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Bond salesmen working out of strip malls across America pitched GWG Holdings Inc. as a good investment. The company would use money raised from bond sales to buy life-insurance policies from people who wanted cash up front, then collect the payouts when those people died. Investors, many of them elderly and retired individuals, put $1.3 billion into the bonds. What many of these retail investors didn’t know was that GWG’s founders and a board director would each use the money to fund and launch their own startup ventures, then move them out of the investors’ reach, WSJ Pro Bankruptcy reported. The roughly 27,000 individuals who bought GWG’s unique debt securities, known as L Bonds, are now facing huge potential losses — for many, their retirement nest eggs. Since 2018, GWG has invested at least $230 million into former chairman Brad Heppner’s alternative-finance startup, the Beneficient Group Co LP, which aims to help wealthy people and institutions convert illiquid assets into cash. The company also put $28 million into FOXO Technologies Inc., a biotech venture backed by GWG founder Jon Sabes, which uses saliva tests to harvest people’s DNA and predict when they are likely to die. But GWG no longer controls either of the startup ventures. Mr. Heppner, Mr. Sabes, and their associates carved out both ventures as independent entities shortly before the company collapsed into bankruptcy in April. The judge overseeing the court proceedings in Houston said he had never before seen a company give up control of everything it owns before seeking chapter 11 protection. GWG, which employed 160 people as of December 2020, is now a shell operation with just two employees remaining. The company is under investigation by the Securities and Exchange Commission, and faces lawsuits from investors who claim they were defrauded. GWG has denied wrongdoing and said it fully disclosed its business risks to investors.

The company and its affiliates built over 1,100 rowhouses in Philly and planned major developments on the city’s waterfront, as well as in northern New Jersey, New York City, and Palm Beach, Fla., the Philadelphia Inquirer reported. In a national advertising blitz, it promised investors big-bucks returns of 12% — perhaps better than 20%. But on Tuesday, New Jersey issued a “cease and desist” order against the Secaucus-based National Realty Investment Advisors alleging they “fraudulently” sold $630 million worth of securities in the last four years to “at least” 1,800 investors nationwide. The state Bureau of Securities found that rather than relying on cash-flow proceeds, company officers used investors’ money to pay off other investors and diverted “millions of investor dollars to make lavish payments to family members,” the state Attorney General’s Office said. That included pay for a no-work job for the wife of portfolio manager Thomas N. Salzano, who last year was criminally charged with fraud by federal authorities. Officers hired “family-owned or controlled companies,” New Jersey officials said, among them a construction company in which Salzano’s son was chief financial officer. While NRIA and its entities haven’t been charged criminally, they have been under investigation by federal agencies and officials in three states. The 63-page order itemized what the New Jersey Attorney General’s Office called “unlawful conduct,” mandating that the company “cease and desist” engaging in it. It was unclear whether NRIA, which has filed for bankruptcy protection, plans to appeal the order. The order prohibits NRIA “from engaging in the conduct described in the order itself, or from further securities law violations,” and publicizes the alleged fraud, the state Attorney General’s Office said. It was unclear how the order would be enforced.

Incarcerated lawyer Michael Avenatti pleaded guilty Thursday to four counts of wire fraud and a tax-related charge in a federal court case in Southern California accusing him of cheating his clients out of millions of dollars, the Associated Press reported. Avenatti made the plea during a court hearing in Santa Ana. Prosecutors said the plea subjects Avenatti to as much as 83 years in prison. The 51-year-old lawyer who is representing himself in the California case said earlier this week that although he didn’t reach a deal with federal prosecutors he wanted to change his plea to be accountable and spare his family further embarrassment. Federal prosecutors accused Avenatti of cheating clients out of millions by negotiating and collecting settlement payments on their behalf and funneling the money to accounts that he controlled. He was charged in a 36-count indictment in 2019 of crimes including wire and tax fraud. A sentencing hearing was tentatively scheduled for Sept. 19, but, if the government decides to try him on any of the remaining counts, that date will likely be vacated so he can be sentenced on all counts after trial. The government said it expects to be able to inform the court of its plans on Monday.

A congressional panel yesterday will examine payouts under a federal coronavirus pandemic aid program intended to help small businesses weather the COVID-19 outbreak amid revelations that as much as 20% of the money may have been awarded to fraudsters, the Associated Press reported. The problems in the COVID-19 Economic Injury Disaster Loan program, overseen by the U.S. Small Business Administration, included a finding by congressional investigators that some 1.6 million applications for the loans may have been approved without being evaluated. Separately, the SBA’s Office of the Inspector General estimated that at least $80 billion distributed from the $400 billion program could have been potentially fraudulent, much of it in scams using stolen identities. The program is expected to be at the center of a congressional subcommittee hearing that also will tackle broader fraud concerns with the flood of pandemic aid from multiple federal government programs for states, local governments, businesses and the unemployed.

The Consumer Financial Protection Bureau (CFPB) has taken action against the owner of a student-loan debt relief company for allegedly withdrawing hundreds of thousands of dollars from student borrowers’ bank accounts, without authorization, according to a press release on the agency’s website. The CFPB alleges that Frank Gebase, Jr. controlled a company that took the borrowers’ money after obtaining their names and account information from a previous student-loan debt-relief scammer that the CFPB shut down. The CFPB’s proposed settlement, if entered by the court, would ban Gebase from the debt-relief industry and order him to pay a penalty. On March 30, 2016, the CFPB ordered Student Aid Institute to shut down its debt-relief operations and rescind all of its consumer agreements. Gebase had leased office space to Student Aid Institute, and he was a longtime associate of its principal. In 2016, Gebase founded Processingstudentloans in San Diego, and he was the founder, sole owner, CEO, and sole corporate officer. The CFPB alleges that from approximately May 20, 2016 to April 5, 2017, Processingstudentloans was a non-bank provider of student-loan debt-relief services. As alleged in the complaint, without authorization, Processingstudentloans collected recurring fees from customers, typically $39 per month, stealing hundreds of thousands of dollars in total fees from hundreds of student loan borrowers. In addition to controlling Processingstudentloans and facilitating the debits, Gebase was aware or should have known that the debits were unauthorized and unlawful. By April 2017, under this scheme, Gebase’s company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts.

Ex-San Antonio attorney Christopher “Chris” Pettit has been sued for allegedly absconding with his former law clients’ money, the San Antonio Express-News reported. He’s landed in bankruptcy and he’s surrendered his law license. Pettit is also dealing with “medically related issues,” his attorney disclosed during the first hearing in Pettit’s massive bankruptcy case. Bankruptcy lawyer Michael Colvard declined to reveal his client’s medical issues but told a San Antonio judge that Pettit was referred to another lawyer who works closely with the Texas Lawyers Assistance Program. The program helps attorneys who have “substance use and other mental health issues,” according to its website. Pettit, who specialized in estate planning and personal-injury law, has been sued at least 14 times by former clients who say he stole millions of dollars from them. He has issued general denials to the allegations in some of the cases but has entered into judgments with some plaintiffs — agreeing to pay them actual and punitive damages. Pettit and his law firm filed for chapter 11 protection June 1, essentially putting a hold on the pending litigation. He listed $27.8 million in assets and $115.2 million in liabilities in his personal bankruptcy, making it one of the largest ever filed in San Antonio. He has given up his law license in lieu of disciplinary action by the State Bar of Texas. Bankruptcy Judge Craig Gargotta agreed to the appointment of a chapter 11 trustee, who will essentially act as a CEO or manager to shepherd the bankruptcy cases and appoint professionals, including forensic accountants to track down money and other assets for the benefit of Pettit’s former clients and other creditors.

Faithfully, by 2:30 a.m. on Fridays, Frantz Victorin said he received at least a 5 percent return from EminiFX, an online investment platform that said people could get rich investing in cryptocurrency and the foreign exchange markets, also known as forex, the Washington Post reported. EminiFX chief executive Eddy Alexandre would explain that investors could withdraw their profits and use the money to pay their mortgage, car note or other bills. Or, they could reinvest the returns, Victorin said. “Everybody got paid,” Victorin said. “They got their profit in their e-wallet.” Alexandre, who is also the founder, president and sole owner of EminiFX, was charged in connection with running a Ponzi scheme, according to a complaint filed in the Southern District of New York. The profits people believe they were making were not real, the complaint said. But to this community, Alexandre was like a shepherd leading a flock to what they hoped would be life-changing fortunes. The weekly returns were so big and consistent, a minimum of 5 percent and sometimes almost 10 percent, that Victorin projected he would become a millionaire after a little less than a year. “EminiFX is your sure path to financial freedom,” the company website promised. It was an appealing pitch that brought in millions of dollars from thousands of investors. The FBI says the purported proprietary trading platform used by EminiFX was a fraud and that Alexandre was operating a cryptocurrency and foreign exchange Ponzi-like scheme that collected more than $59 million starting in September 2021 until he was taken into custody by the FBI in May. The Justice Department complaint alleges the platform only invested a relatively small percentage of investor funds and misdirected around $14.7 million to his personal bank account. A separate complaint by the Commodity Futures Trading Commission alleges that only about $9 million of the $59 million raised from investors appears to have been sent to a futures commission merchant for trading purposes. The complaint alleges that trading by Alexandre at an online brokerage racked up over $6 million in losses.

Todd and Julie Chrisley, stars of the reality television show “Chrisley Knows Best,” were found guilty Tuesday in Atlanta on federal charges including bank fraud and tax evasion, the Associated Press reported. The Chrisleys were initially indicted in August 2019 and a new indictment was filed in February of this year. Their trial began three weeks ago, and a jury on Tuesday found them guilty of conspiring to defraud community banks out of more than $30 million in fraudulent loans, according to the office of U.S. Attorney Ryan Buchanan in Atlanta. They were also found guilty of conspiring to defraud the IRS and tax evasion, and Julie Chrisley was convicted of wire fraud and obstruction of justice. Prosecutors alleged that the Chrisleys submitted fake documents to banks when applying for loans. They said Julie Chrisley also submitted a false credit report and fake bank statements when trying to rent a house in California. They used a company they controlled to hide income to keep the IRS from collecting unpaid taxes owed by Todd Chrisley, prosecutors said. After they were found guilty, U.S. District Judge Eleanor Ross allowed the Chrisleys to remain free on bond. But she placed them on location monitoring and home detention, meaning they can only leave the house for certain reasons, including work, medical appointments and court appearances. They also have to alert their probation officers to any spending over $1,000, according to the order entered Tuesday. Peter Tarantino, an accountant hired by the couple, was found guilty of conspiracy to defraud the United States and willfully filing false tax returns, the U.S. attorney’s office in Atlanta said. He also remains free on bond.