Difference between revisions of "Promissory note fraud"

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'''<u>SEC v. Gina Champion-Cain and ANI Development, LLC</u>'''
'''<u>SEC v. Gina Champion-Cain and ANI Development, LLC</u>'''


On August 29, 2019, the SEC filed charges against ANI Development, LLC and its principal Gina Champion-Cain for operating a multi-year $300 million promissory note fraud. According to the SEC’s complaint, Cain claimed to offer investors the opportunity to make short-term, high-interest loans (between 15% and 25%) to individuals and entities seeking to obtain California liquor licenses. In truth, that investment opportunity was a sham and Cain used the investors’ money to fund her failing business ventures.
On August 29, 2019, the SEC filed charges against ANI Development, LLC and its principal Gina Champion-Cain for operating a multi-year [https://www.sec.gov/news/press-release/2019-168 $300 million promissory note fraud]. According to the SEC’s [https://www.sec.gov/litigation/complaints/2019/comp-pr2019-168.pdf complaint], Cain claimed to offer investors the opportunity to make short-term, high-interest loans (between 15% and 25%) to individuals and entities seeking to obtain California liquor licenses. In truth, that investment opportunity was a sham and Cain used the investors’ money to fund her failing business ventures.


'''<u>SEC v. Philip E. Riehl</u>'''
'''<u>SEC v. Philip E. Riehl</u>'''


On January 31, 2020, the SEC charged Philip E. Riehl with operating a $60 million promissory note scam that targeted Amish and Mennonite communities by making false claims about the use of their funds and guaranteed returns. According to the SEC’s complaint, the defendant raised money by selling promissory notes to community members, which he claimed would be used to make loans to other community members who wanted to borrow money, typically to finance the borrowers’ businesses or real estate purchases. The defendant failed to disclose certain known risks associated with the notes to investors. Additionally, the defendant misappropriated investor funds. As a result, the defendant was unable to pay back investors, despite his personal guarantee to repay their notes.
On January 31, 2020, the SEC charged Philip E. Riehl with operating a [https://www.sec.gov/news/press-release/2020-26 $60 million promissory note scam] that targeted Amish and Mennonite communities by making false claims about the use of their funds and guaranteed returns. According to the SEC’s [https://www.sec.gov/litigation/complaints/2020/comp24728.pdf complaint], the defendant raised money by selling promissory notes to community members, which he claimed would be used to make loans to other community members who wanted to borrow money, typically to finance the borrowers’ businesses or real estate purchases. The defendant failed to disclose certain known risks associated with the notes to investors. Additionally, the defendant misappropriated investor funds. As a result, the defendant was unable to pay back investors, despite his personal guarantee to repay their notes.


'''<u>SEC v. Clarence Dean Alford</u>'''
'''<u>SEC v. Clarence Dean Alford</u>'''


On July 30, 2020, the SEC charged former Georgia state legislator Clarence Dean Alford with defrauding at least 100 investors in a $23 million promissory note scheme. According to the SEC’s complaint, the defendant raised money by selling high-yield promissory notes (ranging from 12 percent to 34 percent annual rates of return) purportedly issued by his energy development company, Allied Energy Services LLC. The defendant claimed that the funds would be used to finance energy projects. Instead, the defendant used most of the funds to operate a Ponzi scheme, by making interest payments to earlier investors from new investor funds, and for personal expenses. In 2019, the defendant’s alleged scheme collapsed when he failed to make promised interest payments to several investors and then failed to repay the investors’ principal.
On July 30, 2020, the SEC charged former Georgia state legislator Clarence Dean Alford with defrauding at least 100 investors in a [https://www.sec.gov/news/press-release/2020-168 $23 million promissory note scheme]. According to the SEC’s [https://www.sec.gov/litigation/complaints/2020/comp-pr2020-168.pdf complaint], the defendant raised money by selling high-yield promissory notes (ranging from 12 percent to 34 percent annual rates of return) purportedly issued by his energy development company, Allied Energy Services LLC. The defendant claimed that the funds would be used to finance energy projects. Instead, the defendant used most of the funds to operate a Ponzi scheme, by making interest payments to earlier investors from new investor funds, and for personal expenses. In 2019, the defendant’s alleged scheme collapsed when he failed to make promised interest payments to several investors and then failed to repay the investors’ principal.


'''<u>SEC v. MJ Capital Funding, LLC, MJ Taxes and More Inc, and Johanna M. Garcia</u>'''
'''<u>SEC v. MJ Capital Funding, LLC, MJ Taxes and More Inc, and Johanna M. Garcia</u>'''


On August 13, 2021, the SEC filed an emergency action to stop an alleged Ponzi scheme that raised between $70.9 million and $128.8 million from more than 2,150 investors through a promissory note fraud. According to the SEC’s complaint, MJ Capital told investors that their money would be used to fund small business loans called “merchant cash advances,” and promised investors annual returns of 120% to 180%. In fact, MJ Capital only made $2.9 million in merchant cash advance loans and earned very little in revenue. In order to keep the fraud from collapsing, the defendants used at least $20 million of new investor money to pay purported “returns” to existing investors in a classic Ponzi scheme fashion. Additionally, the defendants misused another $27.4 million of investor funds by making payments to various other entities, a substantial portion of which represented payments to sales agents for promoting these investments.
On August 13, 2021, the SEC filed an emergency action to stop an alleged [https://www.zuckermanlaw.com/report-ponzi-scheme-earn-sec-whistleblower-award/ Ponzi scheme] that raised between [https://www.sec.gov/news/press-release/2021-151 $70.9 million and $128.8 million from more than 2,150 investors through a promissory note fraud]. According to the SEC’s [https://www.sec.gov/litigation/complaints/2021/comp25168.pdf complaint], MJ Capital told investors that their money would be used to fund small business loans called “merchant cash advances,” and promised investors annual returns of 120% to 180%. In fact, MJ Capital only made $2.9 million in merchant cash advance loans and earned very little in revenue. In order to keep the fraud from collapsing, the defendants used at least $20 million of new investor money to pay purported “returns” to existing investors in a classic Ponzi scheme fashion. Additionally, the defendants misused another $27.4 million of investor funds by making payments to various other entities, a substantial portion of which represented payments to sales agents for promoting these investments.


The SEC’s emergency motion for a temporary restraining order (below) notes that, on April 10, 2021, an individual registered a domain name very similar to MJ Capital’s website and published content alleging that MJ Capital was operating a Ponzi scheme. The defendants responded to the allegations by suing the individual who had created the website. The defendants’ cover-up efforts were successful, and in the months after the appearance of the website accusing MJ Capital of operating a Ponzi scheme, MJ Capital continued to raise ever-increasing amounts of investor money. Specifically, MJ Capital raised between $19.8 million and $61.1 million between May 1 and June 30, 2021.
The SEC’s emergency motion for a temporary restraining order (below) notes that, on April 10, 2021, an individual registered a domain name very similar to MJ Capital’s website and published content alleging that MJ Capital was operating a Ponzi scheme. The defendants responded to the allegations by suing the individual who had created the website. The defendants’ cover-up efforts were successful, and in the months after the appearance of the website accusing MJ Capital of operating a Ponzi scheme, MJ Capital continued to raise ever-increasing amounts of investor money. Specifically, MJ Capital raised between $19.8 million and $61.1 million between May 1 and June 30, 2021.