Ponzi Scheme

Published on: November 14, 2023

SEC Charges Middlesex Mortgage Group and Masanotti with Running $5.9 Million Ponzi Scheme

The U.S. Securities and Exchange Commission (“SEC”) has alleged that unregistered investment adviser John A. Masanotti, Jr. (“Masanotti”) of Darien, Connecticut and his company, Middlesex Mortgage Group LLC (“MMG”), violated federal law in connection with investments that MMG induced from outside investors, totaling least $5.9 million, beginning in 2016. Many of the MMG investors allegedly liquidated securities they held in retirement accounts to invest in the fund.

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The SEC Complaint is accessible here. SEC Complaint

According to the SEC. MMG and Masanotti allegedly used investor money to make Ponzi-like payments to investors and also used some investor funds for Masanotti’s “extravagant personal expenses.”

Published on: August 31, 2021

Horizon Private Equity, III, LLC Allegedly Operated As A Ponzi Scheme, According To SEC Court Complaint

by InvestorLawyers

The United States Securities and Exchange Commission(“SEC”) has accused a Georgia investment adviser of operating a Ponzi scheme that the SEC alleges in its legal Complaint (accessible here SEC Complaint) filed in federal court has defrauded over 400 investors nationwide. The SEC Complaint alleges that investment advisers at a company called Livingston Group Asset Management Company, which does business as Southport Capital, persuaded investors to lend money to a company known as Horizon Private Equity, III, LLC (“Horizon PE”). The SEC alleges that investors in Horizon PE collectively are allegedly owed over $110 million in principal.

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“Investors trusted Woods and the Southport investment advisers working at his direction, and they stand to lose significant portions of their retirement savings when the Ponzi scheme inevitably collapses. The longer the scheme continues, the larger the losses will be for those left holding the bag,” the SEC Complaint states.

According to the SEC Complaint, advisers soliciting investments in Horizon PE allegedly told clients that they would receive returns of 6% to 7% interest, guaranteed for two to three years, and that their money would be used for nonspecific investments such as government bonds, stocks, or small real estate projects. According to the SEC Complaint, clients were not told that their money would be used to pay returns to earlier investors. The SEC also alleges that investors were told they could receive their principal investment back without penalty subject to a 30-day or 90-day waiting period. The SEC alleges that because Horizon did not follow any traditional record-keeping practices, millions of dollars’ worth of investor funds are currently unaccounted for.

Published on: October 2, 2019

James T. Booth, Former LPL Financial Broker, Arrested and Charged With Fraud

by InvestorLawyers

James T. Booth, a former LPL Financial broker, has been arrested and charged by U.S. authorities with securities and wire fraud in connection with his alleged operation of a Ponzi scheme. The scheme allegedly defrauded more than three dozen retail investors, including senior citizens saving for retirement, of nearly $4 million in assets.

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According to the indictment, accessible here u.s._v._james_booth_indictment, Booth, 74, solicited money from over 40 clients of his wealth management business known as Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts. The indictment alleges that, rather than investing the funds as represented, Booth instead misappropriated nearly $5 million to pay his own personal and business expenses. According to the indictment, from 2013 through 2019, Booth purportedly directed some of his clients to write checks or wire money to an entity named “Insurance Trends, Inc.” Booth then allegedly used the funds to pay personal and business expenses.

Under the federal indictment, Booth, of Norwalk, Connecticut, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of investment adviser fraud, which carries a maximum sentence of five years in prison, according to the Department of Justice press announcement.

Published on: November 2, 2018

Alleged Woodbridge Ponzi Schemer Robert Shapiro Fined $120 Million By SEC

by InvestorLawyers

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Robert Shapiro, the former chief executive officer of Woodbridge Group of Companies, has reportedly agreed to pay $120 million to the Securities and Exchange Commission to settle allegations he defrauded investors in an alleged $1.2 billion Ponzi scheme. Shapiro and his subordinates reportedly promised investors returns of as high as 10% from purported “hard money” loans to third parties. In reality, most of the “loans” were in fact extended to shell companies controlled by Shapiro that had no cash flows to repay the loans, and investors’ funds were instead commingled and used for other purposes.

Woodbridge, which is the subject on ongoing proceedings in Delaware bankruptcy court, received approval on October 29, 2018 for its plan of liquidation. Investors in Woodbridge securities reportedly will receive a refund of between 40-70% of their sums invested, depending on the type of investment and other factors.

Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of their losses through securities litigation or arbitration. Although so-called First Position Commercial Mortgages (“FPCMs”) and Woodbridge units are securities according to state and federal regulators, Woodbridge FPCMs were not registered as securities with government regulators as required by law, and in many instances were sold by unregistered, unlicensed persons.

Published on: August 29, 2018

EquityBuild SEC Complaint- Further Details of Alleged Ponzi Scheme

by InvestorLawyers

As recently reported, on August 15, 2018, the SEC initiated formal charges against Defendants Jerome Cohen, Shaun Cohen, and their companies — Equitybuild, Inc. (“Equitybuild”) and Equitybuild Finance, LLC (“Equitybuild Finance”) — in connection with the SEC’s efforts to halt a purported Ponzi scheme. As alleged in the SEC’s Complaint, “Since at least 2010, Defendants … have raised $135 million from more than 900 investors. Defendants raised these funds by falsely promising investors safe investments, secured by income-producing real estate, that generated returns of 12% to 20%.”

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According to the SEC, investors were allegedly defrauded in several ways. For example, the Defendants’ purportedly failed to disclose sizable up-front fees of 15-30% taken off the top of investor equity. In addition, the Defendants allegedly misrepresented the returns earned on various real estate deals, touting their “impressive returns” when, in actuality according to the SEC, investors sustained heavy losses on investments in predominantly South Side Chicago real estate deals. The SEC has further alleged that rather than inform investors of financial distress, father and son Defendants Jerome and Shaun Cohen, respectively, elected instead to continue “[t]o solicit investors with offers of safe investments and outsized returns.”

Equitybuild is structured as a Florida corporation. Since at least 2010, the company has solicited investments, promising returns that were to be generated through the purchase, renovation and development of Chicago real estate. Equitybuild Finance, f/k/a Hard Money Company, LLC, is structured as a Delaware limited liability company. Both companies were founded by Defendant Jerome Cohen, 63 years of age, and currently a resident of Naples, Florida. Defendant Shaun Cohen is a resident of New York, New York, and serves as the President and sole officer of Equitybuild Finance.

Published on: August 17, 2018

EquityBuild, Issuer of Purported Secured Notes, is a Ponzi Scheme, SEC Alleges

by InvestorLawyers

An issuer of purported secured notes backed by real estate has been sued by the Securities and Exchange Commission alleging that amid losses, it “devolved into a Ponzi scheme.” The group of companies, known as EquityBuild, solicited investors via Internet advertising, social media, and other methods, the SEC alleges. According to the SEC suit, EquityBuild and its leaders defrauded investors that invested in notes backed by South Side of Chicago real estate and other assets. EquityBuild affiliates “sustained heavy losses and the properties they pitched to investors failed to earn anywhere near enough to pay the promised double-digit returns,” the SEC complaint says. “As a result, (the EquityBuild) investment program devolved into a Ponzi scheme: Defendants could only pay earlier investors by raising funds from unwitting new investors.”

Jerome and Shaun Cohen, father and son, run EquityBuild and a subsidiary, EquityBuild Finance. EquityBuild allegedly has raised at least $135 million from more than 900 investors since 2010, according to the SEC suit, filed in federal court in Chicago. EquityBuild allegedly solicited investors to invest in debt used to finance properties. EquityBuild allegedly touted outsize returns of 12 to 20 percent with minimal risk of loss of principal. and downplayed the risks, according to the SEC complaint. The SEC alleges that EquityBuild, based in Marco Island, Florida, skimmed 15 to 30 percent off each investment through fees that the company and the Cohens didn’t disclose. EquityBuild also allegedly paid returns to older investors with the proceeds of newer investments, paying investors about $14.5 million in interest payments between January 2015 through February 2017 although income and fees from EquityBuild properties totaled only $3.8 million, according to the SEC suit.

It is unclear from publicly available information whether EquityBuild investments were sold by FINRA or SEC-registered financial advisors. Investors in EquityBuild may wish to consider claims against professionals such as stockbrokers, financial advisors, or insurance agents who sold them the investments, or any professional services firms (law firms, accounting firms, etc.) that may have materially participated in EquityBuild’s unregistered securities offering. As the SEC has alleged that the EquityBuild investments were securities that were not registered or exempt from registration, investors may be able to pursue claims against various third-parties that materially participated in these transactions.

Published on: August 10, 2018

1st Global Capital Targeted by SEC and U.S. Attorney’s Office in Investigation Concerning Alleged Fraud

by Michael J. Giarrusso

Money in Wastebasket On July 27, 2018, two affiliated small business lenders — 1 Global Capital (a/k/a 1^st Global Capital, and 1 West Capital (collectively, “1GC”) — filed for Chapter 11 protection in Bankruptcy Court in the Southern District of Florida. Based in Hallandale Beach, FL, the two affiliated lenders are under the same common ownership and are in the business of purportedly providing small business loans known as “direct merchant cash advances,” to various clientele. In connection with the bankruptcy filing, 1GC’s two primary executives, Messrs. Carl Ruderman and Steven A. Schwartz, relinquished their control over the company and tendered their resignations.

As reported, 1GC had around 1,000 individual unsecured creditors prior to filing for bankruptcy. These creditors had loaned 1GC money with the understanding that these funds would then be invested in direct merchant cash advances. Creditors received monthly statements which demonstrated how their investments had supposedly been allocated, in addition to being provided with an online portal to track their investments.

In total, 1GC has reported more than $283 million in unsecured lender claims. Of the 20 largest creditors, all of them are individuals or retirement accounts. Prior to the bankruptcy filing, the SEC had opened an investigation into whether 1GC was engaging in “[p]ossible securities laws violations, including the alleged offer and sale of unregistered securities by unregistered brokers, and by the alleged commission of fraud in connection with the offer, purchase and sale of securities.” At this stage, both the SEC and the U.S. Attorney’s Office for the Southern District of Florida, which recently commenced a parallel criminal investigation, are investigating allegations of possible wrongdoing or malfeasance at 1GC.

Published on: July 27, 2018

SEC Alleges Financial Visions, Colorado-Based Funeral Financing Business, Operated as Ponzi Scheme

by InvestorLawyers

Piggybank In A Cage The Securities and Exchange Commission (“SEC”) has filed a fraud lawsuit in federal court in Colorado against a group of companies known as “Financial Visions” and their principal, Daniel B. Rudden (“Rudden”), who allegedly bilked at least 150 investors in a $55 million alleged Ponzi scheme.

The SEC’s complaint charges that Rudden, operating under the name Financial Visions and through a group of companies, issued promissory notes to fund a line of business involving providing financing for funeral services and related expenses to consumers. The SEC alleges that Rudden/Financial Vision defrauded as many as 150 investors after promising them annual returns of 12% or more. Since 2010 or 2011, Rudden allegedly used new investor funds to pay interest and redemptions to existing investors and concealed the Financial Visions companies’ true financial performance and condition.

The SEC Complaint is accessible here.

Published on: June 28, 2018

SEC Files Complaint against Suspended Broker John Piccarreto, Jr. in Connection With $102 Million Ponzi Scheme

by InvestorLawyers

Money in Wastebasket On June 19, 2018, the Securities and Exchange Commission (“SEC”) filed a Complaint against various individuals and entities — including former financial advisor John Charles Piccarreto, Jr. (CRD# 6276418) of San Antonio, TX — in furtherance of the SEC’s efforts to “stop an ongoing fraudulent scheme in which the Defendants have raised more than $102 million from at least 637 investors across the United States since 2011.” As alleged by the SEC, Defendants Perry Santillo and Christopher Parris of Rochester, NY purportedly orchestrated a fraudulent Ponzi-like scheme predicated upon first buying or taking over books of business from retiring investment professionals from around the country.

According to the Complaint, after acquiring new investors and assets, Messrs. Santillo and Parris (each formerly registered with FINRA) would coordinate their sales efforts with Defendants, including John Piccarreto, Jr., in order to allegedly persuade victims into withdrawing savings from traditional investments, in order to transfer the capital into issuers controlled by Messrs. Santillo, Parris, or certain of their associates. The SEC has alleged that the Defendants would “falsely claim that their investors’ money [would] be used to operate businesses in fields such as financial services, insurance, real estate development, and medical laboratories.” In actuality, however, the SEC has alleged that Defendants would transfer funds received into “multiple accounts held in the names of different entities” controlled by Defendants. While some of the funds were purportedly used to repay investors in typical Ponzi-fashion, the SEC has alleged that the bulk of the monies were misappropriated by the Defendants.

With regard to Mr. Piccarreto, the SEC has alleged that, in one instance, he met with an elderly investor from Austin, TX in February 2015. As alleged, Mr. Piccarreto convinced the 80 year old investor, who suffered from dementia, into putting $250,000 into an entity controlled by Defendants: Percipience. Mr. Piccarreto later emailed the investor’s daughter, in response to her concerns with the Percipience investment, that “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to any of the money.” In total, the SEC has alleged that Mr. Piccarreto misappropriated approximately $1.3 million in investor money.

Published on: June 28, 2018

Alan H. New Allegedly Sold Unregistered Woodbridge Investments While Employed By NYLife Securities

by InvestorLawyers

woodbridge mortgage funds Investors in Woodbridge Units or Notes, as further defined below, who purchased a Woodbridge investment based upon a recommendation by former financial advisor Alan Harold New (CRD# 2892508) may be able to recover losses through securities arbitration. Publicly available information through FINRA BrokerCheck indicates that Alan New was formerly affiliated with broker-dealer NYLife Securities LLC (“NYLife”) (CRD# 5167) in their Fort Wayne, IN office, from June 2004 – August 2016.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) and certain of its affiliated entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) on December 4, 2017. Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, unlicensed advisors, as well as various licensed financial advisors, including Mr. New. Woodbridge investments essentially came in two forms: (1) so-called “Units” that consisted of subscriptions agreements for the purchase of an equity interest in one of Woodbridge’s Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” that consisted of lending agreements underlying purported hard money loans on real estate deals.

As alleged by the SEC, Woodbridge and its owner and former CEO, Mr. Robert Shapiro, purportedly “used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.” According to Steven Peiken, Co-Director of the SEC’s Enforcement Division, the Woodbridge “[b]usiness model was a sham. The only way that Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”