In what astonishingly is not the first or second time this blog has covered bovine fraud, a Colorado man has been sued by the Securities and Exchange Commission for operating a “massive cattle-flipping” Ponzi scheme that took in tens of millions of dollars from investors and was used to, among other things, fund a marijuana business. Mark Ray, along with several business he operated, was charged with violating federal securities laws in a complaint filed in a Denver federal court. Two other individuals, Reva Stanchniw and Ron Throgmartin, were also named and accused of aiding and abetting Ray’s fraud. The Commission is seeking injunctive relief, disgorgement of ill-gotten gains, and imposition of civim monetary penalties.
Ray, a 59-year old Denver resident, operated multiple companies including Custom Consulting and Product Services, LLC, RM Farm and Livestock, LLC, MR Cattle Production Services, LLC, Sunshine Enterprises, Universal Herbs, LLC, and DBC Limited, LLC (the “Ponzi Businesses”). Beginning in 2014, Ray began soliciting potential investors for his various cattle-trading and state-licensed marijuana business, promising sky-high returns of 10% - 20% in the span of just a few weeks. Potential investors in the cattel-trading venture were told that Ray would purchase specific commercial cattle from a particular ranch, with Ray often telling investors which feed lot their cattle would be sent to for fattening. Other investors were told that their returns would come from Ray’s profitable state-licensed marijuana business, Universal Herbs, while yet other investors simply invested via promissory notes carrying high promised rates of return. At the height of Ray’s scheme, alleged the SEC, more than $140 million per month moved through the Ponzi Businesses’ various accounts.
The SEC alleged that Ray’s scheme was “substantially assisted” by Stachniw and Throgmartin. For example, Stachniw used her ownership of RM Farm and Sunshine Enterprises to allow Ray free reign over the companies’ bank accounts. Stachniw would then sign stacks of blank checks to be used by Ray and his employees and also made wire transfers at Ray’s direction. As owner of RM Farm, Stachniw also signed promissory notes in favor of investors and was “reckless” at best in allegedly not knowing that significant portions of funds deposited into RM Farm’s bank accounts came from Ray’s investors. Similarly, Throgmartin assisted Ray by tracking investor contributions and communicating with investors about the status of their investments. Throgmartin also was the primary craftsman of the various documents used by Ray to perpetrate his scheme, preparing invoices and promissory notes that were sent to memorialize investor contributions. This even included Thromartin communicating with a bank president concerned with the flow of funds in the RM Farm bank account that ultimately resulted in Throgmartin purportedly sending a false cattle inventory to the bank president.
As the SEC alleges, Ray was running a massive Ponzi scheme that used new investor funds to pay fictitious retunrs to existing investors and also misappropriated investor funds for his own personal use. According to the Complaint, “tens of millions of dollars’ worth of investor money is missing and unaccounted for” which is further complicated by Ray’s apparently lack of records of the various cattle transactions he claimed to make and his failure tomaintain adequate records to trace the flow of investor funds. Ray also allegedly “extensively commingled” the assets of the Ponzi Businesses with Universal Herbs, which operates two licensed retail marijuana locations in Denver as well as a separate marijuana production facility.
Amazingly, this is at least the third time that Ponzitracker has covered allegations of cattle being used in a Ponzi scheme. For example, a June 2011 story recounted the guilty plea from a Missouri man who copped to defrauding investors out of at least $8 million in a cattel purchasing business that falsely claimed ownership of over 6,000 cattle. Another story two years later covered the arrests of several Japanese citizens in a $4.2 billion bankruptcy involving promises of steady returns from a "wagyu beef ownership system."
The SEC’s Complaint is below: