'God's Sports Company' Accused Of $3 Million Ponzi Scheme

A California couple has been arrested and charged with operating a $3 million Ponzi scheme through their company, God's Sports Company ("GSC"), which offered a prototype baseball bat that offered "leading performance and durability."  Steven McKinlay, 58, and his wife, Kristi McKinlay, 56, were charged by California authorities with twelve felonies, including ten counts of using untrue statements in the purchase or sale of a security, one count of grand theft, and one count for the use of a device in a scheme to defraud.  If convicted, the couple faces up to nearly 24 years in prison.  Each is currently being held on $3 million bail.

According to authorities, GSC solicited investors for a prototype baseball bat it described as a "one piece [composite] bat that offers leading performance and durability."  The company's (now unavailable) website, which included a tagline of "made with integrity for players with integrity," touted Steve McKinlay's "consistent power hitting" and his reputation in the "competitive softball world" and also referenced Kristi McKinlay's financial background.  Authorities allege that the couple ultimately raised more than $3 million from investors which included a former Major League Baseball player and a cancer patient.

However, authorities allege that potential investors were not advised of Steve McKinlay's prior bankruptcy filings nor that their funds would be used to make Ponzi-like payments to existing investors.  Additionally, the pair is accused of misappropriating investor funds to donate at least $50,000 to their church as well as support a lavish lifestyle that included monthly $10,000 rental payments, payment of their daughter's wedding expenses, and even a luxury suite at the Los Angeles Angels stadium.  

Feds: Company Touting 5% Weekly Returns Was Multi-Million Dollar Ponzi Scheme

A convicted forger was hit with civil fraud charges by the Securities and Exchange Commission on allegations that his multi-level marketing program and commodities trading outfit was nothing more than a $3 million Ponzi scheme.  Vu H. Lee and his company, TeamVinh.com, were accused of violating federal securities laws by soliciting nearly 6,000 investors with the promise of guaranteed 5% weekly returns.  The Commission is seeking disgorgement of ill-gotten gains, prejudgment interest, injunctive relief, and imposition of civil monetary penalties. 

According to the complaint, Le formed TeamVinh.com LLC in 2009.  Le appealed to the multi-level marketing community in claiming to have devised a solution to facilitate the creation of a "downline" for individuals through the creation of a "matrix" composed of other individuals signed up for TeamVinh.com.  Participants were also offered the chance to invest in TeamVinh through either a membership or equity investment, with returns based on TeamVinh's profits.  Le also later solicited investors for a "hidden" platform used by large companies to effectuate commodities transactions.  In total, Le raised more than $3 million from at least 5,600 investors.

Many investors were solicited through various publicly available websites maintained by Vinh, including TeamVinh.com which is still operational as of the date of this article.  The website contained various promises, including that:

My experience as a Business Advisor shows that the greatest opportunities emerge when economic times are at its worst.

TeamVinh has a light at the end of the tunnel. We can provide you with a powerful business solution to help you and your family be much more secured for the future.

Your Dreams will be supported by a Fortune 500-Caliber-Company and Civic Concept.

Earn Money. Earn a lot of Money. And then give a lot of it away.

Ironically, it was the final sentence of this last promise that authorities allege Le actually did keep, albeit likely not the way most investors would have expected.  The Commission alleges that Le used very little of the $3 million raised from investors on MLM-related activities.  Instead, Le is alleged to have gambled away more than $2 million of investor funds at a single Las Vegas casino.  In classic Ponzi scheme fashion, Le is also accused of using investor funds to make Ponzi-style payments to existing investors. 

Le is also accused of failing to disclose to potential investors that he had been previously convicted on charges of forgery and passing bad checks by the state of Wisconsin in 1995 and later served a two-year prison sentence.  Additionally, the states of Wisconsin and Minnesota barred Le from offering or selling securities in 2007 stemming from Le's apparent involvement in an unrelated real estate fraud. 

A copy of the Commission's complaint is below:

Comp 23432

Former Lawmaker's Son-in-Law Gets Two Years For $6 Million Ponzi Scheme

The son-in-law of former New York politician Sheldon Silver will serve two years in federal prison for orchestrating a Ponzi scheme that duped several investors out of $6 million.  Marcello Trebitsch, 37, received the sentence after he pled guilty earlier this year to a single count of securities fraud.  In handing down the sentence, U.S. District Judge Vernon S. Broderick indicated that he departed from his original intent to sentence Trebitsch to a four-year term based on letters from friends and relatives extolling his contributions to society.  Trebitsch's sentence comes nearly one month after his father-in-law was convicted on federal corruption charges.

According to authorities, Trebitsch began soliciting investors in or around 2009 for Allese Capital, LLC ("Allese"), which Trebitsch touted as a successful investment fund that he operated with his wife.  Trebitsch, whose wife Michelle is a certified public accountant and is the daughter of Sheldon Silver, told potential investors that Allese employed a successful trading strategy through the day-trading of large cap stocks that resulted in annual returns ranging from 14% to 16%.  Trebitsch assured investors that little to none of their funds would remain invested in the market overnight, and also claimed that he cleared his trades through a major Wall Street investment bank that also had agreed to invest $50 million in Allese.  In total, Trebitsch raised at least $7 million - a majority of which was raised from a single victim.

After Trebitsch's largest investor requested a partial redemption of his investment in June 2014, Trebitsch ultimately disclosed through his attorney that he had experienced significant trading losses and that, after accounting for Trebitsch's $400,000 "fee," no money remained.  

The Complaint alleged that a forensic review of Trebitsch's bank accounts demonstrated that only a small portion of investor funds were used to engage in trading, and that Trebitsch suffered net trading losses.  A subsequent search warrant executed at Trebitsch's house apparently turned up a handwritten note that appeared to be authored by Trebitsch and stating that he "reckognize [sic] the tremendous pain along with financial," followed by the crossed-out word, "pain." 

Former Bank VP Gets 2.5 Years For Role In Rothstein Ponzi Scheme

A former TD Bank vice president was sentenced to serve thirty months in federal prison for his role in Scott Rothstein's $1.2 billion Ponzi scheme.  Frank Spinosa, 54, faced up to five years after previously pleading guilty to a single count of wire fraud conspiracy.  While prosecutors sought a 37-month sentence, U.S. District Judge Beth Bloom cited Spinosa's rough upbringing and the death of his first child as factors warranting a slight downward departure from that recommendation.  With the sentence, Spinosa becomes the 29th person sent to prison for their role in Rothstein's massive fraud.  Rothstein is currently serving a 50-year sentence at an undisclosed location due to his inclusion in the witness protection program.

Spinosa became involved with Rothstein when the former attorney opened over 20 attorney trust accounts and law firm operating accounts in late 2007 at TD Bank and another bank TD Bank later acquired.  Spinosa was Rothstein's point of contact beginning in 2008, and communicated often with Rothstein regarding the accounts and various documents that were provided to investors.  As Spinosa's compensation was tied to the size and volume of accounts he managed, the fact that Rothstein's accounts were among TD Bank's largest accounts in South Florida meant increased compensation and bonuses for Spinosa.  

Spinosa was implicated in the massive scheme by Rothstein himself, who claimed during a 2011 deposition that he had recruited Spinosa to assist in the preparation of false "lock letters" used to show investors that their investments were safe and that Rothstein could not remove funds from the account holdings the funds. According to the Securities and Exchange Commission, which filed civil fraud charges against Spinosa last year, Spinosa also made oral assurances to at least two investors that certain trust accounts at TD Bank holding investor funds contained hundreds of millions of dollars when in reality the "locked" accounts typically held less than $100.  In one instance during August 2009, months before the scheme eventually collapsed, Spinosa participated in a conference call with Rothstein and an investor in which he told the investor that an account had a balance of $22 million when, in reality, the account had a balance of less than $100.  The investor subsequently made four more investments with Rothstein in the ensuing months.

Spinosa was ordered to report to federal prison no later than February 18, 2016.   

Other Ponzitracker coverage of the Rothstein scandal is here.

Cay Clubs Founder Convicted After Retrial

Less than four months after a Florida jury deadlocked on charges that a Florida man operated a $300 million Ponzi scheme, a second jury returned a guilty verdict on three counts of bank fraud, three counts of making false statements to a financial institution, and obstruction of an official investigation.  Fred Davis Clark, aka Dave Clark, was convicted for his role as CEO of Cay Clubs, which authorities have alleged was a massive $300 million Ponzi scheme disguised as a timeshare leasing venture that defrauded hundreds of investors.  An August 2015 trial resulted in a mistrial for Clark - and a acquittal of Clark's wife, Cristal Clark, of all charges. Authorities quickly announced their intention to retry Clark and handed down a superseding indictment outlining a slightly different theory.  Clark could face dozens of years in prison when sentenced February 25, 2016.

The Scheme

Cay Clubs operated from 2004 to 2008, marketing the offering and sale of interests in luxury resorts to be developed nationwide.  Fred Clark served as Cay Clubs' chief executive officer, while Cristal Clark was a managing member and served as the company's registered agent.  Through the purported purchase of dilapidated luxury resorts and the subsequent conversion into luxury resorts, Cay Clubs promised investors a steady income stream that included an upfront "leaseback" payment of 15% To 20%.  In total, the company was able to raise over $300 million from approximately 1,400 investors.

However, by 2006 the company was alleged to have lacked sufficient funds to carry through on the promises made to investors.  Instead of using funds to develop and refurbish the resorts, Cay Clubs allegedly used incoming investor funds to pay "leaseback" payments to existing investors in what authorities alleged was a classic example of a Ponzi scheme.  After an investigation that spanned several years, the Securities and Exchange Commission initiated a civil enforcement action in January 2013 against Cay Clubs and five of its executives, alleging that the company was nothing more than a giant Ponzi scheme.  However, the litigation came to an abrupt end in May 2014 when a Miami federal judge agreed with the accused defendants that the Commission had waited too long to bring charges and dismissed the case on statute of limitations grounds.  

Original Trial

Just weeks after the dismissal of the Commission's action, authorities unveiled criminal charges against Fred and Cristal Clark and coordinated their arrest and extradition from Honduras and Panama where they had previously been living.  The charges stemmed from the Clarks' operation of an unrelated scheme to siphon money from their operation of a series of pawn shops throughout the Caribbean. Authorities alleged that the pair used a series of bank accounts and shell companies previously used with Cay Clubs to steal funds from the pawn shops to sustain their lavish lifestyles abroad.  Several months later, authorities filed bank fraud charges related to the Clarks' interaction with lenders as part of their operation of Cay Clubs - a strategy seemingly designed to ensure the charges would withstand any statute of limitation challenges given that bank fraud carries a 10-year statute of limitations.  

A forensic analysis conducted by the government alleges that Cay Clubs evolved into a Ponzi scheme as early as April 2005, with $2 out of every $3 paid to investors allegedly coming from existing investors.  The forensic analysis also showed that the Clarks lived lavishly, including nearly $20 million in boat purchases and expenses, $5 million in aircraft expenses, and $3 million in personal credit card bills.  Fred Clark also allegedly spent over $3 million at a Bradenton golf and country club.

After a five-week trial earlier this summer, a federal jury deliberated for four days before acquitting Cristal Clark of all charges and deadlocking on the charges against Dave Clark. 

Superseding Indictment

Shortly after the mistrial, authorities handed down a superseding indictment that signaled a slight change in strategy.  While the previous indictment focused on the Clarks' alleged operation of a Ponzi scheme through Cay Clubs, the superseding indictment honed in on the insider transactions that were used to artificially inflate the unit prices and allegedly defraud the lending institutions.  The new indictment alleged that Clark would identify certain family members to act as "straw borrowers for loans that were used to purchase Cay Clubs units." These straw borrowers would prepare fraudulent loan applications, which included representations about the borrower's employment and income, designed to induce lenders to approve the extension of credit.  Clark and others also allegedly prepared fraudulent HUD-1 Statements in which they certified that the borrowers had made the required down payment and cash-to-close payments when, in reality, those payments were made by a Cay Clubs entity controlled by Dave Clark.  

The retrial began November 9th and lasted four weeks.  

The arrest likely marks the end of a circuitous civil and criminal prosecution of Cay Clubs and its former associates, as former Cay Clubs sales agents Ricky Lynn Stokes and Barry Graham were previously sentenced to a five-year term after entering into plea agreements with prosecutors.  Former Cay Clubs attorneys Scott Callahan and Charles Phoenix previously entered into immunity agreements in which they admitted to concealing information about Cay Clubs from lenders and agreed to provide assistance and testimony. 

A copy of the Superseding Indictment is below: