Notable litigation filed during January 2023 includes: (1) SEC v. Engel; (2) Firestone, et al. v. Residential Properties Resources Fund II, LLC, et al.; (3) Ellusionist Cash Balance Plan and Trust, et al. v. Spiegel Accountancy Corp., et al.; and (4) SEC v. Ellison-Meade.

SEC v. Engel, Civ. No. 2:23-cv-00213-PA-JPR (C.D. Cal.).

The Securities Exchange Commission (“SEC”) filed suit against schemer Defendant in the United States District Court for the Central District of California for losses arising from an alleged Ponzi scheme through his company iWitness Tech, LLC.  The complaint alleges that the Defendant used his community ties to perpetrate a $47 million dollar affinity fraud upon members of the Orthodox Jewish communities in Los Angeles and New Jersey.  Defendant falsely claimed to be raising capital for iWitness Tech, LLC, a business that installed security cameras, and also to fund the purchase of property in Israel.  Instead, the Defendant misappropriated the funds for personal gain while making Ponzi-like payments to earlier investors.  The SEC seeks recovery under theories of violations of the Securities Act and Securities Exchange Act, permanent injunctive relief, disgorgement, and civil penalties.

Firestone, et al. v. Residential Properties Resources Fund II, LLC, et al., Civ. No. 2:23-cv-00292-RGK-E (C.D. Cal.).

Ponzi victims filed suit against Defendant schemers in the United States District Court for the Central District of California for losses arising from material misrepresentations and fraudulent transfer of property involving two real estate investment funds.  The complaint alleges that the Defendants represented the investment funds as “safe” to induce investments, only to later refuse investors access to inspect the funds records pursuant to the operating agreements.  Consistent with a Ponzi scheme, Defendants began transferring properties out of the funds to self-dealing entities and paying distributions to earlier investors.  Plaintiffs seek recovery under theories of common law fraud, fraudulent concealment, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, recission of contract, declaratory relief, appointment of a receiver, and injunction.

Ellusionist Cash Balance Plan and Trust, et al. v. Spiegel Accountancy Corp., et al., Civ. No. 3:23-cv-00287-VC (N.D. Cal.).

Ponzi victims filed suit against Defendant schemers in the United States District Court for the Northern District of California for losses arising from an alleged Ponzi scheme run through 1inMM, a company purporting to finance the acquisition of content rights from streaming platforms such as HBO and Netflix. In reality, the principal Defendant had no relationships with the streaming platforms, and, on September 1, 2021 in a parallel criminal action, Defendant pled guilty to running the Ponzi scheme, defrauding investors of over $17 million.  Plaintiffs seek recovery under theories of accounting malpractice, violations of the Securities Act, declaratory relief, violations of state securities law under California Corporations Code, violation of California’s Unfair Competition Law, and negligent misrepresentation. 

Ponzi Perspectives has been tracking litigation involving the Horwitz Scheme: SEC v. Horwitz, Whitmore v. Horwitz, and Fiene v. SchweinzgerSee also Ponzi Schemes: A Growing Hazard in Film Financing.

SEC v. Ellison-Meade, Civ. No. 2:23-cv-00521 (C.D. Cal.).

The Securities Exchange Commission (“SEC”) filed suit against schemer Defendant in the United States District Court for the Central District of California for losses arising from an alleged Ponzi scheme run through Baycap.io, a purported investment club.  The complaint alleges that Defendant solicited investments in a pooled investment vehicle by fraudulently claiming to have developed a proprietary algorithm which accurately identified stocks that were poised for growth.  Defendant raised approximately $2.8 million from investors while promising to use the funds to generate high investment returns with low risk, when, in fact, Defendant misappropriated the funds for personal expenses and to structure Ponzi payments to previous investors.  The SEC seeks recovery under theories of Fraud in the Connection with the Purchase and Sale of Securities Violations, violations of the Securities Act and Securities Exchange Act, permanent injunctive relief, disgorgement, and civil penalties.