Securities Industry Commentator by Bill Singer Esq

[B]eginning in January 2013, Merrill and his co-conspirators, Jay B. Ledford and Cameron R. Jezierski, perpetrated a Ponzi scheme to defraud investors of more than $396 million.  Specifically, Merrill and Ledford invited investors to join them in purchasing consumer debt portfolios. Merrill knowingly used fictitious sales agreements and other documents, including tax returns, provided by Ledford, to induce individuals to invest with his companies, Delmarva Capital and Global Credit Recovery.  For 2013, Merrill deposited approximately $4.3 million from investors, while Ledford raised just over $186,000 from investors.  Thereafter, Merrill's superior sales ability caused Ledford to assume a background role supplying Merrill with fictitious documents, while Merrill was the "front man," promoting the fraudulent investments to potential investors.

Specifically, the conspirators falsely represented to investors that they would use the investors' money to buy consumer debt portfolios and make money for them by (1) collecting the payments that people made on their debts or (2) selling the portfolios for a profit to other third-party debt buyers, in a practice called "flipping."  According to court documents, the victim investors included small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, professional athletes, and financial advisors, located in Maryland, Washington, D.C., Northern Virginia, Boulder, Texas, Chicago, New York, and elsewhere.

To induce investors to participate, Merrill and his co-conspirators falsely represented who they were buying the debt portfolios from and how much they were paying for the portfolios, whether they were investing their own funds, and their track record of success. According to their plea agreements, sometimes there was no underlying debt portfolio purchased with the investors' money.  To conceal the truth, Merrill, Ledford, and Jezierski created imposter companies with names similar to actual consumer debt sellers or brokers and opened bank accounts in the names of those imposter companies.  In addition, to lend credibility to the transactions, Ledford created false portfolio overviews, created false sales agreements which used the names and forged signatures of actual employees of the sellers, created false collections reports, and falsified bank statements and merchant account reports.  In late 2014, Ledford transferred Cameron Jezierski to manage debt collections for Riverwalk/DeVille.  DeVille had a collections center in Euless, Texas, and the conspirators began to invite prospective investors to tour Riverwalk's office and the collections center, which added substance to their claims regarding the success of their portfolio purchasing strategy and collections efforts.  In December 2017, Ledford recruited Jezierski to the criminal conspiracy because his analytical skills enabled him to contribute significantly to creating false documentation to induce investors to invest, and to conceal the mark-up Merrill and Ledford added to the purchase price charged to investors for debt portfolios.

Further, Merrill and Ledford falsely represented that the monies the conspirators paid to investors were "proceeds" from collections and/or flipping debt portfolios, when in fact, the proceeds were paid from funds provided by other investors.  Merrill and Ledford provided monthly or quarterly reports to investors regarding the "purported progress of the portfolio and its recovery," which Merrill and Ledford created.  From 2013 to 2018, the scheme to defraud took in over $396 million, and at the time of their arrests, the co-conspirators were attempting to obtain an additional $260 million from investors.  Ledford assisted Merrill to divert investors' funds to purchase a home in Naples, Florida, and also helped Merrill falsify records to the bank lender.  Ledford diverted fraud proceeds to purchase and renovate a home in Las Vegas, Nevada;  refinance a home in Texas; gamble at casinos; purchase luxury automobiles and jewelry; and to support a lavish lifestyle.

Finally, Merrill admitted that while the scheme was ongoing, he met with the FBI, lied to the investigating agents, and provided false documents to the FBI.  As detailed in his plea agreement, after his arrest, Merrill attempted to obstruct justice by causing his wife to remove assets from their Naples, Florida home on October 13, 2018, and by preparing a handwritten note instructing his wife to conceal assets from the court-appointed receiver, which he intended to hold up to the glass in the detention center on December 5, 2018, when his wife visited.  These actions violated the restraining order with which Merrill was served in the criminal case, and the preliminary injunction ordered by the Court in the SEC's civil action.

[T]he defendants conned investors through two online binary options brokers they controlled, LBinary and Ivory Option.  The SEC alleges that the defendants also owned and controlled LianTech Finance Marketing, Ltd., which operated a call center in Israel that functioned as a "boiler room."  Employees at the call center allegedly persuaded investors to open binary option trading accounts and deposit large sums into those accounts.  According to the complaint, call center employees lied to investors about their professional backgrounds and falsely told investors that the brokers earned money only if investors made money.  In reality, the brokers earned money only from investor losses and therefore had no incentive to advise investors on how to trade binary options profitably.  As alleged, most investors lost money, with some losing their entire savings. The SEC also alleges that the brokers largely refused to honor investor requests to withdraw money from their trading accounts.

[Z]anen was employed by Cheniere Energy, Inc. ("Cheniere"), a Houston-based energy company whose common stock traded on the New York Stock Exchange under the symbol LNG.  Zanen was a vice president of trading in the Cheniere's United Kingdom Branch and was based in London.  Cheniere maintained written policies prohibiting the direct or indirect disclosure of confidential information and requiring employees to prevent the disclosure of such confidential information.  In his position, Zanen had access to non-public information concerning Cheniere's deals, financings, and other business information, and he was in possession of inside information prior to public announcements.

Between November 2011 and December 2012, Zanen disclosed Cheniere inside information to a friend, Francis J. Van Steenberge, and advised him whether to buy or sell Cheniere securities with the understanding that Van Steenberge would execute the security transactions on the basis of these instructions.  Zanen and Van Steenberge generated approximately $1 million through this scheme.

Zanen also caused to be made materially false and fraudulent statements to the Financial Industry Regulatory Authority ("FINRA") that he was unaware of the circumstances under which Van Steenberge gained knowledge of Cheniere's business activities.

[T]urner encouraged his victims, former clients from his previous employment at two financial services firms, to move funds he had invested for them, or in some cases, new funds, in North American BioFuel.  Turner promised them their ‘loans' would generate a stream of monthly interest payments and return of the full principal at the end of investment periods ranging from one to three years. 

Unknown to his victims, Turner had been fired, lost his broker's license and been banned from the securities industry.  Turner represented the company as specializing in and already producing biofuel, at a time when it was in fact only a shell company consisting of a rented mailbox address and articles of incorporation in Florida.  Turner typically made a fraction of the promised interest payments, did not return the principal, and ceased contact with the victims.  Turner was found to have bilked investors in the fictitious biofuel firm of $877,188.

[A]drianzen partnered with a series of Peruvian call centers that contacted U.S. consumers, many of whom were elderly and vulnerable, using Internet-based telephone calls.  According to the indictment, these callers claimed to be attorneys and government representatives, and falsely told victims that they had failed to pay for or receive delivery of products.  The callers also falsely threatened victims with court proceedings, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and settlement fees.  Many victims made monetary payments based on these baseless threats.  According to the indictment, Adrianzen received the victims' payments and shipped products to the victims for these call centers, knowing that they used fraudulent and extortionate means to extract money from vulnerable victims. 

• Securities Industry Commentator
• Bill Singer