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Articles Posted in Ponzi Schemes

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Boca-Raton-Oppenheimer-Employees-Settle-SEC-Investigation-300x208The CFTC, along with the Utah Department of Commerce, Division of Securities, through its Attorney General, jointly filed a civil enforcement action in the U.S. District Court for the District of Utah, Central Division. They filed against Gaylen Dean Rust and his business Rust Rare Coin (RRC). The complaint charges Rust and his company with committing fraud against approximately 200 individuals from Utah, and also from 16 other states. Rust allegedly obtained more than $170 million from investors since May 2013 in a precious metals ponzi scheme.

The complaint states that Rust’s fraudulent actions are ongoing. From January to August of 2018, Rust received $42 million from investors, which he claimed he used to buy and sell silver. He also allegedly attempted to solicit new investors recently.

On November 15, 2018, the U.S. District Court Judge for the District of Utah, Honorable Tena Campbell, entered a restraining order to freeze Rust’s assets and to permit the CFTC and State of Utah to inspect his records. Jonathan O. Hafen was appointed as a temporary receiver to take control of RRC and Rust’s assets.

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In August, we told you about John Cochran Maccoll (CRD #839441) who was barred by FINRA after multiple fraud allegations. Since then, there have been two additional developments.

Another customer has come forward and filed a complaint on 08/16/2018, alleging misappropriation of client funds from 10/01/2015 through 08/16/2018. The case was settled for $158,163.76. No additional information is available. This case is in addition to the previous cases we described in the earlier blog post.

The SEC Has Proposed New Regulations for Fiduciaries on silverlaw.comOn 8/9/2018, The U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against Maccoll in an action initiated by the United States Securities and Exchange Commission (SEC.) In it, the SEC detailed how Maccoll persuaded investors, mostly elderly, into investing in what he described as a “highly sought after private fund investment.”  These investors, most of them retired, used their retirement accounts to fund their alleged investments. In return, Maccoll promised a 20% return on investment, as well as diversifying their portfolios and better growth potential than their current investment portfolios.

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Back in June, we told you about five former brokers charged by the SEC when the agency shut down their Ponzi scheme worth $102 million.

What-Keeps-a-Ponzi-Scheme-Running-300x200Scott Silver recently spoke with Jennifer Cefalu of WHEC News in Rochester, NY, where two of the suspects lived and the scheme originated. The scheme was run by Perry Santillo, Jr. and Chris Parris, with Santillo headlining.

Santillo, Parris and three others recruited their investors by word of mouth, after buying client lists from brokers. Ultimately, 637 people were defrauded, many in the Rochester area. The entities they represented were not registered with any federal agency like the SEC or FINRA, nor were any of them registered brokers or investment advisors.

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There are many different types of investment and securities fraud scams designed to bilk investors out of millions of dollars. Sometimes even billions.

As was the case of one of the world’s most famous Ponzi schemers, Bernie Madoff, who is spending the rest of his life in prison.

Attorney Scott Silver, of the Silver Law Group says:

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The SEC has strict rules about how a broker-dealer operates, runs their business and keeps records.  Any variation from these rules can trigger a sanction or other regulatory process. Centaurus Financial has been the subject of multiple sanctions for various infractions and disputes filed by customers. For these regulatory sanctions, the company has paid over half a million dollars in penalties, fines and fees over the years. In some cases, there were no financial products involved or sold, only regulatory violations.

Centaurus has paid out over three million dollars in securities arbitration awards and judgments.

Attorney Scott Silver, of the Silver Law Group says:

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Hector May (CRD #323779) is a former registered broker and investment advisor, last employed with Securities America, Inc. (CRD #10205) of New York City. His previous employers include Prime Capital Services, Inc. (CRD #18334) of Poughkeepsie, NY, Equico Securities, Inc. (CRD #6627) and The Equitable Life Assurance Society Of The United States (CRD #4039) of New York City. He has been in the industry since 1973.

May has three disclosures filed this year. The first, on 03/08/2018, is an official criminal investigation by the US Department of Justice for a “suspected felony.”  No additional information is available.

On 3/9/2018, May was discharged from Securities America due to “Misappropriation of client assets.”

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Silver Law Group Managing Partner Scott Silver was again quoted in Investment News regarding the new charges by the SEC against the alleged real estate investment company Woodbridge.

“I think these types of investments are a massive problem, and it’s bigger than people give credence to,” Mr. Silver said. “Look at the ads in the back of the newspaper, or go to retirement conferences in South Florida. Companies there are pitching investments untethered to the stock market that are not securities.”

Ponzi-Schemes2-300x150Much like the recent bankruptcy of 1st Global, Woodbridge was found to be operating a huge Ponzi scheme worth approximately $1.2 billion (and is also located in Florida.) At the center of this operation are individuals acting as brokers and investment advisors. Many of these unregistered salespeople are former brokers and advisors who have been barred by FINRA after a customer complaint, employment separation or other unresolved administrative issue.

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Attorney Scott Silver was quoted in an article from Investment News regarding the recent bankruptcy filing by small business merchant service company 1st Global Capital, and a sister company, 1 West Capital.

Good News about Elder Financial Fraud? on elderfinancialfraudattorneys.comPrior to the bankruptcy, the SEC and the US Attorney’s office in the Southern District of Florida opened similar investigations into the companies. Court documents indicate that the companies used “independent sales organizations, underwriters and other funding agents” to find and secure investors. Once the investigations began, the company could no longer raise capital, and filed for Chapter 11 bankruptcy to protect assets and continue the business. (Another company called 1st Global, located in Dallas, is unrelated.)

Mr. Silver notes that the 1st Global case is “eerily similar” to a prior case, a Ponzi scheme by a company called Woodbridge. That company was charged in December, as well as its founder, Robert Shapiro. That scheme was worth $1.2 billion, and targeted 8,400 investors. Mr. Silver sees 1st Capital as “following the Woodbridge model,” using unregistered brokers nationwide to sell to investors.  It’s clear, Mr. Silver says, that investors, who are mostly mom-and-pop, will not be receiving any distributions. They’ve been left without the promised income, and wondering how much of their principal will be lost in the bankruptcy.

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Silver Law Group continues to investigate Perry Santillo Jr. (“Santillo”), founder and chief executive of High Point Wealth Management. According to a recent Investment News article, Santillo was barred by Maryland regulators for “dishonest and unethical trade practices,” that included selling unregistered securities by fraudulent means. Santillo allegedly solicited clients from an investment advisory business he acquired last year from its barred owner, Philip Rousseaux. Santillo faces almost $3.5 million in civil penalties and fines. Santillo acquired Everest Investment Advisors after its owner, Mr. Rousseaux, had his registration as an investment adviser revoked in March for deceptive securities sales practices. Mr. Rousseaux previously recruited clients through his popular infomercials featuring “The Money Guys.” Santillo, according to the order barring him, in November began soliciting former Everest clients through e-mails explaining how their transition would work in regards to their investments. He would then advise them to sell securities and transfer assets to a self-directed IRA. He also asked client to sell their annuities in face-to-face meetings. Then, Santillo would recommend the clients invest in unsecured promissory notes that were used to finance his own companies.

SWhat-Keeps-a-Ponzi-Scheme-Running-300x200antillo, Chris Parris and others are accused of running a massive Ponzi scheme and paying former stockbrokers and investment advisors to retire and send their clients to their companies.  Silver Law Group is assisting investors who were encouraged to liquidate retirement accounts and other investments to invest in the First Nationle Ponzi scheme.

Silver Law Group is representing investors in claims against their former advisors who recommended that their clients invest with Santillo, Chris Parris, Nationle or United RL.  Investors allege that their former advisors failed to inform them that their stockbrokers failed to tell them that they had received money for the recommendation or that their financial advisor had failed to conduct reasonable due diligence into Santillo and his partners.

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Following the SEC charging five individuals with fraud related to a Ponzi scheme, Bank of America (“BOA”) has now been sued over its involvement with the First Nationle scheme. The class-action suit on behalf of multiple investors who lost money alleges that BOA provided more than 100 accounts for the individuals to perpetuate their scheme.  Others charged in the scheme include Perry Santillo, Chris Parris, Paul LaRocco, Percipience and United RL.

Ponzi-Schemes2-300x150According to the complaint, the brother and sister that sued to recover losses from their late father’s investment allege that the fraudsters “could not have perpetuated their scheme without the knowing assistance of their primary banking institution, Bank of America, which lent the scheme an air of legitimacy and provided critical support, including at times when the scheme would have otherwise collapsed.”

After promising to invest the monies into profitable and dividend paying companies, they used the funds for lavish personal expenses and to pay “dividends” to other investors. The bank is accused of failing to catch their suspicious activity, which included transfers of large amounts of cash into accounts with small, negative or even non-existent balances, and then transferring the cash out in the same week. The money was transferred to their personal accounts, or to that of some of the investors. This fraud occurred over a period of time beginning in or about 2011. By not alerting authorities or putting a stop to the fraudulent activity, BOA assisted in the perpetuation of the scheme.

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