Excerpt from the SAR Activity Review Identification of Elaborate Ponzi Schemes
Case one. A multi-agency investigation of several subjects engaged in a
Ponzi scheme, in which 5,000 investors were defrauded of $67 million, was aided
by the filing of a SAR by a financial institution in Hawaii. Proceeds of the
scheme were deposited into numerous accounts at various business locations in
Hawaii and then wire transferred to offshore accounts in Antigua, Bahamas and
Vanuatu. The scheme collected approximately $67 million from about 5,000
investors throughout the United States and several foreign countries. Investors
were told that their money would be invested with the Cayman Islands Government,
which would pay the principals 20 percent interest per week. The principals,
in turn, promised a return of 8 percent per week, plus 3 percent referral fee
for investors who enrolled new investors. The investment was to run on a
13-week cycle. In reality, there was no such investment with the Caymanian
Government, and the defendants kept substantial profits.
As reported in the SAR, one of the defendants deposited $100,000 which was
subsequently wire transferred to Ireland. The cash consisted of $95,000 in one
hundred dollar bills and $5,000 in twenty dollar bills. The customer represented
himself as an investment consultant and a self-employed educational systems
marketer. The customer provided bank officials with useful identification documents,
and even inquired of bank employees if they wanted to invest with him
promising to pay them a high rate of return. The transaction indicated that the
customer was working as a middle person to hide illegitimate income from other
people who may have been investors under his control.
Thus far, three search warrants have been executed and $1,473,536 has been
seized. One defendant pled guilty to six counts of money laundering, mail fraud,
wire fraud, conspiracy to launder monetary instruments, and conspiracy to defraud
the United States. Six additional defendants were named in a 100-count
indictment charging them with mail fraud, wire fraud, money laundering, structuring,
and conspiracy. Indictments of other individuals involved in this scheme
are expected. (Source: U.S. Customs Service)
Case two. An FBI investigation was predicated on a SAR filed by a bank in
Indiana that indicated structuring of currency deposits. After further investigation,
an elaborate Ponzi scheme was identified which had been in operation from
1996 through August 2000. More than 500 victims were defrauded of more than
$40 million before the scheme was discovered. This case was worked jointly with
the Internal Revenue Service (IRS), the Securities and Exchange Commission
(SEC), and the U.S. Marshals Service. The subject fled to Mexico where he was
arrested. The subject, charged with 20 counts of money laundering and 11 counts
of mail fraud, is currently incarcerated and awaiting trial. This investigation
could be the largest financial loss case to be successfully investigated and presented
by the Southern District of Indiana. (Source: FBI)
Case three. After review of a SAR filed by a Michigan bank, the IRS initiated
an investigation on an individual who engaged in a Ponzi scheme. The SAR,
which was filed on an associate of the principal defendant, described allegedly
fraudulent activity involving the sales of multi-year contracts for satellite dish
systems and services to individuals. The customers were promised that their funds
would be deposited in offshore accounts to help offset the cost of the satellite
services. A business identified in the SAR narrative as being involved with the
offshore investment activity was owned by the principal defendant.
The investigation led to the indictment of the defendant on 63 counts of mail
fraud, wire fraud, and money laundering. Subsequently, the defendant entered a
plea to one count of mail fraud and one count of money laundering. The defendant
admitted that he solicited over $1.2 million from over 105 investors from
late 1994 through September 1997 by representing that he could place the funds
in secure overseas investments, which would return at least six times the investment
amount in 40 weeks. In fact, the defendant placed the funds in the business
account of the company identified in the SAR's narrative. He admitted that he
used the funds from this account to purchase 20 vehicles for cash, which he used
or gave to friends. He drew funds to pay salesmen who recruited other investors.
He used approximately $300,000 of investors. money to make purchases of
furniture, an entertainment center, firearms, real estate, and other items. The
defendant was sentenced to a substantial jail sentence, and the government seized
numerous assets including 10 vehicles, which were sold for approximately
$200,000. (Source: IRS/Criminal Investigation)
Excerpted from SAR Activity Review Issue 2, page 26
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