Tag Archives: Ponzi schemes

Real Estate

Sacramento Man is Sentenced to 18 Years in Prison for Ponzi Scheme

Charles Ponzi the man from whom the name "Ponzi Scheme" comes from.
Charles Ponzi, the man from whom the term “Ponzi Scheme” came from.

SACRAMENTO – In a case prosecuted by the state Department of Justice, William Arthur Sassman II, who looted the life savings of dozens of investors to bankroll his own lavish lifestyle and finance his own investments, was sentenced today to 18 years in prison.

Sassman convinced people who had painstakingly saved for their retirement that he could make a lot of money for them. Instead he used their money for his fine clothing, his expensive cars, his several homes and his own illegal investments.

Sassman, 42, of Sacramento, appeared in Sacramento County Superior Court today where he had previously entered a guilty plea on 13 felony counts of grand theft.

Judge Lloyd G. Connelly sentenced Sassman to prison and ordered him to pay more than $4.45 million in restitution to 48 victims. No funds have been found, however, and it is unlikely victims will receive repayment.

An investigation by agents of the Department of Justice revealed that Sassman, a licensed insurance agent, operated a Ponzi scheme starting about 10 years ago in which he repaid current investors with money from new investors.

Using a book he wrote, “Secrets of a Worry Free Retirement,” Sassman convinced investors, many of whom were senior citizens, to shift their life savings to “high return” investments. These investments included foreclosed properties and real estate on Mare Island (Vallejo) and in other states, commercial property in El Dorado Hills near Sacramento, the production of a laptop computer stand called the “Notefloat,” which never sold, and annuity, stock and foreign currency investments.

Read the rest of the article Office of Attorney General

Real Estate

Attorney Scott Rothstein Arrested in $1.2 Billion Ponzi Scheme

Scott Rothstein in his office
Scott Rothstein in his office

How many Ponzi schemes can there be? I don’t know, but it seems like every day another one is discovered.  Here’s one in Fort Lauderdale, Florida, where attorney Scott Rothstein’s suspected  Ponzi scheme  may have taken  $1.2 billion from investors. One investor  calls it a “tragedy” who says he is at risk for tens of millions of dollars. The scandal has sent lawyers, investors, and politicians alike in a tizzy while investigators are scrambling to learn exactly how much money has been lost.

Rothstein, a partner of the law firm Rothstein Rosefeldt and Adler, is suspected of running a covert investment scheme on the side and may have walked away with “substantial sums” put up by investors, according to a lawsuit brought by his partner, Stuart Rosenfeldt.

In what federal authorities say is the biggest fraud case in South Florida history, the 47-year-old faces five counts of racketeering and fraud related to his alleged scheme. Prosecutors say Rothstein ran the scheme out of the 70-lawyer Fort Lauderdale law firm where he was CEO, swindling his own friends and clients. He allegedly forged federal court documents, including judges’ signatures to make his investors believe the settlements they were buying into were legitimate

He once graced the society pages of local newspapers and gave big to Florida politicians, but on Tuesday, Fort Lauderdale attorney Scott Rothstein was arrested on federal fraud charges, accused of running a $1.2 billion mini-Madoff Ponzi scheme. If convicted, he could be sentenced to up to 100 years in prison. How did he spend all that money? Well, the fed’s grabbed $60 million of his toys, including  20 luxury cars, 15 real-estate properties, an 87-foot yacht, 304 pieces of jewelry and $12 million stashed in Moroccan banks

Click HERE to read the federal charges against Rothstein.

Source: ABC News

Real Estate

Reed Diehl Sentenced to 57 Months in Federal Prison

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Reed Diehl
Reed Diehl

Reed Diehl, a former University of California lineman has been sentenced to 57 months in federal prison for his role in a $5 million Ponzi scheme. What’s with all these people getting away with Ponzi schemes?  Anyhow, 57 months in prison, $5 million take, equals a wage of $87,720 a month. Seems like a light sentence for stealing that much money.

According to an FBI press release in July of this year:

SANTA ANA, CA—A former player with the Tennessee Titans pleaded guilty this afternoon to federal fraud charges related to a $5 million Ponzi scheme in which he collected funds with promises of high rates of returns on investments in loan programs, including multimillion dollar condominium projects in Mexico.

Reed Kyle Diehl, 30, of Coto de Caza, pleaded guilty this afternoon in United States District Court to three counts of wire fraud and one count of money laundering.

According to a plea agreement in the case, Diehl falsely represented himself to potential clients as a banker who made “hard money loans” to businesses or individuals. Diehl also admitted that he fraudulently collected deposits for lines of credit for people who desired financing for construction and development projects in Mexico.

In relation to the “hard money loans,” Diehl told investors that he would pool their funds and make secured loans to individuals or businesses that had shortterm cash needs. Instead of using investor funds to make loans, he used investors’ money to repay earlier investors and to fund his lifestyle.

In relation to the second part of his scheme, Diehl told victims involved in construction projects in Mexico that he could secure multimillion dollar lines of credit. Diehl told one victim that it would cost $1.175 million to secure a $24 million loan and that the deposit would be used as collateral for the line of credit. The victim eventually paid Diehl $2.5 million, money that Diehl used to pay, among others things, other people who had made investments with Diehl. None of the victims ever obtained a line of credit through Diehl.

In his plea agreement, Diehl admitted that he caused losses of just over $5 million.

Diehl pleaded guilty before United States District Judge David O. Carter, who is scheduled to sentence the defendant on September 28. At sentencing, Diehl faces a statutory maximum sentence of 20 years in federal prison for each of the three counts of wire fraud and 10 years in prison for the money laundering count.

Diehl was initially charged and arrested in this case in March 2008. After being freed on bond, Diehl’s bond was revoked in January after he attempted to enter into a real estate transaction for a $3.5 million house using a false name and someone else’s social security number.

The investigation into Diehl was conducted by the Federal Bureau of Investigation.

Remember, if you are promised high returns on your money that seems too good to be true, yep, run for the hills.

Education, Real Estate

Madoff’s Gone But Ponzi Schemes Continue to Flourish

ponzi-snake
Picture from Rebecca Harshbarger

I write a lot of blogs on Ponzi schemes because I know several local people who have been bitten by such a scheme.  I guess it’s kind of easy for some people to fall for a Ponzi scheme so here are some guidelines to watch out for so you don’t become a victim.

What gives Ponzi schemes such appeal to investors? Alabama Securities Commissioner Joe Borg ticks off several draws.

“For the 40- to 50-year-old crowd, there’s the fear that the Social Security umbrella won’t be there,” he says. To make enough to retire, they figure they have to turbocharge their investments — and that plays right into the hands of the Ponzi scammer. “Fear is one hell of a motivator.”

For retirees, the problem is low interest rates. The average one-year bank CD yields just 0.95%, Bankrate.com says. A $100,000 CD gives you just $142 a month in interest.

Retirees find they can’t live off the interest from their savings, and that they have to dip into their principal. “They can’t make any money, and they think they’re going to outlive their savings,” Borg says.

Ponzi scammers can use other methods to get people to invest. Madoff used affinity: He scammed the wealthy. He also used religion: Many of his investors were Jewish.

In the South, many Ponzi scammers use their church affiliations, Borg says. “When you have God on your side, what can go wrong?”

What’s particularly insidious about Ponzi schemes is that many people, particularly the elderly, have a hard time admitting they made a mistake, even when the whole scam starts to unravel.

“There’s this fear that if the kids find out, it’s going to indicate I can’t handle my own affairs,” Borg says. Sometimes, older investors would rather lose the money than lose their independence.

The recent burst of Ponzi schemes has federal and state authorities on alert.

“There’s a significant increase in Ponzi scheme cases this year,” says Scott Friestad, associate director of the SEC’s division of enforcement. “From our perspective, size isn’t important. We’re aggressively pursuing Ponzi schemes regardless of size, because the sad truth is that for those caught up in them, they’re losing most if not all of their money.”

The free-lunch warning sign

How can you keep yourself away from Ponzis? Start by investigating anyone who offers an investment scheme that seems too good to be true. (Be particularly wary of those who offer free lunches while they make their pitches.) The Financial Industry Regulatory Authority’s website, finra.org, has a broker check section so investors can type in a broker’s name or firm and see any complaints that have been lodged.

But don’t stop there. FINRA’s database reported no such problems with Bluestein. It did, however, report problems with the brokerage firms he worked for.

Other steps:

•Check the broker’s record with your state securities administrator. You can find how to contact your state securities administrator at www.nasaa.org. Ask for all materials from the Central Registration Depository (CRD) about your prospective stockbroker. For investment advisers, ask for all materials from the Investment Adviser Registration Depository (IARD).

•Check investment advisory firms with the Securities and Exchange Commission at www.sec.gov. “There’s an online complaint center,” Friestad says. “I’m confident that someone will follow up quickly.”

What victims should do

If you think you’ve been scammed, contact your state securities administrator as soon as possible. They can shut down a scammer quickly: And the sooner they act, the greater chance you have of recouping some of your money. But it’s best to avoid a scam entirely.

It’s easier said than done. Con artists will say anything to part you from your money. And they know exactly what to say: “They’re safe, they’re guaranteed, they’ll make up for everything you didn’t save for the past 30 years,” Borg says. But in the end, the Ponzi always collapses and its investors wind up with nothing.

This article was published for educational purposes.

Source USA Today

Business

Bernard Madoff, King of Ponzi

This chart shows how a pyramid scheme (also known as a Ponzi scheme) is impossible to substain.
This chart shows how a pyramid scheme (also known as a Ponzi scheme) is impossible to substain.

Bernard Madoff, the king of Ponzi, sits in jail for the next 150 years, or at least until he dies, whichever comes first. In the meantime, Irving Picard, the court appointed trustee, also known as the liquidator, is searching for the billions of dollars that disappeared.

Where did the money go?  Madoff sent out statements to his “investors” that the fund was worth 64.8 billion dollars. According to Mr. Picard’s chief counsel David Sheehan, the statement was total lies.  The statement of 64.8 billion dollars was an illusion to keep investors investing.

According to CBS 60 Minutes:

“Asked how much real money went into the whole scheme, Sheehan told Safer, “I’d say about $36 billion. And about 18 of it went out before the collapse. And 18 of it is just missing. And that $18 billion is what we’re trying to get back.”

So for the past nine months, Picard and his team have been on a global treasure hunt. The first step: liquidating Madoff’s boats, his art, even his season tickets to the New York Mets, plus Bernie’s various homes, all sold or about to be sold with a U.S. Marshal as real estate pitchman.

“They didn’t exactly hide their wealth, did they?” Safer asked.

“They did have the house in Palm Beach. They had a place in Montauk. They had to have, you know, an apartment here on Park Avenue in the city – all of which are the accoutrements of great wealth. But it wasn’t an extraordinary lifestyle,” Sheehan said.

According to the government, those homes, boats, art and more are worth over $50 million.

That’s just a drop in an oversized bucket, nothing close to what investors lost. So Picard and his team continue to follow the money.

They started at Madoff’s New York offices, now an impressive landscape of emptiness.

And close by, perhaps a work of art that sums up the entire story: “It was called the ‘Soft Screw.’ And it was about four, I guess four to six feet high. And it was sitting right here,” Picard explained, describing a screw-like sculpture that used to be displayed in Madoff’s office.

And sitting on top of the world was Madoff himself. “He was much like the Wizard of Oz, just hiding behind this wall. And no one could quite penetrate it but they sort of really liked the results,” Sheehan said”

It looks like the “soft screw” turned out to be a total reaming.

Business

SEC Family Members Loses $2 Million to Bernard Madoff

Bernard-Madoff

Sept. 7 (Bloomberg) — Family members of a U.S. Securities and Exchange Commission enforcement official, whose unit got a tip in 2005 that Bernard Madoff may be running a Ponzi scheme, entrusted $2 million to the scam, the agency’s watchdog said.

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 The anonymous e-mailed tip to the Office of Internet Enforcement was among at least six “substantive complaints” the SEC didn’t fully investigate during 16 years, Inspector General H. David Kotz said Sept. 4 in a report released before he testifies before the Senate. Investments by two of the official’s relatives were disclosed as a footnote in the 457- page report, which doesn’t identify him or specify losses. He wasn’t part of any Madoff probe, Kotz noted.

Kotz’s eight-month inquiry offers the most exhaustive look yet at how the agency missed chances since 1992 to detect a $65 billion fraud that burned thousands of investors. The inspector faulted the agency for inadequately pursuing tips, assigning inexperienced staff to conduct reviews and failing to seek trading records that would have revealed the scam.

“It is a failure that we continue to regret, and one that has led us to reform in many ways how we regulate markets and protect investors,” SEC Chairman Mary Schapiro said in a statement. “In the coming weeks we will continue to closely review the full report and learn every lesson we can.”

Read the entire story: bloomberg.com

Real Estate

Mini-Madoff, Used Investors Money for Real Estate and Porn

Ponzi scheme chart, why Ponzi schemes don't work
Ponzi scheme chart, why Ponzi schemes don't work

How about this, a man in New York has been operating a $40 million Ponzi scheme for 31 years. This is a mini-Madoff except that Madoff only lasted 20 years, and Philip Barry, 52, ran the scam without detection for 31 years. He invested the money in real estate and a mail order porn business.

What’s interesting, in both Madoff and Barry’s downfall was the economy. Even more interesting if you can call it that, both were never caught by SEC, but turned themselves in. In both cases, the downfall of the economy led to the downfall of their Ponzi schemes. Money started to run out, so they turned themselves in. What, no money, they develop a conscience?

Prosecutors said that Mr. Barry started his scam in 1978. Bernard Madoff’s $65 billion scam ran for at least 20 years. He was jailed in June for 150 years.

Investigators said they learned of the scheme when Barry turned up at the U.S. Attorney’s office in Manhattan in August of 2008 and asked to speak to a prosecutor. They said Barry acknowledged that, for years, he had been paying off his guaranteed profits by taking money from some customers to cover withdrawals made by others.

Working from a small office in the Brooklyn neighborhood of Bay Ridge, far from the city’s financial center, Barry claimed to be investing in stock options and guaranteed his neighborhood clients solid returns.
But in reality, investigators said, Barry was using much of the money to speculate on real estate. He bought an office building in Brooklyn and big tracts of undeveloped land upstate.

Authorities said he hid the scheme by feeding his customers financial statements boasting of hefty profits that didn’t exist. Sounds familiar, Madoff used the same tactics.

Some of the cash was used to pay for Mr. Barry’s own expenses at restaurants and petrol stations and to maintain the approximately 60 properties he had bought, prosecutors said.

Other funds were diverted to a mail-order business called Barry Publications, which sold pornographic materials

“It’s all in real estate,” Barry said. “I’m going to keep on working to make sure everyone gets the profit they are entitled to.”

Investors have sued Mr. Barry for the return of their cash but are unlikely to receive the bulk of it back. The properties owned by Leverage Group are thought to be worth slightly over $1 million in total. At least 19 of the properties are in foreclosure.

How did this all happen? A promise of high returns on investment, promising 12% to 20% return on money invested. If it’s too good to be true, it’s not true. People’s greed gets them every time.