As an investment fraud attorney, I see first-hand the devastation caused by Ponzi schemes and other financial frauds. Nearly every week I hear from another family who lost their life savings by trusting someone who they believed was a successful investment advisor but who turned out to be bad news. Here's the thing, though: these tragedies are not happening just with unsophisticated widows in faraway places. As I explained in a blog I wrote earlier this year, the victims of investment fraud are often educated, sophisticated business men and women who believe their experience enables them to spot fraud easily.
We are already knee-deep in what I call "mini Bernie Madoff" Ponzi schemes in Ohio. Victims of the Glen Galemmo alleged scheme in Cincinnati have told me they believed Galemmo was running a legitimate hedge fund but it turns out the whole thing may have been a total fraud. Losses in that scheme may be in the hundreds of millions of dollars. I have also met with victims of the Brenda Ashcraft investment scheme near Cincinnati where it turns out that the Real Estate Investment Trusts ("REITs") she was selling may have been completely bogus. A federal grand jury recently indicted Ashcraft accusing her of swindling investors of $15 million. And, just within the last two weeks, I have been contacted by victims of yet another Ohio Ponzi scheme where the schemer produced absolutely fake statements to his clients reflecting trades that never happened. The losses in that scheme are also in the millions of dollars.
The three Ponzi schemes I just described are just the most recent cases we've been dealing with in Ohio. To call this an epidemic would not be an understatement.
It looks like it may be happening again in Ohio, this time in Cleveland. According to news reports in Cleveland, dozens of Cleveland area investors may have lost millions in an investment fund named "WW Capital III fund." It's still early and nobody knows for sure if the investments are legitimate or not but the FBI and the Securities and Exchange Commission are already investigating. In my experience representing many hundreds of investors over the past decade, if the SEC and FBI are involved, there are serious concerns about the legitimacy of the underlying investment. There are other indicators of potential Ponzi-like red flags based on the reports I've been reading: (1) potential commingling of funds: (2) lack of transparency; (3) lack of audited financials; (4) the promise of high returns; and (5) excessive complexity.
Given what I do every day, and having represented many, many victims of investment fraud in Ohio and throughout the country, I have a lot of concerns about how this is going to shake out in Cleveland. For the sake of those who invested their hard-earned money in the fund, I hope I am wrong.