Every day regulators (and criminal authorities) uncover another Ponzi scheme.  The frauds have left their mark on countless numbers of investors, especially in Illinois. 

The good news is that the regulators have uncovered the frauds. Prospective victims won’t be conned, and the victimized at least may have some form of relief.  Among the possible avenues of relief are claims against those who referred investors to the fraud, claims in receivership proceedings where leftover Ponzi money has been seized, and even theft loss tax deductions that the IRS has made extremely attractive since the Bernie Madoff scandal.

Tracking and sometimes investigating the Ponzi schemes uncovered by the regulators, it is apparent that Illinois residents recently have had more than their fair share of frauds.  Let’s highlight the more egregious ones.

First, one of the larger local Ponzi schemes involved a North Barrington, Illinois resident named Daniel Spitzer.  The SEC announced securities fraud charges and obtained an emergency asset freeze against him for operating an alleged $105 million Ponzi scheme impacting over 400 investors.  The SEC alleges that he induced investors to invest in his investment funds that purportedly were engaged in foreign currency trading.  Instead of investing this money, Spitzer created a classic Ponzi scheme by using money raised from new investors to pay earlier investors.  Spitzer also misappropriated investor funds to pay for unrelated business and personal expenses.  To conceal his fraud from investors, Spitzer created false statements that led investors to believe that their investments were actually profitable.

Second, the FBI announced fraud charges against Sunrise Equities and numerous individuals for defrauding hundreds of Chicago investors and several banks in a $43 million Ponzi scheme and affinity fraud involving hundreds of Muslims.  Sunrise Equities purportedly was engaged in real estate related investments, but in classic Ponzi scheme fashion, new investor money was used to pay earlier investors creating the illusion that Sunrise was successful.

Third, state regulators filed charges against Illinois residents Marcin Malarz, Arthur Lin, and Jacek Sienkiewicz and their companies Malarz Equity Investments, LLC and Malarz Equity Investment, Inc. and Invision Investment, LLC in connection with an alleged $6.3 million Ponzi scheme.  Malarz and Lin (who was at the time a registered representative at LPL Financial Corporation) allegedly solicited investors to invest in businesses that purportedly converted apartments to condominiums, then selling condominium units to purchasers.  Malarz converted some the money raised in the offering for his own personal use.  Likewise, Malarz and Sienkiewicz allegedly solicited investors to invest in Invision, LLC, purportedly in the business of converting apartments to condominiums, and then selling condominium units to purchasers. Promissory notes were executed, but Messrs Malarz and Sienkiewicz failed to disclose that the funds would be used to pay back previous investors pursuant to their promissory notes.

Fourth, Financial Update, Inc. and a Chicago resident named Algrid Norkus (registered with Madison Avenue Securities in Delaware until August, 2010) were charged criminally by the United States Attorney's Office for the Northern District of Illinois, alleging that Norkus engaged in mail fraud in connection with his raising more than $9 million from investors through the offer and sale of promissory notes purporting to pay interest of up to 24%.  Norkus allegedly told investors that the return of their principal was “guaranteed” and that there was “no risk” to the investment.  Norkus allegedly targeted investors that were elderly and/or unsophisticated, and gained their trust and confidence by becoming their friend and confidant for some time before soliciting money.  Norkus is believed to have solicited a number of investors through lunch seminars, describing how his company, Financial Update was in the business of providing insurance to the uninsurable. 

            Fifth, a federal grand jury in Rockford, Illinois recently returned an indictment charging Francis Sanchez of Woodstock, Illinois and James Bourassa of Gilberts, Illinois of defrauding investors out of more than $7,000,000.  Sanchez and Bourassa allegedly operated a business known as InvestForClosures.Com (d/b/a InvestForClosures Financial, LLC), which allegedly was in the business of purchasing, rehabilitating, and selling distressed houses for a profit.  Sanchez and Bourassa also marketed InvestForClosures Ventures, LLC (d/b/a Realty Opportunities International), which purportedly operated a real estate project in Mexico known as “Sands of Gold”. 

Sixth, James Brandolino recently was charged with criminal mail fraud for orchestrating a fraud in and around Joliet, Illinois.  Brandolino was registered with the National Futures Association and had trading privileges at the Chicago Board of Trade.  Brandolino operated several entities including Lloyd Lewis Capital Inc., Falcon Trading Group Inc. and Falcon Capital Partners LLC.  Brandolino faces a maximum of 20 years in prison.

Seventh, Forrest David Laidley of Libertyville, Illinois recently was sentenced to prison for defrauding more than 100 investors in and around the northern suburbs of Chicago in a $10 million Ponzi scheme.  Laidley obtained more than $10 million in funding for his real estate development company, Forrest Properties, Inc., from hundreds of investors by selling limited partnership interests in commercial development projects and short-term, high interest guaranteed promissory notes.

            Eighth, David Hernandez of Downers Grove recently plead guilty to one count of fraud and was sentenced to serve more than 16 years in prison for his role in swindling more than 250 people approximately $6.4 million.  Hernandez broke into the spotlight in 2009 when his company, NextStep was announced to be a corporate sponsor of Chicago radio personality Mike North’s show on the Comcast SportsNet Chicago.  Unbeknownst to listeners and investors, NextStep was actually a Ponzi scheme. 

            Unfortunately, the list of scams is lengthier still.  Investors must be on guard!