CFTC Alleges Florida Forex Venture Offering 12% Guaranteed Returns Was $75 Million Ponzi Scheme

The Commodity Futures Trading Commission recently unsealed an action in Florida federal court accusing five men of operating a Ponzi scheme that raised at least $75 million from at least 650 investors nationwide.  The action, filed in the Middle District of Florida, charges Michael DaCorta, Joseph S. Anile, II, Raymond P. Montie III, Francisco “Frank” Duran, John Haas, and various entities with violations of the Commodity Exchange Act and seeks various relief including a permanent injunction, disgorgement of ill-gotten gains, restitution, and imposition of civil monetary penalties.  A temporary receiver was also appointed at the Commission’s request to marshal assets for the benefit of defrauded victims.

The Complaint alleges that the Defendants operated several entities, Oasis International Group Ltd., Oasis Management LLC, and Satellite Holdings Company, collectively as “Oasis” and  began soliciting victims in mid-2014 to invest in two commodity pools - Oasis Global FX, Limited (“Oasis Pool 1”) and Oasis Global FX, SA (“Oasis Pool 2” (collectively, the “Oasis Pools”) with promises of minimum 12% annual returns derived from trading forex.  Potential “lenders,” as investors were called in an apparent effort to avoid implicating federal securities laws, were told that the Oasis Pools had never had a losing month (indeed, one Defendant allegedly claimed the operation had never had a down day), that there was no risk of loss, and that the only way forex trading could be a bad investment was “if all the banks in the world closed.”  Oasis also allegedly offered a referral program designed to incentivize the recruitment of new investors.

Potential investors were told that DaCorta was the “brains of the operation” who was able to obtain consistent returns by trading forex, with the Oasis Pools purportedly returning 22% in 2017 and 21% in 2018.  Investors were also told that the guaranteed annual return of 12% was a minimum return, as investors would also be entitled to share the daily profits their funds purportedly generated from trading.  Oasis also allegedly made numerous representations concerning the safety of investor funds, including Defendant Duran’s purported statements that Oasis owned at least $15 million in real estate and precious metals that served as collateral for its investments and that “the Oasis Pools’ trading platform could not lose money unless there was a bigger problem in the financial markets and people were going to supermarkets with shotguns.”  Investors were received regular account statements showing the purported growth of their account.  Oasis ultimately raised roughly $75 million from at least 650 investors nationwide (despite claiming on its website that it was not open to U.S. investors). 

According to the Commission, however, all of these claims were false and designed to conceal Oasis’s operation of a classic Ponzi scheme by paying fictitious returns using investor funds.  For starters, the Commission alleges that potential investors were not told that DaCorta was effectively permanently banned from the forex trading industry in 2010 after several rules violations during his time as President of a forex trading firm.  While Oasis did engage in some legitimate trading, the Commission alleges that it suffered near total losses of investor funds (and not the consistent above-20% returns in 2017-2018).  For example, Oasis’s actual returns in 2017 and 2018 were -45% and -96%, respectively.  And contrary to Defendants’ representations regarding the safety of investor funds, the Commission alleges that the forex trades in the Oasis accounts had a 100:1 leverage ratio.  

Of the approximately $47 million that was not invested as promised, the Commission claims that Defendants misappropriated those funds to, among other things, make $28 million in Ponzi payments, purchase nearly $8 million of real estate, live a luxurious lifestyle, and make transfers to related third parties.  

A copy of the complaint is below:

Attorney and Daughter Charged With $23 Million Ponzi Scheme

"Ninety-nine percent of cases we see are caused by unregistered investments or investment advisors.  The best thing investors can do is check with our website or call our office to make sure the investment is registered and the person they are dealing with is registered."

- Indiana Secretary of State

An Indiana attorney and his daughter have been arrested and charged with masterminding a $23 million Ponzi scheme that allegedly targeted senior citizens.  Charles Blackwelder, 69, and his daughter, Cara Grumme, 41, were charged by Indiana authorities with twenty felonies, including nine counts of fraudulent sale of securities and four counts of securities fraud on a victim over 60.  Each of the felonies carry at least a four-year minimum sentence.  Blackwelder remains in an Indiana jail where he is being held on a $500,000 bond.  

According to the Indiana Secretary of State, Blackwelder operated CFS LLC ("CFS") in Carmel, Indiana, as an unregistered company that offered investors an opportunity to purchase "real estate investment opportunities" that would allegedly operate as a legal shield of those assets from consideration for qualification for Medicaid.  In total, the company took in over $23 million for over a decade from several hundred Indiana investors - many of them senior citizens.

However, Indiana authorities allege that CFS was nothing more than a Ponzi scheme, using new investor funds to pay returns to existing investors.  While investors were told that they were purchasing undivided interests in properties, authorities allege that in, in reality, the subject real estate was either previously sold or had already entered foreclosure.  In addition, Blackwelder and Grumme were accused of using several of the properties for their own use.

The Indiana Secretary of State Securities Division filed an enforcement action last year against Blackwelder, his son Chad, and Grumme related to their ownership of CFS Inc.  While A receiver was appointed, with over $23 million in claims filed by investors and debtors.  According to the receiver, CFS Inc. may have oversold interests in its properties by as much as 48%.  

SEC: Secretive 'Trust' With World War II Ties That Promised 38% Annual Returns Was $15 Million Ponzi Scheme

The Securities and Exchange Commission ("SEC") instituted a civil enforcement action against a Florida man and a California woman, alleging that the investment opportunity promising 38% annual returns and requiring strict secrecy was, in reality, a Ponzi scheme that raised more than $15 million from unsuspecting investors.  Billy W. McClintock, 70, and Diane Alexander, also 70, were charged with multiple violations of federal securities laws in connection with the alleged scheme, which promised lucrative gains through a highly-secretive entity known as the "Trust".  The SEC is seeking injunctive relief, an asset freeze, disgorgement of all ill-gotten gains, and civil monetary penalties.

According to the SEC, McClintock was a resident of Bradenton, Florida, and had previously served time in prison due to a cocaine trafficking conviction.  McClintock and Alexander apparently shared a long-time friendship, and sometime before 2002, McClintock confided to Alexander that he was associated with a secretive investment club known as the "Trust".  Apparently, while on a trip to London, McClintock had happened upon a man named "John" who was a member of the Trust and disclosed to McClintock that he could lend money to the Trust and receive a 38% annual return.  The "Trust" was allegedly formed after World War II by several wealthy European families, with offices in Luxembourg and Zurich, and had the power to create money "through fractional banking and the sale of banking debentures"

The "Trust" was shrouded by heavy secrecy, with McClintock being told that the communication of any details about the trust to any third person, such as an attorney, certified financial accountant, or financial planner, would result in that person's permanent ban from participating in the Trust.  After hearing McClintock's story, Alexander accepted McClintock's offer to serve as United States Regional Director for the Trust, in addition to three other unnamed Regional Directors.  Along with McClintock - the 'United States National Director' - the two relayed the same story to potential investors, along with the promise of steady annual returns of 38%.  The two also appealed to investors' religious beliefs, telling them to "put your money in the Trust and your trust in God.” In total, approximately 220 investors contributed over $15 million to the "Trust".

However, contrary to their representations, there is no evidence that any secretive Trust ever existed, and neither Alexander nor McClintock ever sent any investor funds to any Trust.  Rather, according to the SEC, investor funds were simply pooled together in classic Ponzi scheme fashion, and the regular interest payments made to investors were in fact comprised of these commingled funds.  Additionally, investors were not told that, in return for referring investors to the "Trust", Alexander received a 'management' fee of 5%, which she also received for every investor that 'rolled over' their principal investment upon expiration. As the SEC stated, 

the Trust is a Ponzi scheme in which new investor funds, not Trust profits, pay the purported fees  and interest owed to earlier investors. 

Ironically, Alexander sought to convince investors to disregard the old agage that  'If it sounds too good to be true, it probably is,' claiming that it was simply 'a lie that came from the pit of hell.' 

A copy of the SEC complaint is here.

Reno Man Indicted For Alleged $2.1 Million Ponzi Scheme That Preyed On Elderly

A Nevada man was arrested Friday for what authorities described as a long-running Ponzi scheme targeting elderly investors that may have bilked victims out of at least $2 million.  Gary Harrison Lane, 59, was charged with twelve counts of mail fraud, as well as five counts of tax evasion, in a federal grand jury indictment unsealed in early August.  Mail fraud carries a maximum potential prison sentence of twenty years per offense, while tax evasion carries a maximum 5-year term. 

According to authorities, Lane was a long-time financial advisor at Bank of America Investment Services, which later merged with Merrill Lynch.  There, beginning in at least May 2002, Lane targeted inexperienced elderly investors with the promise of steady annual returns of six percent through investments in United States treasury bonds with maturities of two years or less.  Based on these representations, Lane convinced twelve elderly investors to entrust him with $2.1 million.  After he received the money, Lane would then send each investor written documentation purportedly confirming the purchase of the promised treasury bond(s). 

However, according to authorities, a treasury bond with a maturity of two years or less never had an annual return of anywhere close to six percent during the relevant time period.  Additionally, there was no record of Lane purchasing the investments through his employer.  Instead, Lane is alleged to have diverted investor funds to his wife, who would then in turn deposit the funds into an E*Trade owned by her.  Lane never purchased any treasury bonds as promised, said authorities; instead, the purported "confirmations" were fictitious and investor funds were used for Lane's personal expenses or to make Ponzi-style payments to existing investors. 

Financial advisors often face strict procedures for ensuring compliance with securities laws and regulations.  These include regular disclosure of any outside business activities or unauthorized sales of securities, as well as prohibitions on targeting inexperienced or susceptible investors.  These duties are serious matters for brokerages and broker-dealers, who can face liability for failure to adequately supervise rogue financial advisors.  Indeed, several lawsuits appear to have already been brought and settled against Lane's former employers accusing them of failures to supervise Lane.  As such settlements are often accompanied by confidentiality agreements, specifics are unavailable.  

Another Day, Another Ponzi: SEC Busts $7 Million Puerto Rican Ponzi Scheme

Continuing its aggressive campaign to root out Ponzi schemes, the Securities and Exchange Commission ("SEC") announced the filing of civil fraud charges against a Puerto Rico man in what is alleged to be one of the largest Ponzi schemes to originate out of the U.S. territory.  Ricardo Bonilla Rojas ("Rojas") and his firm Shadai Yire ("SY") were charged with multiple violations of federal securities laws after taking in at least $7 million from investors primarily located in Puerto Rico.  The SEC is seeking disgorement of ill-gotten proceeds, injunctive relief, and civil monetary penalties.  Simultaneously with the SEC's announcement, the Department of Justice also announced the filing of criminal charges against Rojas.

Beginning no later than August 2005, the SEC alleged that Rojas and SY solicited investors, including Evangelical Christian groups and factory workers, for a "risk-free" investment that promised 15% to 50% annual returns derived from commodities trading.  Rojas told investors that he had a long history of successful returns in trading commodities, and touted SY as an international enterprise in the business of global private investments.  Besides personal solicitations, Rojas also engaged the services of sales agents who solicited potential investors on a commission basis.  From the beginning of the scheme until February 2009, Rojas and SY collected at least $7 million from investors based on these representations. 

In reality, the SEC claimed that Rojas began misappropriating investor funds as early as October 2005 - two months after the scheme started.  Additionally, Rojas alleged failed to invest any of the funds raised from investors, and instead sent out false account statements purporting to show continued growth in investor accounts.  Instead, at least $4 million was returned to investors in the form of fictitious trading profits and principal redemptions.  Additionally, Rojas used hundreds of thousands of dollars of investor funds for his personal use without the consent or knowledge of investors.  

It has been a busy week for the SEC.  In the past seven days, the SEC has (1) filed charges against a Utah man accusing him of operating a $27 million Ponzi scheme, (2) charged 2 Denver men with a $16 million Ponzi scheme, (3) charged a former college football coach with a $80 million Ponzi scheme, and (4) busted a $600 million multi-level marketing scheme called ZeekRewards.  Whether it represents a shift in department priorities remains to be known, but this recent enforcement spree is easily above average for the SEC.  

While the majority of victims are said to be located in Puerto Rico, investors were also located in the mainland U.S., including Florida, North Carolina, and New York.  

A copy of the SEC's complaint is here.