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Financial Fraud Enforcement Task Force Announces Results of Largest-Ever Nationwide Operation Targeting Investment Fraud

WASHINGTON—Attorney General Eric Holder announced today the results of Operation Broken Trust, a nationwide operation organized by the Financial Fraud Enforcement Task Force to target investment fraud. To date, the operation has involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes that harmed more than 120,000 victims throughout the country. The operation's criminal cases involved more than $8.3 billion in estimated losses and the civil cases involved estimated losses of more than $2.1 billion. Operation Broken Trust is the first national operation of its kind to target a broad array of investment fraud schemes that directly prey upon the investing public.

In announcing the results of Operation Broken Trust, Attorney General Holder was joined by FBI Executive Assistant Director Shawn Henry, U.S. Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami, U.S. Postal Inspection Service (USPIS) Chief Postal Inspector Guy Cottrell, Deputy Chief Rick Raven of the Internal Revenue Service Criminal Investigation (IRS-CI), Acting Director of Enforcement Vince McGonagle of the U.S. Commodity Futures Trading Commission (CFTC), and other members of the Financial Fraud Enforcement Task Force.

The interagency Financial Fraud Enforcement Task Force was established by President Obama to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Starting on Aug. 16, 2010, within a three-and-a-half month period, Operation Broken Trust involved 231 criminal cases and 60 civil enforcement actions. Eighty-seven defendants have been sentenced to prison, including several sentences of more than 20 years in prison.

"With this operation, the Financial Fraud Enforcement Task Force is sending a strong message," said Attorney General Holder. To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan—we will use every tool at our disposal to find you, to stop you, and to bring you to justice."

"This operation highlights the scope of this problem, and its impact on individuals from all walks of life," said FBI Executive Assistant Director Henry. "This one sweep alone involves fraud schemes that harmed more than 120,000 victims. The schemes may change, but the underlying greed does not. Working with our partners, we in the FBI will use all the investigative techniques in our arsenal, including undercover operations, to bring those responsible to justice."

"Fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard working families and retirees," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Victims want justice and don't much care who the fraudster is or how unique the fraud. Today's actions underscore that law enforcement agrees and will pursue fraud in whatever form."

Enforcement actions taken as a result of Operation Broken Trust involve a range of different investment fraud schemes, all of which prey directly on the investing public. The operators of these schemes often promise high returns to investors, but engage in little to no legitimate investment activity. Such schemes include Ponzi schemes, affinity fraud, prime bank/high-yield investment scams, foreign exchange (FOREX) frauds, business opportunity fraud, and other similar schemes. In some instances, operators of these schemes filed for bankruptcy in an attempt to avoid claims by victim-investors.

"The U.S. Postal Inspection Service has a long tradition of protecting postal customers from these types of investment and Ponzi scams and bringing those responsible to justice," said USPIS Chief Postal Inspector Cottrell. "The Postal Inspection Service constantly strives to protect our customers and the general public from falling victim to these scams that claim millions of dollars every year."

"The results announced today demonstrate the effectiveness of federal civil and criminal law enforcement in bringing to justice those who have engaged in financial fraud schemes," said Acting Director McGonagle of the Division of Enforcement for CFTC. "The CFTC continues to devote substantial enforcement resources to combat financial fraud. We appreciate the partnership with the other members of the President's Financial Fraud Enforcement Task Force to protect the public from financial fraudsters."

"Securities and investment frauds are serious offenses which have brought financial ruin to many citizens. Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money," said Rick Raven, Deputy Chief, IRS Criminal Investigation. "IRS Criminal Investigation is proud to bring our forensic accounting skills to this joint venture with our law enforcement partners to put a stop to this and other types of white collar fraud."

Operation Broken Trust was conducted in conjunction with various Department of Justice components—including the U.S. Attorney Offices, the FBI, the Criminal and Civil Divisions and the U.S. Trustee Program—as well as the SEC, USPIS, the CFTC, IRS-CI, the Federal Trade Commission, the U.S. Secret Service, and the National Association of Attorneys General.

As a part of Operation Broken Trust, the task force is making the public aware of resources available to protect against these types of fraud and how to report fraud when it occurs. To learn more about investment scams, how to take steps to protect yourself from scams, or how to report investment fraud if you believe you have been victimized, go to StopFraud.gov. The website includes links to a wide array of task force member resources.

The President's Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit StopFraud.gov.

Case Example:
Dennis R. Bolze, 61, formerly of Gatlinburg, Tennessee, was sentenced on August 26, 2010 in United States District Court in Knoxville, to serve 327 months (27 years and three months) in prison and three years of supervised release. He was also ordered to pay over $12 million in restitution to the victims.

Bolze pleaded guilty in November 2009, to a federal indictment charging him with three counts of wire fraud and three counts of money laundering offenses arising from a Ponzi scheme he admitted to operating between April 2002 and December 2008.

According to court documents, Bolze admitted that from April 2002 through December 2008, he perpetrated a scheme to defraud individuals who invested millions of dollars with him and his companies, Centurion Asset Management, Inc. ("CAM") and Advanced Trading Services, Inc. ("ATS"), by fraudulently representing that he would invest all of the funds entrusted to him in CAM's and ATS's day-trading of E-mini NASDAQ futures contracts and E-mini S&P 500 futures contracts (collectively referred to as "futures contracts"). Rather than investing all of his clients' funds in futures contracts, he admitted to running a ponzi scheme by diverting new investor funds to existing investors, thereby lulling the existing investors into believing that they were, in fact, receiving a return on their investment through the day-trading of futures contracts through CAM and ATS. Bolze also admitted that to keep his scheme to defraud running, to encourage additional investments, and to discourage investor withdrawals, he provided fabricated documents to investors entitled "Trader's Invoices" that fraudulently represented to investors that he, CAM, and ATS had generated profitable returns on their investments. For the same reasons, Bolze also caused fabricated day-trading results to be posted on the website www.accesscam.net for the purpose of fraudulently representing to investors that he had generated returns on their investments.

Bolze admitted that through his scheme to defraud he received $21,584,189.13 from investors, but actually invested only $1,601,188 on their behalf, and over the course of the scheme to defraud collectively experienced a substantial net loss. Of the $21,584,189.13 he received, $9,626,620.64 was returned to existing investors for the purpose of lulling them into believing that their investments with him were both safe and generating a profitable return.

Published December 6, 2010

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