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The following is a follow up to a June 2020 article issued by Sage Investigations, LLC, regarding Ponzi Schemes. https://www.sageinvestigations.com/articles/why-do-we-continue-to-see-ponzi-schemes-in-the-news/
According to the Securities and Exchange Commission’s complaint from 2017 to 2019, Georgia state legislator Clarence Dean Alford fraudulently raised at least $23 million by selling promissory notes to at least 100 investors – primarily Indian-American professionals – that he guaranteed would provide high annual rates of return. https://www.sec.gov/litigation/complaints/2020/comp-pr2020-168.pdf. According to the complaint, Alford presented Allied Energy Services LLC as a successful business when in fact, it was struggling and claimed that investors’ funds would finance energy projects while using most of the funds to make interest payments to earlier investors and for personal expenses, including building a multimillion-dollar home. In 2019, Alford’s alleged scheme collapsed when he failed to make promised interest payments to several investors and then failed to repay the investors’ principal. https://www.sec.gov/news/press-release/2020-168
The Securities and Exchange Commission recently charged David Hu, the co-founder, and chief investment officer of International Investment Group LLC (IIG), a former registered investment adviser, with fraud for his role in a $60 million Ponzi-like scheme. According to the complaint https://www.sec.gov/litigation/complaints/2020/comp-pr2020-157.pdf, Hu grossly overvalued the assets in IIG’s flagship hedge fund, resulting in the fund paying inflated fees to IIG. Also, through IIG, Hu allegedly sold at least $60 million in fraudulent trade finance loans to other investors and used the proceeds to pay the redemption requests of earlier investors and other liabilities. The complaint alleges that Hu deceived IIG clients into purchasing these loans by directing others at IIG to create and provide to the client’s fake loan documentation to substantiate the non-existent loans, including counterfeit promissory notes and a forged credit agreement. https://www.sec.gov/news/press-release/2020-157.
The U.S. Attorney for the Southern District of California issued a press release regarding Gina Champion-Cain San Diego business leader, restauranteur and real estate magnate, plead guilty in federal court today, admitting she committed securities fraud by masterminding a massive, years-long Ponzi scheme with hundreds of victims throughout California and the United States. https://www.justice.gov/usao-sdca/pr/san-diego-business-leader-pleads-guilty-masterminding-400-million-ponzi-scheme.The federal investigation revealed a $400 million Ponzi scheme in which she raised money from investors by promising to use their money to make loans to business owners who were attempting to acquire California liquor licenses.
Most times, the charges in the SEC complaints are for violating the antifraud provisions of the federal securities laws and seeks permanent injunctive relief, disgorgement, and civil penalties. In a parallel action, the U.S. Attorney’s Office with the aid of the IRS Criminal Investigation and the FBI for the relevant federal district investigate and file criminal charges, including wire fraud, mail fraud, money laundering, and other charges.
The Securities and Exchange Commission has issued a Red Flags of Investment Fraud Checklist. https://www.investor.gov/protect-your-investments/fraud/how-avoid-fraud/red-flags-investment-fraud-checklist But how to get investors to pay attention is the question! Can you spot the warning signs of investment fraud?
Protect your investments by watching out for these red flags:
🇲🇪 Unlicensed investment professionals
🇲🇪 Aggressive sellers who may provide exaggerated or false credentials
🇲🇪 Offers that sound “too good to be true”
🇲🇪 “Risk-free” investment opportunities
🇲🇪 Promises of great wealth and guaranteed returns
🇲🇪 “Everyone is buying it” pitches
🇲🇪 Pressure to invest right now
🇲🇪 Over-the-top, sensational pitches that may have fake testimonials
🇲🇪 Unsolicited pitches seeking to obtain your personal information
🇲🇪 Asked to pay for investments by credit card, gift card, or wiring money abroad or to a personal account
Three ways to avoid fraud:
🇲🇴 Ask questions of the promoter
🇲🇴 Research every investment opportunity thoroughly before you invest
🇲🇴 Conduct a background check on any investment professional at https://www.investor.gov/
Also, hire a professional private investigator to research the promoter thoroughly. Don’t give your hard-earned money to someone you do not know based on over the top promises.
Before making major investment decisions hire an expert to look into the individuals and the entities involved thoroughly. The minor cost of the research could enable you or your client to save your money for a better, more secure investment. It could also save you years of headaches and the cost of lawyers to sue for your money to be returned. Also, in my opinion, individual investors must protect themselves; law enforcement in most states are overwhelmed by the amount of fraud in their jurisdiction and are very selective in their pursuit of fraudsters.
To learn more about helping your client, contact retired IRS Special Agent Edmond J. Martin, Chief Investigator at Sage Investigations, LLC email edmartin@sageinvestigations.com or call 512-659-3179 for a free 20- minute consult. Visit our website www.sageinvestigations.com and review our team and their CV’s.
