Articles Posted in INVESTMENT FRAUD

December 21, 2009 – Michael Bowen, 57 from Rancho Cucamonga, California, operated a Ponzi scheme by selling unregistered securities, purportedly investments in helicopter and storage facilities. These included Eagle Development Enterprises, Inc., Eagle Storage & Development, LLC, and Eagle Aviation Sales & Leasing, LLC. The SEC‘s complaint, filed in a federal court in central California, alleges that from 2003 to 2009 Bowen raised over $28 million from at least 500 investors nationwide.

According to the SEC, Bowen lured investors by selling securities and membership interests in his
companies. The SEC claims that these offerings were backed by misrepresentations about an upcoming public offering in the United Kingdom, inflated financial disclosures, and falsities about how investor funds would be used. The SEC complaint also claims that Bowen used a sales team who made cold calls to solicit investors.

According to the SEC, from 2003 to 2008, Bowen and his staff sold membership interests in Eagle Storage telling investors that they would receive 8% annual returns and that their money would be used to construct storage facilities. None of these investors were ever paid back and the SEC claims that Bowen did use a portion of investor funds, along with a $6.6 million loan, to purchase a storage facility. However, Eagle Storage subsequently defaulted on the mortgage. The SEC alleges that Bowen did not disclose to investors that Eagle Storage had been issued a cease and desist order in Alabama.

December 9, 2009 – Rockford Funding Group LLC, a New York financial firm controlled by Genadi Yagodayev, was an investment scam, according to the Securities Exchange Commission. Rockford lured customers who believed that they were investing in “Fixed Dividend Contracts,” which purportedly generated 15 percent per year or more from structured settlements of private lawsuits, according the Complaint filed by the SEC this week. From March to November 2009, Rockford raised at least $11 million from over 200 investors.

Yagodayev, and twelve other foreign companies who allegedly received payments from Rockford, were named as relief defendants, including the following: Bookmann Agency, LLP, Houseberg Impex, Inc., Infinita Plus Trading Ltd., Intercity Transit Ltd., Madisa Ltd., Milton Benefits LLP, Pacific Gain Technologies Ltd., Partner Asia Distribution Ltd., Rockford Industry Ltd., Star Trading Inc., Sunrise Import & Export Inc., and Traseks Ltd.

According to the SEC, Rockford marketed itself through its web site and by making cold calls to potential customers, promising an annual return of 15%, and claiming that client funds would be invested in structured settlements from private lawsuits. The SEC maintains that in reality Rockford did not hold interests in any structured settlements, but rather used investor funds to make payments to older investors using new victims’ money.

The SEC Complaint alleges that during the nine months it operated, Rockford sent over $10.4 million to bank accounts outside the U.S. in the name of entities controlled by Yagodayev. Most were located in Latvia and Honk Kong. The transfers were ostensibly made to cover construction costs and other expenses unrelated to the Rockford investments.

December 7, 2009 – Striker Petroleum, LLC, a Dallas based oil and gas company controlled by Mark S. Roberts, 58, and Christopher E. Pippin, 35, was a massive Ponzi scheme, according to the complaint filed by the SEC last week. According to the SEC complaint, Striker
raised approximately $57 million from about 540 investors throughout the U.S. by offering debentures backed by false disclosures about Striker’s financial health. Striker further maintained that collateral backing the debentures was held by an independent third party trustee, which was also false.

Between September 2006 and September 2009, Striker offered debentures to investors in an effort to raise additional capital. Debentures function as an unsecured bond backed by the reliability of the borrower. Each series of debentures issued by Striker was accompanied by a Private Placement Memorandum (“PPM”), which contained vital financial statistics about Striker and further claimed that the money would be used to acquire, develop and maintain existing oil and gas properties, to purchase additional collateral, and for general working capital.

According to the SEC, Striker did not use the funds as advertised, but for other puposes, including paying out fixed returns to prior investors who had acquired working interests, known as “Legacy Offerings”. Striker also sent funds to a related operating company, Reichman Petroleum, which shortly after filed for bankruptcy.

November 26, 2009 – Trevor G. Cook and Patrick J. Kiley, both Minnesota residents, allegedly operated a foreign currency investment scam through their four main entities: UBS Diversified Growth LLC, Universal Brokerage FX Management LLC, Oxford Global Advisors LLC, and Oxford Global Partners LLC. According to the complaint filed by the SEC this week, Cook and Kiley ran a Ponzi scheme, which took in over $190 million and had at least 1,000 investors.

The SEC alleges that from July 2006 through July 2009, Cook and Kiley enticed over 1,000 investors by promising annual returns of 10-12%. Cook and Kiley promised their clients that their money would be kept in separate accounts for each individual and invested in foreign currency trading. In reality, the SEC claims investor money was pooled together and deposited into the accounts of various entities controlled by Cook and Kiley.

According to the complaint, Cook and Kiley moved $108 million through their various entities and did use a portion of that money for foreign currency trading, but this resulted in losses of $48 million. The SEC claims that Cook and Kiley pocketed $42.8 million for personal use, including $18 million used to purchase ownership interests in two trading companies, $12.8 million, which was moved to Panama, ostensibly for the construction of a casino, $2.8 million to purchase the Van Dusen Mansion, and $4.8 million, which Cook lost gambling. Also, it is alleged that nearly $51 million was used to make payments to prior investors in a Ponzi-like fashion.

November 24, 2009 – The SEC alleges that Derek A. Nelson ran a Ponzi Scheme using fictitious companies: Capital Mountain Holding Corporation (“CMHC”), Systems XXI, Act I, LLC, and Systems XXI, Act II, LLC. In a Complaint filed last week in federal court for the Northern District of Texas, the SEC brought civil claims against Nelson, CMHC, Act I, and Act II. The SEC also named two other Nelson entities, Plouteo, Inc. and Homaide Real Estate Services, Inc., as relief defendants. According to the complaint, Nelson’s scam enticed hundreds of investors and raised over $25 million from June 2008 through September 2009.

In June 2008, CMHC, based in Dallas, Texas, began offering promissory notes purportedly to raise capital for investment in distressed homes. Nelson, 42 from Fairview, Texas, told investors that he would use the money to purchase these properties at a discount and then renovate or rent them and eventually sell them at a profit. Nelson gathered investors through vigorous internet marketing and a Canadian-based marketing firm. The CMHC notes promised returns of 10% per month for three months. CMHC allegedly raised $15 million from these sales.

In October 2008, Nelson began offering similar notes from Act I and Act II. The Act I notes offered 18% yearly returns for two year investments and the Act II notes 21% yearly returns for five years. These notes also declared that 90% of investor funds would be used to purchase and rehab properties. According to the SEC, Nelson raised at least $10 million from sales of Act I and Act II notes.

Mantria, based in Bala Cynwyd, Pennsylvania, was run by Wragg and Knorr and offered potential investors unregistered securities with yearly rates of return between 17% and “hundreds of percent.” Investors thought they were financing Mantria’s “green” initiatives including a “carbon negative” housing development in Tennessee, and a “biochar” charcoal alternative made from organic waste. The SEC alleges that Mantria’s supposed projects did not produce significant returns and a majority of payments made to investors were from funds accumulated from earlier investors.

Speed of Wealth, LLC, headquartered in Centennial, Colorado is operated by Wayne and Donna McKelvy and apparently worked in conjunction with Wragg, and Knorr to market and promote investments in Mantria. Speed of Wealth was a “wealth education” program founded by the McKelvys that offered investment seminars, online webinars, telephone conference calls, and hosted online radio programs.