From selling literal snake oil to a frat house Ponzi scheme, these are the 9 strangest scams of the last year

source
Joe Raedle/Newsmakers

  • The “summer of scam” is over, but scammers are continuing to scam.
  • INSIDER reviewed hundreds of court documents to find the scams that have flown under the radar in the last year.
  • Scammers have defrauded investors over everything from cobra venom to Christian music festivals
  • Visit INSIDER’s homepage for more stories.

Last year was a never-ending barrage of scam stories, a period that culminated in “grifter season” and the “summer of scam.” But even though frauds on the scale of Elizabeth Holmes, faux heiress Anna “Delvey” Sorokin, and Fyre Festival have faded into the bureaucratic background, scammers have continued to scam.

Insider reviewed hundreds of litigation summaries posted by the Securities and Exchange Commission in search of the scam investigations that have flown under the radar in the last year. Sure, there were the Billy McFarlands and moneyed brokers whose clientele might inspire more schadenfreude than sympathy – but most of the frauds were smaller scale, involving everyday people who were duped into bad investments.

Everyone wants to have a little more money, and fraudsters have a knack for making promises they can’t deliver on. These are the most bizarre alleged scams that have been investigated in the last year.


Two former plastics company executives were charged with marketing a “garbage to gold” business that was actually a sham. The SEC compared their scheme to a “modern-day Rumpelstiltskin.”

source
one photo/Shutterstock

The Indiana-based company’s “garbage to gold” business model involved turning cheap, recycled, and scrap material into high-quality plastics, through a process described by the SEC’s complaint as “near magic.” The agency alleges that the business model was a fraud, with flame-resistant products catching fire, and performance tests that were faked to fool customers. The company was sold twice “in rapid succession,” through which the defendants allegedly made approximately $2 million.

The defendants now face criminal charges of conspiracy, fraud, and money laundering, in a case that’s being jointly investigated by the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation.

  • Amount of money raised: Defendants received approximately $2 million from stock sales
  • Number of victims: Unknown

In May, the owners of a cryptocurrency start-up were charged with operating a $30 million Ponzi scheme. According to the SEC, they claimed their virtual currency, Argyle Coin, was backed by “fancy colored diamonds.”

source
LanaMais / Shutterstock

The owners of three South-Florida-based companies allegedly told prospective backers that funds they contributed to Argyle Coin’s ICO – the less regulated cryptocurrency equivalent of an IPO – would be used to build a virtual platform where diamonds could be bought and sold. They reportedly assured investors that their investments were risk-free because they were guaranteed by valuable raw diamonds known as “fancy colored diamonds.” In actuality, the SEC’s complaint says, they owned no colored diamonds that protected investor capital, and new funds were used to pay back old investors.

The primary defendant, Jose Angel Aman, allegedly misappropriated more than $10 million of the investments to pay for his home, shopping at Gucci, the purchase of horses, and riding lessons for his adult son.

Amount of money lost: $30 million

Number of victims: 300


A Florida-based company and its CEO were charged with fraud for allegedly making misleading and false statements about producing pain relief drugs with cobra venom from a cobra farm that didn’t exist.

source
Kuganathan Priyatharsan / Shutterstock

The SEC’s complaint alleges that the South Florida company, Nutra Pharma, and its CEO knowingly issued false press releases about its homeopathetic products, including one that touted an upgrade of its cobra farm, when in fact the company “never had a cobra farm, never had cobras, and indeed had never produced cobra venom.”

The cobra venom was purportedly used in Nutra Pharma’s over-the-counter pain-relievers, Nyloxin, a pain reliever for humans, and Pet Pain-Away, a pain reliever for pets.

In March, the FDA stepped in, issuing a warning letter that called out various cobra-venom-related claims on the company’s website, including suggestions that it could be used to treat asthma, arthritis, and cancer pains.

According to the SEC complaint, “Nutra Pharma has never turned a profit.”

  • Amount of money raised: $920,000
  • Number of victims: 30

Two men were <a href=”https://www.sec.gov/litigation/complaints/2019/comp24411.pdf”>charged</a> with defrauding investors to fund a movie called “An L.A. Minute.” An L.A. Times <a href=”https://www.latimes.com/entertainment/movies/la-et-mn-capsule-an-la-minute-review-20180823-story.html”>review</a> of the film called it a “profoundly tacky and misguided endeavor.”

source
SeanPavonePhoto / iStock

The defendants, Daniel Adams – a convicted tax felon who previously spent 21 months in state prison in Massachusetts – and Michael Flanders, an Australian music producer, raised over $1 million to fund their movie, allegedly including at least $160,000 raised from 2 investors by making misleading statements and falsifying documents.Adams co-wrote the film, which is about a blockbuster movie producer whose success has turned him into a hack. “A combination of my past history, a production shutdown we experienced on ‘An L.A. Minute’ a quarter of the way through shooting, and a call to the SEC alerting them to the former two facts, sparked the initial inquiry,” Adams told TheWrap.

“An L.A. Minute” was released in August 2018 and has a 22% rating on Rotten Tomatoes. In addition to the L.A. Times review, the New York Times panned the movie as a “miserable misbegotten picture.”

  • Amount of money raised: $160,000
  • Number of victims: 2

A Maine concert promoter raised over $3 million from investors, <a href=”https://www.sec.gov/litigation/complaints/2019/comp24443.pdf”>allegedly</a> falsely telling them that the money was going to be used to host Christian music festivals, and profit was guaranteed.

source
zavharvard / Shutterstock

The Lighthouse Events, LLC, founded by Jeffrey Wall of Freeport, Maine, described itself as a Christian ministry that promotes, organizes, and hosts music concerts and festivals. Wall solicited investments in the company through emails, one of which read: “Become a financial partner with our summer festivals. Help us spread the message of Christ plus earn 20% on your investment.”

Regulators say that Wall did not disclose his company’s poor finances and growing dues. Instead of Christian concerts, investor funds were allegedly used to pay off his existing debt.

  • Amount of money raised: $3 million
  • Number of victims: 145

A former college student has been accused of running a Ponzi scheme out of his frat house. The SEC <a href=”https://www.sec.gov/litigation/complaints/2019/comp-pr2019-84.pdf”>alleges</a> that he convinced his classmates and their family members to invest $269,000 in an exclusive hedge fund that didn’t exist, spending the money on trips to Las Vegas instead.

caption
Brooks Hall on the campus of the University of Georgia in Athens, Ga.
source
Ken Wolter / Shutterstock

Syed Arbab allegedly ran a fake hedge fund called “Artis Proficio Capital” out of his room at the Phi Kappa Tau fraternity house at the University of Georgia. Arbab told investors that up to $15,000 of their investments were guaranteed, and claimed the purported fund had generated returns up to 56%. Now, the SEC alleges that he defrauded at least eight investors between May 2018 and May 2019.

“I really trusted him,” investor Connor Campbell, 22, told NBC News. Campbell had known Arbab since high school.

In addition to the gambling trips to Las Vegas, Arbab, a former cellular biology major, allegedly spent his investors’ cash on bar tabs, Uber rides, and an “adult entertainment club.”

  • Amount of money raised: $269,000
  • Number of victims: 8

According to a May SEC complaint, a New York City resident raised $23 million by telling investors his company would create an auction website that hundreds of dealers had already signed up for, and that his company owned assets including historic contracts signed by Jackie Robinson. He spent the money on an oceanfront condo and luxury items.

The defendant, Mykalai Kontilai, had appeared in a NASDAQ video with Larry King to promote two valuable original Jackie Robinson contracts that the SEC says he misrepresented his ownership of. The SEC’s complaint alleges that Kontilai misrepresented himself as thrifty to investors: “I am very frugal and have not taken a dime of salary to date,” he wrote in an email.

In actuality, the commission alleges that Kontilai had misappropriated over $6 million in investor funds, spending it on gold bars that were converted to cash to pay for an oceanfront condo in Miami, private school tuition, visits to gentlemen’s clubs, and luxury products from Chanel, Cartier, Louis Vuitton, Saks Fifth Avenue, and Rolex.


A Silicon Valley venture capitalist told investors that his firm was uniquely positioned to find talented millennial entrepreneurs. He allegedly misappropriated millions of dollars to fund his own VR company and to throw lavish parties.

caption
Michael Rothenberg
source
Courtesy of Michael Rothenberg

Michael B. Rothenberg, 34, ran one of the Valley’s youngest and most exciting VC firms. He managed multiple venture capital funds, as well as an investment advisory business, which collectively held $64 million in funds from 200 investors. His early investments included unicorns like SpaceX and Robinhood.

In an August 2018 complaint, regulators allege that Rothenberg misappropriated at least $7 million to fund his own personal projects, which included an online store and a car racing team, and primarily, a studio that produced original virtual reality content. He also allegedly spent hundreds of thousands of dollars on entertainment and parties, including leasing a suite at Super Bowl 50.

A year later, the SEC says Rothenberg misappropriated more than double what they had originally believed.

  • Amount of money raised: $64 million
  • Number of victims: 200

In March, prosecutors charged two pastors with fraud for raising $25 million for their church — “The Church of the Healthy Self” — which they say was actually a Ponzi scheme. The defendants started the church 3 months after one was released from prison for another fraud.

caption
The 2015 Little Saigon Tet Parade in Westminster, California, where the Church of the Healthy Self was based.
source
Joseph Sohm / Shutterstock

Pastors Kent R.E. Whitney and David Lee Parrish, both of Newport Beach, California, promised investors 12% annual returns, insured by the FDIC, on investments in their church, “The Church of the Healthy Self” (CHS). The church had been established shortly after Whitney – who became an ordained minister through an online program – was released from federal prison for defrauding investors in another scheme assisted by Parrish.

The pastors allegedly told investors their business was not a Ponzi scheme, and assured them they would only lose money in the event of a “nuclear war.” According to the SEC, they specifically targeted the Orange County Vietnamese community through radio and TV ads, as well as YouTube videos.

Their church’s website provided “links to YouTube channels offering religious videos and online prayer request forms,” regulators wrote. “But CHS does not hold religious services typically associated with churches. The primary mission of the church appears to be obtaining investor funds.”

  • Amount of money lost: $25 million
  • Number of victims: Hundreds