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Articles Posted in Ponzi Schemes

The SEC charged Allen with fraud for allegedly operating a $31 million Ponzi Scheme.  Allen, with his accomplice Susan Daub, formed a company that made high-interest, short-term loans to athletes.  The loans were funded by money from investors, but Allen used the capital for various expenses. More than 40 people invested money in Allen’s Ponzi scheme dating back to 2012,

Prosecutors say former cornerback Will Allen and partner Susan Daub pleaded guilty to federal fraud, conspiracy and money laundering charges in federal court in Boston. Prosecutors say they took in more than $35 million and repaid less than $22 million.

The indictment details that Allen received $4.1 million of the proceeds and that Daub, who was accused of committing 20 felonies, received $239,000.  Allen’s indictment includes 12 counts of wire fraud, six counts of aggravated identity theft, one count of conspiracy to commit wire fraud and four counts of illegal monetary transactions. If convicted, Allen faces up to 20 years on each wire fraud charge and shorter sentences for the remaining felonies.

This month a FINRA Arbitration panel awarded investors Jeffrey and Marisel Lieberman 100% of the losses they claimed as a result of their investments with a hedge fund which acted as a “feeder fund” for Bernard Madoff’s ponzi scheme.

The Liebermans were customers of broker-dealer Morgan Keegan & Company, Inc. in May 2007 when Morgan Keegan recommended they invest 100% of their account ($200,000) in a hedge fund, Greenwich Sentry, L.P. (“Greenwich”). Greenwich was a feeder fund for Madoff’s fraudulent investment scheme. A feeder fund is an investment advisory firm that incentivizes brokerage firms to solicit customers to invest with them. The feeder funds in turn invests the customers’ money with another fund (in this case, Madoff). Madoff paid the feeder fund fees and commissions. In turn, the feeder fund used those fees and commissions to pay the broker-dealer for the referral.

In this case, the arbitration panel found Morgan Keegan liable for failing to conduct “substantial due diligence” as required by Morgan Keegan’s own internal procedures. In other words, the panel felt that Morgan Keegan had a duty to do their homework before selling its customers this investment and failed in its duty. The arbitration panel also noted in their ruling that not only do Morgan Keegan’s internal procedures require them to perform this due diligence, but this obligation extends to ALL brokerage firms that recommend these types of investments to their customers.
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Bernie Madoff’s $50 billion Ponzi scheme uncovered in 2008 apparently was just the tip of the iceberg. Other significant examples of investor fraud have surfaced since then including Carr Miller Capital LLC and Diversified Lending Group, Inc. scams that fleeced investors out of hundreds of millions of dollars. While federal and state regulators have filed complaints against both of these firms and their principals, it is doubtful that enough funds will be recovered by the regulators to help aggrieved investors recover much, if anything, as a result of these actions.

Carr Miller Capital LLC

The New Jersey Office of the Attorney General and the Bureau of Securities filed a lawsuit against Carr Miller Capital LLC and its three principals. The allegation is use of a Ponzi scheme and other means to defraud investors of over $40 million. The lawsuit filed in State Superior Court in Newark alleges that the defendants violated numerous state Uniform Securities Laws by committing fraud, commingling funds and selling unregistered securities.

According to the lawsuit, in or about 2007, Carr Miller Capital LLC and/or Capital Markets Advisory LLC through the defendants sold and continued to sell securities in the form of promissory notes. The document states that the Carr Miller notes had a term of nine months and promised returns of between 10 percent and 15 percent per year and return of the principal investment at the end of the nine-month period. Between 2007-2009 Carr Miller Capital LLC and related companies received $40 million in deposits. About $36 million of those deposits was from individuals and IRA’s. The investigation revealed that $16 million of the total was transferred into businesses purportedly operated by related companies including hedge funds, real estate, film production companies and an oil and gas venture.
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A federal judge recently ordered convicted Ponzi scheme architect Scott Rothstein to repay $363 million of restitution payments to his victims. Unfortunately, Federal prosecutors have cast doubt on the investors recovering much more than pennies on the dollar of the money Rothstein stole in a scheme involving the sale of rights to bogus legal settlements – the largest Ponzi scheme ever perpetrated in South Florida.

Recent news stories indicate that prosecutors believe there may be an estimated $25 million available to resolve claims made by Rothstein’s victims. This figure pales in comparison to the total amounts invested with Rothstein directly, or through the Banyon affiliated entities.

While the Receiver is expected to recover some additional money, given the complexity of the matter, the expected operating expenses of the receiver and additional professional fees will further deplete the estate and leave little at the end for Rothstein’s victims.
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Wedbush Morgan broker Bambi Holzer, whose employment background is filled with customer complaints for the sale of variable annuities, is now facing new complaints for the sale of Provident Shale Royalties private placement investments. Provident has been accused of being a Ponzi scheme by the Securities and Exchange Commission.

Both private placements and variable annuities products are high commission products, which raises concern whether brokers are recommending these products in the best interests of their clients, or whether the brokers are putting ahead their own financial interests. Provident private placements paid commissions of approximately 6% to 10%, which significantly exceeds commissions earned on more traditional investment products.

Ms. Holzer is currently a registered representative of Wedbush Morgan Securities, Inc. and Sequoia Securities Corp. According to her website, she has appeared on several network television shows such as the Today Show, NBC, CNN, CNBC, Bloomberg and has authored numerous retirement planning and investment books. However, it is not mentioned on Ms. Holzer’s website that her employment record reflects 42 settled customer disputes, violations of firm policy at other brokerage firms and regulatory suspension and fines based on her misconduct (according to FINRA BrokerCheck).
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Today the Financial Industry Regulatory Authority (FINRA) announced that it has expelled Provident Asset Management, LLC, the affiliate broker-dealer of Provident Shale Royalties that marketed the fraudulent Ponzi scheme private placement investments.

FINRA proclaims it is actively investigating other broker-dealers involved in the sale of Provident and other private placement interests. FINRA is looking at firms’ compliance with suitability, supervision and advertising rules, as well as potential instances of fraud.

“While the private placement market is an important source of capital for many companies, the market is also one in which investors have been subject to unsuitable or abusive sales tactics,” stated Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement.
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Blum Law Group is currently investigating former financial advisor Michael Joseph DiMare. According to sources, DiMare solicited his clients to invest approximately $2,000,000 in Ponzi schemes and other faux investment opportunities. DiMare started the scheme in 2001, offering investors bogus tax-free corporate bonds that did not exist.
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