U.S. v. Mr. Z (DMC No. 12954) – Felony Federal Securities Fraud ($15,000,000 Misappropriated by way of Ponzi Scheme/Securities Fraud), Felony Federal RICO, Federal Bank and Wire Fraud, and Felony Federal Embezzlement – Not Charged in Arizona – Arizona Corporation Commission Securities Division Investigated.

Mr. Z lived in both Ontario, Canada and in Scottsdale, Arizona. He held himself out as a securities trader who traded the futures market. He advertised that he could generate guaranteed returns of 9% to 12% with “no risk trading.” He said that he could accomplish this by using a “positive expectancy system” (one that was granted to mathematically deliver profit over time).

In reality, he was not registered or licensed to sell securities. He had a total of $15 million invested with him through 59 separate people. He also held himself out to have a successful lifestyle, when in reality he was supported by his parents and his wife. After the Fraud was discovered, only $5 million could be paid back. Of the defrauded victims, his parents lost their life savings of $2.5 million and his estranged wife lost $300,000.

When investors’ money was lost in trading, Mr. Z would tell them that their money was safe and “locked up” in other investments. He would make interest payments by securing more money from new investors – a classic Ponzi Scheme. Once payments were stopped, the investors began to question him heavily and Mr. Z gave the excuses that the assets were either tied up in bankruptcy proceedings, that they were linked to short-seller real estate investments, or they were invested in Greek debt and in U.S. currency. When the Arizona Corporation Commission Securities Division began investigating, we became involved in the case. We were able to work with a local civil attorney who was dealing with Federal civil lawsuits filed against Mr. Z, and with a Canadian Attorney in Ontario, who was dealing with the Ontario Securities Commission on Mr. Z’s behalf. Ultimately, Mr. Z was charged and plead to only 1 Count of Fraud (above $5,000) in Canada. He was never charged in Arizona. He was sentenced to 4.5 years of prison in the Canadian system, but he was never charged in Arizona.