Category Archives: Ponzi Scheme News

Read current Ponzi scheme news from Blau & Malmfeldt, a Chicago securities law firm. Find out how Blau & Malmfeldt can assist with fund recovery.

SEC Initiates Enforcement Proceeding Against Former McGinn Smith & Co. Brokers

On September 23, 2013, the Securities and Exchange Commission (SEC) initiated an administrative enforcement proceeding against 10 former brokers of McGinn Smith & Co. (McGinn Smith).   The SEC alleges that these individuals sold investments in a Ponzi scheme operated by McGinn Smith’s owners, Timothy McGinn and David Smith.

Timothy McGinn and David Smith were recently convicted of multiple counts of wire fraud, mail fraud and securities fraud for embezzling over $4M from the 17 trusts and other entities that they controlled.

According to the SEC, McGinn Smith’s brokers “sold millions of dollars of [McGinn Smith] private placements in spite of numerous red flags, including a policy – which was clearly inconsistent with the terms of the offerings – that required them to ‘replace’ customers seeking to redeem notes with new customers before the redemption would be honored.

The SEC also contends that in January 2008 the brokers became aware that McGinn Smith related investments had suffered $80 million in losses yet continued to sell the investments to their clients.

Combined, the brokers garnered around $3.5M in commissions for selling investments in the Ponzi scheme operated by McGinn Smith’s owners.

The brokers named in the SEC’s complaint are as follows:

Donald J. Anthony, Jr.

Frank H. Chiappone

Richard D. Feldmann

William P. Gamello

Andrew G. Guzzetti

William F. Lex

Thomas E. Livingston

Brian T. Mayer

Philip S. Rabinovich

Ryan C. Rogers

Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.  Please call us at 312-443-1600 to learn more about the services we offer.

Former LPL Broker Arthur Lin Indicted in Connection with Ponzi Scheme

A federal grand jury last Friday indicted two Chicago area men with fraud in connection with a Ponzi scheme that they operated.  The government alleges that Marcin Malarz, formerly of Lake Forest, and Arthur Lin, of Palatine, fraudulently raised over $9M from approximately 25 investors causing at least $5.5M in losses.

Between 2006 and 2010, Lin used his position as branch office manager of LPL Financial, LLC (LPL) in Itasca, IL, to recruit investors in Malarz Equity Investments LLC (MEI), a company that Malarz managed.  MEI claimed to make money by converting old apartment buildings into refurbished condominiums.  According to the government, Malarz misappropriated over $2M from MEI to pay for personal expenses and make to Ponzi interest payments to older investors.  Malarz made commission payments to Lin’s wife (rather than to Lin directly) – apparently in an effort to avoid detection – of 10% on investments that Lin steered into MEI.

The government contends that Malarz and Lin made misrepresentations to investors about the expected and actual returns on MEI investments, the ways MEI would use investor funds, and Malarz’s ability to personally guarantee investments and loans.  In the indictment, the government seeks forfeiture of at least $5.5M of ill-gotten proceeds as well as Lin’s houses in Palatine and Barrington.  Each fraud count contains a maximum 20 year prison sentence.

Lin agreed in January 2012 to a $485,583 settlement in a civil case that the Securities and Exchange Commission (SEC) had brought against Malarz, Lin, and associate Jacek Sienkiewicz of Rolling Meadows, IL.  The SEC waived all but $158,240 of that settlement based upon Lin’s representation of his financial condition in an August 16, 2011 statement that Lin submitted to the court.

It appears that Malarz and Sienkiewicz have fled the country and are hiding in Poland.

FINRA records show Lin was a registered broker with LPL from 09/2006 – 04/2010.  Lin was previously employed by A. G. Edwards and Sons, Inc. from 10/2001 – 10/2006

LPL had a duty to supervise Lin.  Specifically, LPL had a duty pursuant to industry rules to enforce a supervisory system reasonably calculated to ensure that Lin complied with all applicable laws and regulations and to prevent Lin from engaging in illicit outside business activities.  It appears that LPL failed to adequately supervise Lin.

Lin’s former customers may be able to recover investment losses by pursuing claims against LPL in arbitration at FINRA.  Lin’s brokerage customers are encouraged to contact the law firm of Blau & Malmfeldt at 312-443-1600 for a no obligation consultation.  Blau & Malmfeld is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.

Grifphon Asset Management Head Sentenced to Prison

On September 23, 2013, Yusaf Jawed, the former head of Grifphon Asset Management, received a six and a half year prison sentence.  The U.S. District Court for the District of Oregon ordered that Jawed serve three years of supervised release after his prison sentence and pay $6.47M  to victims of his Ponzi scheme.

In April 2013, Jawed pleaded guilty to five counts of mail fraud and 12 counts of wire fraud in connection with his $34M Ponzi scheme.  As reported on this blog, Jawed used phony marketing materials, audit reports, and tax statements promising double or triple digit returns to lure investors into Grifphon hedge funds.  Soon after Jawed received investor money, he transferred the money into his personal management accounts and used the money to fund his lavish lifestyle.

Under federal minimum sentencing guidelines, the court could have sentenced Jawed to eight years in prison; however, he received a lighter sentence as a result of his cooperation with the government’s investigation into Grifphon’s affairs.

In a parallel civil proceeding, the SEC issued an order on September 11, 2011 requiring Jawed and Grifphon to pay $33.9M.  The SEC also took disciplinary actions against Jawed and associates Robert P. Curtis, Jacques Nichols, Lyman Bruhn and Ben Daniels.  Curtis, Nichols and Bruhn aided Jawed in the orchestration of a scheme whereby fraudulent records were created indicating that a series of shell companies had purchased assets in Gifphon hedge funds.

Daniels, a former Coachella Valley, CA securities broker, steered over $4M of investor money into Grifphon funds.  For his services, Daniels received $286,683 in commissions.

Investors in Grifphon are encouraged to contact Blau & Malmfeldt at 312-443-1600 to discuss recovery options.  Blau & Malmfeldt is a law firm based in Chicago that represents investors across the country in securities, commodity futures, partnership, and shareholder rights disputes.

SEC Prevails in Lawsuit Against Former Broker Nicholas Skaltsounis

A federal jury in Knoxville, TN returned a verdict this week against Nicholas Skaltsounis, a Richmond, VA securities broker in a civil case prosecuted by the Securities and Exchange Commission.  Skalsounis was formerly a registered representative of broker-dealer firms Advent Securities, Inc., Waterford Investor Services, Inc. and Community Bankers Securities, LLC.

Skaltsounis was found liable for his operation of a $7.7M Ponzi scheme.  Skaltsounis and his financial services holdings company, AIC, Inc., was found liable for the violation of federal securities laws in connection with the sale of promissory notes that Skaltsounis knew would never be repaid.  Through the Ponzi scheme, Skaltsounis and AIC raised money from new investors to pay older investors.

In its complaint, the SEC alleged that Skaltsounis and his associates, John B. Guyette of Greely, CO and John R. Graves of Pensacola, FL, engaged in an offering fraud scheme.  From January 2006 to November 2009, the three men raised $7.7 million from at least 74 investors across 14 states by fraudulently selling AIC notes.  The notes promised investors 9.6% to 12% returns on their money.  In reality, AIC was an unprofitable enterprise that had little revenue to support its expenses.  Skaltsounis and his associates hid the company’s financial condition from investors and misled investors about the risks associated with their investments.

AIC was a holding company for three brokerage firms — Community Bankers (CB) Securities, Allied Beacon Partners, Inc. (f/k/a Waterford Investors Services), and Advent Securities, Inc. — and one financial advisor firm — CBS Advisors, LLC.  Skaltsounis’s scheme collapsed in early December 2009, and he declared Chapter 7 bankruptcy in August 2010.

Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership and shareholder rights disputes.  Please call us at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to learn more about the services that we offer.

Guilty Plea Entered against Ralph Saviano, Formerly of Brokerage Firm Centaurus Financial

Ralph Saviano, a former broker with Centaurus Financial, Inc., was sentenced to 27 months in federal prison after pleading guilty to one count of wire fraud.

The New Jersey-based broker and investment adviser was charged with intentionally devising a defrauding scheme that lasted about five months. Saviano had approximately 300 clients, many of whom were elderly “unsophisticated investors,” according to a lawsuit filed against him.

Saviano, aware that some of his clients were about to receive “significant amounts of cash,” including maturing certificates of deposit, told them to invest their funds into low-risk investments or into his company, the Saviano Financial Group, which he operated as a Ponzi scheme.

Instead of investing the money for his clients, Saviano used the funds to repay loans from other clients and for personal expenses, including a family vacation to Aruba and new granite countertops in his Somerset, New Jersey home. He also used some of the money to cover his mortgage and rent payments.

In one particular instance, an 85-year-old client of Saviano’s gave him approximately $63,000, to be invested into two investment funds. The money never got invested – Saviano wired the money from a New Jersey bank account to a Philadelphia bank account, and used the money for personal expenses.

Another client, an 80-year-old woman, provided Saviano with $75,000 that she had recently acquired. He used this money for personal expenses, as well, informing the client that he was “working on” investing her money when she inquired.

According to the lawsuit filed in the United States District Court in New Jersey, Saviano purposefully targeted clients whom he had known for many years and who trusted his financial expertise.

Saviano was associated with Centaurus until June 2012, when the fraud allegations arose. Under FINRA rules, Centaurus was responsible for supervising Saviano.  Specifically, Centaurus had the obligation to enforce a supervisory system reasonably calculated to ensure that its brokers acted in compliance with applicable rules and regulations and to ensure that its brokers were not engaging in illicit outside business activities.  It appears that Centaurus failed in this respect.

It may be possible for Saviano’s investors to recover funds from Centaurus by pursuing claims against the firm in arbitration at FINRA Dispute Resolution.  Contact Blau & Malmfeldt at 312-443-160, or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com, for a no-obligation consultation regarding possible recovery options. Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.

Blau & Malmfeldt Investigates Former Broker Shawn Dicken

The Michigan Attorney General’s Office has accused Bay City, Michigan resident Shawn Dicken of playing an integral role in a multi-million dollar Ponzi scheme. Dicken was arraigned in Midland County Court on September 18, 2013 on charges of organizing a criminal enterprise and embezzlement.

Dicken was formerly a registered representative of three different FINRA registered securities broker-dealer firms: Chelsea Financial Services (11/2009 – 01/2010); W R Rice Financial Services, Inc. (12/2010 – 07/2012); and G – W Brokerage Group, Inc. (09/2012 – 05/2013).

Dicken is charged with funneling $2 million of investor money into an investment fund that she knew was a Ponzi scheme.  The state alleges that Dicken forged investor paperwork, mislead investors about the risks associated with their investments, and, in one case, took advantage of a severely disabled woman.

Beginning in 2008, Dicken began telephoning victims claiming that she could offer them a better return for their money by investing in Diversified Group.  It appears that Dicken promised investors a 10% return and told investors that the worst that could happen is they get their money back.

Diversified Group is a series of companies run by Joel Wilson.  On November 15, 2012, the Securities and Exchange Commission (SEC) obtained an emergency order against Wilson after its investigation revealed that Wilson diverted over $500,000 of investor money to pay for personal expenses.  Wilson is facing nine criminal charges in Michigan and has fled the country.  Dicken received $160,000 in commissions for funneling money into Wilson’s Ponzi scheme.

Brokerage firms have an obligation to supervise their brokers and establish review systems to ensure abide by all applicable laws and regulations.  Brokerage firms also have an obligation to maintain supervisory systems reasonably calculated to prevent their registered representatives from engaging in illicit outside business activities.

It appears that Dicken’s brokerage firms – Chelsea Financial Services, W R Rice Financial Services, and G – W Brokerage Group, Inc. – failed to fulfill their supervisory duties.  If you are a former customer of Dicken and suffered losses in Diversified Group or in other questionable investments, you may be able to recover your losses by pursuing claims in arbitration against Dicken’s brokerage firms.

Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.  Please call us at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to schedule a free consultation or learn more about the services we offer.

Recovery Options for Grifphon Asset Management Victims

It may be possible for victims of Grifphon Asset Management’s multi-million dollar Ponzi scheme to reclaim investment losses by pursuing FINRA arbitration claims against securities brokerage firms and securities brokers that sold investments in Grifphon funds, including the Grifphon Alpha I Fund.

After being fired from his securities firm in 2000, Yusaf Jawed began over a decade long run of fraud under the Grifphon Asset Management name.  Jawed used phony marketing materials, audit reports, and tax statements to claim that Grifphon’s funds were making double or triple digit returns on their investments.  At one point in 2010, Jawed claimed to manage $63 million in assets for 150 investors.  In reality, Grifphon made few investments.  Most of the money went to finders fees, broker fees, transfers to Jawed’s personal accounts, and other schemes.  Jawed claimed that transfers to his personal accounts were investments in “off-shore” bonds, when in fact he was using investor money to finance his lifestyle.  In 2008 Jawed set up a shell company to further his schemes with his friend Lyman Bruhn that claimed to want to buy out Grifphon’s hedge funds.

The SEC brought fraud charges against Jawed on September 21, 2012.  Jawed pled guilty to 17 counts of mail and wire fraud in April 2013, and agreed to a $34 million settlement to resolve civil charges against him.  After Jawed completes his expected 6 ½ year prison sentence, he will likely have 10% of his income garnished by the government to pay off the $34 million civil settlement and $6.7 million in fines charged against him in the criminal case.  He is also banned for life from working in the securities industry.

There is little chance that Jawed will be able to compensate investors for his crimes.  Investors recently took action in a class action suit against Grifphon’s accountants and lawyers to recoup some of their losses.  Jawed is also cooperating with the SEC as they investigate parties associated with Grifphon.

Pursuing FINRA arbitration against their securities brokers is another option investors have to receive restitution for their losses in Grifphon funds.  Brokerage firms have an obligation to perform due diligence on the securities they sell and have a fiduciary duty to their clients.  One recent arbitration decision resulted in a $130,095 arbitration award on a $230,105 claim against Raymond James Financial Services for selling an investment in the Grifphon Alpha I Fund.

If you were a victim of the Grifphon Ponzi scheme, you may be able to recoup some of your losses in FINRA arbitration.  Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.  Please call us at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to schedule a free consultation or learn more about the services we offer.

Blau & Malmfeldt Investigates Larry J. Dearman

On August 23, 2013, the Securities & Exchange Commission (SEC) filed a lawsuit against former Securities America, Inc. broker Larry J. Dearman in federal court in Oklahoma.  The SEC has alleged in its complaint that Dearman sold securities in companies that he controlled and then used the proceeds to pay gambling debts, personal expenses, and Ponzi payments to earlier investors.  The SEC alleges that Dearman was able to lure many victims who knew him as a wedding singer and as an active member of his church.

The Financial Industry Regulatory Authority’s (FINRA) records indicate that Dearman was associated with Securities America, Inc. between January 2009 and February 2010.  FINRA’s records also indicate that Dearman was associated with Cambridge Legacy Securities, LLC between February 2010 and May 2012, and with Brecek & Young Advisors, Inc. between February 2005 and January 2009.

FINRA rules required the brokerage firms with which Dearman was associated to supervise any of his outside business activities.  It appears that these brokerage firms may be liable for losses suffered by Dearman’s customers as a result of their failure to adequately supervise Dearman.

If you suffered losses through investments sold by Dearman, we encourage you to call Blau & Malmfeldt at 312-443-1600 or to email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to discuss your recovery options.  Blau & Malmfeldt is a law firm based in Chicago that represents investors across the United Sates in disputes with securities industry members.