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Charles Ponzi is Alive and Well and Living in Texas
Following the investment crisis, more and more investment scams are coming to light - and as two recent securities cases from the Austin area demonstrate, investment fraud is not specific to Wall Street.
December 14, 2011 /Personal Finance PR News/ -- With the stock market currently having more ups and downs than a rollercoaster, investors throughout the country are being particularly careful when choosing to invest their money. To add to the market volatility, the high-profile Madoff and Stanford scandals illustrate that investors are not only susceptible to market changes, but investment fraud as well. Following the investment crisis, more and more investment scams are coming to light - and as two recent securities cases from the Austin area demonstrate, investment fraud is not specific to Wall Street.
Warr Investment Group
The Texas State Securities Board (TSSB) investigation of Warr Investment Group and its CEO, James Elton Warr, resulted in the group being placed into receivership, after they were found to be selling a fraudulent real estate program.
The alleged fraud was operated with YouTube videos and internet advertising. Warr misrepresented his investments "as a safe and lucrative alternative to the stock and bond markets." He claimed investors would receive "guaranteed annual returns of 8 percent."
The TSSB announced in October that investors would receive nearly one-third of their money back, with the possibility of further payments.
Warr Investment Group had been subject to an emergency cease and desist order in September 2010, due the alleged use of "materially misleading" statements, designed to deceive investors, their alleged sale of unregistered securities in Texas and alleged fraud in connection with the sale of the securities.
The Texas State Securities Board investigation of Warr concluded that he received about $1.1 million from investors, but that he used a "significant portion of the funds" to fund the day-to-day expenses of the company and other non-investment related expenditures, such as:
- Commissions to unregistered sales staff
- Travel and dining expenses
- A E350 Mercedes Benz for his personal use
A court appointed receiver seized the assets of the firm in January, and in October announced that 43 of the investors would receive 31 percent of their investment back.
The receiver expects to continue the liquidation of Warr companies' assets and to return the proceeds of those sales once they are complete.
Triton Financial
A second Austin area investment scandal involved Triton Financial - resulting in Triton Financial's principal, Kurt Barton, being sentenced on November 4, 2011 to 17 years in federal prison for running a $75 million Ponzi scheme.
According to a story in the Austin New Statesman, Barton used high-profile NFL football players and Heisman Trophy winners, to attract investors.
Barton was convicted in August of "conspiracy to commit wire fraud, making false statements to secure loans from financial institutions and money laundering as well as multiple substantive counts including one count of securities fraud, 15 counts of wire fraud, five counts of making a false statement related to the acquisition of loans and 17 counts of money laundering," according to a Department of Justice news release.
Axis or NSIC
A filing from the TSSB for an administrative hearing in 2010 details how they believed the scheme occurred. According to the filing, Triton Holdings was created to buy an insurance company - as such; $6 million was raised by Triton Insurance to purchase National States Insurance Company (NSIC) through Triton Holdings.
The filing states that in 2008, after depositing $200,000 of investor funds in a Triton Insurance checking account, $110,000 in funds were transferred to an account for Triton Athletic Center, LP. Triton Insurance also transferred $465,000 to an account of Triton, which before this deposit, had only had $7,200 in it. After the deposit, $250,000 was transferred to Barton's personal account.
In 2009, Triton Holdings acquired Axis - an equipment leasing business, which was acquired while they were raising funds to purchase NSIC - and as the TSSB filing notes, even though Triton had raised over $6 million by the sale of Triton Insurance LP interests, there was only $6,505 in its Triton Insurance's bank account.
Fraudulent Confidential Investment Memorandum
In spite of all the money raised on behalf of its insurance endeavor, Triton had to raise additional funds to purchase Axis by the sale of promissory notes, according to the TSSB filing. At the same time, they were still selling Triton Insurance LP interests and the Confidential Investment Memorandum (CIM) for the sale of that security still indicated NSIC would be their initial acquisition.
The TSSB filing notes they used investments by latter investors to make payments to earlier investors, in classic Ponzi style.
"If it sounds too good to be true, it probably is"
The Texas State Securities Board website warns that investors in the current economy need to be ever diligent against investment and securities fraud. Benette L. Zivley, the Texas Securities Commissioner says, "Investors may be susceptible to fraudulent investments that purport to guarantee high returns and safety of principal."
If you believe you have been induced by fraud or misrepresentation with an investment, you may want to speak with an attorney experienced in handling securities fraud. They can examine your investment and help determine if changes in an account were potentially due to market volatility or something less innocent.
After Barton's conviction, Internal Revenue Service-Criminal Investigation Special Agent Steve McCollough commented that even though the economics of the Ponzi scheme were simple, "sophisticated marketing techniques" are used to hide their true nature. And he offered the age-old teaching: "If it sounds too good to be true, it probably is."
Article provided by John McDuff Attorney at Law
Visit us at www.johnmcduff.com/
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