ATM LEASEBACK SCHEMES-- any insight?

[Tednewsom]

All true, but for some details peculiar to this particular situation.

Few people here-- like, maybe, none -- have implied that all outstanding stolen funds will be found and disbursed back to the victims. Or that wrapping up a two-decade scam was going to be easy or quick. Sure, that would all be nice, but it's arithmetically impossible. The "books" were bogus and designed to deceive (or just improvised.) Much of the income went out as "profit payments" to continue the scam. OK, those are givens, standard with any Ponzi scheme.

And you're right, absolutely: "There are hundreds of these Ponzi scams running every year and the justice system can only spend so much time on each before moving on to the next." And as Gregg pointed out, there are scammers who seem untouchable despite the obvious illegality (Brad Kamanski, Faith Sloan, Charis Johnson, Ken Russo, Frank Cradduck. Todd DIsner, Kristi Johnson, Aarron and Shaara Andrews -- all off the top of his head without even having to look them up.)

The major difference here is, the SEC and the law have these miscreants dead to rights. I think you'll agree that this is unusual. Nice, and deserved. But unusual.

Quickly after they were caught, the pair of jugglers rolled over and confessed, including particulars not known by investigators or investors (i.e., the scouring phone books to find genuine ATM locations.) Such an admission seems hardly enough reason to spend months or years poring over their cooked books or contacting every investor for data. And if the Boyz rolled over and attempted to strike a deal for less jail time, they better have something to offer beyond, "OK, we did it, please be kind."

I've never suggested victims would receive all their lost funds. I do expect these two wretched crooks, having scammed a couple thousand intelligent people for almost twenty years, were smart enough to make plenty of dough along the way, not just "make a comfortable living." Even a common squirrel is smart enough to store plenty of nuts for the winter.

[Gregg]

Funny you should mention squirrels, I remember a long ago class where I learned that a common squirrel could not remember where it actually hid the nuts as little as 1 minute after having done so, and the only reason they didn't starve was, well, they eventually hid the little things EVERYWHERE and even the blind pigs were digging them up...but I digress.


I'd offer that Ed and Joel weren't as smart as the aforementioned squirrels. They didn't hide any significant amounts, they paid it out as fast as it came in and what they skimmed they spent as fast as it came in, too. They obviously weren't brilliant financial planners. As to why they rolled as soon as the feds started asking questions? It was over and they were too tired and too caught to really care much anymore, I'd posit. They had for at least a few weeks and in the back of their minds for years known that the damn was going to break someday and having worked out the possibilities of what was going to happen when it did they just conceded the point, they didn't have anything to offer and they didn't have anything to lose.

Ever watch on TV one of those epic, 2 hour freeway car chases? Some mook leads half the CHP down the I-5 for a few hundred miles, totals 2 dozen cars, drives 30 miles after the stop sticks take out the tires and with 45 patrol cars in chase THEN they finally realize they're not going to get away? Do you think that when they finally pull over, they've got something to trade? Nope, some people just finally reach the rational conclusion that "fuck it" is the best answer there is.

Without any funds recovered via clawbacks, the estate of NASI won't cover the costs of wrapping it up and burying it. And I would put the odds of them even seeking clawbacks at less than 50/50 unless its found that there are some insiders who have big easy money to go after, which there may be if some of the winners were heavily involved in bringing in new suckers and were paid commissions to do so. And I don't think that's going to happen either, honestly.

[grimreaper]

Without any funds recovered via clawbacks, the estate of NASI won't cover the costs of wrapping it up and burying it. And I would put the odds of them even seeking clawbacks at less than 50/50 unless its found that there are some insiders who have big easy money to go after, which there may be if some of the winners were heavily involved in bringing in new suckers and were paid commissions to do so. And I don't think that's going to happen either, honestly.

I definitely disagree. They will have a complete list of ALL distributions made..either provided from NASI records and/or the BANK RECORDS for the checks issued. Now they *should* also have a complete list of the contracts made as well.... info on how many ATMS each investor had from the monthly statements issued to investors. Now, if they can't identify how many ATMS each investor has and when purchased (those who are net LOSERS will obviously cooperate), they will hold those people FULLY responsible for ALL distributions made in the statute period..not allowing them to get credit for the initial investment.
As to how much they will be able to actually GET from the net winners is an unknown at this point, but I'm 100% certain they will go after ALL of them and that # is probably in excess of $75 Million (just my estimate). It seems most people here believe they will get next to nothing...that will only take place if the MAJORITY of net winners demonstrate they are essentially bankrupt with no assets. If they have assets, the receiver will go after them if the winners won't settle. We'll see.

[Gregg]

I'm 100% certain they will go after ALL of them and that # is probably in excess of $75 Million (just my estimate).

No, he won't. Every single case I am aware of, which is over 100, the receiver has only gone after the biggest winners, the closest any case I have seen to ALL of them the receiver sent notices to people who were net +$1000, and a little more than a third of them offered to settle, the receiver then included the rest of the $1,000 winners in a class action which has not yet gotten to court. If he wins, and he will BTW, he can theoretically attempt to collect on these judgements from 900 odd people, but each will have to be at that time pursued one at a time, in hundreds of counties in more than 25 states and 4 foreign countries. Of the 900, 800 are for less than $5000, so lets not count on half of those 800 being anything more than sold to debt collectors for no more than 10% (of which the receiver is getting 30% as his fee, and were he to attempt collection the local attorney is going to get 30% first). As to the $75 million, not even possible, you'd have to be in insider or working for the accountants with the records for me to take that number seriously. The total take was only $123 million? 95% of which came in during the last 24 months? The math of ponzi schemes doesn't work that way. But okay, let's let that number pass, and still, that's at the end of the day still about $25 million after settlements, litigation and just plain "fuck you I'm not paying, I stashed it in Fuckintardistan and you can't get it", pay the receiver and his lawyers their 1/3rd and your back to paying victims pennies.

It doesn't make any sense to sue a single net winner for less than $10,000, having a receiver also has the downside of adding a layer of people getting either a fee or contingency amount. The accounting investigation of this is going to cost somewhere between half a million to a million dollars. Another thing to consider is that since a lot of the net winners were more or less not criminals, they have been paying income (capital gains) tax on this, so a darn near flat 15% of that money is in the US Treasury and good damn luck getting any of that back. Yeah, they can amend tax returns and all, but that's not going to help in the time frame involved and may or may not result in the person getting any positive cash flow from the IRS, unless you also are 100% certain of all the net winners tax situations, too.

I do like what the RVG receiver is doing suing the very low threshold winners as part of a class action defendants. That is something I've never seen before and it'll be interesting to see how it works out. Its much more typical for the floor amount to be somewhere between $5,000 - $10,000 and until a few years ago the number of people involved was dozens, not hundreds like its been with Zeek, ASD, TelexFree and the other current big ones.

It's not simple, and every way you can be 100% certain of something I, and the others here who have dealt with it before, can come up with 3 ways of how its more complicated than you'd think. And there's 3 more ways after that which no one has even though of yet. The one thing I am 100% certain of is every time one of these cases occurs, something about it is more complicated than the last.
But hey, if you know there's $75 million out there just setting in a US bank waiting to be seized, you go get it Sparky!

[grimreaper]

Of the 7 investors I'm personally familiar with, ALL have net profits in excess 50K for the 4 year period and 4 are in excess of 100K. The mean # of contracts is over 10 per investor (30000ATMS/2400 investors) and this holds true for those I know as well. I would assume there are 1000 or more are net winners for the 4 year period. So,even being conservative, that's 10,000 ATMS@ 2K per year profit each>>>>20M per yearX4years=$80M profits. There should be a significant # of investors with profits in excess of $10K...and a good # in excess 0f 50K.

[Tednewsom]

That would be the impetus to get Sparky to run and sniff real good.

Slightly OT: The plan with disbursement of the assorted huge chunks of Madoff money-- which is considerable-- was to try to get investors back to zero. A bunch of net winners from the scam sued to collect the profits they WOULD have made if what they were told by Madoff had been true. The judge laughed and said "Go Fish."

[grimreaper]

[Gregg]

Of the 7 investors I'm personally familiar with

None of them are among the 2393 you don't know about. You have to quit assuming anything, beyond the math of exponential growth, which pretty much works out to 80-90% losers.

The 7 you are personally familiar with represent a third of 1%, but if they have between them $550K in net winnings, and no losses among them, are hardly representative of the rest of a class of net losers.

Still, if you can get them to just send over a check for the $550K, you only need to find another $74.45 Million and you've got that $75 million! In the last 20 months, $123 million came in and out the door, hell, almost $4 million came in after the checks bounced in August and before the feds started looking around on September 17th.

This is like trying to explain math the Zeeklers, who after the SEC locked the doors cried that it couldn't be a scam because there was still $47 million in the bank and no one had missed a payment. They never did, and still don't understand that the $47 million was not enough to cover the $3.48 Billion Zeek had in deferred current liabilities...they were still getting paid and they didn't care.

[grimreaper]

Stay tuned..we'll soon find out.

[Gregg]

This is a long thread and I don't have the inclination to go looking for it, but it wasn't that long ago someone was calling me crazy when I said I thought they might own closer to 3,000 machines than 31,000...they knew FOR A FACT that the company had taken in $700 million and the ATMs HAD TO generate AT LEAST $35 million or it would have collapsed much sooner. In order for just 3,000 actual machines to exist I was told, each machine had to generate $1200 a month in revenue and that just wasn't possible. (he was right about that, the $1200 per machine WASN'T possible but I don't want to kick him while he's down...or not much anyway) Nope, they had to be making tens of millions of dollars off the real machines, it would never have lasted if they weren't.

Oops. But, whoever that was knew for sure, maybe he was right...oh wait, he wasn't.

[Judge Roy Bean]

An alleged net winner (or loser, for that matter) should not rely on advice from the Receiver, the SEC or the Internet.

[notorial dissent]

Point to really seriously remember, the Receiver is NOT anyone's friend, he is there to do a job, and paid to do that job, nothing more.

Which is why the judge and I keep saying that if you think you need advice on ANY of this you need to see a tax/accounting/legal professional, and not some general practioner.

[The Observer]

This is like trying to explain math [to] the Zeeklers...

Bingo! This is an component that people like grimreaper don't seem to understand or grasp. They fail to understand the exponential losses that mount in these Ponzi schemes simply because they have never done the math. So they indulge in caveman mathematics where any number over the number of toes and fingers they were counting on represents untold wealth beyong imagination (which might explain the follies of the Dinarians as well). So grimreaper knows that he has seven friends or relatives that are netwinners and immediately jumps to the conclusion that there must be tons of net winners out there as well - and all of them will be able to pay the clawbacks and all of the victims will receive a ton of money.

(Which reminds me of a math problem story: A man goes to a blacksmith to have his horse re-shoed. The blacksmith quotes him a price of $32 at $8 a horseshoe. The man objects and says the price is too high. The blacksmith counters with an offer based on the number of nails he will have to use - 32 - and states the the first nail will cost 1 cent, the second nail 2 cents, the 3rd nail 4 cents, and so forth, essentially a doubling of the price of the previous nail. The customer happily agrees to this proposal. How much is the bill when he comes back to pay?)

...]it wasn't that long ago someone was calling me crazy when I said I thought they might own closer to 3,000 machines than 31,000...they knew FOR A FACT that the company had taken in $700 million and the ATMs HAD TO generate AT LEAST $35 million or it would have collapsed much sooner...

It's there and I remember it, along with one person stating that the SEC needed to get in and take over the operation of the ATMS so that their investment wouldn't go down the drain. There were people who still clung to the belief (and maybe still do) that somehow there has to be ATMS out there, otherwise how could NASI have had so much money involved? They see the figure of $120 million and they immediately believe that means there has to be $120 million sitting in a box somewhere.

This is why you can't get people to understand the brutal math behind the situation - they are emotionally invested in this scam and cannot come to grips about the reality of the situation. And with other idiots jumping in and claiming that clawbacks are going to save the day and they will be receiving oodles of monies from troves of phantom net winners, it is no wonder that the truth gets tossed out the window. At least Ted ran a sample spreadsheet exercise that demonstrated the steep drop that NASI would have experienced at the end and saw the power of the mathematics involved. It is too bad others do not that as well, if only to gain some insight on why these scams utimately fail.

[grimreaper]

Clawbacks won't save the day by a long shot....but you'll see an aggressive clawback that will leave no stone unturned. I actually hope they fail and those family and friends I know escape it's clutches. But that's denial...they will come for profits...and to simply dismiss the *threat* is spitting in the wind. I really want to be WRONG on this. Then again, in a perverse way..I'd like to see some here eat their words.

[grimreaper]

How long am I liable to "clawback" money I have received from a Ponzi scam
Asked 2 months ago - Encino, CA
ATM scam in place for 19 years I'm an investor most yrs for 1 or 2machines until recently

Licensed in CA
Andrew Bryan Holmes


Securities / Investment Fraud Attorney - Los Angeles, CA
Contributor Level 1

Answered 2 months ago.

Based on the timing of this question, I assume you are an investor in the Nationwide Automated Systems case recently brought by the SEC. The receiver will do his/her best to find all of the assets he/she can in order to return investor funds to those who lost their investments -- and the "clawback" is a way of (essentially) equitably redistributing those funds.

While there are many theories available for a receiver to use as a basis for a clawback, the two more common legal theories are found in the Bankruptcy Code (which has a 2 year SOL for fraudulent conveyances), and state law claims (which vary by state, but in California, the SOL is as long as six years under certain circumstances).

You should consult with an SEC defense specialist to determine your exposure.

[grimreaper]

But hey, if you know there's $75 million out there just setting in a US bank waiting to be seized, you go get it Sparky!

It isn't *sitting* anywhere..it's been distributed to net winners and they'll have to account for ALL of it. Can it be clawed back? Yes it can. Will they be successful? Well, that's a matter of degree. There is ZERO legal defense for a confirmed ponzi, so those that want to dodge the bullet better have a cover story that's a DOOZY!

[The Observer]

Clawbacks won't save the day by a long shot....but you'll see an aggressive clawback that will leave no stone unturned. I actually hope they fail and those family and friends I know escape it's clutches. But that's denial...they will come for profits...and to simply dismiss the *threat* is spitting in the wind. I really want to be WRONG on this. Then again, in a perverse way..I'd like to see some here eat their words.

The only one who needs to be eating their words are you. You have maintained from your earlier days posting about how sizeable the payouts would be from clawbacks and actually told Notorial Dissent and Gregg that they were in denial (and that is a quote "in denial") for stating that the payouts from any clawbacks recovered would be pennies on the dollar.

And, of course, you hope that your family/friends don't get caught up in the clawbacks because you support them keeping their illegal net profits over the other victims who got sucked in. So your pretense here at being supportive of the victims is just hogwash and hypocrisy.

[grimreaper]

So your pretense here at being supportive of the victims is just hogwash and hypocrisy.

Don't confuse support with dealing with the inevitable. I'll be here to the bitter end and so will you. One of us has their head up their ARSE.... time will tell and I'm in for the final outcome.

[Gregg]

But hey, if you know there's $75 million out there just setting in a US bank waiting to be seized, you go get it Sparky!

It isn't *sitting* anywhere..it's been distributed to net winners and they'll have to account for ALL of it. Can it be clawed back? Yes it can. Will they be successful? Well, that's a matter of degree. There is ZERO legal defense for a confirmed ponzi, so those that want to dodge the bullet better have a cover story that's a DOOZY!

Sure it can be clawed back. But saying every penny is subject to clawback action is a long damn way from getting more than 10 cents on the dollar to the investors who lost. I haven't said it couldn't be done, or that it wouldn't be done, I've said, and I still say, that what they get isn't going to pay investors who lost back much of what they lost. You're right there's zero legal defense for the winners, but face it, they're not facing criminal liability, they're not very likely to face criminal liability unless they joins the SovCit Stupid Club and the doozy cover story that has worked in the past has been "I spent it and can't afford to pay anything back".

Don't think so? Go look. I gave a link a few pages back. I provided plenty of examples for the full on ponzi pimps who were six figure net winners and settled for less than $10K in the end. That's not an exception, one scheme had pages of them. Dustin Fennel won half a million dollars in CEP, bought a $375K house after it failed but before the receiver came calling, settled his case before even being sued for $8,000.
If I were a winner in this case, I'd be spending the money now. Lease a Porsche, spend a winter in New Zealand, transfer the house to a family member and sprinkle in a few gold bars to drop in a safe deposit box in the Caymens. Doing so now isn't illegal and aside from insiders I've never seen a court force anyone to start selling assets to satisfy a ponzi clawback. Ask a lawyer after you pay him (attorney client privilege so he can tell you the truth) how he likes the chance of going in front of a jury with a case that if he wins, you don't have to pay back money YOU didn't have any culpability in stealing and to pay it back that wife and kids in the back of the courtroom are going to lose their home, and if he loses you only have to pay what you'd have to pay anyhow. No court I know of has yet made anyone do that.
I admit any lawyer in the world will tell you THE LAW is you have to give it back, but a lot of them will gladly take your case to keep you from having too.

And truly, you don't grasp the maths, the cash outflow curve on a graph shoots up like a cliff while the income line is a gently ascending line. An overwhelming number of participants are losers not winners. So by the time you go after the few winners, and give up half to them in settlements, then pay the expenses of a receivership, there's not much left in the grand scheme of things, and the victims get checks for 10% of what they lost, years after they lost it. Aside from ASD, and incredibly Scott Rothstien's victims, that's the way it goes almost every time.

(Rothstien stole $1.2 Billion dollars but his victims had the King Hell Walking upon the Land receiver. After Rothstien himself turned and got a few dozen other people convicted the receiver when after TD bank and others. In the end, and through some pretty fancy lawyer'in by some vicitms, most actually came out in profit in the end, the ONLY time I've heard of that happening)

[wserra]

Ask a lawyer after you pay him (attorney client privilege so he can tell you the truth)

The privilege applies to any communication with an attorney for the purposes of seeking legal advice, and does not depend on whether the lawyer is ultimately retained. United States v. Dennis, 843 F.2d 652 (2d Cir. 1988); In re County of Erie, 473 F.3d 413 (2d Cir. 2007); Fierro v. Gallucci, 2007 WL 4287707 (NYED 2007).

Gregg, did some lawyer tell you that you needed to pay him/her so the privilege would protect your conversation?