Resident of Spain Pleads Guilty in Manhattan Federal Court in $16 Million Investment Fraud Scheme

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), announced today that Anthonie R. Sparrow pled guilty for his role in perpetrating a $16 million investment scheme that victimized hundreds of investors around the world. Sparrow, who was charged in December 2009 and extradited from Spain in August 2013, pled guilty today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said, “Anthonie Sparrow engaged in a flagrant fraud, stealing millions of dollars from hundreds of innocent victims around the world, and then fled to Spain to try to avoid the consequences of his crime. His prosecution, possible only through an extradition from Spain, shows this office’s resolve in holding accountable those who victimize innocent investors.”
Assistant Director in Charge George Venizelos said, “Sparrow minted his own destiny by lying to investors and cheating them out of millions of dollars. When the game was up, Sparrow fled to Spain, where he thought he was beyond the reach of the FBI. Today, Sparrow finds himself guilty as charged, agreeing to forfeit all 16 million dollars made in his illicit scheme.”
According to the allegations contained in the indictment and statements made at court proceedings:
From 2002 to January 2005, Sparrow and co-defendant Masroor A. Khan (Khan) orchestrated and carried out an extensive fraudulent coin investment scheme. The defendants solicited victims to invest in rare, collectible coins through Lloyd’s & Associates Asset Management Ltd. (LAM), a purported collectible coin and precious metal business run by Sparrow. The victims were directed to wire funds—purportedly for investments in rare coins—to LAM bank accounts in New York that Sparrow controlled. Khan and Sparrow told the victims that these funds would be used to purchase coins and that the coins would then be held at Pinnacle Depository Service (Pinnacle), a purported coin depository and secure storage area, which was also run by Sparrow.
However, rather than purchase coins with the victims’ funds as the defendants had promised, Sparrow simply diverted the vast majority of the money, totaling approximately $16 million, to a bank account in Cyprus controlled by LAM. To prevent the victims from discovering the theft of their investments, Sparrow maintained a website where victims were given false information about the value of the coins they supposedly owned. Sparrow deliberately discouraged victims from coming to view their coins in person, and, when certain victims insisted on doing so, he staged elaborate ruses to prevent them from seeing more than a few coins.
Beginning in late 2004, victims began to demand the return of their funds. In response, in January 2005, Sparrow closed the New York office of LAM and fled to Spain.

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Sparrow, 53, of Estepona, Spain, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count. Sparrow is scheduled to be sentenced by Judge Robert W. Sweet on June 2, 2014, at 4:00 p.m. As part of his guilty plea, Sparrow also agreed to forfeit $16 million to the United States. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Khan remains a fugitive from the charges contained in the Indictment.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Spanish National Police for their assistance in the arrest and extradition of Sparrow.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Alexander J. Wilson is in charge of the prosecution.
The pending charges against Khan are merely accusations, and he is presumed innocent unless and until proven guilty.

Two Men Charged in $983,000 Investment Fraud Scheme

ROCKFORD, IL—A Rockford man and a Califomia man were indicted today by a federal grand jury in Rockford on fraud charges. Todd C. Smith, 46, of Rockford, was charged with seven counts of mail fraud and 10 counts of wire fraud, and Travis Oliver, 36, of Tremecula, California, was charged with eight counts of mail fraud and 15 counts of wire fraud in connection with a scheme to defraud investors by falsely representing to investors that their investments in Electus Asset Holdings were guaranteed, thereby fraudulently obtaining more than $983,000 from the investors.
According to the indictment, Oliver was sole managmg member of Electus Asset Holdings, and both Oliver and Smith solicited individuals to invest in Electus Asset Holdings, engaging in a scheme from February 13, 2009 to at least March 2012 to defaud investors. The indictment alleges the defendants falsely represented to the investors that their investments would be retmned in one year, yielding a guaranteed rate of interest per month, and that the funds could be withdrawn at any time without penalty. However, it is alleged the defendants knew a large portion of the investors’ funds was used to pay personal and other expenses, such as commissions to the defendants and to make interest and principal payments to other individuals who had invested money with Oliver prior to the fonnation ofElectus Asset Holdings in January 2009 and that the remainder of the investors’ funds was placed in a non-guaranteed investment
It is further alleged that in order to conceal their false promises and misrepresentations and to prevent the investors from demanding the return of their principal, defendants used funds from new investors to pay interest and principal owed to prior investors. The indictment also charges that defendants mailed monthly statements and IRS 1099-INT forms to investors that falsely stated that the investors had earned interest on their investments, when defendants knew no interest had been earned on the investments. The indictment alleges that when investors requested the return of their interest and principal, Oliver and Smith made false statements and promises to conceal the fact the investors’ money had been spent or lost in high risk investments, including that the investors’ checks were going to be issued shortly, that their checks were lost in the mail, and that the investors’ money was invested in company that was under investigation by the Federal Trade Commission and its assets had been frozen.
Each count of mail fraud and wire fraud carries a maximum penalty of 20 years in prison and a maximum fine of $250,000 or an alternate fine totaling twice the loss or twice the gain derived from the offense, whichever is greater. If convicted, the court must impose a reasonable sentence under the advisory United States Sentencing Guidelines and under federal sentencing statutes, as well as restitution.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of Federal Bureau of Investigation; and Antonio Gomez, Postal Inspector in Charge of the Chicago Division of the U.S. Postal Inspection Service. The Illinois Secretary of State Securities Department assisted in the investigation. The government is represented by Assistant U.S. Attorney Joseph C. Pedersen. The public is reminded that an indictment is only a charge and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving each defendant’s guilt beyond a reasonable doubt.

Investment Manager Sentenced to 188 Months for Investment Fraud Scheme

Earlier today, Aleksander Efrosman, the investment manager of Century Maxim Fund, Inc. and AJR Capital, Inc., was sentenced to a term of imprisonment of 188 months following his conviction for wire fraud. Efrosman, who fled the United States, was extradited from Poland and pleaded guilty on October 18, 2012. In addition to the prison term, Efrosman was ordered to pay restitution of approximately $4 million.
The sentence was announced by Loretta E. Lynch, United Attorney for the Eastern District of New York; George Venizelos, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office; and Philip R. Bartlett, U.S. Postal Inspector in Charge, New York Division.
“This case proves the old adage: ‘You can run, but you cannot hide.’ Aleksander Efrosman stole over $5 million from unsuspecting investors and fled the country, then engaged in a globetrotting effort to escape justice. But the coordinated efforts of law enforcement resulted in his capture. Today, Efrosman has finally been held to account for his betrayal of his clients’ trust,” stated United States Attorney Lynch. “As proved again today, this office will relentlessly pursue and prosecute the perpetrators of investment fraud schemes.” Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation and the Postal Inspection Service for their assistance in this case.
From January 2004 through June 2005, working from offices in Brooklyn and Staten Island, Efrosman defrauded investors by soliciting investments purportedly for the purpose of trading in the stock market and the foreign currency exchange market. Efrosman falsely told investors that he had a history of profitable trading and that the investments would be protected by a “stop-loss” mechanism which ensured that no trade lost more than 3 percent. Based on these misrepresentations, Efrosman raked in over $5 million from more than 100 investors. Efrosman did not invest the funds as promised, but instead used the funds for his personal benefit, including gambling over $3 million at the Foxwoods casino.
Efrosman fled the United States in 2005 with millions of dollars of investor funds. He first traveled to Cozumel, Mexico, then to Panama and ultimately to Poland, where he assumed the identity of “Mikhail Grosman” and obtained a high-quality fraudulent Russian passport. In the meantime, federal agents in the United States pursued leads as to Efrosman’s whereabouts. In a coordinated multinational effort, law enforcement authorities in Austria, the Czech Republic, and Poland tracked, located, and ultimately arrested Efrosman in Krakow, Poland on May 28, 2010.
The sentence was imposed by United States District Judge Nicholas G. Garaufis at the federal courthouse in Brooklyn, New York.
The government’s case was prosecuted by Assistant United States Attorney Daniel Spector.
The Defendant:
ALEKSANDER EFROSMAN
Age: 51

Former Parker Man Sentenced to Serve 51 Months in Federal Prison in $1.7 Million Ponzi Scheme

DENVER—Shawon McClung, age 27, formerly of Parker, Colorado, was sentenced earlier this week by U.S. District Court Judge R. Brooke Jackson to serve 51 months in federal prison for wire fraud, U.S. Attorney John Walsh and FBI Denver Division Special Agent in Charge Thomas Ravenelle announced. Following his prison sentence, Judge Jackson ordered McClung to serve three years on supervised release. The defendant was also ordered to pay $1,756,750 in restitution to the 15 victims of his fraud. McClung was ordered to voluntarily surrender to the institution designated by the U.S. Bureau of Prisons within 15 days from the date of designation.
McClung was first charged by Information on June 12, 2013. He pled guilty before Judge Jackson on July 30, 2013. The defendant was sentenced on December 16, 2013.
According to court documents, including the stipulated facts contained in the plea agreement, in 2009, McClung began Flint‑McClung Capital LLC (FMC) in Indiana. In November 2010, McClung moved FMC from Indiana to Denver, Colorado. In early 2009, McClung entered into financing discussions with a software programmer for the development of proprietary software to make automated trades on the foreign currency (FOREX) market. The goal was to develop a software program that would perform numerous automated trades during a short time based on an algorithm designed to predict and exploit differences in foreign exchange rates. On December 15, 2010, an agreement was reached by McClung and the software programmer to provide funding for the software program. However, McClung only provided approximately $213,000 of the promised $614,790, and the software program was never developed and was never available for FMC’s use.
Despite the fact that the software program had not been developed, from approximately March 2009 to approximately April 2011, McClung solicited investor money by falsely representing that FMC owned and used a proprietary "massively parallel automated trading system" to trade currencies on the FOREX market. McClung falsely told investors that this proprietary software was already being used at FMC and had a history of success. Both verbally and in writing, McClung falsely represented to investors, potential investors, and others that investors in the investment programs he was offering "historically" received returns of 15 to 100 percent approximately every 14 to 30 days. In reality, as McClung well knew, the software program did not exist and had no history of success.
Both verbally and in written "Investment Contracts" and "Joint Venture Agreements," McClung falsely represented to investors, potential investors, and others that FMC guaranteed from loss the principal of the investment placed with FMC. McClung also falsely represented to investors, potential investors, and others that FMC would use their entire investment to trade in currencies using FMC’s proprietary system, which McClung knew did not exist. In fact, McClung did not place any of the investors’ money in trades.
McClung did make some promised payouts to early investors using money he received from other investors. Some of those early investors told other potential investors about their successful "investments" with FMC, which reassured others about investing their money with McClung and FMC.
After McClung and FMC failed to make promised payments to investors via e-mail and other forms of communication, McClung made a number of false excuses to investors and others regarding why the payments had not been made. He also made a number of false promises about future payments. In March 2011, McClung sent to several investors via e-mail a document entitled "Cancellation of Contract and Account Settlement" in which he falsely represented that FMC would return an amount of money specified in the document if the investor signed and released McClung and others of any liability. After receiving signed "Cancellation of Contract and Account Settlement" from many investors, McClung failed to make the promised payouts and failed to return the investors’ principal.
“All too often we see con men like the defendant in this tragic case who claim to have a super-secret method that enables them to make instant millions by manipulating or outwitting the financial markets,” said U.S. Attorney John Walsh. “That sort of claim always deserves the highest level of skepticism—if a deal promises sky-high returns with no risk, it’s too good to be true, and investors should run away.”
“In order to ensure our financial markets operate fairly, the FBI is committed to aggressively pursuing those who commit investment fraud,” said FBI Denver Division Special Agent in Charge Thomas P. Ravenelle. “We are confident the results of this investigation will deter others who engage in these types of fraudulent schemes.”

Former Hedge Fund Manager Indicted for Defrauding Investors and Obstructing SEC

GAINESVILLE—Stanley J. Kowalewski has been arrested in South Carolina after being indicted by a federal grand jury in Atlanta for defrauding investors of hedge funds of up to $8 million and for obstructing the U.S. Securities and Exchange Commission’s subsequent investigation of his activities.
“Kowalewski is charged with stealing from the investors who trusted him and then repeatedly lying to them and the SEC about his self-dealing,” said United States Attorney Sally Quillian Yates. “The victims of his greed include pension funds, schools, hospitals, and other non-profits who lost over $8 million in hard-earned money, which Kowalewski diverted to his own personal use.”
Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office, stated, “Investment fraud cases such as this remain a focus of the FBI’s criminal investigators in that these cases generate many victims and large loss amounts. The FBI will continue to work with its many law enforcement partners in an effort to hold accountable those individuals who would victimize unsuspecting investors by diverting their funds for personal gain.”
“Theft of employee benefit assets jeopardizes the benefits of workers. This case reaffirms the Labor Department’s commitment to protect workers’ benefits by identifying criminal activity wherever and whenever it occurs,” said Isabel Colon, Regional Director of EBSA’s Atlanta Regional Office.
According to United States Attorney Yates, the charges, and other information presented in court, Kowalewski was the sole owner and chief executive officer of SJK Investment Management LLC in Greensboro, North Carolina. Beginning in 2009, Kowalewski solicited investment money from pension funds, school endowments, hospitals, non-profit foundations, and other investors that he placed in two SJK “hedge fund of funds,” an onshore fund and an offshore fund called the Absolute Return Funds. Almost immediately after receiving the first investor money, Kowalewski began diverting the proceeds to pay for personal and business overhead expenses.
In December 2009, Kowalewski formed a new SJK fund called the Special Opportunities Fund, which he did not disclose to investors. He diverted millions from the Absolute Return Funds to the Special Opportunities Fund without disclosing the transfers to investors. After he secretly transferred the funds, Kowalewski diverted millions from the Special Opportunities Fund to himself through various self-dealing transactions, including having the Special Opportunities Fund buy three homes that Kowalewski owned and in which his family, his parents, and his brother-in-law’s family lived. Kowalewski also bought a multi-million-dollar beach house and directed that the Special Opportunities Fund pay him $4 million as a fee to which he was not entitled. Kowalewski created and altered documents in an effort to make these transactions appear legitimate.
Also as part of the scheme, Kowalewski overvalued the assets held by the Special Opportunities Fund and used those fraudulent valuations to calculate the returns for investors in the Absolute Return Funds. As a result, the monthly statements distributed to SJK investors showed fraudulently inflated returns. Investors lost over $8 million as a result of Kowalewski’s fraudulent scheme.
On March 30, 2010, the SEC initiated a proceeding to determine whether there had been violations of the federal securities laws in connection with SJK. As part of its investigation, the SEC subpoenaed Kowalewski to testify under oath. During his sworn testimony, Kowalewski testified that, after the Special Opportunities Fund had purchased his three homes, the fund had leased the properties to him and his relatives, each for a yearly rental payment. He testified further that Michael J. Fulcher, the chief financial officer of SJK, had drafted and Kowalewski had signed the leases at or near the time of the homes’ sales. According to the indictment, however, Kowalewski and his relatives had never leased the homes back from the Special Opportunities Fund. Prior to Kowalewski’s sworn testimony, Kowalewski and Fulcher conspired to obstruct the SEC proceeding by creating the leases and backdating them, in an effort to document the claimed lease relationships and to conceal the self-dealing transactions by Kowalewski. The leases were not created and signed at the time of the homes’ sales but in November 2010, a few weeks before Kowalewski testified. Kowalewski provided the fraudulent leases to the SEC as part of the investigation and then testified falsely about them to conceal his actions and obstruct the SEC’s investigation. The indictment also alleges Kowalewski lied in his sworn testimony when he testified that he had disclosed the Special Opportunities Fund to investors and that attorneys and other professionals had approved of his self-dealing transactions.
The indictment charges Kowalewski, 41, of Pawleys Island, South Carolina, with 22 counts of wire fraud, one count of conspiracy, and one count of obstructing the SEC proceeding. Each wire fraud count carries a maximum sentence of 20 years in prison. The conspiracy and obstruction charges each carry a maximum sentence of five years in prison. On April 19, 2013, Fulcher pleaded guilty to one count of conspiring with Kowalewski to obstruct the SEC proceeding, which charge carries a maximum sentence of five years in prison. Each of these charges carries a fine of up to $250,000. Fulcher’s sentencing date has not yet been scheduled. In determining the actual sentence, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
Members of the public are reminded that the indictment contains only allegations. The defendant is presumed innocent of the charges, and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.
This case is being investigated by special agents of the Federal Bureau of Investigation, investigators with the Atlanta Regional Office of the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA), and special agents of the Atlanta Regional Office of the U.S. Department of Labor’s Office of the Inspector General. The Atlanta Division Office of the U.S. Securities and Exchange Commission previously brought a civil action against Kowalewski. In that case, Kowalewski was ordered to pay over $16 million in disgorgement and civil penalties.
Assistant United States Attorneys Stephen H. McClain and Russell Phillips are prosecuting the case.
For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.Presse-mails@usdoj.gov or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia Atlanta Division is http://www.justice.gov/usao/gan/.

Former NBA Player and CEO of the George Group Convicted on all Counts in $2 Million Ponzi Scheme

TRENTON, NJ—C. Tate George, former NBA basketball player and the CEO of purported real estate development firm The George Group, was convicted today on all counts on which he was indicted in connection with his role in orchestrating a $2 million investment fraud scheme, U.S. Attorney Paul J. Fishman announced.
The jury deliberated four hours before convicting George, 45, of Newark, of four counts of wire fraud after a three-week trial before U.S. District Judge Mary L. Cooper. George was immediately remanded into federal custody to await sentencing, which is scheduled for Jan. 16, 2014.
According to documents filed in this case and evidence presented at trial:
George, a former player for the New Jersey Nets and Milwaukee Bucks professional basketball teams, held himself out as the CEO of The George Group and claimed to have more than $500 million in assets under management. He pitched prospective investors, including several former professional athletes, to invest with the firm and told them their money would be used to fund The George Group’s purchase and development of real estate development projects, including projects in Connecticut and New Jersey. George represented to some prospective investors that their funds would be held in an attorney trust account and personally guaranteed the return of their investments, with interest.
Based on George’s representations, investors invested more than $2 million in The George Group between 2005 and 2011, which he deposited in both the firm’s and his personal bank account. Instead of using investments to fund real estate development projects as promised, George used the money from new investors to pay existing investors in Ponzi-scheme fashion, as well as paying for his daughter’s Sweet 16, extensive renovations on his New Jersey home (that has since been foreclosed), the mortgage on a New Jersey home, the mortgage on a Florida home, taxes to the IRS, and traffic tickets. The defendant gave money to family members and friends. He also spent $2,905 for a reality video about himself (a “sizzle reel” for “The Tate Show,” is available on YouTube). The George Group had virtually no income-generating operations.
Each of the wire fraud counts on which he was convicted is punishable by a maximum potential penalty of 20 years in prison and a $250,000 fine.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; postal inspectors of the USPIS, under the direction of Postal Inspector in Charge Maria L. Kelokates; and criminal investigators with the U.S. Attorney’s Office, with the investigation leading to today’s conviction.
The government is represented by Assistant U.S. Attorneys Joseph B. Shumofsky and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
13-401
Defense counsel:
David E. Schafer Esq., and Andrea Bergman Esq., Assistant Federal Public Defenders, Trenton

Former Tulsan to Serve Nine Years for Role in $7 Million Investment Fraud Scheme

TULSA, OK—A former Tulsa-based promoter of fraudulent oil and gas investments was sentenced on Thursday to serve nine years in federal prison for perpetrating a $7 million dollar fraud, announced Danny C. Williams, Sr., United States Attorney for the Northern District of Oklahoma.
Jimmy E. Morrisett, 53, of Burnet, Texas, once chief executive officer of now-defunct Red Earth Resources Inc. and Alpine Petroleum LLC, pleaded guilty to an unlawful monetary transaction with the funds he obtained from the massive four-year investor fraud scheme victimizing 238 investors in Oklahoma and 37 other states and Canada. Morrisett promoted a Ponzi scheme in which investors supposedly received returns from oil and gas properties. Actually, however, most of the returns came from money provided by investors themselves. Many of the investors were elderly and lost their life savings.
United States District Court Chief Judge Gregory K. Frizzell imposed the maximum sentence allowed under the United States Sentencing Guidelines and ordered Morrisett to pay restitution to the victims in the amount of $6,874,135.44.
The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigations. Assistant United States Attorneys Kevin C. Leitch and Charles M. McLoughlin prosecuted the case on behalf of the United States.