Over seven years after the Securities and Exchange Commission shut down a massive Ponzi scheme targeting the south Florida Haitian community, victims are finally on the verge of recouping some of their losses through a court-administered claims process. Jonathan Perlman, the court-appointed receiver over two companies operated by convicted schemer George Theodule, has announced that victims may submit a claim to share in assets recovered by the receiver. Perlman estimates that approximately $5 million will be available for distribution to victims, which equates to an expected recovery of approximately 10% of the estimated $41 million in losses suffered by Theodule's victims. Victims are required to submit a proof of claim on or before August 16, 2016.
Theodule owned and operated several companies, including Creative Capital Concept$, LLC ("Creative Capital") and Creative Capital Consortium, LLC ("CCC"). Using these companies, and a variety of other entities and investment clubs he formed, Theodule held himself out as a financial expert to the Haitian community, touting his 17+ years of experience trading stocks and options. Theodule promised astronomical returns, guaranteeing potential investors 100% returns on their investment in just 90 days. As if these exorbitant returns were not enough, Theodule also told potential investors that part of his trading profits were used for a variety of humanitarian purposes, including the funding of start-up businesses in the Haitian community as well as contributing to business projects in Haiti and Sierra Leone. Based on these representations, Theodule is said to have raised more than $30 million from as many as 2,500 investors from July 2007 to December 2008.
However, authorities alleged that Theodule's claims of trading success were completely false, and that in reality, Theodule was operating a massive Ponzi scheme. Theodule's trading records showed trading losses of at least $18 million, and the remainder of investor funds were diverted to support Theodule's lavish lifestyle that included exotic car collections, motorcycles, rings, and even trips to Vegas. The scheme collapsed when the Securities and Exchange Commission filed an emergency enforcement action in December 2008. Perlman's subsequent investigation revealed that Theodule had spent nearly 100% of the money he took in, meaning little remained for victims.
Perlman filed a series of lawsuits against entities he accused of being complicit or ignorant of Theodule's scheme, including Wells Fargo, Bank of America, TD Ameritrade, and OptionsXpress. While Bank of America and TD Ameritrade settled for $2.75 million and $1.25 million, respectively, the lawsuit against Wells Fargo took several years. Perlman alleged that Wachovia ignored obvious red flags about Theodule's banking relationship, failed to conduct the requisite due diligence, and even made special accommodations for Theodule's benefit including the delivery of large amounts of cash through the drive-through window. Perlman also alleged that internal bank documents showed the bank's knowledge of suspicious activity, including a decision to freeze one of the accounts that essentially acted as a funnel for investor deposits to Theodule's main account. This freeze was subsequently removed four days later after a Creative Capital employee faxed the bank a business plan.
While the Wells Fargo suit was initially dismissed by the trial court, Perlman was successful in petitioning the Eleventh Circuit Court of Appeals to overturn the dismissal. After a two-week trial in April 2015, the parties reached a $3.175 million settlement on the eve of jury deliberations. The settlement was noteworthy as it marked one of the largest recoveries from banks in Ponzi litigation.
In order for a victim to share in this and potential future distributions, a proof of claim form from the receivership website must be submitted by August 16, 2016. A link to the receivership website is here.