Fraud

Beyond sheer greed and malevolence, the most common catalyst for Ponzi schemes is to cover up other serious losses. This was the situation for Francisco Illarramendi, a former hedge fund manager in Connecticut, who ultimately spent five years raising over $30 million in illicit funds to cover an initial $5 million shortfall.  But such is the nature of Ponzi schemes that every additional dollar brought in simply increased the debt, rather than solving the problem, due to the unethical nature of the financial solicitation and promises made.  The SEC recently passed judgment on Illarramendi, who was sentenced to disgorgement (repayment of profits) of $26 million and a lifetime ban from the securities industry. The conclusion to a drawn-out debacle This case originally dates back to 2011; however, victims have had to wait to receive their full restitution until a complete evaluation of the case’s complexities was made. The original fraud began over 11 years ago in 2006, when Illarramendi lost [...]

Religion rarely comes into account when making investing decisions. However, in the case of one church in California, the mixture led to fraud, losses, and a lawsuit. The church mandated participation in the courses: victims claim they were pressured by their religious leaders into taking investing direction from Paul Ricky Mata, a member since the church’s establishment. Paul Ricky Mata had legal troubles dating back to 2009, with a securities license suspension in 2010. Mata’s licenses then expired in 2012, yet the Water of Life Church continued to employ him to teach members in mandatory courses, receiving “donations” from Mata as recompense. Church members who did research Mata’s background also discovered a history of previous sanctions by state regulators and an extensive disciplinary history, including nine FINRA disclosures. These bans were not disclosed to church members, and various promises of returns and “indestructible wealth” were made. No such returns were ever realized by investors who paid over $1,000,000. Accusations of [...]

In early March of 2017, the value of one Bitcoin surpassed the value of one ounce of gold for the first time. Proponents saw this development as validation of the digital currency’s endurance; but other, more baleful watchers saw instead an opportunity to create new scams and defraud unwary investors. Why is Bitcoin so exciting to investors, and why is the medium also so rife with fraud? While the US dollar has not been tied to the gold standard in decades, there is still a common belief that the US dollar is tied to some real-world commodity. But that connection is vague at best. There is an equation tying the value of a dollar to the gross domestic product of the nation, but even that does not clearly link to any tangible object of value. What Bitcoin offers is similar to the benefits of a gold-based currency: a valuable commodity, internationally valued, and with limited scarcity, without the drawbacks of [...]

Promissory notes are often used by companies to raise revenue. Investors loan money to the company in exchange for a promise to repay the principal, plus interest, on a specific date. While these forms of debt can sometimes be legitimate, there is a substantial enterprise of fraudulent notes being marketed to individual investors. With hundreds of millions of dollars in financial losses, the United States Securities and Exchange Commission (SEC), along with state security agencies, is working to combat this widespread problem. Promissory note fraud schemes follow a pattern Promissory note fraudsters target a wide range of victims, but reports show that the most targeted group is the elderly, with many of these vulnerable people losing their retirement savings in the process. As explained by the SEC, promissory note fraud generally follows this general pattern: Independent life insurance agents sell the notes. These individuals rarely have a legitimate license to sell securities. They are lured into the scheme with promises [...]