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April 16, 2014 / 16 Nisan, 5774
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Posts Tagged ‘ponzi scheme’

Five Madoff Employees Found Guilty in Ponzi Scheme

Tuesday, March 25th, 2014

A federal jury Monday found five former employees of Bernard Madoff guilty of knowingly being involved in the biggest Ponzi scheme in history and rejected their claims that they were just following orders.

The defendants’ testified that Madoff was the only one who knew of the swindle, but assistant U.S. attorney John T. Zach had told the jurors, “There’s really no dispute here that there was a massive criminal conspiracy” and that “the defendants knew that fraud was going on at Madoff Securities.”

Sentences will be handed down later, but it is certain that the five men and women will be joining Madoff by moving their residence to a prison cell.

One of the key testimonies on behalf of the prosecution was by Frank DiPascali Jr., who pleaded guilty in 2009 and has been cooperating with federal prosecutors and who told the jury that  a fake ledger of securities trades was written up to show an auditor.

Madoff’s senior staffers kept a special set of books for the Securities and  Exchange Commission.

Lawyers for the defendants questioned DiPascalis veracity and claimed his testimony was based on his desire to reduce his own jail sentence.

The defendants’ material wealth blinded them from simply quitting the swindle that robbed institutions, such as Yeshiva University, and thousands of people of millions of dollars.

Daniel Bonventre, 67, New York, N.Y., received hundreds of thousands of dollars in personal expenses and bought a New Jersey beach home.

Annette Bongiorno, 65, North Hills, N.Y., bought expensive homes in New York and Florida and Bentley car.

JoAnn Crupi, 52, Westfield, N.J., bought a vacation home on the New Jersey shore and also charged personal expense to Madoff Securities.

Jerome O’Hara, 50, Malverne, N.Y. and George Perez, 48, East Brunswick, N.J., objected to Madoff about having to change records and delete records and said they would not follow such orders in the future. However, a pay raise solved the problem.

Madoff Says His Scheme Was Not Betrayal of Jews

Thursday, March 20th, 2014

Ponzi schemer Bernie Madoff said in a prison interview that he does not feel he “betrayed the Jews.”

Madoff, 70, is serving a 150-year sentence at the medium-security federal prison in Butner, N.C., for a scheme believed to be the largest of its kind in U.S. history — one that affected a disproportionate number of Jewish individuals and organizations.

“Religion had nothing to do with it,” Madoff told Politico in an interview published Thursday.

“I don’t feel that I betrayed the Jews, I betrayed people. I betrayed people that put trust in me — certainly the Jewish community. I’ve made more money for Jewish people and charities than I’ve lost.”

Madoff told Politico that he attempted to recover money for his victims, and it has largely gone unacknowledged.

He said the information he shared with Irving Picard, the trustee charged with overseeing the recovery and distribution of money lost in the Ponzi scheme, has been critical to Picard’s ability to collect the money.

“Everybody thinks the worst of me,” Madoff said. “The only thing I’m happy about is I was able to help people recover.”

The investment advice he offers is not to invest in the stock market.

Madoff, who sees a prison psychiatrist once a week, said he has “nothing to repent for. I already knew what I did was wrong.”

He also said, “I don’t believe I’m a bad person.”

Madoff said the loss of his family, who have had nearly nothing to do with him since the scheme became public, is “more punishment than being incarcerated.” His son Mark committed suicide in December 2010 at 46.

He said he suffers from kidney disease and not cancer, as has been reported, and takes about 14 medications, which he did not do before entering prison. Madoff had a heart attack over the winter; and a stent was inserted to open a blocked artery.

JP Morgan to Pay $1.7 Billion to Madoff Fraud Victims

Tuesday, January 7th, 2014

J.P. Morgan Chase will pay $1.7 billion to victims of the Bernard Madoff Ponzi fraud scheme, according to deal announced by the Justice Department’s prosecutors, who agreed to delay criminal charges against the bank.

The financial institution is charged with violating the Bank Secrecy Act, and charges will be delayed for two years pending the payments and changes in the bank’s policies to stop prevent money laundering, which is how Madoff got away with his fraud until finally getting caught.

Madoff is serving a sentence of 150 years in prison for raking billions of dollars from investor’s accounts. One of those hardest hit was yeshiva University.

The Wall Street Journal reported Tuesday that the bank failed to send U.S. regulators a formal report on Madoff’s activities even though it had informed Britain in 2008 that Madoff’s returns on investments were “too good to be true.”

Police Arrest LA Man Accused of Defrauding Iranian-American Jews

Wednesday, May 1st, 2013

The FBI has arrested a Los Angeles man who allegedly operated a Ponzi scheme targeting the city’s Iranian Jewish community.

Shervin Davatgarzadeh, also known as Shervin Neman, was taken into custody on suspicion of defrauding $3 million from mostly Jewish Iranian-American investors, the FBI said.

According to the indictment, Davatgarzadeh posed as a hedge fund manager promising to invest in the Los Angeles real estate market.

He is suspected of illegally using the investments to pay for a lavish lifestyle for himself and his wife that included a $60,000 wedding ring, luxury cars and a new office.

Iranian Jewish community in Los Angeles has been rocked by a series of Ponzi schemes in recent years, according to the L.A. Jewish Journal.

A U.S. district court in March sentenced an Iranian-Jewish radio talk show host and businessman, John Farahi, to 10 years in prison for swindling $24 million from dozens of victims, mostly Iranian Jews.

In October 2011, Iranian-Jewish businessman Ezri Namvar was sentenced to a seven-year prison term for stealing $21 million from four clients.

Prison Bound Madoff’s Brother at Granddaughter’s Bat Mitzvah

Monday, January 21st, 2013

Peter Madoff, brother of notorious Ponzi-scheming Bernie, partied with friends and family at his granddaughter’s bat mitzvah on Sunday, the NY Post reported.

Today, writes the Post, the Madoffs will continue their celebration at 404 NYC, a sleek event space on 10th Avenue. The cost of the event is estimated at between $75 and $100 thoysand.

Peter Madoff, 67, received a 10-year sentence on Dec. 20, but the judge delayed Madoff’s incarceration until Feb. 6, based on pleas from family and clergy to let the proud grandfather attend the event.

Before little Rebecca Skoller read from the Torah at the Central Synagogue in Midtown Manhattan, Peter Madoff said a brief prayer in Hebrew and kissed the Torah.

Little Rebecca told the assembled congregation that “the suffering of others should not be forgotten.”

After the ceremony—live-streamed online—Madoff, the 100 guests, and security, went downstairs to the Pavilion Room, catered salmon, tuna and bagels.

You know, if the whole thing was streamed, grandpa could be watching it from the prison library. Too late now.

The Post approached a few of Madoff’s victims for their reaction.

“I would much prefer that Peter Madoff be locked up and the only way he can attend the bat mitzvah is through pictures sent to him in prison,” said Michael DeVita, 62, who lost his retirement assets to the Madoff scam.

“I don’t think he should have any rights,” said Shelly Ludlow from Long Island, whose mother lost everything in the Ponzi scheme. “She has nothing, and here he can go and party — that’s injustice.”

Peter Madoff, the chief compliance officer at Bernard L. Madoff Investment Securities, worked for his brother for 40 years and took in $40 million just from 1998 to 2008.

He pleaded guilty in June to conspiracy to commit securities fraud and falsifying documents.

He told the court that he was “deeply ashamed and sorry,” but argued that he was also among his brother’s $20 billion fraud.

US District Judge Laura Swain said his plea of ignorance was “frankly, not believable.”

Little Rebecca begged the judge to let her “Papa” attend her “13th-birthday rite.”

Wait a minute – 13th birthday? Must be a Reform thing. Equal opportunity B-Mitzvah.

“Papa and I have always looked forward to sharing the experience of my bat mitzvah. I would give anything just to have him see me reading from the Torah even if it was only for a second,” the girl wrote.

Central Synagogue Rabbi Peter Rubinstein also wrote the judge.

“I suspect that the unfolding tragedy of Peter’s circumstances . . . were hatched early on in his dependence on his older brother as the closest father figure he had,” Rubinstein wrote.

There you go – a fine teaching of moral responsibility: my brother made me do it.

As part of his plea deal, Peter Madoff forfeited his assets, and his wife Marion must now endure life in a $3,300-a-month apartment in Battery Park City.

Madoff will now report to the upstate NY Otisville medium-security federal prison. Forbes rated it as one of the most comfortable prisons in America.

How to Avoid Being the Next Ponzi Scheme Victim

Tuesday, September 11th, 2012

One of the main headlines in world financial news this August has been the fate of ZeekRewards.com, an online company that offered investors the chance to get rich quick. Interestingly enough, I heard about ZeekRewards before this company hit the headlines, when one of its salespeople contacted me and asked me to represent them. The very pushy salesman nagged me to set up a meeting, but the more he pushed me, the more uneasy I felt. So I decided to follow my mother’s adage of, “If it sounds too good to be true, it probably is,” and I didn’t meet him.

Reading the headlines, I’m very relieved with my decision. ZeekRewards offered promises of returns such as 1.5% of the investment at the end of each day and shares of 50% of the daily profits. Wouldn’t everyone want that kind of deal? However, this August, the Securities and Exchange Commission (SEC) filed an emergency action in a North Carolina federal court because this investment project was yet another Ponzi scheme.

The owners of ZeekRewards must have realized that many of these potential investors were going to ask questions. So, in a bid to protect themselves they added a clause for new users stating that they were not purchasing stock or any kind of “investment or equity,” and they even labeled the whole thing as an “e-commerce subscription.” The SEC saw through their ruse and said that this was not the case and in fact the company was offering its subscribers false securities. However, the average investor did not have the knowledge to understand what they were getting into, and the abovementioned clause probably sounded fair enough.

As people kept subscribing and playing the company’s game, investing and reinvesting, the company’s cash outflows began to exceed its total revenue, leading to a collapse and many unhappy subscribers who were left with nothing.

This time, there are more than 1 million victims of the scheme, making this the largest such bankruptcy case, with around $600 million at stake.

Interestingly, many observant Jews, both in Israel and America, have fallen prey to this scheme. It’s not the first time that Jews have been hit hard by Ponzi schemes (think Madoff).

This raises the question of why Ponzi schemes such as ZeekRewards are tempting to the religious Jewish community. One possible answer is that many religious Jews have large families and in this economic climate finances may be tight. Offer a person who is trying to find legitimate ways to support his family a way to make some extra money, and it’s tempting to find out more.

Sadly, as stated above, ZeekRewards is not a one-off story. Apart from desperation to make more money, another possible reason people fall for these schemes is that the scammers may have gotten smarter.

However, there are three basic measures that you could follow to protect yourself from falling victim in a financial scheme:

1. Remember my mother’s rule: “If it sounds too good to be true, it probably is.” ZeekRewards offered high gains for pressing a few buttons and looking at some ads. This is the first sign of something suspicious. When something sounds too good to be true, ask yourself, “What’s the catch?”

2. Do your research. One potential investor who decided against investing with ZeekRewards said that when he heard about it, he did his homework. He discovered that the company’s securities offerings were not registered with the SEC as required by U.S. federal law. Recognized authorities monitor investments for a reason; their absence speaks volumes.

3. Don’t feel pressured. If the company/salesman/friend keeps nagging you, saying that the investment opportunity will be gone if you don’t “buy now,” it may be wise to let the opportunity pass.

While there are no guarantees in the world of finance, taking these three steps will provide a basic level of protection against becoming a victim of the next Ponzi scheme that rears its ugly head.

If you are interested in hearing more about the biggest investment fraud in history, watch this TV interview that I did on the subject of Bernie Madoff. Although this was four years ago, the points remain the same. If anything, there are more frauds out there and we need to be more careful than ever. So be wary and tread with caution.

The Investment Scam That Will Wipe You Out

Sunday, June 10th, 2012

A new fraudster has just turned himself into the police for defrauding investors out of millions of dollars (or shekels, actually, as this guy was in Israel). But the story is the same as when Mr. Ponzi himself was inventing the Ponzi scheme.

Want to blame the government or the regulators? As they say, all that blame and five bucks will get you a cup of coffee. I would not want to blame the victim, but let’s look at some of the facts in the case. In fact, these points are the same in almost all of the fraud cases I have read about in my two decades on Wall Street:

The clients gave money directly to the investment advisor.

The clients did not get statements from a bank or brokerage account.

The clients believed the investment advisor who said he could make totally unrealistic gains … guaranteed!

The clients believed there was little or no risk.

If these clients were children or severely mentally incompetent, I would agree with the argument that we need stronger regulations and better government oversight. But in the most recent case in Israel, and if we look at the biggest scandal ever – Madoff – we see that the clients were often very sophisticated professionals who were very experienced in all aspects of business.

Rather than going into the behavioral finance explanations for why even top-tier investors let greed trump caution, let’s get practical. (If you do want to learn about the psychological aspects of what makes people do the wrong thing, you can listen to my interview with Nobel Prize Laureate Daniel Kahneman on my radio show. You can see that interview on YouTube.)

In this blog post, I want to make only one basic point, and if you finish reading this article with this one take-away, you can feel pretty confident that you won’t get suckered into a fraudulent investment scheme. If it sounds too good to be true, it probably is. This idea came from my mother (also a Wall Street veteran, and author of a book for children about how the stock market works).

If Ponzi scam victims considered this core concept before getting involved, this is what they might have thought: “You’re promising me 1.5% profit every month. What do you think I am? Stupid? Not even Warren Buffet can do that.”

They would have continued to think: “You are guaranteeing my principal? Who do you think you are? A government guaranteeing its bonds? Germany guaranteeing the Greeks? You couldn’t possibly have enough money.”

Finally, they would have considered who custodies the money: “You are saving me the trouble of opening my own bank account and putting my money into your own account? And then you will just print up statements on your own laser printer? Come on, buddy, I wasn’t born yesterday.”

Which investment scammer has you in his sights? Who knows? But one thing is for sure – if you start by asking the most basic questions and not believing the unbelievable, you’re well on your way to protecting yourself. The scammer will just move on to his next victim.

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/the-investment-scam-that-will-wipe-you-out/2012/06/10/

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