Hawaii Ponzi Scheme Cases: The Bond Pitch and the Money Behind It

Promises of bond income concealed investor-funded payments in Hawaii Ponzi scheme cases involving The Mortgage Store on Maui and the Honolulu companies Amasse Capital and Solomon & Co. The sales channels differed: home-equity workshops in one operation, an investment prospectus in the other. If you handled the refinancing, sold the investment or reconciled the payments, you may know where the promised return and the actual money parted company.

This page follows those Hawaii businesses and a separate bank-detection example involving Hawaii accounts and offshore transfers. Our explanation of how a Ponzi scheme works covers the broader payment pattern.

The Mortgage Store Turned Home Equity Into Investment Money

The Mortgage Store’s mortgage and insurance business on Maui supplied both the audience and the financing for an investment called The Parking Lot. In its May 28, 2015 account of evidence presented at the criminal trial, the Justice Department described 166 people investing more than $26 million. The operators issued promissory notes promising a seven percent return. The department reported a jury finding of mail and wire fraud and identified the FBI as the investigating agency.

The trial evidence traced the route from publicity to investment. Radio advertisements, magazines and a weekly radio show drew potential investors to weekly workshops at The Mortgage Store. The workshops taught homeowners to use their home equity for investing. The operators then used their position as mortgage brokers to refinance investors’ residences and extract that equity.

The Parking Lot pitch described a safe place for the money, invested largely in secure corporate bonds in Fortune 500 companies. According to the Justice Department’s trial account, the operators instead bought junk bonds or entered marginal real estate investments, spent investor funds on themselves and paid existing investors with new investor money. We see a different kind of parking lot: the next arrival paid for the last.

The same trial account described a $3.5 million residence above Lahaina built largely with investor funds. Another operator used hundreds of thousands of dollars for trips, automobiles and credit card debt.

What the Maui Refinancing and Payment Records Can Show

For someone inside a mortgage business, the useful comparison starts before the investment deposit. Workshop materials explain the proposition sold to the homeowner. Refinance records can connect the release of home equity to the money that entered the investment. The promissory note then identifies the repayment promised in exchange.

The next comparison concerns the source of the payment. Bond purchases, interest receipts and property records can test the stated investment activity, while bank transfers and investor ledgers can show which incoming money funded an outgoing payment. The Maui trial account makes that distinction concrete: the operators had investment activity, personal spending and payments to earlier investors moving through the same story.

An employee who handled only the mortgage transaction may know a different part from the person who maintained the investor ledger. Our work on securities fraud evidence connects those separate records to what investors were told. The knowledge you bring can explain why a transfer occurred, who requested it and how the business described it afterward.

Amasse Capital Promised High Returns and Minimal Risk

The Honolulu companies Amasse Capital and Solomon & Co. purported to invest in high-yield bonds with minimal risk to principal. In its September 13, 2012 account of the criminal case, U.S. Immigration and Customs Enforcement described court documents showing that investor money paid earlier investors and the remainder went to the scheme leader’s personal use. The agency reported that the men had pleaded guilty to wire fraud. Net investor losses exceeded $1.6 million.

The same account said Amasse Capital’s prospectus falsely described management experience, business activity, capability and financial stability. The company was marketed as registered with the Securities and Exchange Commission. Its president and marketing executive claimed the companies could return 100 to 400 percent monthly interest.

Amasse Capital’s president and chief executive led the scheme, its senior vice president of marketing solicited investors, and its chief operating officer managed their money. Homeland Security Investigations and the FBI conducted the joint investigation. Someone preparing the prospectus could see the claimed business capability, while someone handling the accounts could see where the funds went.

Hawaii Bank Accounts Connected the Pitch to Offshore Transfers

A Hawaii financial institution’s suspicious activity report helped investigators identify a nationwide and international Ponzi scheme described by the Financial Crimes Enforcement Network. Its June 2001 case example, attributed to the U.S. Customs Service, says the operation collected approximately $67 million from about 5,000 investors across the United States and several foreign countries. The Hawaii connection was specific: proceeds entered numerous accounts at business locations in the state before wires sent them to Antigua, the Bahamas and Vanuatu.

FinCEN’s account of the criminal investigation described the alleged pitch: an investment supposedly placed with the Cayman Islands government. The pitch claimed the government would pay the principals 20 percent interest per week on a 13-week investment cycle. They in turn promised investors 8 percent per week and a 3 percent referral fee for bringing in more investors. FinCEN said the supposed government investment did not exist and the defendants kept substantial profits.

The bank’s observations supplied a much narrower view of the operation. As FinCEN recounted the suspicious activity report, a customer deposited $100,000 in cash that was subsequently wired to Ireland. He described himself as an investment consultant and educational-systems marketer, supplied identification documents and tried to recruit bank employees into his investment.

That example shows the value of the transaction someone actually saw: the customer’s explanation, the cash deposit, the destination and the solicitation in the bank. It also connects Hawaii to an investment operation reaching across borders.

What Happened to the Investors’ Money?

In the Maui and Honolulu criminal accounts, new investment money funded payments to earlier investors while the operators diverted funds to personal use. The Justice Department’s trial account reported net Maui investor losses of $8.9 million. The Honolulu account described the scheme leader and his spouse living in a luxurious Kahala residence, buying expensive cars and leasing an entire floor in a downtown office building.

The Honolulu criminal account also described the spouse’s fraudulent credit application with a local bank as part of the scheme. For an insider handling loan applications or payments, that connects the investment business to another set of representations about money. We work with you on what those records mean for investor recovery and whistleblower awards.

The Insider Can Connect the Sales Desk to the Account

The strongest contribution is the connection between records held by different parts of the business. A mortgage employee can explain how investment money emerged from a refinance. A marketer can identify the version of the prospectus investors received. A person managing payments can explain which deposits funded them and who approved the transfers.

The Significance of Whistleblowing as an Anti-Fraud Measure, published in the Journal of Forensic & Investigative Accounting in 2018, examined occupational-fraud survey data with complete information for 4,943 cases. The study found that whistleblowers detected 35.9% of the sample, compared with 21.4% detected through internal controls. Its broader finding gives weight to the person who can connect a polished investment explanation to the transactions behind it.

For a Hawaii investment insider, that means the account you know deserves a serious conversation. We assess the investment, the representations and the money movement together, including what the money trail can show. We work through the reporting decision with you and securities fraud whistleblower lawyers who understand the scheme.

Eligible SEC whistleblowers can share 10% to 30% of qualifying sanctions collected when the enforcement action exceeds $1 million in monetary sanctions. We assess how your information connects to that opportunity. If your records also concern false claims for government money, we assess that separately: a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know What Funded the Payment

If you know how a Hawaii investment business turned a refinance, a bond pitch or a new deposit into an investor payment, talk with our whistleblower experts about that money trail. We turn your knowledge of the business into a case strategy, bring in securities fraud whistleblower lawyers who understand investment cash flows and remain your partners through the case.