Accused Ponzi Schemer Solicits Victims To Fund Private Defense

A Michigan man accused of operating a $1.5 million Ponzi scheme - which collapsed when he told victims that his account had been "hacked" - has been permitted to retain private counsel in lieu of continuing with his public defender using funds he had solicited in "donations" from friends that included several victims of the alleged scheme for which he faces charges.  Jerry Stauffer, 66, was charged earlier this year by civil and criminal authorities with operating a $1.5 million Ponzi scheme that promised substantial profits from purported foreign currency trading.  In addition to charges from the Commodity Futures Trading Commission alleging violations of the Currency Exchange Act, Stauffer was also indicted on wire fraud and money laundering charges.   Stauffer has maintained his innocence.

The Alleged Scheme

According to authorities, Stauffer operated solicited potential investors beginning in 2009 by promising that he would use his foreign currency ("forex") trading expertise to generate significant returns of up to 10% monthly.  Stauffer told potential investors that he was a highly successful forex trader, that he taught forex trading classes, and that he would conduct his forex trading at commodity broker Interactive Brokers.  Stauffer also showed at least one investor past performance charts which were allegedly characteristic of the returns he promised.  Based on these and other promises, Stauffer raised at least $1.5 million from victims.

However, authorities alleged that Stauffer was not the savvy trader he held himself out to be.  According to the CFTC, Stauffer conducted minimal forex trading and ultimately incurred approximately $50,000 in trading losses.  Despite conducting little trading, Stauffer made Ponzi payments to victims of approximately $1.2 million representing both returns of principal and the returns he had promised.  However, in August 2013, Stauffer contacted his investors and claimed that his Interactive Brokers account had been hacked and that he had incurred significant losses as a result.  In support, Stauffer provided a July 2013 account statement showing nearly $700,000 in purported losses.  Stauffer told investors that he had contacted Interactive Brokers and been informed that the attack had occurred through his computer.  Investors were also told that Stauffer hired a company called Cyber Investigation Services to look into the attack.  According to the CFTC, this was all false.

Switching Counsel

In September, Stauffer sought court approval to hire private defense counsel in the place of his then-current public defender.  While Stauffer was subject to an asset freeze order, he disclosed that he planned to fund his requested private counsel with more than $20,000 he had raised in donations through an email campaign to his "friends."  However, further inquiry by the court revealed that at least four of those donors were, in fact, victims of Stauffer's alleged fraud who declared they were "firmly aligned" with Stauffer.  Indeed, the government - which ultimately did not take any position with regard to Stauffer's request - revealed that these victims had actively resisted speaking with the government and had gone so far as to conceal their location to prevent the government from contacting them.  

The court noted that a number of risks were presented in the unusual scenario where Stauffer's donors were also likely to be called as a witness, including the potential that Stauffer's counsel might "want to avoid questions suggesting that the donor witnesses themselves engaged in reckless or even potentially criminal wrongdoing."  However, the court reasoned, these were risks that could - and would - be waived by Stauffer after full disclosure.  Ultimately, in an order entered last week, the court sided with Stauffer and ruled that:

The Court is satisfied that there is good cause for the substitution; that the risk of conflict--though real--is not disqualifying; and that the risk of other distortion of the trial process can be managed through full disclosure of funding solicitations and sources, which defendant has agreed to provide. The defendant has been fully apprised of his rights and the risks, and has unequivocally recited his desire to proceed with prospective retained counsel, and his willingness to provide full disclosure to the government of his solicitations for funds, and the source of all funds provided for his defense.

A copy of the Order is below.

Motion Substitition

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.