in the United States and Latin America - of which roughly $30 million was returned to investors. Initially, all signs pointed to Cyprus being a great success, with Bartoli making numerous real estate purchases in his hometown Doylsetown, Ohio, including a Victorian mansion, three storefront boutiques, and a huge 12-acre farm house. He even transformed a building into a replica of a 16th century pub - where authorities later found jewelry and gold coins hidden in a passage behind a wall.

However, in 1999, investors stopped receiving their regular dividend checks.  Bartoli fled as regulators closed in, and an indictment and arrest warrant was issued in October 2003.  After moving through several states, he then moved to Italy before finally settling down in Peru - where he had gained citizenship in 2000.  Despite allegations that authorities knew of his whereabouts in Peru, Bartoli made no attempt to conceal his presence, working as an financial adviser, Internet finance commentator, and real estate prospector.  Bartoli is alleged to have maintained blogs under the pseudonym Enrico Orlandini, discussing gold and silver investments as well as Dow Theory analysis.  These efforts also resulted in the loss of hundreds of thousands of dollars by unsuspecting victims.

Authorities estimated that Bartoli's scheme ensnared nearly 1,000 victims who suffered collective losses of at least $30 million.  Those victims have received nearly $10 million in total distributions from Receiver Michael Goldberg.  This recovery could likely increase as a result of Bartoli's capture and anticipated cooperation.

Rothstein "Independent Asset Verifier" Gets 30-Month Sentence

A south Florida investment advisor who once served as a financial advisor to convicted Ponzi schemer Scott Rothstein has been sentenced to a 30-month term for his role in the scheme.  Michael Szafranski, 37, received the sentence from U.S. District Judge Dimitrouleas after previously pleading guilty to a single wire fraud conspiracy charge. Szafranski had originally faced a dozen fraud charges when he was indicted earlier this year, but later decided to cooperate with prosecutors and was expected to testify at the trial of former TD Bank vice president Frank Spinosa.  Spinosa ultimately decided to plead guilty on the eve of trial and faces sentencing later this year.   

Rothstein touted hefty returns from purported investments in confidential pre-suit settlements, using his position as chairman of one of the fastest growing law firms in south Florida to bolster his credibility while simultaneously flaunting his newfound wealth.  Rothstein fled to Morocco in late October 2009 when the scheme was on the verge of collapse - a country lacking an extradition treaty with the U.S. - only to later return to face the music.  His extensive cooperation with authorities ultimately led to his placement in the Witness Protection program, and his subsequent assistance has resulted in over two dozen additional arrests.

Szafranski, who once worked for the now-defunct brokerage Bear, Stearns & Co., Inc., was hired in or around 2008 by several New York hedge funds to act as an "independent asset verifier" to verify the authenticity of the deals Rothstein was peddling.  However, Szafranski soon allegedly switched from his position of impartiality to become close friends with Rothstein and actively began soliciting investors for the scheme.  Rothstein himself testified during 2011 depositions that he paid Szafranski handsomely, including several million dollars in post-dated checks, and extensively wined and dined him.  According to Rothstein,

"There was a point in time when he [Szafranski] had a pretty good idea. There was a point in time when he absolutely knew, and then there was a point in time when he was bringing in investors into something he knew didn't exist."

As an example, Rothstein recounted a time during 2008 when Szafranski questioned him about similarities between signatures in legal documents.  In another instance, Szafranski is said to have accompanied Rothstein and another familiar cohort, Stephen Caputi, to a TD Bank branch where Caputi masqueraded as a bank official.  The indictment alleges that Szafranski ultimately was responsible for bringing more than $200 million of new investments into Rothstein's scheme.  

Szafranski's prosecution was notable because he was the first defendant charged after the expiration of the five-year statute of limitations applicable to many of the offenses previous defendants had faced.  Prosecutors had indicated their intent to rely on 18 U.S.C. 3293, which provides for an extended 10-year statute of limitations for certain offenses, including wire fraud and mail fraud, that "affect a financial institution."  This reasoning was bolstered by broad authority interpreting whether an individual's conduct "affects a financial institution," with a federal appeals court observing in 2003 that the operative test was whether the conduct caused an "increased risk of loss": 

‘‘[j]ust as society punishes someone who recklessly fires a gun, whether or not he hits anyone, protection for financial institutions is much more effective if there’s a cost to putting those institutions at risk, whether or not there is actual harm.’’

United States v. Serpico, 320 F.3d 691, 694-95 (7th Cir. 2003).  

Rothstein's scheme was unique in that a national banking institution, T.D. Bank, played a key role in the scheme.  Rothstein testified that his relationship with TD Bank VP Frank Spinosa was essential to perpetuating and legitimizing the scheme. 

Following completion of his sentence, Szafranski will also be required to serve three years of probation - during which period he will be forbidden from working in the financial industry.

Previous Ponzitracker coverage of the Rothstein scheme is here.