Securities Industry Commentator by Bill Singer Esq

January 17, 2023


El Paso Man Pleads Guilty to Operating Ponzi Scheme Disguised as Crypto Investment Firm (DOJ Release) 

Hawaii Couple Charged With Fraud And Money Laundering For Selling Counterfeit Art (DOJ Release)

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El Paso Man Pleads Guilty to Operating Ponzi Scheme Disguised as Crypto Investment Firm (DOJ Release)

In the United States District Court for the Western District of Texas, Abner Tinoco pled guilty to five counts of wire fraud. As alleged in part in the DOJ Release, Tinoco:

operated a Ponzi scheme through his business by soliciting millions of dollars of investments from clients and claiming he would invest their money into funds dealing with cryptocurrency and foreign exchange markets.  Out of approximately $9 million worth of investments deposited into his business accounts, Tinoco spent more than half on personal expenses to include luxury cars, private jets, real estate and jewelry.  Tinoco furthered the deception by providing some of the misappropriated funds as profits to his clients.

In a separate civil case stemming from the above scheme, the Commodities Futures Trading Commission (CFTC) secured a civil consent decree against Tinoco and his business, imposing a ban relating to trading activities.  The Department of Justice will work to achieve restitution for any additional victims of Tinoco's scheme.

Hawaii Couple Charged With Fraud And Money Laundering For Selling Counterfeit Art (DOJ Release)
In the United States District Court for the Middle District of Pennsylvania, an Indictment was filed charging Earl Marshawn Washington and his wife, Zsanett Nagy, with conspiracy to commit wire fraud, mail fraud, and money laundering; and additionally charging Washington with bank fraud and conspiracy to commit bank fraud. As alleged in part in the DOJ Release:

[F]rom 2018 to 2021, Washington and Nagy sold counterfeit artistic goods known as "woodblocks" or "woodcuts" to various buyers and then laundered the proceeds from the sale of those goods. According to the indictment, xylography is the art of making "woodcuts," or engravings made from wooden blocks, especially for printing using historical techniques. In traditional xylography, an artist uses a sharpened tool to carve a design into the surface of a woodblock. The raised areas that remain after the block has been cut are inked and printed, while the recessed areas that are cut away do not retain ink and will remain blank in the final print. Woodblock images can be printed onto paper, fabrics, textiles, or other materials. The technique has been used in different geographic regions at different times. One woodblock tradition stems from Germany starting around the 14th century and continuing for several hundred years thereafter.

The indictment also alleges that Washington and Nagy sold inauthentic woodblocks and prints made from woodblocks that they advertised as being from between the 15th and early 20th centuries. The buyers included a pair of woodblock collectors residing in France, as well as a buyer of a woodblock print who then resided in Hummelstown, PA. The buyers of the woodblocks in France allegedly made $84,350.91in PayPal payments to Nagy before learning that the woodblocks they purchased were not from the 15th and 16th centuries, as advertised. According to the indictment, Nagy received these payments through PayPal, moved the proceeds to a bank account in her name, and then quickly converted the proceeds to cash through withdrawals of several thousand dollars at a time.  It is alleged that Washington admitted to one of the French buyers as being the creator of the woodblocks sold to the French buyers.

Washington is also charged with defrauding a collector of woodblocks from York, PA. The indictment alleges that this collector paid Washington, who used the alias "River Seine," and his then girlfriend, $118,810 from 2013 to 2016 in exchange for approximately 130 woodblocks, again advertised as being several centuries old. The indictment alleges that at least some of these woodblocks were, in fact, made in the second half of the twentieth century.

Texas Man Admits Role in Scamming Seniors in Rhode Island and Elsewhere in Online Romance Scams (DOJ Release)
In the United States District Court for the District of Rhode Island Fola Alabi, a/k/a Folayemi Alabi pled guilty to charges of conspiracy and money laundering. As alleged in part in the DOJ Release:

To carry out these schemes, a member of the conspiracy befriended unsuspecting seniors online, often posing as a General in the U.S. military serving overseas. The conspirator feigned a personal, and sometimes romantic, interest in his victims, and convinced them to send substantial sums of money, usually in the form of bank checks or cash, to addresses and companies in Texas that were controlled by Alabi. Alabi received the money and either deposited or directed that it be deposited into one of several bank accounts that he controlled.  He then quickly withdrew or transferred the funds to other accounts.

Among Alabi's victims is a Rhode Island widow who was contacted by a member of the conspiracy claiming to be a "General Miller," purportedly a four-star General, who convinced the victim to provide $60,000 to finance shipment of his personal belongings to the United States. At the purported "General Miller's" direction, a check was made payable to Full Circle Import Exports, a company created by Alabi, and mailed to Alabi's residence in Texas. The victim was prepared to send an additional significant sum of money to the purported "General Miller," when it was determined by her bank and the Westerly Police Department that she was likely the victim of fraud.

According to court documents, in a cellphone seized from Alabi at the time of his arrest in May 2022, federal agents discovered photographs and videos of packages containing cash and checks received by Alabi from victims of the scam.

According to a plea agreement filed in this matter, for purposes of sentencing, the loss attributed to the romance scams perpetrated by Alabi and members of the conspiracy is $1,640,421. Under the terms of the plea agreement, Alabi will forfeit assets derived from his criminal conduct, to include his Texas residence and $31,773.22 contained in a bank account.

SEC Denies Whistleblower Award to Claimant 
Order Determining Whistleblower Award Claim ('34 Act Release No. 34-96669; Whistleblower Award Proc. File No. 2023-29)
The SEC's Claims Review Staff ("CRS") issued a Preliminary Determination recommending the denial of a Whistleblower Award to Claimant 1, Claimant 3, and Claimant 4. The Commission ordered that CRS's recommendations be approved. The Order asserts in part that [Ed: footnotes omitted]:

[T]he CRS stated that Claimants' information did not either (1) cause the Commission to (a) commence an examination, open or reopen an investigation, or inquire into different conduct as part of a current Commission examination or investigation, and (b) thereafter bring an action based, in whole or in part, on conduct that was the subject of claimant's information, pursuant to Rule 21F-4(c)(1); or (2) significantly contribute to the success of a Commission judicial or administrative enforcement action under Rule 21F-4(c)(2) of the Exchange Act. The CRS preliminarily determined that the investigation which led to the Covered Action (the "Investigation") was opened based upon information reported in the news media and not in response to any information provided by any of the Claimants. The CRS also preliminarily determined that none of the Claimants' information significantly contributed to the success of the Covered Action. Enforcement staff assigned to the Investigation received Claimant 1's information approximately four months after the Investigation was opened, and the staff was already aware of the underlying conduct alleged in Claimant 1's complaint. In addition, while Claimant 1 provided certain information to the Commission about Claimant 1's family experiences, none of the information advanced the Investigation or otherwise impacted the charges brought by the Commission in the Covered Action. The CRS stated that staff assigned to the Investigation did not receive or review any information from Claimant 3 or Claimant 4 and that none of their information advanced or contributed to the Investigation or the Covered Action.