Little Rock — United States Attorney Jane Duke, and Tom Brown, Special Agent-In-Charge, Federal Bureau of Investigation (FBI), announced that James Blackman Roberts 71, of Heber Springs, Arkansas, was sentenced Friday, January 23, 2009, to serve 180 months in federal prison for wire fraud. Roberts’ term of imprisonment will be followed by three years of supervised release. United States District Susan Webber Wright also ordered Roberts to pay $43,456,874.40 in restitution to the victims of this crime.

Roberts’ sentence is the result of a guilty plea he entered in May 2008 on one count of wire fraud. During his plea, Roberts acknowledged that when he began obtaining heavy losses in foreign currency exchange trading, he began a PONZI scheme telling investors that he was getting high returns on investments by paying earlier investors with later investors’ money.

Roberts admitted that he posted gains on a website used by investors to see the current status of their investment when in fact there were substantial losses. There were more than 400 investors throughout the United States and Central America that fell victim to this scheme. Roberts admitted that the loss attributed to his fraudulent conduct was $43,456,874.40.

This investigation was conducted by the Federal Bureau of Investigation in cooperation with the Securities and Exchange Commission. Assistant U. S. Attorney George C. Vena represented the United States.

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

"Litigation Release No. 20798 / November 3, 2008

Securities and Exchange Commission v. Frank J. Russo et al. (United States District Court for the District of Massachusetts, C.A. No. 06-10984-RGS)

MASSACHUSETTS FEDERAL COURT ENTERS JUDGMENT AGAINST CALIFORNIA BASED RELIEF DEFENDANT IN SEC ENFORCEMENT ACTION, ORDERING IT TO PAY OVER $14 MILLION

The Securities and Exchange Commission announced today that on October 28, 2008, a final judgment by default was entered by the federal court in Boston, Massachusetts, against relief defendant Veritasiti Corporation d/b/a MediaData Corporation ("Veritasiti") in an enforcement action filed in the United States District Court for the District of Massachusetts. Veritasiti was ordered to pay over $14 million in disgorgement and prejudgment interest.

On June 6, 2006, the Commission filed a complaint alleging that Frank J. Russo, formerly of Wakefield, Massachusetts, operated a fraudulent ponzi scheme through his investment advisory corporation FJR Corporation. Russo, the Commission alleged, raised at least $15 million from at least 160 investors in 12 states to invest in two limited partnerships he controlled: Russo Associates Limited Partnership and Eliot Partners. On June 28, 2006, the Commission filed an amended complaint in the action naming Veritasiti, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud perpetrated by Russo.

The amended complaint alleged that while Russo told investors that their funds were being invested in bonds and other investment securities, and that the investments were safe and conservative, he diverted at least $11.5 million in investor funds to Veritasiti, a corporation that Russo formed with a college acquaintance. The amended complaint further alleged that Russo was Veritasiti=s chief financial officer and that he was one of two directors. According to the amended complaint, Russo did not disclose the purported investment in Veritasiti to investors in the limited partnerships. To the contrary, the amended complaint alleged that he sent false and misleading account statements to investors reporting fictional returns in excess of 10% and making false statements concerning the investment strategies of the limited partnerships. The amended complaint alleged that Veritasiti has no legitimate claim to the funds and that it was unjustly enriched by its receipt of those funds. The amended complaint sought disgorgement of all funds diverted to Veritasiti. The default judgment, entered on October 28, 2008, orders Veritasiti to pay disgorgement of $11.9 million plus prejudgment interest of $2.2 million for a total of $14.1 million.

In a parallel criminal proceeding, Russo pled guilty to federal charges of investment fraud and mail fraud. On February 25, 2008, he was sentenced to 18 years in prison to be followed by 3 years of supervised release and ordered to pay $20 million in restitution and a $500,000 fine. Russo has also been barred by the Commission from any future association with any investment adviser based on his criminal conviction. The Commission's civil action is still pending against Russo and his entities (FJR Corporation, Russo Associates Limited Partnership, and Eliot Partners).

For further information, see Litigation Release Nos. 19718 (June 6, 2006), 19744 (June 28, 2006), 20103 (May 3, 2007), 20468 (February 27, 2008) and Investment Adviser Release No. 2720 (March 12, 2008)."

"What is a "Ponzi" Scheme?

A Ponzi scheme is essentially an investment fraud wherein the operator promises high financial returns or dividends that are not available through traditional investments. Instead of investing victims' funds, the operator pays "dividends" to initial investors using the principle amounts "invested" by subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds, or when a sufficient number of new investors cannot be found to allow the continued payment of "dividends."

This type of scheme is named after Charles Ponzi of Boston, Massachusetts, who operated an extremely attractive investment scheme in which he guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial investors, the scheme dissolved when he was unable to pay investors who entered the scheme later.

• As with all investments, exercise due diligence in selecting investments and the people with whom you invest.
• Make sure you fully understand the investment before you invest your money"

Click here to read more about Ponzi Schemes and other common fraud schemes at the FBI website