Former Westlake Investment Advisor Pleads Guilty to Stealing More Than $9.3 Million in Ponzi Scheme (DOJ Release)SEC Charges ICO Issuer and Founder with Defrauding Investors / Self-Proclaimed "Man behind the Machine" Diverted ICO Proceeds to Gold Mining in South Africa (SEC Release)Maryland Man Pleads Guilty to Stealing Over $120,000 from Bank Customer Accounts / Bank Detected Fraud Before Even More Money Was Stolen (DOJ Release)SEC Wins Judgment Against Georgia Individual Who Defrauded Investors in Real Estate Investment Scams (SEC Release)Former bookkeeper of a St. Louis accounting firm sentenced to prison for $670K fraud scheme (DOJ Release)
[B]runst was employed as a licensed investment advisor for co-defendant Raymond A. Erker in Westlake, Ohio. Beginning in January of 2013 and continuing through January of 2018, court records state that Brunst and the alleged co-conspirators engaged in a conspiracy that devised a scheme that stole approximately $9,366,976.37 from investors.As part of the scheme, members of the conspiracy sold investments to clients that they misrepresented as annuities and senior secured notes with no risk of loss and with a guaranteed rate of return. Without the approval or consent of investors, investor funds were diverted to other entities they controlled and personal bank accounts.Court records state that to keep up with promised rates of return, Brunst and the alleged co-conspirators falsely represented that payments to previous investors were rates of return and interest when the payments were actually new investor funds, the trademark of a Ponzi scheme.Additionally, Brunst and the alleged co-conspirators failed to disclose to investors that they had substantial or limited ownership interests in companies receiving investments from the scheme.To avoid detection, members of the conspiracy set up office fronts in Delaware and Nevada, contracted with call centers and created false websites and account statements that purported to show investor account balances
[B]ortnovsky served as a financial services professional for more than 20 years and Shapiro was an entrepreneur and founder of two privately held companies. From at least August 2017 to at least May 2019, it is alleged that Bortnovsky and Shapiro conspired to trade in the stocks of certain publicly traded companies, including At Home Group, Inc., Aphria, Inc., DSW, Inc. and Rite Aid Corp., among others, based on material nonpublic information (MNPI) regarding the earnings results and merger-and-acquisition activity of those companies. In many instances, Bortnovsky and Shapiro allegedly obtained the information from Schottenstein, who was a relative of one or more directors of these companies or of companies involved in proposed acquisitions of them. In another instance, Bortnovsky obtained the MNPI and shared it with Shapiro and Schottenstein.
David Schottenstein of Surfside, Fla. repeatedly obtained inside information and used it to trade in advance of an August 2017 DSW earnings announcement and a December 2018 tender offer to acquire Aphria. Schottenstein also allegedly received information and traded ahead of the February 2018 announcement of a merger agreement between Albertsons Companies, Inc. and Rite Aid. According to the complaint, Schottenstein obtained the information from a cousin who served on the board of directors of both DSW and the company that had attempted to acquire Aphria, and whose family owned a private business that was involved in the Rite Aid transaction. Schottenstein allegedly generated illicit gains of more than $600,000 in his personal brokerage accounts from these three market moving announcements and tipped two close friends, Kris Bortnovsky, also of Surfside, and Ryan Shapiro of Bay Harbor Island, Fla., who traded ahead of these announcements.Bortnovsky, who managed investment vehicles in which Schottenstein had invested, allegedly placed illicit trades for his investment management firm, defendant Sakal Capital Management, LLC, and one of its hedge funds, defendant Sakal U.S. Fund, LLC, in addition to trading in individual brokerage accounts owned by himself and another person. According to the SEC's complaint, Bortnovsky used these various accounts to trade ahead of all three announcements for total profits of more than $4 million. Shapiro allegedly traded Rite Aid and Aphria and reaped total profits of approximately $121,000.
Sproule, who referred to himself in social media postings as the "Man behind the Machine," claimed to have raised $40.7 million through his companies, collectively referred to as "Crowd Machine," in an initial coin offering of Crowd Machine Compute Tokens (CMCTs). In this offering, which occurred between January and April 2018, Sproule told investors that the ICO proceeds would be used to develop a new technology that would enable Metavine, Inc.'s existing application-development software to run on a decentralized network of users' own computers. Instead, Crowd Machine and Sproule began diverting more than $5.8 million in ICO proceeds to gold mining entities in South Africa - a use that was never disclosed to investors.The SEC also alleges that Crowd Machine and Sproule did not register their offers and sales of CMCT tokens with the Commission and knowingly sold CMCTs to "ICO pools"-groups of investors, including individuals in the U.S.-without determining whether the underlying investors were accredited.
[D]rummond admitted to orchestrating a scheme that was carried out in 2017 in which Drummond recruited bank employees who would make unauthorized withdrawals from Wells Fargo customer accounts. The bank employees used the bank's internal systems to check the account balances of customers without the customer's knowledge. Those employees then told Drummond the customer's name and account balance.Drummond then sent another accomplice into the bank to pose as the customer and to withdraw the funds, unbeknownst to the actual customer. The conspirators used this scheme to steal $124,000 in cash and an $80,000 cashier's check from two of the bank's customers. Although Wells Fargo was able to detect the theft and stop payment of the $80,000 cashier's check, Wells Fargo incurred losses on behalf of its customers for the $124,000 in cash that Drummond and others stole.
[K]abra told investors they could make double-digit returns with no risk by providing Kabra with short-term infusions of cash to be invested in one or more startup companies in which his company, LaunchByte, purportedly had an ownership interest. The complaint alleged that, upon receiving investor funds, Kabra diverted them almost immediately to his own use, including to pay for a boat Kabra had agreed to purchase, and, in other instances, to pay back earlier investors in Ponzi-like distributions. The SEC alleged that Kabra repeatedly lied to investors to keep them from discovering his fraud. On August 6, 2019, the court entered a temporary restraining order and asset freeze against the defendants.
[F]rom 2014 through 2017, Craig convinced at least six investors to invest over $1.3 million in two separate real estate investment schemes by promising high returns and misrepresenting that investor funds would be used for real estate investment projects or, for one investor, that funds would remain in escrow and used only to obtain a "proof of funds" to purchase a condominium property. Despite these promises, Craig almost immediately misappropriated investor funds, including by transferring funds to bank accounts that Craig controlled.
[F]rom 2012 to October 2020, Giltman and others engaged in an internet-based financial fraud scheme, which generally involved the creation of fraudulent websites to solicit funds from investors. At times, the fraudulent websites were designed to closely resemble websites being operated by actual, well-known, and publicly reputable financial institutions; at other times, the fraudulent websites were designed to resemble legitimate-seeming financial institutions that did not exist.Victims of the fraud scheme typically discovered the fraudulent websites via internet searches. The fraudulent websites advertised various types of investment opportunities, most prominently the purchase of certificates of deposit, or CDs.The fraudulent websites advertised higher than average rates of return on the CDs to lure potential victims. The fraudulent websites used a variety of means to appear legitimate and to gain and maintain the trust of prospective investors, including: (a) displaying the actual names and logos of real financial institutions; (b) purporting that the institutions were members of or regulated by the Federal Deposit Insurance Corporation (FDIC), Financial Industry Regulatory Authority (FINRA), the Securities Investor Protection Corporation, or New York Stock Exchange; (c) claiming that deposits made to the institutions associated with the fraudulent websites were FDIC-insured; and (d) using FINRA or FDIC member identification numbers issued to real financial institutions and real FINRA broker-dealers.After discovering one of the fraudulent websites, victims would contact an individual - identified in the information as Giltman - by telephone or email as directed on the sites. During his communications with victims, Giltman impersonated real FINRA broker-dealers by using their names and FINRA Central Registration Depository numbers. He would then provide the victims with applications and wiring instructions for the purchase of a CD. The funds wired by the victims would then be moved to various domestic and international bank accounts, including accounts in Russia, the Republic of Georgia, Hong Kong, and Turkey. None of the victims received a CD after wiring the funds.To date, law enforcement has identified at least 150 fraudulent websites created as part of the scheme. At least 70 victims of the fraud scheme nationwide, including in New Jersey, collectively transmitted approximately $50 million that they believed to be investments.
[G]iltman purchased internet ads targeting investors searching for CDs with high interest rates. The ads allegedly included links to phony websites Giltman helped create, many of which mimicked those of existing financial institutions, in order to offer investors fictitious CDs, which the websites falsely claimed were FDIC-insured. As alleged in the SEC's complaint, when investors called the phone numbers listed on the websites, Giltman impersonated registered representatives at the legitimate firms and instructed victims to wire funds to domestic or foreign bank accounts, purportedly to purchase the CDs. The SEC alleges that investor funds were then misappropriated as part of the scheme, with Giltman receiving a portion of the funds. The SEC also alleges that Giltman used a variety of methods to evade detection, including attempting to anonymize his digital footprint by using the identities of victims to register for online services used in the scheme.In March 2020, the SEC charged another alleged participant in the scheme, Denis Sotnikov.
Smith was a bookkeeper at an accounting firm that managed a lucrative trust account for a client (the D.E.W. Trust). The D.E.W. Trust, which was at one time valued at $8.6 million, had over twenty named beneficiaries, including twelve charitable organizations in St. Louis, Missouri. Between October 2013 and June 2018, Smith defrauded the D.E.W. Trust and its beneficiaries by writing numerous checks totaling $670,000 from the D.E.W. Trust to herself. None of the funds should have gone to Smith.
To conceal her scheme, Smith manipulated the accounting records for the D.E.W. Trust by mislabeling the fraudulent checks as being advance payments to a trustee and as payments to a vendor. As a result of these fraudulent transactions, there were less available funds to be properly distributed to the intended charitable organization beneficiaries of the D.E.W. Trust.Smith used the funds to personally enrich herself, including to buy a 2017 Chevrolet Silverado K1500 and a 2018 Keystone Hornet Hideout 26RLS Travel Trailer.
Ritchel Morehead pled guilty to one count of wire fraud as charged in an Information filed in the United States District Court for the Eastern District of Louisiana https://www.justice.gov/usao-edla/press-release/file/1460791/download As alleged in part in the DOJ Release:
The government filed a superseding bill of information that charged MOREHEAD with committing wire fraud from December 2018 through February 2019. According to court documents, MOREHEAD used a corporation, Chel Corporation, to defraud six victims by embezzling a total of $460,000 that was supposed to cover fees, costs, and down payments for multi-million-dollar loans, when in fact MOREHEAD spent the funds on personal expenses, such as jewelry and a vehicle, and transferred cash to accounts overseas. Under the terms of the plea agreement, MOREHEAD pled guilty as charged to the superseding bill of information and agreed to pay $460,000 in restitution to the victims of her scheme. The government has already seized $190,784.90 in cash and assets from MOREHEAD.
[F]rom May 18, 2011, through July 16, 2018, Martinez allegedly used his position as the Unit Supervisor/Bureau Chief of the Questionable Refund Unit at the New Mexico Taxation and Revenue Department to fraudulently alter tax refunds and direct them to bank accounts that he controlled.SEC Awards Over $13 Million to WhistleblowerMartinez perpetrated the fraud by copying tax returns that had already been processed or creating new returns in taxpayers' accounts. He altered information such as taxpayers' Social Security numbers, bank account numbers and withholding amounts in the returns. By changing the withholding amounts, he increased the amounts of the refunds. Martinez fraudulently directed $689,797 into accounts in his control.
[(1)] Claimant expeditiously provided significant information that alerted Commission staff to an ongoing fraud, prompting the opening of the investigation; (2) Claimant provided extensive assistance to Commission staff by meeting in person and helping the staff understand the mechanics of the fraudulent scheme and preparing a declaration to help the Commission obtain emergency relief; and (3) the law enforcement interest is very high, as Claimant's information and assistance helped the Commission shut down an ongoing fraud and return tens of millions of dollars to harmed investors.