New York (HedgeCo.Net) – Since 2010, the SEC has brought more than 100 enforcement actions against nearly 200 individuals and 250 entities for carrying out Ponzi schemes. More than 65 individuals have been barred from working in the securities industry. The SEC also has worked closely with the U.S. Department of Justice and other criminal authorities on parallel criminal and civil proceedings against Ponzi scheme operations.
Here are some examples from 2013:
- John K. Marcum – SEC charged an Indiana resident who falsely touted himself as a successful trader and asset manager to raise more than $6 million from investors. He squandered the money on personal luxuries and other ventures such as a reality TV show, and continued soliciting money from new investors to pay earlier investors’ redemption requests.
- Trendon T. Shavers – SEC charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin.
- Duncan MacDonald and Gloria Solomon – SEC charged two executives at a Dallas-based medical insurance company with operating a $10 million Ponzi scheme that victimized at least 80 investors by falsely promoting their start-up venture as a thriving business.
- Mark Morrow and Detroit Memorial Partners – SEC charged a Cincinnati resident and his purported cemetery operations business with issuing approximately $19 million in fraudulent promissory notes and selling $4.5 million in equity interests through an investment advisory company that operated as a massive Ponzi scheme.
- Alvin R. Brown and First Choice Investment – SEC shut down a $3 million Ponzi scheme that targeted seniors, including an elderly investor suffering from a stroke and dementia, by falsely promising high profits from commercial and residential rental properties in California and other Western states.
- Walter Ng, Kelly Ng, and Bruce Horwitz – SEC charged three Bay Area real estate fund managers with operating a Ponzi-like scheme in which they solicited and secretly used $39 million in assets of a new real estate fund to make payouts to investors in an older, rapidly collapsing fund.
- Five real estate executives – SEC charged five former executives at Cay Clubs Resorts and Marinas with defrauding investors into believing they were funding the development of five-star destination resorts in Florida and Las Vegas when they were actually buying into a $300 million Ponzi scheme.
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of money from new investors to continue. Ponzi schemes inevitably collapse, most often when it becomes difficult to recruit new investors or when a large number of investors ask for their funds to be returned.