Unregistered Securities Result in $135 Million South Florida Ponzi Scheme

The founders and co-owners of the Miami-based real estate development company Royal West Properties, Inc. have been charged with fraud for conducting a $135 million Ponzi scheme. The Securities and Exchange Commission (SEC) alleges that Gaston E. Cantens and his wife allegedly sold promissory notes to investors after acquiring various properties and later financing their sale.

According to the civil complaint filed by the SEC, the Cantens targeted members of the Cuban-American community. Well-known within the close-knit community, the couple gained the trust of mostly elderly investors whom they met at charitable and religious gatherings, and at events hosted at their Miami home. Mr. Cantens also allegedly used his connections as an alumnus and board member at the Belén Prep School to recruit investors. Outside of their immediate community, investors were attracted by televised commercials broadcast on Spanish-language channels nationwide.

Despite the Cantens not being registered with the SEC under the federal securities laws to make securities offerings to investors, reportedly no questions were asked of the couple that a community regarded as old friends.

In a statement given by Director of the SEC’s Miami Regional Office, Eric I. Bustillo commented on the couples’ recruiting tactics, saying that “They portrayed themselves as a pious couple closely involved with educational and religious organizations, while in reality they were living lavishly off money from defrauded investors.”

Along with allegedly using investor money to repay earlier investors, the SEC also contends that the Cantens misappropriated more than $20 million to fund personal business ventures, pay themselves high salaries, and allocated an estimated $1 million to their children and grandchildren citing “consulting fees”.

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U.S. SEC charges Miami couple in Ponzi scheme

U.S. securities regulators charged a prominent Miami couple on Wednesday with running a $135 million Ponzi scheme that victimized elderly Cuban-Americans living in South Florida.

In a complaint filed in Miami federal court, the Securities and Exchange Commission alleged that Gaston and Teresita Cantens, founders and co-owners of real estate developer Royal West Properties Inc in Miami, had enticed investors with promises of 9 to 16 percent returns.

Instead, beginning no later than 2002, they used new investor money to repay earlier investors and the company’s operating costs, the SEC charged. All told, the couple raised $135 million from hundreds of investors, many from South Florida’s Cuban-exile community, the complaint alleged.

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Midwest Insider Trading

Ats Medical Inc.
Martin Sutter major shareholder Exercised options: 1,000,000 Price: $2.48 Date: Dec. 18 Directly holds: NA
Best Buy Co. Inc.
Sanjay Khosla director Shares purchased: 1,000 Price: $41.29 Date: Dec. 17 Directly holds: 1,000 Rogelio Rebolledo director Shares purchased: 850 Price: $41.29 Date: Dec. 17 Directly holds: 850 Bradbury Anderson officer and director Exercised options: 121,000 Price: $24.71-$31.17 Date: Dec. 14-15 Directly holds: NA
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Safeguard Your Investments From Ponzi Schemes

It is becoming difficult to get a good return on invested money. Banks are paying very low interest rates. The stock market is slow in recovering from its earlier declines. Real estate is still fluctuating. Investors are looking for investment vehicles that have a return that will at least keep pace with inflation. As such, the situation is excellent for Ponzi schemes. And even astute investors are capable of being duped.

To paraphrase The New Oxford Dictionary, a Ponzi scheme (named after Charles Ponzi who first carried out such a fraud in 1919-20) is a swindle by which a nonexistent enterprise is believed to be successful by new investors whose investment dollars are used to provide a quick and consistently better return to those investors who are already in the program. Wall Street financier Bernie Madoff is only the latest example of how a cool marketing campaign and slick salesmanship can fool even the wise.

So how does an investor know what is real and what is being scammed? There are red flags that can alert investors. Although these indicators are not guarantees that a scam is being committed, they should alert the investor to look further into the history and operations of the investment consultant. If Madoff’s investors had examined his operations more closely, they may have avoided their losses.

n Who is supervising the brokers? Most brokers are in a broker-dealer relationship. They are being examined regularly as to their advertising, their business operations and their ethics. The broker-dealer bears responsibility for the agents under supervision. In the brochures and correspondence of an agent, the broker-dealer is always identified. When examining the agent, examine the agent’s supervisor, as well. Independent brokers are usually registered with the Securities and Exchange Commission as a registered investment adviser. In addition, the investor can look for designations (CFP, CLU, ChFC, etc.) that mean that the agent is abiding by ethical standards and are meeting the ongoing continuing education requirements of the designation-granting board.

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Ex-SEC Lawyer Pleads Guilty in Dreier Ponzi Fraud

A former enforcement lawyer with the U.S. Securities and Exchange Commission pleaded guilty to impersonating two people to help confessed Ponzi scheme operator Marc Dreier defraud hedge funds.

Appearing in Manhattan federal court on Monday, Robert Miller, 52, admitted to fraud in the attempted sale of a $44.7 million fictitious promissory note to two hedge funds by impersonating a representative of the Canadian pension plan and later a representative of an Icelandic hedge fund.

Miller pleaded guilty to one count each of securities fraud and conspiracy to commit securities and wire fraud.

The sales were part of Dreier’s nearly $400 million Ponzi scheme, which led to last December’s collapse of the law firm that bore his name.

Dreier confessed to the fraud and was sentenced in July to 20 years in prison by U.S. District Judge Jed Rakoff.

According to prosecutors, Dreier provided Miller with a cell phone with a Canadian dialing code in November 2008, and instructed him to impersonate a representative of the Canadian pension plan based on a detailed script.

Later that month, after a representative of the hedge fund told Dreier the deal was unlikely to go through, he had Miller make a second call and again provided a detailed script.

“I knew what I was doing was wrong, and I deeply regret what I did,” Miller said.

Miller was paid $100,000, he said in court.

Miller was ordered released on a $100,000 bond. A sentencing date has not yet been set.

The case is U.S. v. Miller, U.S. District Court, Southern District of New York, No. 09-01077.

(Reporting by Edith Honan; Editing by Lisa Von Ahn)

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SEC Sued by Madoff Investors for Missing Ponzi Scheme

Two of Bernard Madoff’s victims sued the U.S. Securities Exchange Commission last week for failing to uncover Madoff’s $65 billion Ponzi scheme. The lawsuit was filed by Phyllis Molchatsky, a disabled retiree and single mother who lost $1.7 million, and Steven Schneider, a doctor who lost almost $753,000. The SEC earlier denied the investors’ administrative claims, clearing the way for them to file today’s suit under the Federal Tort Claims Act. The government’s “sovereign immunity” from lawsuits should be waived under a law that permits cases against the U.S. if its workers were negligent, according to the complaint filed in Manhattan federal court seeking the return of $2.4 million. Through a “pattern of incompetence,”the SEC missed at least six opportunities to uncover Madoff’s fraud even after receiving detailed tips from an expert explaining how Madoff’s high returns and mysterious investment strategy were proof of the world’s biggest Ponzi scheme, according to the complaint. “Had the SEC carried out its functions with even a minimum of reasonable due care, many, if not most, of Madoff’s victims would have been spared the financial ruin they face today,” the two New York investors said in their 63-page complaint. “Plaintiffs relied on the SEC to protect them and, instead, time after time, the SEC’s agents looked the other way, allowing an obvious danger to grow exponentially, until massive injuries to the plaintiffs and other Madoff investors became inevitable,” according to the complaint.

Full Story: SEC Sued by Madoff Investors for Missing Ponzi Scheme

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Florida Ponzi Scheme Targeted Haitian-Americans

Three men are accused of running a Ponzi scheme that scammed more than $14 million from hundreds of Haitian-American investors in South Florida and New Jersey.

In a complaint filed Friday, the Securities and Exchange Commission said Ronnie Eugene Bass Jr., Abner Alabre and Brian Taglieri promised to double their clients’ money every 90 days through their HomePals Investment Club.

“The extraordinary promises made by these three men spread by word of mouth throughout a close-knit community,” said Glenn Gordon, associate director of the SEC’s Miami regional office. “Bass presented himself as a master trader of stock options and commodities, when in reality he was a master of deceit.”

Bass, 35, of Miami, invested no more than $1.2 million of the $14.3 million collected from investors, and suffered trading losses of 20 percent, authorities said.

Bass, Alabre and Taglieri also face criminal charges of securities fraud, wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering, according to a grand jury indictment. Each faces up to 20 years in prison if convicted.

From April 2008 to December 2008, the men pitched their investments to prospective clients in their Delray Beach offices and maintained a Web site, homepalsinvestmentclub.com, authorities said.

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California Court Sentences Ponzi Schemer to 100 Years

The SEC announced today that on September 28, 2009 the United States District Court for the Central District of California sentenced Richard M. Harkless, 65, of Riverside, California to 100 years in federal prison. Harkless was convicted in July of three counts of mail fraud, three counts of wire fraud, and one count of money laundering. According to the United States Attorney’s Office, Harkless’s sentence is believed to be the longest ever imposed in a white collar crime in the Central District of California.

Harkless was charged by the United States Attorney’s Office for the Central District of California with orchestrating a multi-million dollar Ponzi scheme between 2000 and late 2003. Harkless and his sales agents fraudulently induced investors nationwide to invest in Mx Factors’ notes, which purportedly paid a “guaranteed” return of up to 14% every two to three months. Mx Factors claimed that it would use the investor funds to provide its clients - construction contractors, wholesalers, and manufacturers - with accounts receivable financing. Instead, Harkless operated a Ponzi scheme and skimmed investor funds to finance a Mexican crab fishing business, pay personal expenses, and fund overseas bank accounts. In February 2004, the Commission obtained a restraining order against Harkless, Mx Factors, and the sales agents, and federal criminal authorities executed search warrants. Harkless fled to Mexico shortly thereafter. Harkless was arrested by special agents with IRS-Criminal Investigation two years ago when he traveled to Phoenix.

In a related proceeding, the Commission obtained a final judgment against Harkless on February 6, 2006. That judgment permanently enjoins Harkless from future securities law violations and orders him to pay over $42 million in disgorgement, prejudgment interest, and civil penalties. The Commission also obtained a judgment by default against Mx Factors and its sales agents BBH Resources and JTL Financial. Mx Factors, BBH Resources, and JTL Financial have been under the control of a court-appointed receiver since the Commission’s action was filed on February 26, 2004 in federal district court in Riverside, California. And, on June 2, 2006, the Commission obtained a final judgment against Harkless’s three sales agents, Daniel Berardi, Jr., Thomas Hawkesworth, and Randall W. Harding ordering disgorgement, prejudgment interest, and civil penalties. The judgment orders Berardi and Hawkesworth, managing members of BBH Resources, LLC, to pay over $11 million in disgorgement, prejudgment interest, and civil penalties. The judgment orders Harding, managing member of JTL Financial Group, LLC, to pay over $17 million in disgorgement, prejudgment interest, and civil penalties. Berardi, Hawkesworth, and Harding received sentences of up to six years as part of the criminal proceeding.

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SEC Halts $50 Million Ponzi Scam Targeted at Elderly

The U.S. Securities and Exchange Commission said it halted a $50 million Ponzi scheme near Detroit that raised money for a real-estate investment fund and targeted the elderly.

A federal judge in Michigan agreed to freeze assets after the SEC sued John Bravata, 41, and Richard Trabulsy, 26, claiming they lured more than 400 investors by promising 8 percent to 12 percent annual returns, the agency said today in a statement. Of $50 million raised since May 2006, less than $20.7 million was spent on real estate, the SEC said.

“Investors thought they were investing in a safe and profitable real-estate investment fund, but instead their money was being used to pay for luxury homes, exotic vacations and gambling debts,” said Merri Jo Gillette, director of the SEC’s regional office in Chicago.

The men “lied” to prospective investors about the use of funds and spent $7.2 million buying a $85,000 Maserati, a $90,000 Ferrari, and paying about $80,000 on jewelry and almost $1 million on the mortgage for a vacation house, the SEC said. Trabulsy and Bravata made $11.3 million in Ponzi payments to earlier investors, the SEC said.

BBC Equities’ real-estate investments were highly leveraged, with mortgages and other liabilities exceeding $128 million, the SEC said. To avoid a collapse of the scheme, the defendants continued to solicit investors and held weekly “free lunch” seminars for wealthy senior citizens, the SEC said.

IRA Conversions

The defendants allegedly lured investors by saying the fund offered “safer returns” for individual retirement accounts. More than half the proceeds raised by BBC Equities were conversions from investors’ IRAs, the regulator said.

The SEC lawsuit also named the defendants’ Southfield, Michigan-based companies, BBC Equities LLC and Bravata Financial Group Inc., as well as Antonio Bravata, 21, who allegedly assisted in the scheme.

Telephone calls to George Donnini, Justin Klimko and Joseph Richotte, lawyers representing the defendants at Butzel Long in Detroit, weren’t returned. BBC Equities and Bravata Financial were preparing a response to the SEC actions, said a person answering the telephone at the company’s office.

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Man Charged In Ponzi-Like Scheme

- A Chula Vista resident and two entities he controls were charged in San Diego federal court Wednesday with operating a Ponzi-like scheme through five hedge funds.

According to the U.S. Securities and Exchange Commission complaint, Moises Pacheco, Advanced Money Management Inc. and Business Development & Consulting Co. raised $14.7 million from more than 200 investors over a 3 1/2-year period, acting as investment advisers to the five self-described hedge funds — AP Premium Value Funds I through IV and Capital Partnership Group.

According to the SEC suit, Pacheco told investors he had developed a lucrative investment strategy involving the purchase and sale of covered call options, and that the hedge funds exclusively relied upon that strategy to generate trading profits ranging from 30 to 48 percent per year.

In reality, Pacheco did not generate the returns he claimed and instead used investors’ principal to pay purported returns until the scheme collapsed, according to the SEC.

The SEC alleges that the defendants further misused investor principal by transferring victims’ money to Pacheco, entities under his control, or numerous third parties for reasons having nothing to do with the purported trading.

Neither Pacheco nor his entities were registered with the SEC, according to the complaint.

Most fund investors live in the Chula Vista area, and know either Pacheco, one of his friends or family members, or another investor, according to the SEC.

“Pacheco disseminated monthly statements reflecting purported profits and trading activity, but provided little detail about how those returns were generated,” alleged Rosalind Tyson, director of the SEC’s Los Angeles regional office.

“These investors were principally solicited through word-of-mouth, which serves as a reminder to beware of opaque investment opportunities that promise unusually high payoffs even if it’s a referral coming from family or friends,” she said.

According to the complaint, the actual profits from the hedge funds totaled about $367,000, but investors were promised returns of more than $9.7 million.

The SEC alleges Pacheco, AMM and BD&C violated the securities registration and antifraud provisions of federal securities laws and is seeking permanent injunctions, return of alleged ill-gotten gains with pre-judgment interest and financial penalties.

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