Articles Posted in Ponzi Scheme

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors affiliated with the Cetera financial group.  The securities regulator FINRA recently fined three Cetera Financial Group broker-dealers $1 million, claiming that Cetera’s “supervisory systems and procedures were deficient when handling securities transactions.”

Like many advisory firms, Cetera employs representatives who are “dually registered,” meaning they are broker-dealers and registered investment advisers. In the Cetera case, their representatives managed more than $80 billion in assets across 47,000 accounts. According to U.S. Securities and Exchange Commission (SEC) exams conducted in 2013, 2015 and 2017, Cetera was “aware of the supervisory deficiencies.”

Without admitting or denying the allegations, Cetera recently signed a FINRA letter of Acceptance, Waiver, and Consent and agreed to FINRA’s sanctions, which included a censure and an agreement that they would review and revise, as necessary, systems, policies and procedures related to the supervision of dually-registered reps’ securities transactions, according to ThinkAdvisor.com.

Chicago-based Stoltmann Law Offices has represented athletes who’ve suffered losses from dealing with broker-advisors who have fleeced them. Just because a person is a professional athlete and makes tens of millions of dollars for playing a sport doesn’t mean they are financially sophisticated. Far too many great athletes fall prey to con men and advisors who rip them off.

Sadly, there’s a long list of athletes who’ve been defrauded by advisors. Some have achieved great fame in their sports such as boxer Mike Tyson, pitcher CC Sabathia, NBA great Kareem Abdul Jabbar and quarterbacks John Elway and Bernie Kosar. Sometimes all it takes is one crooked advisor to do a lot of financial damage. For example, major league pitchers Jake Peavy and Roy Oswalt and Quarterback Mark Sanchez had three things in common: They were well-paid athletes and shared the same financial advisor. Ash Narayan, an Irvine, California-based advisor with RGT Capital Management, pleaded guilty to defrauding the stars of some $30 million. Narayan was forced to pay nearly $19 million in restitution and serve 37 months in prison.

How were these pros swindled? Prosecutors stated that “from December 2009 to early 2016, he advised his clients to invest in a money-losing online sports and entertainment ticket company in Illinois (The Ticket Reserve, Inc.) without telling them that he was on the board, or that it was a risky and unprofitable business,” according to The Los Angeles Times.

Chicago-Based Stoltmann Law Offices, P.C. is currently investigating reports that Michael Edward Magill raised $700,000 in purported private notes that turned out to be part of a criminal scheme. If you were sold investments by Mr. Magill and lost money as a result, you may have a claim to pursue to recover your investment losses through FINRA Arbitration.

According to a FINRA Acceptance, Waiver, and Consent (AWC) signed by Mr. Magill on December 7, 2020, Mr. Magill was hied by a private company to raise money for it. the FINRA allegations state that Mr. Magill solicited at least three investors to invest a total of $700,000 in this company, representing the investments as short term secured notes.  He urged investors to invest quickly because time was of the essence.  Mr. Magill was paid a salary by this company for his services and also received a commission for the investments he sold.  He also distributed marketing materials for the investments.  The investments were not registered with any regulatory agency and were sold in violation of applicable state and federal securities laws.  The principals of the company for whom Magill raised these funds pled guilty to conspiracy to commit wire fraud.

At all times relevant, Mr. Magill was a dually registered and licensed financial advisor with Foreside Fund Services and as a Registered Investment Adviser with WBI Investments, Inc. out of Boca Raton, Florida.  By virtue of FINRA Rules and the fiduciary duty owed by WBI Investments, both Foreside and WBI could be liable to investors who were caught-up in this scheme.  Stoltmann Law Offices has for many years pursued brokerage firms and investment advisers for these claims and has successfully recover money on victims’ behalf.  These companies have legal obligations to supervise the conduct of their registered representatives. Typically referred to in the securities industry as “selling away”, Magill allegedly did not advise the companies he was registered with of his illicit activities.  Nevertheless, there likely existed a stack of red flags that would have put Foreside Funds and WBI Investments on notice that Magill was participating in what was in reality a fraudulent scheme.

Stoltmann Law Offices is investigating allegations in a grand jury indictment in the United States District Court for the Eastern District of Texas, levied against Keith Todd Ashley, of Collin County, Texas.  According to the indictment, which was filed on November 13, 2020, Ashley ran a Ponzi scheme while a registered representative for Parkland Securities, formally known Sammons Securities Company, and Midland National, a life insurance and annuity company. According to the indictment, Ashley recommended investors purchase UITs (Unit Investment Trusts) through Parkland and another entity called SmartTrust, which was an investment offered by another brokerage firm, Hennion & Walsh. The indictment alleges that Ashley made representations via email to clients that these investments offered returns of anywhere between 3% and 9% per year, with no risk to the investor’s principal, and that the securities were offered through Parkland and SmartTrust.  The indictment further alleges that instead of investing the money as represented, Ashley converted a substantial amount of it – more than $1 million – for his own use.

If you invested with Keith Ashley and believe you have suffered losses in connection with his alleged Ponzi scheme, please contact Stoltmann Law Offices, at 312-332-4200 for a free, no obligation consultation with a securities attorney.  

The news in connection with Mr. Ashley and his scheme turned quite dark just this afternoon when the publication Investment News ran a story indicating that Ashley was arrested in Carrolton,Texas on suspicion of committing murder. The story reports that Ashley is accused of murdering an investor-client in February 2020, staging the murder as a suicide, in some attempt to gain access to the victim’s money. Ashley was discharged from Parkland Securities in October suggesting he was fired for failing to disclose outside business activities.  This is a common response by brokerage firms when it turns out that one of their registered representatives has been running a Ponzi scheme.

Chicago-based Stoltmann Law Offices is investigating claims made by the Securities and Exchange Commission that financial advisor Scott Fries of Piqua, Ohio engaged in a Ponzi-like scheme , defrauding investors of nearly $200,000.  According to the complaint filed by the SEC last week, Fries raised approximately $178,000 from investors and used that money to pay personal expenses like his mortgage, payday loans, and credit cards. The SEC further alleges that Fries attempted to fraudulently conceal his activities by creating fake account statements which he delivered to his clients that purported to show their money invested in legitimate investments. The SEC alleges Fries’ misconduct violated several federal securities laws including Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5, Section 17(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77q(a), and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”), 15 U.S.C. §§ 80b-6(1) and 80b-6(2).

Before the SEC took action, the Financial Industry Regulatory Authority (FINRA) barred Fries from the securities industry in November 2019 for violating FINRA Rule 8210. In response to being terminated for cause by his broker/dealer firm TransAmerica, FINRA launched an investigation into the allegations which led to Fries’ termination. If a broker/advisor fails to respond to these requests for information under FINRA Rule 8210, they can be barred for life from the securities industry. In many instances, brokers refuse to answer Rule 8210 requests because doing so would put them in the untenable position of having to answer question under oath.  It is likely, given the SEC’s allegations, that Fries chose not to answer FINRA Rule 8210 requests because it was not in his best interest for their to be a record of whatever this scheme actually was.

Investors who were caught up in this scheme run by Fries have legal options to attempt to recover their losses.  First and foremost, at all times relevant, Fries was a registered, licensed, representative of TransAmerica. This means victims – even those that were not contractual customers of TransAmerica – can file an arbitration action against TransAmerica to seek recovery of their losses. As a FINRA registered broker/dealer firm, TransAmerica is legally obligated to supervise the conduct of its financial advisors. This supervision requirement is rooted in the Securities Act and all applicable state laws, including myriad FINRA Rules and regulations, including FINRA Rule 3110.  Case law also supports the proposition that even non-customers of the firm can sue for the firm’s role in facilitating or failing to supervise their advisors. See McGraw v. Wachovia Securities, 756 F. Supp. 2d 1053 (N.D. Iowa 2010). When “red flags”of misconduct present themselves, firms like TransAmerica have a duty to act and to take steps to protect investors.

Barrington, Illinois based Stoltmann Law Offices has been retained by victims of Matthew Piercey’s alleged Ponzi scheme involving Wealth Legacy, UpVesting Fund, Zolla Investment Fund, amongst other alleged investments, to pursue claims against potentially liable third parties. Matthew Piercey was arrested at Lake Shasta, California after attempting to evade the FBI using an underwater scooter. Piercey was arrested and indicted on 31 counts of wire fraud, money laundering, mail fraud, and witness tampering. Piercey is alleged to have orchestrated a $30 million Ponzi scheme, converting investor funds that were supposed to be invested in supposedly legitimate investment vehicles, like the Zolla Investment Fund.  Piercey’s alleged co-conspirator, Ken Winton, was arrested separately, although under less dramatic circumstances.

Victims of Matthew Piercey’s Ponzi scheme may have claims against third-parties to recover their losses. Pursuing Matthew Piercey directly in a lawsuit to recover is probably a fool’s errand. Once the criminal justice system is through with him, there won’t be anything left. Sure, assuming he is found guilty of these heinous crimes, he will be ordered to make restitution to victims, but the money is gone and his earning capacity will be destroyed.  So victims need to look to third parties for recovery.

If you were referred to Matthew Piercey or Ken Winton by a lawyer, a financial advisor, a wealth manager, or a CPA or accountant, those individuals could be liable to you for the losses you have sustained as a result of Piercey’s alleged schemes. 

Stoltmann Law Offices is a Chicago-based securities and investment fraud law firm that offers nationwide representation to victims of Ponzi schemes and other securities frauds.  We are currently investigating allegations made by the United States Securities and Exchange Commission (SEC) and the US Attorney for the Southern District of New York that contend the Belize Infrastructure Fund I, LLC was a Ponzi scheme.  According to published reports, Minish “Joe” Hede and Kevin Graetz sold $9.6 million worth of promissory notes to their clients, many of whom were customers of their brokerage/dealer firm Paulson Investment Company.

According to the complaint filed by the SEC, Brent Borland, the principal of the Belize Infrastructure Fund who is also under indictment, approached Paulson Investment Company to act as “placement agent” for this fund. After the sales pitch, Paulson declined to act as the placement agent and disapproved of the investment. Whether Paulson Investment Company approved of the deal or not, meant nothing to Hede and Graetz who went on to sell almost $10 million worth of notes issued by the bogus company to at least 21 Paulson clients.  In so doing, Graetz and Hede violated numerous FINRA Rules and SEC rules and regulations by selling a fund that was not approved of by their broker dealer.  The SEC complaint also alleged that Hede and Graetz received hundreds of thousands of dollars in illicit commissions from selling notes issued by the Belize Infrastructure Fund.

Paulson Investment Company can still be held liable for the conduct of the firm’s registered brokers, Hede and Graetz. First, even though Paulson Investment did not formally approve of these sales, Hede and Graetz were still registered with the firm as brokers when these sales occurred so that means Paulson had an obligation to supervise their activities pursuant to FINRA Rule 3010. Additionally, “red-flags” that brokers may be “selling away” increase that responsibility. Certainly, having sold almost $10 million in this fund to 21 Paulson clients means there was, at a minimum: 1) a paper trail that they were selling these notes; 2) communications via email discussing the Belize fund; 3) transactional records, including the sale of securities in the clients’ legitimate Paulson accounts in order to fund the Belize Fund investments; and 4) client meetings.  Furthermore, brokers with numerous disclosures on their CRD Report require firms to put those advisors on “heightened supervision.”  According to his FINRA BrokerCheck Report, Graetz had numerous tax liens and customer complaints on his record before he started selling the Belize Fund to his clients.  Paulson Investment Company should have had him under a supervisory microscope. Instead, as is typical at brokerage firms like Paulson, the company invests minimally in its compliance and supervisory structure and brokers like Graetz and Hede end up selling firm clients almost $10 million in a Ponzi scheme.

Chicago-based Stoltmann Law Offices has represented hundreds of investors who have been victims of one of the most egregious investment frauds: Ponzi schemes. These swindles promise quick riches and rely upon an increasing number of “investors” to keep the operation going, sometimes over a period of years. The schemes eventually blow up when new investors can’t be found to perpetuate it or promoters are outed by investors or associates for faking returns.

The most famous Ponzi scheme – and perhaps one of the largest – involved broker-money manager Bernie Madoff. Over a period of 17 years, Madoff defrauded thousands of investors, lying about profitable trades. In 2009, he was sentenced to 150 years in prison, after pleading guilty to a $65 billion swindle of some 65,000 victims around the world. Many of Madoff’s victims, which ranged from non-profit organizations to celebrities, were financially ruined. A court-appointed “Madoff Victims Fund” has distributed nearly $3 billion to investors. His sons, who worked for their father’s firm, turned Madoff into authorities when they learned of the scam.

Despite the notoriety of the Madoff swindle, Ponzi schemes are still ensnaring innocent investors. As one of the oldest investment fraud vehicles around, the Ponzi scheme has two selling points: Promoters promise outrageous returns in a short period of time and rely upon continuing stream of new victims to “pay off” early investors in fake profits. This perennial false promise of easy riches makes it one of the most durable schemes for dishonest brokers, who continue to sell them — until the frauds collapse.

Chicago-based Stoltmann Law Offices is investigating reports of selling away and securities fraud engaged in by Douglas Kiffmeyer.  On July 27, 2020, Douglas Kiffmeyer pleaded guilty to 17 counts delivered via indictment in June 2018.  Kiffmeyer pleaded guilty to two counts of wire fraud, 18 U.S.C. Section 1343, 14 counts of failing to timely file income tax returns, 26 U.S.C. Section 7203, and one count of engaging in a financial transaction in criminally derived property, 18 U.S.C. Section 1957.  Kiffmeyer has yet to be sentenced but under federal criminal sentencing guidelines, should received between 46-57 months in prison. At times relevant to perpetrating his criminal scheme, Kiffmeyer was a registered representative and financial advisor for FINRA broker/dealer Brokers International Financial Services, LLC.

According to Kiffmeyer’s FINRA BrokerCheck Report, many of the entities through which he conducted his fraudulent investment scheme were disclosed as “outside business activities” to his member-firm. According to the Stipulation of Facts entered on July 27, 2020, Kiffmeyer’s scam began as investments he solicited in a company called Creative Digital, Inc., which he represented was designing a digital trigger for the M-16 rifle. In total, Kiffmeyer raised $827,000 for Creative Digital, Inc., but spent almost all of the money on a GMC Sierra 1500 truck, a Hummer H2, a motor coach, a Corvette, a Nissan 370, and an engagement ring. According to the Stipulation, of the $827,000 raised, only $1,500 was returned to investors.

Kiffmeyer’s scheme took a different and even more sordid turn next. He began selling promissory notes to elderly investors, convincing them to surrender IRAs and annuity products in exchange for promissory notes bearing interest. One of his victims was 90 years old. The last part of Kiffmeyer’s scam involved selling interests in a medical marijuana clinic. Little, if any, of the $206,000 raised for this company was used for the business and was instead converted for personal use.

Stoltmann Law Offices has been following the Justice Department’s case against former Ameriprise Financial advisor Yilin Hsu Lee, a/k/a Li Lin Hsu, since 2016 when she was barred by the Financial Industry Regulatory Authority (FINRA).  On Friday, January 31, 2020, the Justice Department announced that Hsu had been sentenced to 136 months in prison – more than 11 years – for swindling her clients out of almost $8.2 million dollars. Amongst her more than 20 victims were members of her family, an all too common fact in Ponzi scheme cases like this.  Although she has been ordered to pay over $5 million in restitution as part of her sentence, it is unlikely she will ever be able to repay even a fraction of what she owes to the victims.

According to the U.S. Department of Justice, Hsu’s scam ran from February 2014 to May 2018. During this time, it was alleged that she falsely represented to investors that she would invest their money safely.  Instead of investing the money conservatively as she represented, Hsu converted her clients’ money and used the funds to buy homes in Diamond Bar, California, a Tesla automobile, an expensive stay at the Peninsula in Paris, France, and spent thousands of dollars of her clients’ hard-earned money during shopping sprees at Hermes and Chanel.

Hsu gained the trust of her victims, mostly members of the Chinese American community in Southern California, by speaking to them in their native Chinese or Mandarin. This is called Affinity Fraud which is a specific type of scam where the schemer solicits his victims from a select community, usually one he is actually a part of. Affinity Fraud scams impact specific ethnic and religious groups. In Hsu’s case, she focused her fraudulent scheme on the Chinese American community.  Her ability to speak the same language and understand the customs of her victims made her even more dangerous, and even easier for her victims to fall for her fraudulent sales pitch.  As pointed out by the Securities and Exchange Commission, Affinity Fraudsters may not actually be members of the community they seek to victimize, they just pose as a member, in a true crime sense.

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