PonziScams.com Schemes & Due Diligence

The Securities and Exchange Commission has obtained an emergency court order freezing the assets of the alleged perpetrator of an Internet fraud scheme that reaped approximately $72 million from more than 3,000 investors in all 50 states and at least 30 foreign countries.

The SEC alleges that from December 2005 until at least November 2007, Gregory N. McKnight of Swartz Creek, Mich., and his company, Legisi Holdings LLC, sold unregistered securities through a Web site by representing that he would invest the offering proceeds in foreign currencies, commodity futures, stocks, and real estate. He promised to pay interest as high as 15 percent per month out of the profits from his investments. Throughout the offering period, McKnight represented to investors that his investments were profitable and were generating the promised returns. But McKnight invested approximately $33 million, less than half the money he raised, on behalf of investors. Those investments suffered substantial losses. Furthermore, nearly $30 million of the investors’ funds were allegedly dissipated through an unlawful Ponzi scheme and unauthorized personal expenditures by McKnight. The SEC froze millions of dollars of remaining assets controlled by McKnight and Legisi Holdings on behalf of the injured investors.

“This emergency action demonstrates that the Commission can and will move quickly to secure and preserve assets for the benefit of all investors, both in the United States and internationally,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

“As alleged in our complaint, McKnight lured investors from around the globe into investing by claiming on his Web site that the Legisi program was legitimate and unlike other ’scams’ and ‘high yield investment programs’ that you see on the Internet. In fact, McKnight’s Legisi program was just that, a scam from beginning to end,” said Merri Jo Gillette, Regional Director of the SEC’s Chicago Regional Office.

On May 5, 2008, the Honorable Judge Paul V. Gadola of the U.S. District Court for the Eastern District of Michigan issued an Asset Freeze Order against all assets of McKnight and Legisi Holdings, LLC, as primary defendants, and against all assets of McKnight’s affiliates, Legisi Marketing, Inc., Lido Consulting, LLC, Healthy Body Nutraceuticals, and Lindenwood Enterprises, LLC, which were named as relief defendants based on their alleged receipt of investor funds. In addition, Judge Gadola issued an order appointing a receiver over all assets of McKnight, Legisi Holdings, and the affiliates.

The court issued the freeze and receivership orders under seal while the assets were being secured, and the seal has now been lifted.

The SEC alleges that the defendants used approximately $27.5 million of the offering proceeds to make payments of purported profits to prior investors in a Ponzi scheme, and McKnight used $2.2 million of investor funds to pay for his personal expenses and to make payments to his relatives.

The SEC action also seeks recovery of the assets McKnight allegedly transferred to his relatives, including his daughter Jennifer McKnight, his niece Danielle Burton, and Danielle Burton’s mother Theresa Burton, all of whom were named as relief defendants based on their receipt of investor funds.

The SEC’s complaint charges the defendants with an unregistered securities offering and securities fraud in violation of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition to the emergency relief already obtained, the SEC’s complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains and civil penalties against McKnight and Legisi Holdings, as well as disgorgement of ill-gotten gains from the relief defendants. A hearing on the SEC’s request for a preliminary injunction is scheduled for May 19, 2008 at 2 p.m.

The SEC acknowledges the assistance of Michigan’s Office of Financial and Insurance Regulation, the U.S. Secret Service, and the Commodity Futures Trading Commission in this investigation.

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For more information, contact:

Tim Warren
Associate Regional Director, SEC’s Chicago Regional Office
(312) 353-7394

Kathryn Pyszka
Assistant Regional Director, SEC’s Chicago Regional Office
(312) 353-7416

The Securities and Exchange Commission announced today that it filed a civil action in the United States District Court for the District of Colorado based on an ongoing fraudulent scheme operating under the names American Investors Network (“AIN”), Fairweather Management, and Access Funding. The Commission charged Jarrod W. McMillin, Laurence Young, Anne B. Liebermann, and Jason A. Kolakowski, all of whom live in the Denver area, and Innovative Projects, Inc., an Arkansas corporation controlled by McMillin, with conducting a “Ponzi” scheme by paying purported returns to early investors using money provided by later investors. The Commission charged all of the defendants with violating the antifraud and securities offering registration provisions of the federal securities laws. The Commission also charged each of the individual defendants with violating the broker-dealer registration provisions of the federal securities laws. On the Commission’s application, the Court issued a Temporary Restraining Order, Asset Freeze and Other Equitable Relief, and Order Setting Preliminary Injunction Hearing (“Order”).

In its Complaint, the Commission alleges that, from approximately February 2007 through the present, McMillin and Innovative, doing business as AIN, and Young, doing business as Fairweather and Access Funding, raised up to $2.9 million from investors. They solicited investors by misrepresenting that they would use invested funds to purchase advertising for a variety of products AIN and Fairweather purportedly sold. However, investor funds were not used to advertise or sell these products. According to the Complaint, McMillin and Young instead used investor money to pay other investors, pay commissions to salespeople, and for their personal expenses, among other things. The Commission alleges that Liebermann and Kolakowski acted as salespeople for the Ponzi scheme and, with McMillin and Young, continued to solicit and lull investors through November 2007. The Complaint also alleges that all of the defendants participated in unregistered offers and sales of securities, and that McMillin, Young, Liebermann, and Kolakowski acted as unregistered broker-dealers.

The Complaint claims that, based on this conduct, all of the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Complaint also claims that McMillin, Young, Liebermann, and Kolakowski violated Exchange Act Section 15(a). Among other things, the Court’s Order prohibits McMillin and Young, pending a hearing, from disposing of any assets and prohibits financial institutions holding these defendants’ assets from allowing any withdrawals. The Order also requires that the defendants notify the Court of each account they hold with a financial or brokerage institution.

http://www.sec.gov/litigation/litreleases/2007/lr20415.htm

Looks like Trevor Reed and Clayton Kimbrell decided to use their Fifth Amendment right not to incriminate theirselves while giving testimony to the receiver of CEP.

“I took the depositions of Clayton Kimbrell and Trevor Reed today in Atlanta, Georgia in the bankruptcy cases and adversary proceedings filed in the Bankruptcy Court thus far. A deposition is a sworn statement given in response to questions by opposing counsel and taken down by a court reporter for potential use as evidence in these cases. Mr. Kimbrell and Mr. Reed chose to exercise their Fifth Amendment rights against self-incrimination, answering no questions regarding the CEP programs or investments. They also asserted their Fifth Amendment rights against self-incrimination in response to my Requests for Production of Documents, Interrogatories and Requests for Admission.”
http://www.wfperkinsforcep.com/#oct24

Washington, D.C., Sept. 27, 2007 - The Securities and Exchange Commission today filed fraud charges against an Arcadia, Calif., investment adviser who misappropriated millions of dollars from investors to whom he had promised huge returns through “no risk” options trading.

According to the Commission, investment adviser Charles Trigilio withdrew more than $3.4 million from his clients’ accounts for his personal use, transferred money from one client to another in a classic Ponzi scheme tactic, and gave clients false information about their investments to hide the losses from his spectacularly unsuccessful trading strategy.

“Trigilio exploited his clients’ trust, using his complete control over their brokerage accounts to finance his lifestyle and conceal his failed securities trading activities,” said Helane Morrison, Director of the SEC’s San Francisco Regional Office. “Today’s action serves as a reminder that investors should be wary of those pitching investment schemes as supposedly risk-free.”

According to the Commission’s complaint, Trigilio has managed at least 96 brokerage accounts belonging to dozens of investors at a number of different brokerage firms since at least 2003. He concealed his identity from the brokerage firms, pretending to be the investor when making trades and transferring money from their accounts to himself and others. The Commission alleges that Trigilio misappropriated $3.1 million from investor accounts at one brokerage firm alone, transferring the money to bank accounts held in his name or the name of his wife and her business.

The Commission’s complaint further alleges Trigilio fraudulently concealed the large losses he incurred trading options in his clients’ accounts. Between January 2006 and September 2007, the accounts handled by Trigilio at one brokerage firm suffered nearly $2 million in trading losses. According to the Commission, Trigilio concealed the losses from investors by providing them with phony account information. He further hid his fraud by using money obtained from several clients to pay promised returns. Among other things, the Commission alleges he concealed his activities by using his clients’ personal information to establish and control their brokerage accounts while requiring clients to agree not to directly contact the brokers themselves.

The Commission’s complaint charges Trigilio with violating the antifraud and investment advisory provisions of the federal securities laws, and seeks preliminary and permanent injunctions, disgorgement, and civil penalties. The Commission further seeks disgorgement of all investor funds disbursed to Trigilio’s wife, Razel Trigilio, who received thousands of dollars in investors’ money from her husband. In addition, the Commission is seeking an order temporarily prohibiting Trigilio from further trading in the brokerage accounts of his investor clients in order to manage and preserve any remaining investor funds. If granted, the federal district court’s order would also freeze the assets of Trigilio as well as the assets of his wife.

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For more information, contact:

Helane Morrison
Regional Director
SEC’s San Francisco Regional Office
(415) 705-2450

Cary Robnett
Assistant Regional Director
SEC’s San Francisco Regional Office
(415) 705-2335

http://www.sec.gov/news/press/2007/2007-206.htm

One of the top Democratic Fundraisers, Norman Hsu, funds may have came from Ponzi Scam, which took at least $60 Million from unknowing investors. Hillary Rodham Clinton was most notably the main benefactor of these donations from the Ponzi Scheme. U.S. Attorney Michael Garcia said the the Clinton Camp was unaware of any improprieties from Hsu.

Hsu has been charged in California and now in New York on this illegal ponzi scheme. The FBI stated that Hsu has no actual business but was using members investment to pay out to other investors as well as the Donations to the Democratic Contenders.

Hsu was charged with mail fraud, wire fraud and violating campaign finance laws. If convicted, he faces a maximum of 20 years in prison on each of the fraud charges and five years on the campaign finance charge.

CEP being placed in voluntary bankruptcy does 2 things.

First thing it allows the Creditors(Those that are not in profit but at a monetary Loss) to stake a claim against what is in the CEP coffers.

Second thing once the coffers are emptied the Receiver will then start calling upon The Debtors of CEP(Those that are in Profit).

Spell this out so I know what you are saying!!!
Simple If you are at a Loss you can file a claim with the Receiver to get some or all of your Funds back (Usually a percentage of what you put in is what you will get).
If you are in profit you can, and most likely, be sued as a Debtor to CEP (CEP gave you funds in excess of your investment. Thus you OWE the excess funds, therefore a debtor)

How Do I determine my Claim?

Your Losses are very simple to figure. Take the amount of Funds invested minus any funds returned to you. Let’s say you invested $1000 and got $500 back your Loss will be $500. You will not be paid any interest!

Now If you Paid in $1000 and you received back $2000, you owe the Trust $1000. You can and most likely will be called upon for that amount of excess of your investment.

Investor Lawsuits Filed, Discovery Hearing

I have filed 33 lawsuits in the Bankruptcy Court (two more to go) in this first round of recovery suits against investors. We are pursuing all distributions to these defendants. I am not attaching the complaints here due to volume, although I understand that some have probably been picked up off the docket and are being circulated about the forums. This group includes Caroline, Bart and Heidi Strittmatter, Israel Lagares, Daniel May, Gary Schrier, Marcus Petrelli, Regina & Gary Johnson, Dustin Fennell, Thomas Hall, Maurice Usenbor, Max Gonzalez, Troy Winters, Pamela Anderson, Curtis Greek, E-Business (Alwine), Hobson Black, Wilfried Owatoye, Patricia Bruno, William Nugent, Skye Karls, Shad Foss, Wilmer Michael Wrenn, Bill Holcombe, Andrew Hockenbrock, Jevard Hitch, Brenda Bumgardner, Jace Wingard, Greg Collier, Jim Pratt, Denise Higgins, Howard C. Phillips, and Gareth Lodge. This group received distributions in excess of $2.5 million with over $2.0 million of that amount appearing to be in excess of their investment.

There is a hearing scheduled for Tuesday morning, August 28, 2007 at 10:00 am to hear motions I’ve put forth to the Judge to expedite the discovery process related to these and other cases pending or to be filed. [See Documents CEP #0032 and #0020]. “Discovery” is essentially the process by which both sides of the litigation endeavor to find out the facts. This includes responses by both plaintiff and defendant to specific questions called interrogatories, the physical production of electronic and hardcopy documents or records, and questioning of parties under oath.

Washington, D.C., August 23, 2007 - Continuing its crackdown on financial fraud against senior citizens, the Securities and Exchange Commission today filed an emergency action to shut down a $25 million Ponzi scheme that victimized hundreds of senior and other investors nationwide who bought fractional ownership interests in life insurance policies.

The SEC asked a federal district court in Sacramento, Calif., to grant the SEC’s request for an order temporarily prohibiting further sales of the products, freezing the assets, and appointing a receiver to take control of operations in order to manage and preserve remaining investor funds.

The SEC has brought more than 40 enforcement actions over the past two years against frauds targeting retirees and other older investors, which will be a focus of the Commission’s second annual Seniors Summit in Washington, D.C., on Sept. 10. The Summit also will include the release of findings from regulatory examinations of 110 firms offering “free lunch” investment seminars aimed at seniors.

In the latest action, the Commission alleges that Donald Neuhaus of Redding, Calif., his daughter Kimberley Snowden, and their company Secure Investment Services, Inc., orchestrated the Ponzi scheme that falsely promised safe, secure and profitable interests in life insurance policies known as “viaticals” while failing to disclose the dire financial condition of the investment venture. Many of the investors were elderly and invested their retirement savings. The Commission also alleges the father-daughter fraudsters pocketed $700,000 for their personal use while the scam was on the verge of collapse.

“Moving to shut down this Ponzi scheme reaffirms the Commission’s overall commitment to aggressively investigating and stopping those who prey upon the retirement funds of older Americans,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “These perpetrators lined their own pockets and deliberately disguised the serious risks that investors faced, misleading senior citizens and others to believe they were making safe and secure investments when, in reality, they were being lured into a financial crisis.”

Helane L. Morrison, Regional Director of the Commission’s San Francisco Regional Office, added, “The defendants engaged in a predatory scheme, making promises that they knew they could not keep to senior citizens and other investors. The requested court order temporarily halting this fraud is a critical step in protecting these investors and preserving their remaining assets.”

According to the Commission’s complaint, Neuhaus and Snowden sold shares of life insurance policies, calling them “bonded life settlements.” They persuaded investors to buy the securities by representing that their money would be used to purchase and pay the necessary premiums on the life insurance policies. They promised returns up to 125 percent when the person insured by the policy died.

The Commission’s complaint alleges that Neuhaus and Snowden instead used investors’ money for their own personal use and to cover the premiums on other insurance policies owned by other groups of investors. Their conduct constituted a Ponzi scheme in which every new investor was being defrauded to provide the cash needed to conceal the misrepresentations to an earlier group of investors. They failed to inform investors that the enterprise was on the brink of collapse, and that investors risked losing everything if life insurance policies expired due to lack of payment.

The Commission further alleges that Neuhaus and Snowden misled investors by providing them with life expectancy estimates supposedly certified by a physician who was, in reality, a convicted felon falsely holding himself out as a physician. They falsely claimed that the investments were protected by bonding companies. But these were, in fact, unlicensed overseas firms with no assurance of actually repaying investors.

The Commission’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement, and civil penalties. The Commission acknowledges the assistance of the United States Attorney’s Office for the Eastern District of California, the California Department of Corporations and the Criminal Investigation Division of the Internal Revenue Service.

Court Grants Summary Judgment Against Creator and Principal of Fraudulent Foreign Currency Option Scheme

On August 1, 2007, the Honorable Jane Boyle, United States District Judge, Northern District of Texas, issued an order granting the Commission’s Motion for Summary Judgment against Defendant Gerald Leo Rogers (”Rogers”), the architect of a fraudulent Ponzi scheme that collected more than $11 million from over 100 investors, many elderly or investing retirement savings. The Court permanently enjoined Rogers from future violations of the securities registration and anti-fraud provisions of the federal securities laws. The Court also ordered Rogers to pay disgorgement in the amount of $10,959,000, plus prejudgment interest, and imposed a civil penalty of $120,000.

In its Complaint, filed on March 3, 2005, the Commission alleged that Rogers, a twice-convicted felon, whose criminal and securities fraud history spans nearly four decades, started this scheme shortly after being paroled from a 35-year prison sentence for mail and securities fraud. The Commission alleged that from January 2004 through the present, Rogers and the other defendants, operating principally through Premium Income Corp. (”PIC”) engaged in a deliberate scheme to defraud investors with promises of “guaranteed profits” and “safety of principal.” The complaint alleged that the defendants falsely claimed that PIC would use “100% of investor funds” to write covered call options in the foreign currency market. In fact, according to the complaint, the defendants operated a “Ponzi” scheme, using new investor funds to pay “interest” to earlier investors, and made undisclosed payments to Rogers and PIC salesmen. Based on evidence presented to the Court on March 3, 2005, Judge Boyle granted the Commission’s request for a temporary restraining order, the appointment of a Receiver, an asset freeze and other equitable relief to halt the ongoing scheme

In her order granting summary judgment, Judge Boyle concluded that the Commission established that there was no genuine issue of material fact that: (1) the PIC foreign currency program was a security; (2) Rogers recruited and trained 140 sales agents to offer and sell the security and encouraged them to disseminate false and misleading information about the PIC investment; (3) Rogers and his sales force materially misrepresented the risks involved in covered call options; (4) Rogers falsely touted his credentials and experience in legitimate international commerce, while failing to disclose to the sales agent or investors his long history of criminal convictions and regulatory injunctions; (5) Rogers, in fact, did not use investor funds to write covered calls, but rather risked investor funds in speculative foreign currency trade, resulting in the loss of millions of dollars; and (6) PIC operated as a Ponzi scheme, using funds supplied by new investors to pay the monthly returns promised to existing investors.

On January 18, 2007, the Court issued final judgments against PIC, Inforex Ltd. and Tri-Forex International, Ltd., based on their failure to appear or otherwise defendant the case. The Court’s summary judgment against Rogers should clear the way for the Court-appointed Receiver to petition the Court to distribute Receivership funds to the victims of the fraud.

The Commission acknowledges the assistance and cooperation of the Texas State Securities Board and the Commodity Futures Trading Commission in this matter.

For additional information, please see Litigation Release No. LR-19115 (March 3, 2005).

http://www.sec.gov/litigation/litreleases/2007/lr20235.htm

SEC Files Charges Against Ponzi Scheme Operators in $20 Million Mining Claim Securities Fraud

On August 9, 2007, the Securities and Exchange Commission filed charges against two Nevada companies and their officers for perpetrating a $20 million Ponzi scheme involving mining claim interests. The Commission filed charges against Earthly Mineral Solutions, Inc. (”EMS”), Natural Minerals Processing Company (”NMPC”), both based in Henderson, Nevada, and their three principal officers, Roy D. Higgs, age 65 of Henderson, Nevada, Frank L. Schwartz, age 43 of Henderson, Nevada, and Rick Lawton, age 60 of Reno, Nevada, (collectively, “the defendants”).

Also on August 9, 2007, the United States Attorney for the Eastern District of Missouri filed criminal charges against EMS, Higgs, and Schwartz for conduct alleged in the Commission’s complaint.

The Commission’s complaint alleges that between 2003 and 2006, the defendants offered and sold investors mining claims interests based on false and misleading information. As alleged in the complaint, the defendants claimed that investors’ funds would be used to expand EMS’ and NMPC’s mineral processing and fertilizer production businesses. The defendants guaranteed investors a 7% to 9% annual return their on investment, which was to be paid out of the operating revenue from the mining and fertilizer businesses. In reality, the defendants were running a Ponzi scheme; neither EMS nor NMPC operated a functioning mining or fertilizer business, and the returns promised to investors were paid using the investments of new investors. The complaint further alleges that the defendants’ scheme raised approximately $20 million from over 100 investors nationwide, many of whom had been saving for retirement and liquidated their personal Individual Retirement Accounts (”IRAs”) to invest in the mining claims.

The Commission charged EMS, Higgs, Schwartz, and Lawton with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 (”Securities Act”). In addition, the Commission charged EMS, NMPC, Higgs, Schwartz, and Lawton with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 (”Exchange Act”) and Rule 10b-5 thereunder. The Commission also charged Higgs, Schwartz, and Lawton with violating the broker-dealer registration provision of Section 15(a) of the Exchange Act. The Commission seeks a permanent injunction, disgorgement with prejudgment interest, and civil penalties against all of the defendants.

The Commission acknowledges the valuable assistance the United States Attorney’s Office for the Eastern District of Missouri, the Bureau of Land Management, and the Federal Bureau of Investigation in bringing this case.

SEC Complaint in this matter

http://www.sec.gov/litigation/litreleases/2007/lr20237.htm