450% Returns in 40 Days? Rhode Island Man Indicted For Running $14 Million Ponzi Scheme

A Rhode Island man who once offered investors 450% returns in 40 days was indicted by a federal grand jury on charges he ran a decade-long Ponzi scheme that raised more than $14 million from investors. Thomas Huling, 55, of West Warwick, Rhode Island, was arrested on twenty-one counts of wire fraud, money laundering, and tax evasion. Each of the wire fraud charges carries a maximum twenty-year prison term, while each money laundering and tax evasion charge carries a ten-year and five-year maximum term, respectively.

According to authorities, Huling - a former mortgage broker - began promoting several purported investment projects to potential investors as early as 2008 including offshore high-yielding bond trading platforms, a car emissions reduction technology, and an online advertising and marketing company. Investors were lured with promises of substantial returns with little to no risk, including the allure of up to 450% returns within 40 days - an annualized return of over 3,000%. As unfortunately seen in an increasing number of fraudulent schemes, authorities also claim that Huling incorporated various religious aspects and themes to both enhance his credibility and build rapport with investors.

Over the course of the ten-year period from 2008 to 2018, Huling allegedly opened more than 50 bank accounts at nine different banks using entity names such as HTH Enterprises LLC; Global Funding Group LLC; Global Investment Company S.A. LLC; 46 Well Realty LLC; Global Technology LLC; World Holding Group LLC; and WebDreams LLC. In total, Huling raised more than $14 million from investors.

But prosecutors allege that Huling’s promises, including massive returns with little to no risk, were the result of a Ponzi scheme rather than legitimate business activity. Huling allegedly failed to pay taxes from 2009 to 2018 while using millions of dollars in misappropriated investor funds to sustain a lavish lifestyle that included a $15,000 2012 Can-Am Spyder motorcycle, a $34,000 2013 Mercedes Benz, and expenditures at the Foxwoods Resort Casino. Proscutors allege that Huling used investor funds to pay returns to existing investors - a classic hallmark of a Ponzi scheme. Of the $14 million he raised from investors, Huling is accused of causing losses of at least $6 million.

Huling pleaded not guilty to the charges and was released on a $50,000 bond. He was also ordered not to have any contact with any investors and to refrain from gambling.

A copy of the indictment is below:

Former CPA Accused Of Running $29 Million "Pure" Ponzi Scheme

A California woman faces civil and criminal charges over allegations that she ran a $29 million Ponzi scheme that promised 8% annual returns by investing in “federally guaranteed” securities. Carol Ann Pedersen, 65, was the subject of charges filed by the Securities and Exchange Commission and the U.S. Attorney’s Office for the Central District of California. Pedersen consented to entry of a final judgment in the Commission’s action and also pleaded guilty to a single wire fraud charge in the criminal case. Pedersen could face up to twenty years in prison on the wire fraud charge, although she will likely receive a lower sentence under non-binding federal sentencing guidelines.

According to the Commission, Pedersen received her CPA license in California in 1977 and provided accounting services to numerous California individuals and families. Beginning in 1991, Pedersen also began soliciting those same clients to offer money management and investment adviser services. Potential clients were told either that their funds were used to purchase specific securities on their behalf or that their funds were being pooled with other investor funds to invest in an extensive stock portfolio. For clients in the former category, Pedersen promised that she would only purchase investments offering at least 8% annual returns. Those in the latter category had their funds invested in the CA Pedersen Client Investment Pool and signed limited partnership agreements granting Pedersen sole authority to invest their funds.

To conceal her alleged wrongdoing, Pedersen generated periodic account statements that were provided to both individual and pooled investors purportedly showing their various investment holdings. From September 2010 to July 2017, Pederson raised over $29 million from 25 investors. The scheme began to fall apart in 2017 when Pedersen was unable to make scheduled distributions to investors. Several investors filed suit against Pedersen and a receiver was subsequently appointed.

With one known exception, the Commission alleges that Pedersen failed to invest any of the funds she received from investors and instead ran a “pure” Ponzi scheme by using investor funds to make distributions to other investors “almost from the moment of inception.” Pedersen is also accused of misappropriating nearly $2 million of investor funds for her own use including car payments, medical costs, and home renovation expenses.

Unfortunately, this is another tale where standard due diligence might have prevented the scheme from continuing until implosion. As the Commission alleges, Pedersen concealed her failure to invest practically any funds in the securities she promised by generating account statements that were sent to investors. Thus, Pedersen would likely have had difficulty accomodating an investors’s request to provide statements from the entity(ies) custodying those assets. Rather than focusing on a promised rate of return, potential investors should focus on verifying the claims made by an investment professional.

A copy of the Commission’s complaint is below:

California Fugitive Faces Criminal Charges For Alleged $300 Million Ponzi Scheme Targeting Veteran Pensions

A California man has been indicted on federal fraud charges for running what authorities allege was a massive Ponzi scheme that purportedly obtained pensioners’ future cash flows by paying up-front premiums and then selling those structured cash flows to potential investors. The U.S. Attorney’s Office for the District of South Carolina announced that Scott Kohn and his company Future Income Payments, LLC (“FIP”) had been indicted on charges of mail fraud conspiracy and wire fraud conspiracy. The charges come as multiple states have already filed lawsuits or instituted cease-and-desist proceedings against FIP, which apparently collapsed after stopping payments to investors in April 2018. If convicted of the charges, Kohn could face up to twenty years in federal prison. However, Kohn must first be found - he is a fugitive and rumored to be in the Philippines.

Kohn is convicted felon who pleaded guilty in 2006 to felony charges of trafficking in counterfeit goods and later served a 15-month term in federal prison. Following his release, Kohn formed Pensions, Annuities, and Settlements (“PAS”) in 2011 which would later be known as FIP. Through various marketing tactics, FIP and Kohn solicited pensioners by offering the ability to receive a lump sum, buyout, or advance through the sale of a portion of their future pension payments. FIP and Kohn attempted to classify the process as a “Purchase and Sale Agreement” even though the transaction was simply the loan of money to the pensioner in exchange for an agreement to pay future sums based on that principal amount. For example, the following “Recitals” from one Virginia man’s “Purchase and Sale Agreement” made multiple references to a “seller,” “purchased asset,” and “purchase price”:


Unbeknownst to many of the pensioners was that the “Purchase and Sale Agreement” also obligated them to pay a significant amount of future pension payments to FIP that often equated to an annual interest rate exceeding 100% over a five-year term. These payments obligations sometimes continued even after death, forcing some pensioners to secure life insurance policies that could cover those obligations if necessary. According to the Consumer Finance Protection Bureau, which sued FIP and Kohn in September 2018, “many military veterans, retirees, and their spouses have contracted with FIP..” Federal law prohibited the assignment of military pension payments.

FIP and Kohn then offered the income streams from those pensioners to third-party investors in the form of 60-month or 120-month cash flow payments providing annual payments from 6% to 12%. FIP used a network of various financial professionals to pitch the “pension loan” program to potential investors through promises of a consistent and predictable income stream that could be purchased using retirement funds as well as assurances that FIP had established short and long-term reserve accounts to mitigate default risks. Those financial professionals were often incentivized through an up-front commission after an investor’s purchase.

According to federal authorities, FIP “diverted new investor funds flowing into the business to fund payments to earlier investors” in a textbook example of a Ponzi scheme. FIP ceased doing business in April 2018 while owing investors approximately $300 million.

Kohn is rumored to be in the Philippines given his apparent familiarity with the country through the use of a Philippines-based corporation used in the scheme.

A copy of the Indictment is below:

FBI Affidavit Claims California Solar Company Is $800 Million Ponzi Scheme

A California company that purported to build and lease mobile solar generators failed to disclose to investors that it was running a "Ponzi-type arrangement" using new investor money to pay old investors, according to an FBI agent's 60-page affidavit.  The allegations come after DC Solar Inc., owned by California residents Jeff and Paulette Carpoff, had its headquarters raided by FBI agents in December 2018 and filed for Chapter 11 bankruptcy protection earlier this month in a Nevada bankruptcy court.  According to the affidavit, which is embedded below, the company is believed to have raised approximately $810 million from at least 12 investors.

According to the FBI agent's affidavit (the "FBI Affidavit"), the Carpoffs operated two closely held businesses collectively as DC Solar beginning no later than December 2009.  DC Solar purported to be in the business of building, assembling, and leasing mobile solar generators ("MSGs"), which essentially consisted of solar panels placed on a wheeled trailer.  The company told interested investors that MSGs were in high demand from cellular companies to provide emergency power to cellular towers or to power light structures at sporting events. 

DC Solar solicited potential investors to purchase MSGs that would then purportedly be leased out by DC Solar to third parties.  The company touted the favorable tax treatment of the investment and the ability to "finance" nearly 75% of the $150,000 purchase price that would then be repaid through lease payments from third parties.  For example, the federal tax code allowed purchasers of alternative energy sources like an MSG to claim significant tax credits of up to 30% of the purchase price as well as other savings.  Investors were told that they would only have to pay $45,000 in cash of the $150,000 purchase price per MSG, with the remainder financed by a DC Solar subsidiary.  The $45,000 purchase price is also the maximum tax credit a purchaser would be able to claim from the purchase - in essence offsetting the entire initial cash outlay.  That investor would then execute a promissory note to pay the remaining 70% of the purchase price to a DC Solar entity with the understanding that the resulting lease revenues would be sufficient to cover payments on the promissory note.  As the FBI Affidavit explained,

The purported lease revenue from third parties was a critical component of the transaction because the investment funds provided no money other than that initially contributed by the investors that covered only approximately 30% of the transaction. Without some mechanism for payment of the remaining approximately 70% of the sales transaction, the transaction would facially be a sham. As such, the existence of lease revenue from third parties to Company D was required in order for the investors to obtain their tax benefits and to entice investors to make the initial investment of $45,000 per MSG.

At least 12 investors were identified that provided nearly $700 million to DC Solar through the creation of nearly three-dozen investment vehicles.  DC Solar also obtained nearly $100 million in investments from two financial institutions under similar circumstances.

Integral to DC Solar's claims to investors was its ability to generate sufficient MSG lease revenues to cover investors' promissory note payments.  Potential investors were told that DC Solar generated tens of millions of dollars in lease revenues from third parties leases comprised of both long-term and short-term lease arrangements.  

According to the FBI Affidavit, these claims were false.  As the Affidavit explains,

In truth, the evidence developed in the investigation to date demonstrates that over 90% of the money that Company D has claimed as lease revenue, and which it has used to pay the investment funds, was actually the result of transfers from Company S. The money from Company S is investor money as Company S has very little other significant sources of revenue or income other than through the investment funds. The evidence developed so far demonstrates that Company S is the primary source of income for Company D and merely pays obligations due to investors with money raised from that investor and later investors.

Based on my training and experience, I recognize the flow of investor money from Company S to Company D and then from Company D to the investment funds has permitted and continues to permit Individual 1 and others to conceal the absence of third party leases and to create the appearance that the MSGs are generating lease revenue when they are not. In my training and experience, the use of investor money to lull investors into believing the transaction is legitimate and profit making is evidence of a Ponzi-type investment fraud scheme.

In short, the Affidavit claims that more than 90% of the purported lease revenues were simply the result of circular transactions comprised of other investor funds.  The Affidavit also claimed that, in contrast to DC Solar's representations that more than 12,000 MSGs were in use as of March 2018, only 3,000 to 5,000 MSGs were actually in use.  Instead, the Affidavit alleges, the "vast majority of the MSGs that the Company has manufactured and sold to the investment funds are stored in lots throughout California..."

The Affidavit alleges that investor funds were diverted to, among other things, purchase over 20 real estate parcels and 90 vehicles, fund approximately $19 million in private jet travel, and apparently fund an independent baseball team.  That team, the Martinez Clippers, recently indicated to the league commissioner that the Carpoffs "weren’t going to be in a position to operate the team."

Ponzitracker is not aware of any response to date by the Carpoffs or DC Solar.  

The FBI Affidavit is below:


FBI Pleadings DC Solar