Zeek Rewards and Ponzi Scheme: Affiliates File Lawsuit and Zeekler, the Lexington company shut down by the Securities and Exchange Commission last week after being accused of running a Ponzi scheme, have been handed a class-action lawsuit by nearly 100 Zeek affiliates. The suit, brought by 82 named affiliates of the Zeek web site, names ZeekRewards as well as CEO Paul Burks and Rex Venture Group, the company through which Burks ran Zeek. Lexington attorney J. Calvin Cunningham represents the plaintiffs. The state court action, filed in Davidson County Superior Court this past Wednesday, seeks damages for all affiliates and demands a jury trial. The lawsuit claims damages from the company’s “fraudulent, unfair, deceptive and illegal acts.” Numerous other unnamed individuals could be inserted into the lawsuit at a later date, the filing said. Read more in the Franchise Herald [...]

MF Global customers win big

MF Global’s Australian customers have scored a significant win after a court ruled that a pool of $62.7 million being fought over by creditors be distributed in their favour. Justice Ashley Black of the NSW Supreme Court ruled yesterday that the $16m being pursued by MF Global Singapore and the $46m being pursued by ordinary creditors of MF Global Australia should be regarded as client funds and distributed accordingly.
The ruling represents a milestone for MF Global Australia’s client base of investors and traders who had $313m in accounts frozen when its US parent collapsed amid claims of misappropriation of client money. More in the Australian here.

Investor protection: Complex protection

Investors must beware of being sold ‘capital protection’ schemes as they tend to be very complicated ‘Capital Protected’ schemes exert such a magnetic pull on investors that I am amazed at the so-called high net worth individuals (HNIs) and ultra HNIs getting suckered, big time. This clearly shows that financial literacy has not penetrated even to those who have the money. Read Money Life report [...]

Gupta Insider-Trading Sentence Is Re-Set for Oct. 17

Ex-Goldman Sachs Group Inc. (GS) director Rajat Gupta’s sentencing on securities fraud for leaking inside information to fund manager Raj Rajaratnam was reset for Oct. 17, a day earlier than previously set. Gupta, 63, formerly managing partner of McKinsey & Co., was convicted by a federal court jury in Manhattan on June 15 of three counts of securities fraud and one count of conspiracy. Prosecutors said Gupta, who sat on the board of New York-based Goldman Sachs and Cincinnati-based Procter & Gamble Co. (PG), leaked tips he learned from board meetings to Rajaratnam, who had also been his business partner. More on Bloomberg Businessweek [...]

How Ponzi Schemer Sam Israel Fell for Conspiracy Scam: Review

Lying came easy to Sam Israel, the Connecticut hedge-fund manager who faked suicide in 2008 to escape a 20-year prison sentence for running a $450 million Ponzi scheme. Within two years of starting the Bayou hedge fund in 1996, Israel, trader Jimmy Marquez and chief financial officer Dan Marino began cooking the books to hide a 14 percent loss. Confessing would have driven investors to withdraw their money, depriving the trio of the chance to show the world that the fund’s Forward Propagation strategy — a crazy-quilt of technical-sounding palaver and marketing — worked. Though of course it didn’t. Read Bloomberg report here.

Another ‘Madoff’ name nix

The second of Ponzi-schemer Bernie Madoff’s daughters-in-law is asking a court for permission to shed her now notorious married name. Deborah West Madoff, who started divorce proceedings against Bernie’s son Andrew back in 2008, has sought permission in Manhattan Supreme Court to revert to her maiden name. The couple have two children. More in the New York Post [...]

New Jersey Tax Court Cuts A Break To Madoff Victim

There are some taxpayer wins that I feel particularly good about. The refund claim of the Estate of Theodore Warshaw is one of them. Theodore Warshaw died in May 2006. His estate, which was left in trust for his widow, was valued at $1,848,293. Most of its value was in an IRA account that, according to its statements held securities worth $1,463,733. The estate paid estate tax of $88,677 to the state of New Jersey. In 2007 and 2008, there were distributions of $183,148 and $90,478. Then came the news at the end of 2008. Bernie Madoff had been running one of the largest Ponzi schemes in history. The IRA statements had been entirely fictitious. The distributions had been funded by the latest victims of the scheme. Mr. Warshaw’s executors figured that since there really had not been anything in the IRA, the estate taxes should be refunded. The New Jersey Division of Taxation did not agree. More in Forbes [...]

Latinos Who Invested Savings Claim Betrayal in Ponzi Scheme

Mr. Loja is one of about 400 investors — mostly immigrants from Latin America — who say they are the victims of a Ponzi scheme that robbed them of at least a combined $10 million dollars. Though most of the victims lived in Queens, others are scattered around the country in places like Florida and New Jersey. The company stopped issuing checks last year and has since closed up its office and warehouse; its principals are nowhere to be found. Complaints have been lodged with multiple law enforcement agencies, including the Federal Bureau of Investigation, the Queens district attorney’s office and the Federal Trade Commission. The communities that were singled out are grappling with the sense of being betrayed by some of their own people, who used their victims’ financial naïveté, distrust of government and common cultural ties to earn their trust. Read New York Times report [...]

Judge releases billions in Madoff money

A federal bankruptcy court judge cleared the way for billions of dollars to be distributed to victims of Bernard Madoff, the mastermind behind the biggest Ponzi scheme in history. Judge Burton Lifland in the southern district of New York gave the green light on Wednesday to distribute up to $2.4 billion to burned investors. The victims could receive the money within weeks, according to the trustee’s office. More on CNNMoney [...]

Peregrine Financial trustee, clients parry over return of funds

Six weeks after the collapse of Peregrine Financial Group, tensions are rising between customers clamoring for the release of frozen funds and a bankruptcy trustee skeptical of records at a brokerage whose CEO confessed to forging financial data. Customers say Ira Bodenstein, the trustee in charge of recovering client money, is delaying payouts and keeping the customers in the dark as to why. Read Reuters report [...]