Criminal Charges Filed Against Co-Founder Of "Triple Algorithm" Ponzi Scheme

North Carolina prosecutors have filed criminal charges against a Michigan man accused of masterminding a massive Ponzi scheme that duped over 10,000 victims out of at least $7 million by telling them he could deliver outlandish returns exceeding 700%.  Troy Barnes, 53, was charged with one count of wire fraud conspiracy and three counts of wire fraud in an indictment unsealed today.  The charges come after Barnes' accused co-conspirator in the scheme, Kristine Louis Johnson, was indicted earlier this summer and is currently awaiting sentencing after pleading guilty.

Johnson and Barnes operated Work With Troy Barnes Inc. ("WWTB"), which was subsequently rebranded as "The Achieve Community" ("Achieve") in April 2014.  Johnson served as CFO of WWTB and Achieve and was responsible for day-to-day activities.  Achieve solicited investors to purchase "positions" costing $50 each that in turn promised a pay-out of $400 per position in the subsequent three-to-six month period - a return of 700% and an annualized return exceeding 1000%. In a short video on Achieve's website, Johnson touted Achieve as a "lifetime income plan," and explained:

How are we a lifetime income plan? It’s simple. Every $50 position you purchase, you make $400. With two positions, you make $800. With five positions, you make $2,000. Want to go bigger? With twenty positions, you make $8,000. With one hundred positions, you make $40,000. This is limitless.

Barnes made similar claims, narrating a different Achieve video claiming that Achieve “will teach you how to take $50 and turn it into thousands of dollars, and that’s a fact.”  Investors that questioned Achieve's ability to pay such exorbitant returns were assured that Achieve utilized a "triple algorithm" and "matrix" created by Johnson and Barnes.  Johnson attempted to explain the "3-D matrix" as follows:

I thought, what can I do, what can I make, what can I design, that has only what works and none of what doesn’t, and one day, honestly this is what happened, I just saw it. I just saw it in my head. This matrix is 3D, which is why we can’t put it on paper. It’s a triple algorithm. And I can’t for the life of me tell you why I could figure that out in my head. But I could.

Investors were encouraged to re-invest their returns, with Barnes assuring investors that such a strategy would make it "very easy to make six figures."  In total, Achieve took in at least $6.8 million from investors.

However, despite its claims that it was "not a pyramid scheme," both civil and criminal authorities alleged that Achieve was a pure Ponzi and pyramid scheme.  For example, Achieve's sole source of revenue allegedly originated from investor contributions.  Nor were any profits derived from legitimate business activities; rather, Achieve used funds contributed from new investors to make principal and interest payments to existing investors.  Johnson admitted to taking more than $200,000 in investor funds for her own personal use.  

Barnes' indictment marks a final chapter in authorities' investigation of the alleged Ponzi scheme, as some had speculated that Barnes may have avoided criminal prosecution given that he was not indicted along with Johnson back in June 2015.    

The indictment is below.  Special thanks to Don at ASDUpdates.

Indictment (2)

Trial Begins Friday For 20-Year Old Nightclub Owner Accused of $500,000 Ponzi Scheme

Trial begins Friday for a Connecticut teenager accused of operating a Ponzi scheme that duped friends and family - including his parents - out of $500,000.  Ian Bick, now 20, is facing eleven counts of wire fraud, three counts of money laundering, and one count of making a false statement to law enforcement.  Bick has been free on bond since his arrest earlier this year - with one of the conditions of his release prohibiting his use of social media.  Bick could potentially face decades of prison time if convicted and sentenced to the maximum term for the charges, as wire fraud carries a maximum prison term of twenty years per count while money laundering and making false statements to law enforcement carry maximum sentences of 10 years and 5 years, respectively.  

Bick is the owner of a popular Danbury, Connecticut club known as Tuxedo Junction.  In addition, Bick also owned multiple entities such as This is Where It's At Entertainment, Planet Youth Entertainment, W&B Wholesale and W&B Investments. According to authorities, Bick used these entities to solicit friends, business partners, and even his parents with the promise that their investments would be used for multiple purposes to yield lucrative returns in short time periods.  For example, potential investors were told that their funds would be used to buy electronics and subsequently resell them for a profit, as well as for the organization and promotion of concerts in Connecticut and Rhode Island.  These investments were memorialized through "loan agreements" and "music venture participation agreements."  In total, approximately $500,000 was raised from at least 15 investors.

However, according to authorities, Bick did not use the funds raised from investors to purchase electronics or organize concerts.  Rather, Bick is accused of diverting investor funds for his own personal use, including luxury travel, the purchase of jet skis, and the payments of fictitious interest to investors.  At an interview with U.S. Postal Inspection Service in June 2014, Bick represented to investigators that 70% - 80% of investor funds had been used on "artist deposits."  However, in reality, only a minimal portion of investor funds were allegedly used as promised.

At 19 years of age at the time of his arrest, Bick is likely one of the youngest known defendants accused of a Ponzi scheme.  Donald French, a Florida man, was 25 when he was arrested in 2012 and charged with operating a $10 million Ponzi scheme.  French is currently serving a 10-year prison sentence. 

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