According to U.S Attorney Daniel Bodgen, the men told thousands of overseas investors that their investments were safely managed by a third party escrow agent in Nevada. Nevertheless the men are accused of using investors’ funds to pay for gambling, a private jet, and other personal expenses. The government alleges that this Ponzi scheme preyed on new enrollees’ money that they turned and used to pay early-stage investors and to give other investors incentive to take part.

According to the indictment filed by the U.S. District Court, the scheme was exposed in April 2013 after four years of operation and individually charges Fujinaga with three counts of money laundering. The document also seeks from the defendants the forfeiture of proceeds from the alleged crime. As a result the defendants could also face decades in prison if convicted.

Money placed in a Ponzi scheme is typically difficult to recover directly from the primary wrongdoers, as that money has often been spent. However, Ponzi schemes often involve a number of other players who may have both liability to the victims and the ability to pay damages. Victims should consult with an experienced fraud recovery attorney to discuss their options.

According to the SEC, Elm perpetrated a Ponzi scheme – in effect recycling new investor money to earlier investors, and using investor funds the funds for personal expenses, such as a $1.75 million home, luxury automobiles, and jewelry. In this way, Elm allegedly stole at least $17 million from unsuspecting investors. This kind of misconduct violates the anti-fraud provisions of federal securities laws and SEC rules.

The investors sent their investment funds to Elm by wire transfer or by mailing a check. Elm deposited the funds in various bank account that he controlled. In this way, Elm had custody and control over the investors’ funds, and was able to misappropriate the funds.

Investors should be wary of sending money anywhere other than to an account set up for them at a well-known, trustworthy financial institution. Normal operating procedure is for investment advisors to manage a client’s money held in an account at a reputable firm, which would have actual custody of the funds and safeguards in place to prevent the kind of theft alleged by the SEC.

Issuers of private placement investments often employ unregistered brokers and financial advisers to sell them to individual (or retail) investors. The sellers of private placements typically receive outsized commissions, and thus do very well indeed. On the other hand, many investors who could ill afford it have lost a substantial portion of their life savings by investing in private placements.

The SEC recently published an Investor Alert identifying 10 red flags that an unregistered offering (private placement) may be fraudulent. The red flags include such things as promises of high returns with little or no risk; involvement of unregistered sales people; high-pressure sales tactics; amateurish, sloppy or no documentation; absence of the “usual suspects” involved in “legitimate” private placements (lawyers, accountants, etc.); the old “mail drop as corporate address” trick; cold call solicitations; and phony backgrounds of managers or promoters.

While it is true, as the SEC indicates, that some private placements may be used by legitimate businesses to raise capital, it is also true that private placements may be fraudulent investment schemes. Even if a private placement is legitimate, it is always improper for an investment adviser or broker to recommend that an individual investor invest a substantial percentage of his or her liquid net worth in such investments due to the risk of losing everything you invest.

The laws requiring registration of securities offerings are designed to protect investors, though that protection may be illusory. Generally, unregistered securities can only be sold to so-called “accredited investors.” For an individual to be considered an accredited investor, he or she must either have annual income of over $200,000 for the prior two years (or $300,000 jointly with a spouse), or have a total net worth of over $1 million above the value of the primary residence and any loans secured by it.

Now, it is still true that $1 million is a lot of money, but it is not nearly as much as it used to be back when these “accredited investor” rules were written. The “accredited investor” requirement is supposed to protect investors but, arguably, the income/net worth cut-off is too low. It is based on a false premise that anyone with $200,000 or $300,000 annual income or a net worth of $1 million is wealthy and, therefore, able to bear the loss of his or her entire investment, even if that investment is all or a substantial portion of that person’s net worth.

The bottom line is that private placements (even if they are not outright frauds) are almost always unsuitably risky and illiquid for individual investors. They should not be recommended to most individual investors by brokers or investment advisers, and would not be recommended were it not for the high sales commissions. If such an investment is presented to you, the best response is to “just say no.” If the opportunity was so great, venture capitalist investors would invest and the issuer would not need to be raising money from people like you and me. More appropriate, liquid, and less risky investment alternatives that do not pay the seller high fees or commissions are usually available.

If you are stuck in one of these investments, you may be able to get your money back by undoing the sale (a legal remedy called rescission). We would be glad to discuss your options with you, so feel free to give us a call.

The nation’s largest bank faced two felony charges of violating the Bank Secrecy Act because it did not file a Suspicious Activity Report after witnessing red flags about Madoff and did not have appropriate anti-money laundering compliance procedures in place. The charges come on top of other legal woes at J. P. Morgan, including a $13 billion settlement with the U. S. government in connection with its mortgage practices that led up to the financial crisis.

Madoff reportedly perpetrated his Ponzi scheme through accounts at J. P. Morgan from 1986 up until his arrest in 2008. Almost all of his clients’ funds were deposited at J. P. Morgan, and money flowed into and out of those accounts. In October 2008, one of J. P. Morgan’s analysts wrote a memo indicating that the bank could not verify Madoff’s trading activities or custody of assets. It also questioned Madoff’s “odd choice” of using a small, unknown accounting firm. Also in October 2008, J. P. Morgan filed a report with British regulators that stated in part that Madoff’s purported investment returns were “too good to be true.”

J. P. Morgan will pay approximately $2.24 billion to settle criminal charges plus another $350 million in civil penalties. In return, the U. S. will defer prosecution of the bank for two years as long as the bank complies with certain provisions, including reforming its anti-money laundering policies and cooperating with ongoing investigations. No individual executives at J. P. Morgan Chase were charged with a crime.

In addition to the criminal case settlement, the trustee for the liquidation of Bernard L. Madoff Investment Securities, LLC (“BLMIS”) appointed by the Securities Investor Protection Act (SIPA), Irving H. Picard, announced recovery agreements with J. P. Morgan totaling approximately $543 million for the benefit of BLMIS customers, for which bankruptcy court approval is being sought. The SIPA trustee has recovered approximately $9.783 billion for the BLMIS Customer Fund, or about 56% of the $17.5 billion that was lost in the Madoff ponzi scheme, according to a press release from the office of Mr. Picard.

While $1.7 billion is reported to be the largest bank forfeiture in history, investor advocates have been critical of the criminal case settlement. In particular, they criticize the failure to charge individual bank executives, who may have turned a blind eye to Madoff’s fraud, with a crime. They also criticize the leniency of the settlement terms as amounting to an ineffective deterrent.

National Life Settlements, LLC solicited money from both active and retired state employees and teachers by having funds rolled out of retirement funds and into National Life Settlements investments. According to the Texas Securities Board, the company quickly grew by using insurance agents to sell products. Agents, many of whom were not licensed to sell securities, earned more than $4 million in commissions.

However, the company never acquired the necessary life insurance policies needed to pay investors. They just paid new investors with money from earlier investors (i.e. Ponzi Scheme) and told investors that the company had received billions of dollars from the Federal Reserve.

Following the probe in 2009, the company was placed in receivership, and investors received about two-thirds of their investments back.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

The SEC alleged in the complaint that Cay Clubs Resorts and Marinas raised more than $300 million from nearly 1,400 investors nationwide through a network of hundreds of sales agents, marketing seminars, and podcasts that touted the profitability of purchasing units at Cay Clubs resort locations. The executives charged in the complaint promised immediate income from a guaranteed 15% return and a future income stream through a rental program that Cay Clubs managed. However, the Cay Clubs executives “used new investor deposits to pay leaseback returns to earlier investors.” Additionally, the executives “paid themselves exorbitant salaries and commissions totaling more than $30 million, and investor funds also were misused to buy airplanes and boats.” The scheme began in 2004 and Cay Clubs abandoned its operations in 2008, but still continued its scheme.

The SEC’s complaint filed in U.S. District Court for the Southern District of Florida charges the following former Cay Clubs executives:

• Fred Davis Clark, Jr. – president and CEO • David W. Schwarz – chief accounting officer • Cristal R. Coleman – manager and sales agent • Barry J. Graham – sales director • Ricky Lynn Stokes – sales director
More often than not, the perpetrators of ponzi schemes spend money as fast as they steal it. As a result, victims looking to recover their losses typically must sue third parties who were involved in the unlawful transactions. As stated above, the fraudsters here defrauded nearly 1,400 investors through a network of hundreds of sales agents.

These sales agents may be the key to recovering investor losses because any person that sells securities must be a registered representative of a brokerage firm. In addition, sales agents and their firms are required to conduct their own due diligence about the investments they recommend.

It is imperative for victims of this ponzi scheme to begin collecting documents and information to help identify all parties that were involved in the unlawful transactions. These documents include but are not limited to:

• All contracts signed by the customer,
• All marketing material that the sales agents provided to the investors,
• All subscription agreements or offering memorandums that describe the investments at issue,
• All emails and correspondences between the investor and any party that they spoke to in connection with the investments,
• All calendar entries of meetings and notes of conversations.

Furthermore, investors need to be careful before drafting any complaint letters to regulators because that document constitutes evidence that can be used against the investors in subsequent legal proceedings. As a result, it is recommended that investors contact an attorney to draft any complaints.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

Accoding to Dimare’s CRD report, a report that tracks customer complaints made by customers and securities regulators, ING Financial has compensated some investors who have come forward. In the article, Jason Doss, an attorney with The Doss Firm was quoted, “The question is whether everyone will come forward.”

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

FINRA’s investigation uncovered that between 2001 and 2008, Dimare persuaded his clients to invest in fictitious investments. Between 2001 and 2006, Dimare was a sales manager for John Hancock Mutual Life Insurance Company. During that time period, victims wrote checks made payable to John Hancock believing that the money would be invested. In reality, Dimare deposited the funds into his own bank account.

Between 2006 and 2008, Dimare was a registered representative of ING Financial Partners. During this time period, it appears that Dimare continued to encourage his clients to write checks made payable to John Hancock and then deposited the funds into his bank account.

Victims who lost money prior to 2006 likely have legal claims that can be brought against John Hancock for failure to supervise as well as the depositary bank who accepted the checks for deposit for conversion. Victims who lost money between 2006 and 2008 likely have claims against ING Financial Partners and the depositary bank.

For more information, feel free to contact us for a free consultation.

Given that he pleaded guilty to defrauding 22 people, there are likely more victims who have not come forward yet.

The Doss Firm, LLC represents investors across the nation against financial firms and seeks to recover investment losses that result from fraud. If you believe you have been defrauded by Mr. Dimare, feel free to contact us.

On December 29, 2009, FINRA, the organization tasked with regulating the financial services industry, issues an Investor Alert entitled, Save Your Greenbanks – Don’t Fall for Green Energy Scams. The Investor Alert provides a great discussion on ways to avoid becoming a victim of these scams.

Some tips include:
1. Beware of investment opportunities promises high returns;
2. Beware of unsolicited recommendations communicated through methods such as faxes, emails, text messages, etc.;
3. Don’t invest in things you do not understand.

The most unfortunate part of these scams is that when something goes wrong, there is rarely a chance to recover the losses from the fraudster because they are almost always insolvent. As a result, the best approach is to stay away altogether.

Gresham allegedly promised monthly returns of 5 to 10 percent with very little risk. He would then allegedly pay off certain individuals with money invested by new individuals. It is said by the Commission that Gresham would communicate the bogus returns of the scheme to investors through emails.

Gresham’s longtime friend, Werner H. Beiersdoerfer, of Calera, Alabama, and his son, Kirk Gresham, have also been named as “relief defendants.” A “relief defendant” is defined as “a person who is not accused of wrongdoing in a securities enforcement action where that person: (1) has received ill-gotten funds; and (2) does not have a legitimate claim to those funds.” S.E.C. v. Cavanagh,155 F.3d 129, (C.A.2,1998).

Assets of all three individuals have been frozen by a federal judge. A hearing has been set for July 23.

For more information about investment fraud, please visit our website at www.dossfirm.com. If you would like a personal consultation with a lawyer regarding potential claims that you may have, please call our investment abuse hotline, (855) 534-4581.

New York state officials have also stated that individuals who have already filed their 2008 state tax returns can amend their returns.

However, individuals should know that New York tax laws do limit how much can be written off. According to newsday.com, “itemized deductions are reduced by up to 25 percent for individuals who make more than $100,000 in adjusted gross income, and for married taxpayers with more than $200,000 in adjusted gross income. Further, “it’s reduced by up to 50 percent for all filers making more than $475,000 in adjusted gross income,” says Ellen Yan of newsday.com. However, those with an adjusted gross income of more than $1 million will not be able to make non-charitable itemized deductions, which includes theft deductions.

This should come as some relief for investors who have lost money as a result of a ponzi scheme. Most notably in New York this shall aid those who are victims of the Bernie Madoff investment scam.

In addition to tax relief, victims of investment fraud may have legal claims which could provide further financial relief and/or recovery. If you believe that you are a victim of investment fraud, please do not hesitate to contact our firm.  We provide free legal consultations. Additionally, please visit our website www.dossfirm.com for further information with regard to investment fraud.

The U.S. Attorney’s office says that Copeland, a lawyer who specialized in elder law, solicited his victims through seminars and financial planners. Copeland would promise the investors that he would invest their money in real estate and promised returns as high as 15 percent every six to 12 months. In addition to the promises made by Copeland, he would show the investors false security deeds to document their promised profits. Unfortunately, this was merely a scam, which netted Copeland more than $40 million.

It is believed by the U.S. Attorney’s office that Copeland conducted little, if any, real estate financing or development.

Copeland does face up to 20 years in prison and a $25,000 fine. Additionally, Copeland will likely have to pay restitution to his victims and forfeit all of the proceeds from the fraud.  The Government has seized several bank accounts, jewelry and cars, 12 properties, and other valuable items from Copeland.

It is hoped that Copeland’s investors are able to recoup at least some of their losses.

If you would like to learn more about investment fraud, please visit our website www.dossfirm.com.

What Mr. Nahmias did not say, however, how the assets will be distributed to investors. You need to pay attention to this because you may be entitled to more than a pro rata share of the seized assets if you can trace your money.  Typically, when the U.S. Government seizes the assets of a fraudster, the Government distributes the money seized back to investors on a pro rata basis.  This means that if the government seizes $10 million from a fraudster and there are 125 victims, each victim receives from the restitution fund a percentage of the $10 million based on how much each victim invested. For example, if the total amount of the fraud totals $28 million and Investor A invested $2.8 million, Investor A would receive 10% of the $10 million or $1 million.

This may seem fair on the surface.  What if Investor A invested the $2.8 million a week before the Government seized the assets and the money can be traced to the fraudster’s bank account? Is is fair for Investor A only to receive $1 million out of $2.8? Maybe not.

Does the U.S. Government have unfettered discretion to distribute the funds anyway it sees fit? The answer is no.  Victims of Ponzi schemes have the right to petition the Court and challenge the Government’s discretion.  If you can trace your funds, you may be able to establish a constructive trust on the money.  In simple terms, this means that title to the money never transferred to the fraudster. Therefore, the Government did not have the right to seize the funds in the first place. If Investor A, for example, can establish a constructive trust on the $2.8 million, he or she is entitled to receive $2.8 million, not $1 million.

If you are a victim in this situation, our firm has handled these types of cases.

Those brokers often are employed by legitimate and solvent brokerage firms that are responsible to supervise the broker’s business activities.  If you invested in a ponzi scheme through a broker or salesperson, it would be wise to take the following steps immediately:

1. Start making a written chronology that touches on the following areas:

• How did you learn about the investment?
• Did someone recommend the investment to you? If so, who?
• Why did you decide to invest?
• What did you expect the investment to do for you?
• Did you purchase the investment to generate income? If so, how much income did it generate and how important was that income to your overall financial picture?
• How was the investment described to you? Was it described as a safe investment? Risky?
• Were any promises made to you about the performance of the investment?

2. Gather all of the written marketing materials that you received in connection with the investment.

The written chronology is very important because (1) memories fail over time and (2) the document is a living document because it can evolve over time when new information is added later. For example, many times an unrelated event such as a TV commercial will trigger a memory about a statement that was made to you about the investment. If you have already created a written chronology, it is easy to add that information.

It is alleged by the U.S. Attorney’s Office that Copeland used a number of businesses, including Axiom Development Group, Inc., We Buy Inc., Robert P. Copeland, P.C., and HBV Services, Inc. to perpetuate the fraudulent scheme.

Copeland has not yet been charged criminally with regard to this alleged conduct. Despite attempts by the AJC, Copeland refused to return phone calls seeking comment regarding the allegations made by the U.S. Attorney’s Office.

According to the Georgia Bar website, Copeland was admitted to the Georgia Bar in 1995.

According to the U.S. Attorney’s office, Spell faces a maximum sentence of 20 years in prison and a fine of up to $250,000. Sentencing has not yet been schedule for Spell.

Investors must be very careful as to who they trust with their money. Furthermore, although they may consider someone a friend, they should still conduct appropriate background checks on the person, checking whether they are licensed or registered and investigating their experience and employment history. Additionally, investors should be very diligent in researching any investments they make and should be wary of guaranteed promises of high returns. Remember investing always involves a certain amount of risk.

For the sake of Spell’s investors, it is hoped that federal authorities seized funds from Spell that can be distributed to his alleged victims. Unfortunately, however, recovery may be minimal at best.

In that article, Mr. Chilton was also quoted as saying, “Because of the economy, people are seeking redemptions more than they ever have and that’s making a lot of these scams go belly up.”

Mr. Chilton should have made another play on words and said that “a lot of these scams go ‘pork-belly’ up.”  That is because many of the recently discovered ponzi schemes involve commodities futures trading.  Mr. Chilton admitted that so far this year, the agency has uncovered 19 ponzi schemes, up from 13 for all of 2008.

While the SEC has certainly received its fair share of criticism recently, the CFTC has not received much negative press. It deserves some though.

What many investors do not know is that the CFTC along with the National Futures Association (NFA) regulate the commodities industry, not the SEC.  Investors often are unaware that the rules and regulations of the NFA have the practical effect of being less stringent on its members than those imposed on brokerage firms that sell securities.  Risk disclosure requirements are more relaxed and less effective because the rules shift much of the burdens of risk disclosure to the commodities trading advisors and away from the brokerage firms.  As a result, it is more difficult to hold the brokerage firms actually making the trades liable for unsuitable recommendations.

In addition, because much of the commodities trading is done through online forex trading platforms, it is not difficult for criminals to open accounts in his or her name and trade (without a license) on behalf of groups of investors. Because of lax regulations, commodities brokerage firms called Futures Commodities Merchants (FCM) disregard their due diligence duties and do nothing to stop ponzi schemes from forming.  As a result, the scams are not discovered until it is too late and rampant ponzimonium takes effect. 

It is no wonder, therefore, that crooks looking to rip off consumers view the commodities industry as their Afganistan of the scam artist criminal landscape.  

These examples were followed by a quote from an accounting professor at Ohio State University in Columbus which stated, “Due Diligence 101 should demand that you check out the auditing firm and find out if it exists” […] “Then, you have to find out if they are qualified.”

The implications from this article are disturbing because it suggests that investors should have known better than to invest with people who turned out to be crooks.  The truth is that “due diligence 101” should require accounting firms who “audit” books of investment entities to make sure that the Bernie Madoffs of the world are accurately reporting the scope and nature of the audit.

A subtle but disturbing undertone of this article is that investors should have known better.  This mindset is dangerous to the integrity of the laws designed to protect investors.  For example, a common claim brought by victims of ponzi schemes is common law fraud and section 10b-5 securities fraud claims.  Both of these claims require investors to prove that they justifiably relied on the misrepresentations contained in the prospectus or other sales literature.  Whether reliance is justifiable is a defense commonly raised to defend these actions.

It is disturbing to think that investors could lose a lawsuit because they failed call the accounting firm who conducted the audit of the books just to make sure that the work was done properly.  This goes against the heart of the securities laws.  These laws were meant to abolish the “buyer beware” mindset and shift the burden to the seller of securities and other parties involved in the sales process (including accounting firms) to make sure that the information contained in the prospectus is accurate and truthful. 

While it is true that it is be a good idea for investors to call those firms to verify that the representations made in any prospectus or investment sales document are accurate, investors who do not should not be penalized.