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Canadian Charged in Multi-Million Dollar International Stock Fraud Ring

February 15, 2009 By Paul (Founder, WorkAtHomeTruth) 5 Comments

2/12/2009 United States Department of Justice Press Release:

PHILADELPHIA – Acting United States Attorney Laurie Magid and Special Agent-in-Charge of the FBI Janice K. Fedarcyk today announced that a federal grand jury has returned an indictment1 charging George Georgiou with conspiracy, securities fraud, and wire fraud for his role in an international stock fraud conspiracy that resulted in more than $26 million in actual losses and hundreds of millions of dollars in intended losses. The indictment charges that Georgiou and his co-conspirators sought to manipulate the markets for four stocks publicly traded on the Pink OTC Markets Inc. (commonly known as the “Pink Sheets”), and the OTC bulletin board (“OTCBB”): Neutron Inc., Avicena Group, Inc., Hydrogen Hybrid Technologies Inc., and Northern Ethanol, Inc. Georgiou was a registered investment professional in Canada until 1995 when he was banned from acting as broker.

According to the indictment, Georgiou conspired with others in the United States, Canada, Turks and Caicos, and the Bahamas to manipulate the demand for, and prices of, the four companies’ stocks. Georgiou and his conspirators intended to profit from the scheme by (1) selling the stocks when they reached an artificially inflated price; and (2) using the artificially inflated values of the stock as collateral to obtain loans in brokerage accounts often referred to as “margin.”

“This fraud attacks the credibility of our financial markets at a time when individual investors have already suffered great losses and when legitimate small companies can ill afford yet another blow to their efforts to raise capital through stock offerings,” Magid said. “The crimes charged reached across America and into Canada and the Caribbean. This prosecution shows that we will not be deterred by international borders in our efforts to protect Americans, and the markets upon which they rely, from fraud.”

Georgiou and his co-conspirators owned significant amounts of the four companies’ stocks. They opened brokerage accounts in various locations including Canada, the Bahamas, and Turks and Caicos in various names which they then used to engage in manipulative trading in the stocks. By trading the stocks among and between the various accounts they controlled, they artificially inflated the prices of the stocks and falsely made it appear that there was an active market for the stocks. Georgiou and his co-conspirators sold their shares at inflated prices for a profit and also used the artificially inflated stocks as collateral to fraudulently obtain margin and other cash loans of at least $26 million from two Bahamian brokerage firms. When Georgiou caused trading losses in these accounts, the Bahamian brokerage firms were left with virtually worthless stocks as collateral. As a result, one of the firms was forced to liquidate its business.

“The defendant in this case engaged in an organized and on-going international scheme to manipulate and artificially inflate stock prices of publicly traded companies,” said Fedarcyk, “and in so doing defrauded all of the legitimate market investors who owned shares in these companies. The investment market, and the entire economy, suffers when individuals use deceitful means to unscrupulously cheat the system.”

Georgiou was arrested after allegedly agreeing to pay an undercover FBI agent a kickback to bribe brokers to purchase $10 million worth of Northern Ethanol stock in their clients’ accounts. The FBI agent was posing as a person who had access to a network of corrupt brokers whom the agent could bribe to buy stock as part of the scheme.

Georgiou is currently on house arrest in the United States pending trial.
INFORMATION REGARDING THE DEFENDANT
NAME ADDRESS AGE
George Georgiou Camp Bell Ville, Ontario, Canada 39

If convicted of all charges, Georgiou faces a statutory maximum of 165 years imprisonment and a $21.25 million fine. He also faces approximately 262-327 months under the advisory federal sentencing guidelines.

The case was investigated by the Federal Bureau of Investigation and the United States Securities and Exchange Commission. It is being prosecuted by Assistant United States Attorneys Derek A. Cohen and Louis D. Lappen.

UNITED STATES ATTORNEY’S OFFICE Contact: PATTY HARTMAN
EASTERN DISTRICT, PENNSYLVANIA Media Contact
Suite 1250, 615 Chestnut Street 215-861-8525
Philadelphia, PA 19106

Filed Under: FBI Releases, USDOJ Tagged With: , , , , , , , , , , , , , ,

OWNER OF REAL ESTATE COMPANY CHARGED WITH OPERATING MASSIVE INVESTMENT FRAUD SCHEME

January 4, 2009 By Paul (Founder, WorkAtHomeTruth) 3 Comments

December 17, 2008 F.B.I. News Release:

Scam took at least $62 million from victims

A Norwalk man who owned and operated Best Diamond Funding, a real estate brokerage and mortgage lending company, was arrested this morning on federal charges for allegedly running an investment fraud, also known as a ponzi, scheme that lured more than 2,000 victims into investing more than $62 million. Milton Retana, 43, was indicted on December 12, 2008, on seven counts of mail fraud, one count of wire fraud, and one count of making a false statement to federal law enforcement agents. The El Salvadoran national made his initial appearance this afternoon in United States District Court in Los Angeles.

According to the indictment, Retana began soliciting investors in late 2006 to invest with Best Diamond Funding by telling them that their money would be used to buy and sell real estate.

Best Diamond Funding advertised in Spanish-language magazines, on the Internet, and held weekly investment seminars at several locations in Los Angeles.

The indictment alleges that in these advertisements, at investment seminars, and in personal meetings with potential investors, Retana, and others at Best Diamond Funding, told potential investors that the company’s success in buying, renovating, and selling properties allowed it to pay investors returns as high as seven percent of their invested principal each month, for a total guaranteed return of 84 percent each year. Potential investors were also encouraged to use the equity from their homes to fund their investment with the company. The indictment also alleges that investors were told that Best Diamond Funding employed as many as 60 real estate agents and often purchased as many as 50 to 60 properties at one time.

The indictment alleges that, in reality, Best Diamond Funding used only a fraction of the money that it received from investors to purchase and sell real estate. The indictment also alleges that most, if not all, of the monthly “profit” payments to investors did not come from real estate activity, but instead was siphoned from money invested by other investor victims, and in some cases, from the investor victims’ own principal. Finally, Best Diamond Funding is alleged to have employed fewer than five licensed real estate brokers and purchased fewer than 50 properties from late 2006 through October 2008.

“By perpetrating this giant Ponzi scheme, the defendant stole tens of millions of dollars from thousands of innocent investors, depriving them of their hard-earned life savings and financial security,” stated United States Attorney Thomas P. O’Brien. “The United States Attorney’s Office will prosecute him and others who steal investor money to the fullest extent of the law.”

The scheme was disrupted in October when inspectors from the United States Postal Inspection Service and agents from the Federal Bureau of Investigation executed a federal search warrant at the business offices of Best Diamond Funding Corporation in Huntington Park, as well as the religious bookstore Libreria del Exito Mundo, which was located in the adjacent building and was owned by Retana’s wife. During the search, agents seized nearly $4 million in cash. The FBI also froze approximately $8 million in funds from Best Diamond Funding and Retana’s bank accounts.

“Thousands of victims were lured by what appeared to be legitimate investments in the real estate market,” said Salvador Hernandez, Assistant Director in Charge of the FBI in Los Angeles. “The FBI is increasingly concerned with alleged scam artists who prey on individuals affiliated with certain religious or community groups and exploit their trust.” The FBI and its partners, while committed to investigating fraud, encourage citizens to be cautious before investing their hard-earned money.”

“The devastation to one’s emotional well-being is immeasurable, when the trust they have placed in another is violated. The Postal Inspection Service is committed to these investigations to ensure public trust in the mail,” said B. Bernard Ferguson, Inspector in Charge of the Los Angeles Division of the United States Postal Inspection Service.

Rentana faces a statutory maximum penalty of 165 years in federal prison.

This case was investigated by the United States Postal Inspection Service and the Federal Bureau of Investigation.
Contact: Assistant United States Attorney James A. Bowman
(213) 894-2213
Release No. 08-155

Filed Under: FBI Releases Tagged With: , , , , , , , , , ,

Court Permanently Enjoins Bulverde, Texas Resident George “Lin” Phelps from Violating Certain Antifraud and Registration Provisions

November 6, 2008 By Paul (Founder, WorkAtHomeTruth) Leave a Comment

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20799 / November 6, 2008

SEC v. Michael E. Kelly, et al., Case No. 1:07-CV-4979 in the United States District Court for the Northern District of Illinois

Court Permanently Enjoins Bulverde, Texas Resident George “Lin” Phelps from Violating Certain Antifraud and Registration Provisions

The Securities and Exchange Commission announced that on November 3, 2008, Judge Elaine Bucklo of the United States District Court for the Northern District of Illinois entered an order permanently enjoining George L. Phelps (Phelps) of Bulverde Texas from violating certain of the antifraud and registration provisions of the federal securities laws. Phelps is also known as “Lin” Phelps and also did business under the name “Safe Estate Plans.” The order, entered with Phelps’ consent, permanently enjoins him from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 10b-10 promulgated thereunder, and from aiding and abetting violations of Rule 10b-10 of the Exchange Act.

The SEC’s complaint in this matter charges that Michael E. Kelly (Kelly) and 25 other defendants, including Phelps, participated in a massive fraud on U.S. investors that involved the offer and sale of securities in the form of Universal Lease investments. Universal Leases were structured as timeshares in several hotels in Cancun, Mexico, coupled with a pre-arranged rental agreement that promised investors a high, fixed rate of return. The SEC’s complaint alleges that from 1999 until 2005, Kelly and others, including Phelps, raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts. The SEC further alleges that a nationwide network of unregistered salespeople who sold the Universal Leases, including Phelps, collected undisclosed commissions totaling more than $72 million. The SEC also alleges that Kelly and others ran the scheme from Cancun, Mexico, through a number of foreign entities in Mexico and Panama. According to the SEC’s complaint, Kelly and others told investors that Universal Leases would generate guaranteed income through the leasing of investor timeshares by a large, independent leasing agent. In fact, the complaint alleges the leasing agent was a small Panamanian travel agency controlled by Kelly and for most of the scheme its payments to investors came from accounts funded by money raised from new investors. Further, the complaint alleges that Kelly and others, including Phelps, failed to disclose key facts about the Universal Lease investments, including the risks of the investments and that more than $72 million in investor funds were used to pay commissions as high as 27% to the selling brokers. The SEC continues to pursue its claims against Phelps for disgorgement and civil penalties. The SEC’s action against the remaining defendants is also pending.

For additional information, see Litigation Release Nos. 20267 (Sept. 5, 2007), 20573 (May 14, 2008), 20578 (May 15, 2008), 20579 (May 15, 2008), 20664 (July 31, 2008), 20679 (August 12, 2008), 20708 (Sept. 9, 2008) and 20709 (Sept. 9, 2008) [SEC v. Michael E. Kelly, et al., Civil Action No. 07-cv-4979 (N.D. Ill.)]

http://www.sec.gov/litigation/litreleases/2008/lr20799.htm

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