Feds say investment business run by Folsom adviser was $14.5 million Ponzi scheme

One investor, an optical fiber engineer in Virginia, was told his $150,000 contribution would be held safely in a Swiss bank “fully protected” against loss and that he would receive a $3 million loan, $1 million of it within 60 days.

Another, a Michigan businessman who had just won a multi-million dollar contract with the U.S. government, was told his $150,000 investment would lead to a $3 million loan within 120 days. When the money never materialized, he was told it was because “European bankers and traders were on long summer vacations.”

A retired banker in Colorado who was handling her mother’s trust account kicked in $100,000 with the promise of receiving a payout of $600,000 within 120 days. When she complained after the money never arrived, her investment adviser stopped taking her calls and she was told she was causing him “a nervous breakdown.”

These are the allegations in documents unsealed in federal court in Sacramento last week that say a Folsom investment adviser, an attorney in Colorado and other defendants orchestrated a $14.5 million Ponzi scheme that victimized at least 91 investors worldwide.

“Defendants misappropriated at least approximately $5.1 million to make Ponzi payments to other pool participants and at least an additional approximately $6.3 million for unauthorized personal or business expenses,” according to the civil complaint originally filed under seal in June by the federal Commodity Futures Trading Commission.

“The fraud is ongoing,” the court documents say, and federal regulators are seeking contempt citations from a judge because they say the defendants have ignored a court order to turn over business records to investigators.

The complaint names seven individuals allegedly involved in a scam dressed up as an investment plan to trade foreign currency contracts and options, including John D. Black, a Folsom man who runs Financial Tree, Financial Solution Group, New Money Advisors LLC and touts on his Twitter account that he is involved in “Business & Cannabis loans.”

Black denied wrongdoing in a telephone call Thursday to The Sacramento Bee.

“I’m innocent and a victim as well of fraud for multiple investments that were made on behalf of investors that were stolen by other investment companies,” Black said in a statement he read. “I have the proof of those contracts and I will fully comply with the CFTC to make sure every investor is made whole.

“My only intention was and is to help people and families, and now it has come to this point.”

Black added that he was not withholding access to his business records but had delayed turning them over because he was working Thursday to hire a defense attorney.

“They are moving fairly quickly, and I’m getting counsel right now,” he said. “I’m not going to come to them without representation.”

Others named in the complaint — Fort Collins, Colorado, attorney John Glenn, Chris Mancuso of Irvine and Joseph Tufo of Antioch — could not be reached.

No criminal charges have been filed in the case, but federal regulators say in court papers that the alleged scheme has been running since June 2015 and that there were warning signs of trouble with the investment advisers.

In April 2018, for instance, the California Department of Business Oversight issued a desist-and-refrain order against Black, Mancuso and Financial Solution “finding they unlawfully sold unregistered securities in California and made material misrepresentations or omissions.”

Despite that, Black and Mancuso continued soliciting for funds, the court papers say.

The Better Business Bureau says it has “confirmed that Financial Solutions Group Trust had not obtained a necessary license from Department of Business Oversight.”

And court papers say Tufo pleaded guilty in November 2015 “to criminal violations of the Alabama Securities Act for fraudulently soliciting investments in ‘no risk’ gold trading programs where funds would purportedly be held in an attorney’s trust account.”

Court papers say the investment advisers did not bother to disclose those issues to investors, and instead had most investors wire their money to Glenn, the Colorado attorney, “to provide a false veneer of safety and legitimacy.”

About $14.32 million went into Glenn’s bank accounts, and $258,438.24 was retained in accounts he controlled, court papers say.

“Glenn had no legal right to these pool funds,” court documents say. “Glenn spent such funds on, among other things, expenses related to his divorce and spousal support.”

The rest of the money went to Financial Tree and Financial Solution, two firms Black created that have an address in Folsom that is a UPS store, court papers say. The documents also note that Black “is also known as John Barnes.”

With the promise of huge yields luring dozens of investors, the defendants made very few — and no profitable — investment trades, court papers say.

Instead, they used incoming cash from new investors to make payments to other investors, and misappropriated millions of dollars used for travel, rent, dining out, limousines and hair care expenses, court papers say.

Investors were pitched stories about how “foolproof” the systems was and promised their money was safe, and were told they would receive higher returns if they invested more money, court papers say.

On Christmas Day 2015, Mancuso emailed some investors promising 70 percent monthly returns for deposits of more than $3 million, court papers say.

“On approximately July 1, 2016, Black advised (one investor) that he could increase his return on deposits from 10% to 13% per month—but only if he deposited an additional $25,000 in addition to his previously deposited $25,000, court papers say.

But when people started asking where their money was, they got the runaround, court papers say.

One investor emailed Black and others in January 2019 complaining about being told “one story after the next” by Black, “including ‘that funds were delayed in August because the European market had fluctuation and it was their summer vacations’ and that ‘there was a legal issue as to why the funds did not transfer from Singapore to Hong Kong,’” according to court documents.

When one investor found out about the 2018 desist-and-refrain order issued by California regulators, court papers say Mancuso responded in all caps that the issue “was resolved some time ago … A currency program that was not our service. This client received a refund but sometimes it’s hard to remove administrative proceedings from the internet.”

In May 2017, when one investor called Glenn to ask about $600,000 she was owed, the attorney told her he had the money and would transfer it by the end of the week, court papers say.

“Glenn’s May 2017 statements ... were false,” court papers say. “At no time in May 2017 or otherwise did Glenn or the Glenn Law Firm possess the $600,000 (the investor) was owed under her agreement.

“Defendants never paid (the investor). When (she) subsequently attempted to call Glenn, he did not answer his phone or return her calls.”

Another investor waiting for their money in January 2018 received an email from Mancuso with the subject line “GREAT NEWS!!!” and a promise that it would be wired by “Jan. 8-10,” court papers say. On Jan. 11, Mancuso emailed to tell the investor the money had arrived at a bank in the Bahamas, “but storms and rain in the Bahamas had created connectivity issues delaying return of funds,” court papers say.

By September 2018, one investor had heard enough, emailing Mancuso and others that “this matter has become exhausting, comical and nonsensical.”

“It borders on criminal,” the investor wrote. “Your last response that the matters would close in 15 days has per usual been nothing but ... another lie. I am sick to my core of your damn lies.”

On July 2, U.S. District Judge Troy L. Nunley issued a 27-page restraining order freezing the assets of the defendants, forbidding them from altering or destroying any documents and ordering them to provide investigators access to business records.

But federal regulators said in a court filing made Wednesday that Black has not cooperated and that they want a civil contempt citation issued.

“Black has not responded,” court papers say. “Black has refused to participate in any calls with the CFTC regarding document collection. And Black has not produced any documents or electronic equipment to the CFTC for inspection, or provided any other information (for example, usernames and passwords) to facilitate inspection.”

This story was originally published July 17, 2020 at 5:00 AM.