Ponzi Scheme Clawback Actions – Forcing Victims to Right Other People’s Wrongs

Ponzi scheme’s collapse almost always leads to a bankruptcy, receivership, or some other formal liquidation proceedings.  In these proceedings, a trustee or receiver is charged with collecting as much funds as possible to pay creditors and defrauded investors.  Among the methods used to recover assets are claims against investors who received returns from the Ponzi scheme.  These claims are referred to as a “clawback actions.”

Clawback actions are incredibly controversial.  How can an innocent defrauded investor now be subject to a lawsuit from the receiver or trustee? The subjects of these suits often argue that they had no knowledge of the fraud and had every reason to believe the money they withdrew from their investment accounts was legitimate profits.  Most of the time, the money received by the defrauded investor has been spent – on a house, on college tuition payments, or on basic living expenses.  Returning the earned income to a receiver can be devastating or impossible.

The legal theory is that money received by defrauded investors came from other defrauded investors, and all investors should be on equal ground.  Clawback actions are supposed to be filed against “net winners” in a Ponzi scheme – meaning people that earned more than what they invested.  In our practice, we have seen clawback actions filed against many people who were “net losers,” subjecting them to steep legal fees just to prove they did not make any money overall in the Ponzi scheme.

The money raised in clawback actions is supposed to be divided equally among the Ponzi victims, but questions remain as to where the money actually winds up.  Bankruptcy trustees earn commission on assets recovered, and commissions and trustee legal fees are paid out of the funds raised by the trustee.  So, money from defrauded investors often goes back to pay the lawyers involved in the clawback case rather than going to the Ponzi scheme victims.

Meyer Wilson Representing Investor Victims in Madison Timber Ponzi Scheme

Arthur Lamar Adams of Mississippi pleaded guilty to orchestrating a massive Ponzi scheme exceeding $100 million stolen from more than 250 investors in at least 14 states. He was sentenced to almost 20 years in prison.  Meyer Wilson currently represents victims of his scam.

Adams and his cohorts represented to investors that a company called Madison Timber Properties was in the business of buying timber rights from landowners and then selling the timber rights to lumber mills at a higher price. The object was to get people to invest in loans that purportedly were for the purpose of financing contracts for the purchase of timber rights to be sold to lumber mills at a higher price.  Madison Timber Properties did not have timber rights or contracts with lumber mills.  Instead, the money from unsuspecting investors lined the pockets of the scammers involved.

Investors were guaranteed that they could expect 12% to 15% returns on the investment they made.  To any competent financial advisor, this should have been a red flag of a probable Ponzi scheme or investment fraud.  High returns come with high risks, and if it sounds too good to be true, then it probably is. If your financial advisor ignored the red flags and recommended you invest in Madison Timber Properties, you may be able to recover your monetary loss.  Give the investment fraud attorneys at Meyer Wilson a call today for a free case evaluation.

Emergency Freeze Against Today’s Growth Consultants For Running $75m Ponzi Like Scheme

The US Securities and Exchange Commission (SEC) recently announced that they have obtained a restraining order and filed an emergency enforcement action against Today’s Growth Consultant Inc. as well as company owner, Kenneth D. Courtright III.

Courtright was arrested on criminal fraud charges in addition to the securities fraud charges brought by the SEC. It is alleged that his company, which also did business under the name “The Income Store,” operated a Ponzi-like scheme that raised more than $75 million from over 500 investors.

What Does the SEC Complaint Say?

The SEC complaint, which was unsealed on January 14, 2020, says that Courtright and Todays Growth Consultant Inc. (TGC) promised investors high rates of return from website revenues.

TGC allegedly told investors that they would use their investment money to buy or build them a website. They then promised investors that they would develop and market the website to generate income. The SEC complaint says that TGC told investors they would use their money only for expenses related to the website. In reality, TGC was using investors’ money to make unlicensed security offerings. They were allegedly using new investors’ money to pay off old investors.

This behavior has all of the hallmarks of a Ponzi scheme. Readers are likely familiar with the infamous Bernie Madoff Ponzi scheme that was revealed in 2008. Madoff’s Ponzi scheme is currently the biggest of all time and involved $50 billion in assets.

The SEC complaint says that TGC operated from at least 2017 through October, 2019. The associate director in the SEC’s Division of Enforcement, Antonia Chion, said that “TGC and Courtright’s alleged fraud promised a guaranteed return when the company’s business model and financial condition could not possibly support it.”

The SEC complaint also says that Courtright used the money from his investors to pay his mortgage as well as private school tuition for his Family.

Kenneth D. Courtright III and TGC have been charged with violations of registration provisions of the antifraud and registration provisions of the federal securities laws. In addition to the temporary restraining order, and freezing assets of TGC and Courtright, the Court has appointed a receiver for TGC.

What to Do If You Were a Victim of Fraud

If you have done business with or allowed Kenneth D. Courtright III and Todays Growth Consultant Inc. (or The Income Store) to use your money for investments, you should speak to an attorney as soon as possible. The lawyers at Meyer Wilson are ready to get you through this. Our team has a thorough understanding of Ponzi schemes, and we are ready to investigate every aspect of your case. Our goal is to secure compensation for your losses. Read more about how to recover losses after a Ponzi Scheme.

We handle all matters related to Securities Litigation in arbitration concerning investment fraud and misconduct. Even if you are not a victim of the wrongdoing by Courtright and TGC, you may suspect you are being taken advantage of by a financial or investment advisor. Sometimes, it takes the bravery of one person to come forward in these cases to break a case open. Do not hesitate to seek legal assistance to protect yourself, your family, and your valuable assets. Call (800) 738-1960 or contact us online to speak confidentially with an attorney today.

Investment Scams In 2020 You Could Be Targeted By

While a new year may have brought new resolutions for you, it also comes with investment scams that consumers need to worry about. Some of them have been around a while, but others are relatively new and gaining traction. Most financial experts will tell you that a sign that an investment opportunity may be a scam is the promise of high returns. You should also be wary of anyone who says their investment comes with no risks. Nobody can guarantee an investment return.

Watch Out for These Scams

1.      Ponzi schemes

Over the last few decades, many notorious Ponzi schemes have made the news. While many people have heard of Ponzi schemes, few actually understand the inner workings of these investment scams. With these scams, investors are paid returns from their own money or money paid by future investors rather than from actual earned revenue through investments. This is unsustainable, and a Ponzi scheme often leaves the bulk of its investors with no money at all.

2.      Promissory notes

A promissory note is a form of debt, similar to an IOU or a loan. Companies may issue these to raise money. However, fraudsters throughout the country have begun to use promissory notes as ways to defraud investors. These individuals may convince somebody that they have a legitimate and lucrative company and promise major returns when in reality, they may not have a company at all or have no plans for growth.

3.      Real estate-related investments

These scams often come in the form of real estate investing seminars that market aggressively to alternative routes of owning and making money off of real estate. Fraudsters will typically brag about how much money they have made through simple real estate investments in an attempt to get your money with the promises of the same returns. In reality, your money is what they are profiting from and you may never see any returns.

4.      Cryptocurrency-related investments products

Cryptocurrency is incredibly difficult to understand and a relatively new type of investment. Because the typical investor does not fully understand cryptocurrency, fraudsters will make wild claims about possible returns with invested money. The reality is that cryptocurrency trading is volatile and not well understood, even by financial experts. Many well-known investment agencies do not even deal with cryptocurrency, so be wary of anyone promising high crypto returns.

5.      Social media and internet-related investment schemes

It is easy to get involved in social network groups and internet groups with like-minded individuals. Many fraudsters will use these mediums looking for those who want to make investments. Fraudsters will use social media and internet groups defined people who share similar backgrounds and personal information so they can make highly specialized pitches for investment scams.

How You Can Protect Yourself

The phrase “If it sounds too good to be true, it probably is” rings true with investments. If you are being promised high returns with little to no risks, you are likely being scammed. Research any potential investment opportunities presented to you. Investors should determine whether investments and their sellers are registered. You would not go to an unlicensed doctor or dentist, so do not invest with any unregistered agents. If you think you have been scammed, you may need to consult with an experienced financial investment fraud lawyer about your case.

Stark County Financial Advisor Convicted on 53 Felony Counts for Operating $1.7m Ponzi Scheme

On Friday January 18, 2019, a Stark County jury returned a verdict finding former financial advisor Kimm C. Hannan guilty on all 53 felony counts of securities-related fraud he had been facing in connection to operating a Ponzi scheme. It took the presiding Judge roughly 30 minutes to read the individual verdict forms, which included multiple counts of false representations in the sale of securities, fraudulent conduct as an advisor, prohibited securities acts, and theft from an elderly individual, among others.

The verdict, delivered Friday afternoon after eight hours of jury deliberation, brings some closure to the five clients prosecutors say paid Hannan roughly $1.7 million between 2014 and 2017 under the belief that he would invest on their behalves. $800,000 of that came from one married couple.

The Scheme

As case records show, 67-year-old Hannan enjoyed great success over decades in the financial industry, but soon ran into financial problems. During closing arguments, Stark County Assistance Prosecutor Joe Vance drilled into the scope of Hannan’s scheme, telling jurors he perpetuated “nothing but a con” in which he abused investors’ trust, and used savings and retirement funds as his personal piggy bank.

In addition to funding failing business ventures, including two dry cleaner’s, a fledgling dog daycare, and an HR business, Hannan used his clients’ money on personal expenses, debts, alimony payments, and rent for an upscale apartment in downtown Canton. Evidence presented in the case also show Hannan used upwards of $100,000 in client cash to bankroll high stakes card games at local casinos.

Hannan is scheduled to be sentenced on Tuesday. He faces more than 300 years in prison.

The Investigation

Hannan’s criminal indictment and conviction stem from an investigation conducted by the Ohio Division of Securities, which received a tip Hannan had been orchestrating a Ponzi scheme and paying off old investors with new clients’ funds. Attorney Inspector Janice Hitzman stated Hannan’s actions constituted clear violations of Ohio securities laws, including his:

Hitzeman said that even if client funds been paid as purported “loans,” they still constituted a security and investment under the Ohio Securities Act. During a recorded interview with investigators, Hannan also admitted to spending client money without their knowledge on personal expenses, and stated clients would have never trusted him had he informed them his businesses couldn’t make payroll, let alone profit. Hitzeman testified that during the interview, Hannan also pitched investigators to invest in his latest business venture as a means to repay investors. They didn’t accept the offer.

Criminal & Civil Cases: What They Mean to Wronged Investors

Criminal cases undoubtedly provide wronged investors with the sense of justice and accountability they deserve, but they are separate and distinct from civil legal actions. Though this particular advisor has been found guilty of committing crimes, and will be sentenced accordingly, that outcome does little to provide investors with any meaningful source for recovering their losses. In order seek such recoveries, investors can turn to the civil justice system and various claims related to investment fraud and misconduct – which focus on holding bad actors accountable for their wrongful conduct, and financially liable for the damages suffered by victims.

If you have questions about a matter involving investment fraud or misconduct, Meyer Wilson is available to help. Our lawyers represent clients nationwide and offer free and confidential consultations.

10 Years after Bernie Madoff Arrest: A Look at the Largest Ponzi Scheme in History

This Tuesday December 11, 2018 marks the 10th anniversary of Bernie Madoff’s arrest for perpetrating the largest Ponzi scheme in history. For many of the investors victimized by Madoff’s $19 billion fraud, this day brings more even reason to celebrate. In a bankruptcy court hearing, the trustee unwinding Madoff’s long-defunct investment advisory firm sought authorization of $419 million in distribution payments to nearly 900 accounts.

That $419 million payment brings the total payouts for wronged investors to just over $12 billion. While that figure will never approach the $45 billion in fraudulent profits claimed by Madoff on account statements, a return of that magnitude is quite rare.

In honor of this particular day, we’ve put together a few points about Madoff’s operation, where things currently stand, and what lessons we’ve learned:

While the scheme will long retain its indelible mark in the pages of history, and the name Madoff now synonymous with greed, it’s important to not forget the devastation Madoff left in his wake. From the many convictions of aides, employees, and family that followed to the tragic stories of investors who trusted Madoff’s firm, the scheme is a glaring reminder of the need to improve our systems of oversight and accountability. Though the trustee overseeing the case has made the recent payment and is currently evaluating a revival of lawsuits from overseas investors worth around $4 billion, there’s still a lot to be done, both for victims in this case, and all investors at risk of becoming the next.

Meyer Wilson: Attorneys for Investment & Securities Fraud

For investors today, it’s worth noting that Ponzi schemes didn’t cease to exist when Madoff’s particular scheme went south. These types of schemes and many other forms of investment fraud are continually perpetrated across the country, with investors paying the price. Fortunately, financial crimes do provide an opportunity for the recovery of assets by victims, and our team at Meyer Wilson is committed to helping investors nationwide make the most of this opportunity in a range of investment misconduct claims.

Financial Fraud Is on the Rise According to Officials, Scamming Billions of Dollars From Investors

It’s been nearly a decade since the $65 billion Ponzi scheme orchestrated by Bernard Madoff, and while there was a temporary dip in the number of similar schemes in the wake of that massive theft, securities officials are reporting that scams are on the rise again.

The biggest case in recent years by far is the $1.2 billion Ponzi scheme operated by the Woodbridge Group of Companies, but it’s not the only one. 1st Global Capital LLC and 1st West Capital LLC were the subject of an SEC investigation after warning signs indicated that the companies were involved in a $283 million loan fraud. Neither of these schemes come close to the financial damage that Madoff’s scheme caused, but they’re part of a much larger issue facing the investment world – more of these types of schemes are popping up seemingly every day. And, a considerable number of the people attempting to take advantage of their marks are unregistered and unlicensed in the securities industry, a change from recent trends.

"The surge in cases against unregistered actors reversed a two-year trend in which registered individuals and firms in the securities industry, broker-dealers and investment advisers, had constituted the majority of respondents in state enforcement actions," according to the North American Securities Administrators Association (NASAA).

NASAA reported that 647 of the cases in 2017 involved registered brokers, a nine percent spike from 2016, while 675 cases in that year involved unregistered individuals, a 24 percent spike from the year before. On top of that, some officials are seeing another worrying trend among scammers.

"A lot of the scamsters are getting a lot smarter," said Joe Borg, director, Alabama Securities Commission. "For example, if you asked me 10 years ago, do you have a problem with lawyers, I would have said no. Now, there are a slew of cases where lawyers are roped in by the crooks. They recruit the attorney to open an LLC or create an operating agreement."

This dramatic increase in the number of reported cases of fraud is a worrying issue, and our investment fraud lawyers at Meyer Wilson are currently investigating a number of brokers and individuals accused of fraudulent actions. If you were the victim of an investment scam or fraud, contact us today by filling out our online form, or call us at (800) 738-1960 to discuss your legal options with a member of our firm.

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$5 Million Ponzi Scheme Defrauds Investors

According to the Securities and Exchange Commission (SEC), Edward Lee Moody, the owner of CM Capital Management LLC in Virginia has been charged with operating a $5 million Ponzi scheme that allegedly defrauded approximately 60 investors. The SEC has been granted a restraining order to freeze assets in more than 30 brokerage and bank accounts controlled by CM Capital Management. They are also seeking an injunction, disgorgement, and fines and penalties against Moody and CM Capital Management.

According to the SEC, Moody represented CM Capital as a successful money management firm that invested client money in securities. To support alleged profitable investments, CM Capital Management created fictitious monthly account statements for investors that showed high returns. Instead of actually investing his clients' money, Moody used it to pay off earlier investors and to fund his personal trading and expenses for a new house, a new car, exotic travel, and other luxury items. Moody created a separate company, G.E. Holdings, to receive and transfer funds from exploited investors. At least 13 of Moody's alleged Ponzi scheme victims were elderly adults who funded their investments by liquidating existing IRA accounts.

Moody launched CM Capital Management in June 1999, and his Ponzi scheme activities began in October 2009. In addition to close to $5 million in losses for investors between 2009 and 2017, Moody allegedly took more than $1.1 million from investment fraud victims in 2018.

Ponzi schemes take millions from investors. They promise low-risk investments with high returns. Rather than investing client funds, money collected from new investors is used to pay prior investors. Since Ponzi schemes have no legitimate earnings, they require a constant flow of new money to succeed. When new investors fall off or a lot of existing investors cash out, Ponzi schemes typically collapse rather quickly.

Investors who have been victimized by investment fraud may be able to recover damages, which could include investment principal, expected gains if money had been invested appropriately, arbitration costs, and attorney's fees. In cases where egregious misconduct is involved, investors may be entitled to punitive damages. Most cases against brokerage firms are handled through mandatory FINRA arbitration. For help with investment fraud loss, contact the attorneys at Meyer Wilson at (800) 738-1960 today to set up a free case consultation.

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Hedge Fund Ponzi Scheme Leads to More Than $15 Million in Losses

Massachusetts securities regulators allege that three hedge funds in Cambridge are operating a Ponzi scheme that has cost investors more than $15 million in losses.

Ponzi Scheme Fraud

A recent Massachusetts hedge fund Ponzi scheme has collected approximately $15.3 million from at least 47 investors. Three Cambridge-based hedge funds and their manager, Yasuna Murakami, have been barred by regulators from doing further securities business in Massachusetts. A Boston federal court has sentenced Murakami to six years in prison and ordered him to pay $10,520,634 in restitution for defrauding hedge fund investors.

Yasuna Murakami has a 10-year history of hedge fund fraud dating back to 2007 when he established MC2 Capital Partners Fund. The fund was sold to friends and family members who invested over $3.5 million and lost most of their investments. In 2008, Murakami started a second hedge fund, MC2 Capital Value Partners Fund, which showed net losses for the first three years. In 2009, Murakami launched the MC2 Capital Canadian Opportunities Fund in Toronto with a well-known partner, Donville Kent Asset Management. Securities regulators say the association with Donville Kent encouraged many investors to invest in the fund, including a Boston institutional investor who invested $2 million. According to the report, Murakami used funds collected from investors through the Canadian Fund to pay Value Fund and Partners Fund investors their promised returns.

In 2017, Murakami was arrested and charged with investment fraud. He admitted to spending millions of dollars of investor funds on things that promoted his personal lavish lifestyle. He purchased a luxury sports car, designer clothing and expensive jewelry, air travel to international destinations, expensive hotel rooms at five-star hotels, and luxurious accommodations for his home. He took money from investors and placed investments in his own name, then made Ponzi scheme payments to investors. In court, Murakami admitted to withholding important hedge fund information and providing false information to investors, so they would think their investments were safe.

In the 2017 arrest, the SEC alleged that Murakami cost investors more than $8 million in losses by spending funds on his personal expenses. They also alleged that over $1.3 was spent in Ponzi scheme payments. Avi Chiat, Murakami's former business partner, was also charged for allegedly raising money from investors by providing them with falsified account statements that showed inflated investment performance.

If you were the victim of investment fraud, our attorneys at Meyer Wilson may be able to help. Call us at (800) 738-1960 to discuss your situation with a member of our firm today, or fill out our online form to set up a free case consultation. Our firm has secured more than $350 million in verdicts and settlements for our clients over the years, and we know what it takes to fight for and secure the maximum compensation possible. Don’t wait to get the legal help you need.

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Former Ohio Stockbroker Thomas E. Brenner, Jr., Accused of Participating in Nationwide Ponzi Scheme

Thomas Edward Brenner, Jr., who at one point worked out of a brokerage firm office in Orrville, Ohio, has been named as a defendant in a federal securities fraud case filed earlier this week by the U.S. Securities & Exchange Commission (SEC).

The case, which was filed in the U.S. District Court for the Southern District of New York, alleges that Brenner; his colleagues Perry Santillo, Christopher Parris and others; and various entities owned or controlled by Santillo and Parris, sold sham investments to 637 investors throughout the U.S. since 2011.

In addition to Brenner, Santillo and Parris, the SEC case also names Defendants Paul Anthony Larocco and John Piccarreto as parties. Also named are entities owned or controlled by Santillo and Parris, including First Nationle Solution, LLC, Percipience Global Corporation, and United RL Capital Services.

According to the SEC:

Defendants Santillo and Parris buy or take over books of business of retiring investment professionals from around the country. Then Santillo and Parris, or local sales people, including Defendants Piccarreto, LaRocco, and Brenner, persuade these newly acquired clients —their victims — to withdraw their savings from traditional investments and invest in issuers controlled by Santillo, Parris, or their associates, including Defendants First Nationle, Percipience, and United RL. The bulk of the more than $102 million raised in this fraud was purportedly raised for these three issuers.

However, the SEC states that “any business operations for each issuer appear to be limited or non-existent.” Instead, most of the investor funds were allegedly misappropriated and used to fund Defendants’ lavish lifestyles or, in classic Ponzi scheme style, to pay alleged “redemptions” to earlier investors.

The SEC accuses Brenner of selling securities in Percipience and United RL to Ohio customers. The SEC states that,

“Brenner has been a central figure in Ohio, where Santillo, Parris, and Brenner and potentially others raised at least $8 million from at least 74 investors since Apri1 2013.”

Regulatory records show that Brenner was registered as a stockbroker from 1986 until 2016. He was suspended for a number of regulatory issues, including making misrepresentations in connection with selling securities. He was then barred from the securities industry after he failed to appear for testimony requested by the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization that supervises brokerage firms and their employees.

From 2011 through 2016, Brenner worked for the brokerage firm First American Securities, Inc. In 2016, First American was accused by FINRA of violating various industry rules relating to the sale of private placements to brokerage firm customers. The regulator ordered First American to pay a fine of $150,000 and disgorge $190,000 in commissions. Although First American initially consented to the order, it failed to comply and was expelled from FINRA in March 2017.

If you lost money as a result of investments with United RL Capital, Percipience Global Corporation, First National Solution, John Piccarreto, Paul Larocco, Christopher Parris, Perry Santillo, Tom Brenner, or any other similar investments, please give the lawyers at Meyer Wilson a call today for a complimentary, no-obligation consultation.

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