A Federal Bankruptcy Judge, in an Adversary Proceeding* pending against a purported lender and its principal officer, has sanctioned both, with probably more to come. Seen by most observers as a combination of Advance Fee Scheme & Ponzi Scheme, Atlantic Rim Funding Corp. failed to obtain any financing last year, for a nonprofit corporation in Pennsylvania seeking to purchase and operate a historical landmark. Its promises seemed to evaporate into thin air, as did its principals.
Then, the "lender" failed to return the $600,000 "escrow deposit", of which $240,000 is still due and owing and missing, a year after funding failed to occur. The balance of the escrow was reportedly used to repay deposits of earlier investors, hence the Ponzi aspects.
This week, the Court:
(1) Ordered that Atlantic Rim & Dean Kennedy, (this may be an alias) its principal, provide all documents requested by the Plaintiff by 14 may.
(2) Ordered that the corporation produce a designated officer, with personal knowledge of the case, by 21 May.
(3) Fined the defendants $500 for their conduct.
(4) Entered Defaults against Atlantic Rim Funding Corp., and Dean Kennedy, for failure to respond to the Complaint. They were ordered to reply on 10 February. No lawyers have appeared for either defendant. Their former lawyer, J "Mac' Rust, from Texas, has filed an answer pro se. He has alleged that the Plaintiff was supposed to sue his professional corporation, and not him individually. He released funds from escrow, according to the court file. Is there not personal liability ? Corporate shield does not apply.
(5) Set a date, 23 May, " to consider the imposition of further sanctions. "
Don't hold your breath, anyone. These fraudsters will not show up in court and it appears that they have already gone on to another scam. The moral of the story: never, never advance fees to get a loan or other funding. Reputable companies deduct it at closing from the loan proceeds; anyone else is a fraudster. Ponzi schemers pass along the deposit to earlier victims, part of it, keeping some for themselves.
* Case No.: 12-00007-ELF (ED PA).