John Scott Clark of Utah is being sued by the SEC for allegedly running a Ponzi scheme with the two online payday loan companies that he owns. Image from Wikimedia Commons.

The Securities and Exchange and Commission has slapped two online payday loans lending companies owned by a single man with fraud suits. John Scott Clark, of Utah, is being sued by the SEC for allegedly running a Ponzi scheme with two online financial services companies. He has allegedly bilked more than 120 investors out of millions.

SEC slaps online lending companies with fraud suit

The owner of two companies involved in lending payday loans online has been sued by the Securities and Exchange Commission for running a multimillion-dollar Ponzi scheme. The SEC sued John Scott Clark, of Cache County, Utah, for defrauding more than 120 investors over a period of five years in return for investing capital into two businesses that he owned, Impact Cash LLC and Impact Payment Systems LLC, according to the Salt Lake Tribune. Clark allegedly recruited investors by promising an average return of 80 percent in exchange for capital, which he allegedly said would be used to fund payday loans to reliable customers. Clark was allegedly recruiting investors from March of 2006 to September 2010 and was able to secure more than $47 million from the investors he convinced to join the operation, according to the Credit Union Times.

Clark accused of funding Mercedes habit with investor funds

Clark would gain the confidence of investors and allegedly use new investment funds to pay dividends to initial investors and fund his lifestyle, according to Deseret News. Clark supposedly purchased three Mercedes-Benz cars, a 1963 Chevrolet Corvette, installed a home theater system in his home that cost $25,000 and also purchased lavish home furnishings. Some of his investors were growing suspicious by 2009 and asked Clark to sell their stake in his companies and turn the proceeds over, which he refused to do. Eventually, the SEC became involved, slapping Clark with a lawsuit alleging five different violations of the Securities Act. A Federal judge has placed both Impact companies into receivership and frozen the same day loans lending companies, according to the Wall Street Journal.

One bad apple

Online payday lenders are thought by some to be a nest of vipers. That is far from the case, but transactions that are completed fairly and honestly do not go widely reported. Still, customers and investors should be careful who they deal with in financial matters. Organizations like the Better Business Bureau exist for a reason. An informed consumer will always be in a position to make a better decision, and something that sounds too good to be true usually is.

Sources

Salt Lake Tribune

Wall Street Journal

Deseret News

Credit Union Times

Bernie Madoff's Ponzi scheme took in an estimated $20 billion. (Photo Credit: Public Domain/U.S. Department of Justice/Wikipedia)

The Associated Press and Reuters report that Irving Picard, the court-appointed trustee in charge of recovering funds for the victims of Bernard Madoff, has reached settlement with Madoff’s primary beneficiary in a massive Ponzi scheme. The estate of Jeffry Picower, the late Florida philanthropist and businessman, has agreed to repay $7.2 billion to Bernie Madoff’s victims.

Jeffry Picower’s estate denies involvement in Ponzi scheme

Jeffry Picower’s widow Barbara Picower, who is the official representative of the estate, has maintained that her husband “was in no way complicit” with Bernie Madoff’s fraud. The Madoff-related profits were supposedly made on “stock trades.” However, she has stated that the estate of Jeffry Picower will “return every penny received” from Madoff investments.

Initial estimates from U.S. prosecutors were that the Bernie Madoff Ponzi scheme took in about $65 billion. Trustee Irving Picard later reduced that figure to $20 billion, still considered the most lucrative instance of investment fraud in history. Jeffry Picower’s $7.2 billion settlement allegedly covers more than one-third of fraud funds. Picard argued in New York bankruptcy court that Picower had to have known that the returns were “implausibly high” and in some way tied to fraudulent activity.

‘The largest civil forfeiture payment in American judicial history’

According to the New York Times, prosecutors in the Bernie Madoff fraud case say that the settlement will be the largest of its kind in the history of U.S. courts. It should enable a sizable number of fraud victims to get “at least half” of their funds back, a remarkable achievement in the minds of those who had resigned themselves to the idea that they’d lost everything for good.

The many victims of Bernard Madoff

The Bernie Madoff Ponzi scheme cut a wide swath across America’s financial landscape. Individuals, banking institutions and various hedge funds invested money in Madoff investment schemes, only to see everything disappear when the fraud was exposed. Some, like Jeffry Picower, had been drawing massive profits for years. Unlike most at the time, however, Picower took the money and ran.

Sources

Associated Press/Reuters

What happened to Jeffry Picower

The New York Mets: second in New York, first in Ponzi lawsuits. (Photo Credit: CC BY-SA/Koe/Wikipedia)

The New York Mets have been used to coming in second when it comes to the race for New York City baseball fans’ hearts. However, when it comes to profiting from Ponzi schemes, ESPN reports that the New York Mets – as well as team owner Fred Wilpon and family – have been finishing first. Bernie Madoff victims’ fund trustee Irving Picard is suing the team and the Wilpon family as part of investor fund recovery. Mets Limited Partnership – a division of the New York Mets organization – is known to have invested and profited from dealings with Madoff and his investment company.

The New York Mets are in settlement negotiations

Like many well-off Bernie Madoff clients who have agreed to return funds to help repay other victims, the New York Mets are currently in settlement negotiations with the U.S. Bankruptcy Court for the Southern District of New York. Team executives have assured Mets fans that this situation will not impede operations of the team. According to the New York Times, the Mets Limited Partnership invested $522.7 million with Bernie Madoff and walked away with $570.5 million, a $47.8 million profit.

In a statement by the Wilpon-owned real estate company Sterling Equities, it was revealed that further details regarding ongoing settlement negotiations remain confidential. Much like the case between Irving Picard and JPMorgan Chase, however, more details could be revealed with time.

The pain of loss is greater for some

New York Mets owner Fred Wilpon, 74, told ESPN that he sympathizes with the victims of Bernie Madoff, saying that “(lost) money smarts,” but that the most painful element for people like himself is the betrayal.

“I’ll go to my grave (with) that one, as will (team president) Saul (Katz) and Jeff (Wilpon) and the rest of our partners. That was a total betrayal of us. We were investors for something like 25 years,” he said.

Wilpon assured the media that returning the money will not leave the New York Mets and Wilpon group of companies destitute. Real estate and development businesses were “running the shop,” by the owner’s estimation.

Sources

Boston Globe

ESPN

The New York Mets appear to be hiring…

U.S. Attorney General Eric Holder announced that Operation Broken Trust has collared more than 500 people engaged in investment fraud schemes. Image: Department of Justice/Wikimedia Commons

Operation Broken Trust is a federal investigation into widespread fraud perpetrated by criminals taking advantage of the financial crisis. The Justice Department announced Monday that Operation Broken Trust has brought criminal and civil charges against more than 500 people. The schemes exposed by the investigation defrauded thousands of investors out of $10.5 billion.

Operation Broken Trust: nationwide fraud sweep

Operation Broken Trust was organized by the Obama administration’s Financial Fraud Enforcement Task Force. At a news conference Monday, Attorney General Eric Holder said the three-and-a-half-month investigation is the first nationwide operation to combat investment fraud schemes that prey on the general public. Holder said 343 people face criminal charges and another 189 are getting slapped with civil suits. Eighty-seven people have already received prison sentences. Several defendants were sentenced to more than 20 years. One was sentenced to 85 years in prison.

Fraudsters prey on vulnerable citizens

Operation Broken Trust investigated more than 120,000 cases of fraud including Ponzi schemes, foreign currency fraud, investment scams and market-manipulation. Holder said the fraudsters targeted communities, churches, immigrants, the elderly and the disabled. According to the Justice Department, many victims were set up by neighbors or fellow church members. A man in Texas ripped off others in his church by telling them his lucrative foreign exchange trades were a “blessing from God.” Another case involved a police officer stealing from fellow cops in a Ponzi scheme. Other victims included a blind man and a bereaved family.

Lessons from Operation Broken Trust

Operation Broken Trust was a joint effort among the Justice Department, the U.S. Postal Service, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Robert Khuzami of the SEC said that while Wall Street banks have gotten the biggest fraud headlines, hundreds of other scams devastate working families and retirees. The lesson to be learned from Operation Broken Trust, Holder said, was that “Cheating investors out of their earnings and savings is no longer a safe business plan.” He also warned the public to be alert for scams, take measures to protect themselves and report to authorities when they think something fishy is going on.

Sources

Wall Street Journal

Los Angeles Times

Washington Post

JPMorgan Chase may be on the hook for billions of dollars for allegedly aiding and abetting Bernie Madoff. (Photo Credit: CC BY-ND/Market Mix Up)

The latest chapter in the Bernie Madoff financial scandal involves one of the United State’s largest banking and investment companies, reports PR Newswire. It has been announced via press release that Irving Picard, the trustee for liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS), is filing a complaint in U.S. Bankruptcy Court for the Southern District of New York against several arms of JP Morgan Chase , including banks and securities companies. Picard seeks to recover $1 billion in fees and profits, plus $5.4 billion in damages for Madoff clients, from JPMorgan Chase, previously BLMIS’ primary banker. The allegation is that JPMorgan Chase aided and abetted Bernie Madoff and company in the largest known Ponzi scheme in U.S. history.

Case says JPMorgan Chase was center of Ponzi scheme

David Sheehan, court-appointed counsel for Irving Picard, said that “JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff.” While JPMorgan Chase was not the only financial organization involved in Bernie Madoff’s intricate investing scheme, Sheehan places the banking and investment corporation at the center of the misdeeds and says it was thoroughly complicit, despite knowing of various warning signs regarding Madoff’s activities over the span of 20 years. Despite what the prosecution calls overwhelming evidence, JPMorgan Chase says it “simply continued to collect fees and derive profit.” Without JPMorgan Chase’s participation, says Sheehan, the Madoff Ponzi scheme would not have been possible.

Currently, nearly all financial data involved in the complaint is filed under seal with the Bankruptcy Court. This is because JPMorgan Chase has designated all of the information confidential. Picard is fighting for the seal to be removed as soon as possible.

Madoff’s main account was held by JPMorgan Chase

If JPMorgan Chase had taken the initiative to review internal account records of the massive amounts of cash being moved, it could have easily seen that something was illegitimate, claims Sheehan. As suspicious activity was quickly discovered once the FTC began to investigate, supporters of Irving Picard believe that JPMorgan Chase was negligent in its duty to expose the fraud.

Sources

PR Newswire

Recent interview with Irving Picard re. SIPC Insurance

Charles Ponzi, the man whose scheme launched a thousand frauds (Photo: Wikipedia)

Manhattan, New York investment adviser Ken Starr – not to be confused with the attorney made famous by the Bill Clinton-Monica Lewinsky scandal – is the latest shifty-eyed money man to get caught with his hand in the cookie jar. He has been arrested by federal authorities for allegedly brewing a $30 million Ponzi scheme, reports NBC New York. The full slate of charges include wire fraud, investment adviser fraud, money laundering, IRS fraud and lying to a federal officer. Some of Ken Starr’s clients include famous portrait photographer Annie Leibovitz, Uma Thurman, Martin Scorsese and Wesley Snipes.

Ken Starr and Andy Stein were arrested

Ken Starr, an accountant and head of New York-based Starr and Co., was arrested by federal officers for the Ponzi scheme along with Andy Stein, former Manhattan borough president and the president of the New York City Council. Stein’s charges will likely include lying to law enforcement officers who were conducting the probe. Starr’s company has refused comment, while Stein’s office has yet to respond to press inquiries. Surely they’ll want the best attorneys paydayloans can buy.

Some of Ken Starr’s clients had their own troubles with the law

Wesley Snipes, star of the “Blade” film series, was a client of Ken Starr. Snipes had been convicted in 2006 for not filing tax returns in his home state of Florida. By 2008, Snipes was cleared of tax fraud and conspiracy. During the trial, Ken Starr was called upon to testify, and he told the court that he’d personally advised Snipes not to run afoul of the IRS.

Starr may have led Leibovitz and Sylvester Stallone into bad deals

In 2007, Ken Starr began an adviser-client relationship with photographer Annie Leibovitz. Allegedly, Leibovitz was advised to invest in Art Capital Group, a private bank that provides exclusive services to the art world. Leibovitz took a $24 million dollar loan in order to invest, but was unable to keep up with payments as the investment allegedly didn’t produce the returns Starr had promised. Five years earlier, Hollywood star Sylvester Stallone slapped Ken Starr with a lawsuit because the advice about investing in Planet Hollywood restaurant chain didn’t bear the returns Stallone was expecting.

Sources:

NBC New York

The complaint against Ken Starr

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You don't look well, Bernie (Photo: picasaweb.google.com)

The Bernard Madoff Ponzi scheme was the largest financial fraud scheme perpetuated (allegedly) by one individual in United States history. When Madoff was thrown in prison, some people felt that he had gotten his just desserts and that the punishment fit the crime. While those on the outside may be resorting to the cheapest personal loans for aid, at least they can walk about free.

I’m not one of those people. I was not directly impacted by the Ponzi scheme, mind you. But it has been painfully clear to me from the outset that this operation was so large that it couldn’t have been run by only one person. The prosecution tried to get him to give up names and offer some consolidation of illegal activities, but the prosecution was unsuccessful. So Bernard Madoff is serving a 150-year term that will coincide with the end of his life, while others who are equally guilty of defrauding and destroying people’s lives remain free.

Now we see why Madoff has remained silent

Multiple reports indicate that Madoff has cancer. Specifically, Madoff is said to have pancreatic cancer that is killing him. It is said he hasn’t much longer to live, which will make obtaining the names of his conspirators near to impossible. For instance, RTT News (as well as reports by the New York Post and Wall Street Journal) indicate that the 71-year-old financier is “taking 20 pills a day to treat his cancer,” and that Madoff is telling inmates he hasn’t long to live. The specific nature of the cancer has not been definitely confirmed, but Brian Baxter blogs for AM Law Daily that it is pancreatic cancer.

Madoff’s wife Ruth or their lawyers have yet to respond to these reports.

Deception and death

According to the New York Post, the news has “tongues wagging within white-collar circles.”

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“If Madoff is truly dying, this revelation perhaps sheds new light on the real motivation for his voluntary admission of guilt,” says former federal prosecutor Robert Mintz. “It would be the ultimate act of manipulation for Madoff to have fallen on the sword, confessing his crime knowing that his days were numbered. And taking to his grave the names of those who helped him carry out his deception.”

Death attracts fans, particularly death of the rich and famous. This may be why various prison gangs have tried to recruit Madoff to their cause, but I’ll bet his financial expertise also has something to do with it. If you think people like Bernie Madoff don’t have contact with the outside world when they want it, you’re only partially right. Not as easy as whipping out a cell phone and making a call, but people in Madoff’s position have to be resourceful to get to where they are in life.

Getting ready to die

(Photo: picasaweb.google.com)

But I was talking about death, wasn’t I? The Post claims Madoff and his cancer have been participating in various Native American ceremonies that are intended to purify his body… or prepare him to pass into death, I’m not sure which. Prayers, hot rocks, ceremonial pipes… I know they may have cultural significance to some (and New Age commercial potential for others), but as Blind Willie McTell sings “Might ‘s well get ready, cause you got to die.” How about doing what’s right before you do, Bernie? Consolidation of information could save people from having to live off the cheapest personal loans…

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