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SEC Issues Multiple Press Releases Warning of Investment Ponzi Schemes

July 17, 2023 Blog

It has been more than a century since Charles Ponzi was arrested for conducting the scheme that now bears his name. Yet, Ponzi schemes remain a very real concern for investors, and each year investors lose untold millions in schemes perpetrated by scam artists and unwittingly recommended by their brokers and advisors.

Recently, the U.S. Securities and Exchange Commission (SEC) has issued several press releases warning of investment Ponzi schemes. This includes four press releases issued in June and July alone. For investors, it is important to be wary of the risks of these schemes and to know when they are at risk of becoming (or may have already become) victims of fraud.

Recent SEC Investigations Targeting Ponzi Schemes

While all Ponzi schemes rely on the same basic structure, scam artists are finding new and increasingly sophisticated ways to defraud unsuspecting investors. Ponzi schemes can involve all types of securities and other investments, and they can be convincingly presented as legitimate investment opportunities. As a result, investors need to be very careful when pursuing any type of alternative investment, and when in doubt, investors should generally avoid investment “opportunities” that present risks for fraud.

So, what does a Ponzi scheme look like in 2023? Here are four recent examples:

1. SEC Charges Convicted Fraud Artist with Perpetrating Real Estate Investment Ponzi Scheme

On June 23, 2023, the SEC announced that it had filed charges against Wilson Baston, a convicted fraud artist who is accused of conducting another Ponzi scheme involving real estate investments. As the SEC’s press release explains:

“[S]oon after his release from prison in 2017, Baston began using aliases . . . and presented himself to investors as having expertise in the real estate industry. The complaint alleges that Baston solicited investors to invest with Gordon Management Group LLC, a purported real estate company, by telling them that their money would be used for the purpose of funding specific real estate transactions. . . . The complaint alleges that, instead of using investor money solely to fund the real estate transactions he promised, Baston used the money to pay earlier investors and for his own personal expenses and benefit.”

According to the SEC, Bason raised millions of dollars from dozens of investors, in some cases offering up to a 25-percent return on investment. In addition to facing SEC enforcement action, Baston is also facing criminal charges in New York City.

2. SEC Charges Florida Resident with Conducting $112 Million Ponzi Scheme

On June 26, 2023, the SEC announced charges filed against a South Florida resident who is accused of raising approximately $112 million through a Ponzi scheme that primarily targeted Haitian-Americans. The SEC’s press release states that the defendant, Sanjay Singh, “offered and sold investors high-yield investment programs that purportedly generated 12.5 to 325 percent in guaranteed returns.” While Singh allegedly told investors that his company, Royal Bengal Logistics Inc., was generating revenue that was being used to pay returns, in reality, the SEC alleges that the company “operated at a loss and used approximately $70 million of new investor funds to make Ponzi-like payments to other investors.”

The SEC also alleges that Singh misappropriated at least $14 million of investor funds and diverted another $19 million to brokerage accounts that he controlled personally. Through its complaint, the SEC is seeking various remedies, including asset freezes and disgorgement of ill-gotten gains.

3. SEC Charges Two Oregon Residents with Conducting $10 Million Ponzi-Like Scheme

On June 30, 2023, the SEC charged two Oregon residents with conducting a “Ponzi-like scheme” that involved selling unregistered promissory notes to retail investors. As the SEC’s press release alleges, the defendants raised more than $10 million “through the offer and sale of unregistered promissory notes, which promised high-interest rates between nine and 15 percent to be paid to investors, in addition to the return of all principal, within just a few months.”

As the SEC’s press release also alleges, the defendants “did not have the ability to pay investors the promised returns within the time periods identified in the notes” and instead “relied on new investor money to pay earlier investors.” The SEC also alleges that the defendants used investors’ funds to cover various luxury expenses.

4. SEC Charges Multiple Individuals with Perpetrating $38 Million Ponzi-Like Scheme

On July 19, 2023, the SEC charged multiple individuals with conducting a Ponzi-like scheme that raised approximately $38 million from at least 150 investors who were promised returns that never materialized. According to the SEC, on multiple occasions, the defendants “took money from unsuspecting investors for fake deals and shuffled funds around to pay out earlier investors to give the false impression that they were receiving real profits from those deals.” One of the defendants is Eliyahu Weinstein, who received a 24-year prison sentence in 2014 in connection with another Ponzi scheme, but whose sentence was commuted to time served by former President Trump in 2021.

Recovering Your Investment Losses as a Ponzi Scheme Victim

If you have lost money in a Ponzi scheme, what are your options? The short answer is, “It depends.” In some cases, investors may be limited to pursuing claims against scam artists directly. This generally involves going to court, and investors’ ability to recover their fraudulent losses in these cases can depend in large part on whether their funds are still within the court’s reach.

In other cases, defrauded investors will be able to pursue claims against their brokers or advisors in FINRA arbitration. If your broker or advisor negligently or recklessly recommended an investment that turned out to be a Ponzi scheme, your broker or advisor could be liable for your losses.

Request a Free and Confidential Consultation at Zamansky LLC

Did you lose money in a Ponzi scheme? Or, do you have concerns that you may be a victim of a Ponzi scheme recommended by your broker or advisor? If so, we encourage you to speak with one of our lawyers as soon as possible. To arrange a free and confidential consultation at Zamansky LLC, call 212-742-1414 or request an appointment online today.

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