Trustee Schwartzer Sues the Highest-Paid Broker in a Multimillion-Dollar Sports Betting Ponzi Scheme for Clawback Transfers
January 19, 2021, District of Nevada - Debtors Welscorp, Inc. and its co-debtor affiliates and principals (collectively, the “Debtors”) were operated as a Ponzi scheme. Debtors ran an allegedly sports betting investment business. Trustee Lenard E. Schwartzer recently initiated several lawsuits to avoid and recover monies paid in the Ponzi scheme to various defendants, because such payments were preferential, actual fraudulent, and/or constructively fraudulent.
According to the Court papers, Debtors John F. Thomas and Thomas Becker utilized the Debtor entities to raise nearly $40 million from approximately 600 investors as participants in ostensible online sports betting contracts, as part of this fraud. Third-party agents, who received generous commissions from the Debtors in return for capturing new investor money, often lured the investors into the scheme.
Defendant Damian Ostertag was amongst the highest producing, and highest earning agents in the entire scheme. He was also among the highest-paid brokers in this fraud, earning commissions from 2016. Ostertag was allegedly neither a registered broker nor was he associated with a registered broker, at the time that he earned these commissions. The lawsuit intends to avoid and recover monies previously paid to Defendant because such payments were preferential, actually fraudulent, and/or constructively fraudulent.
By way of background, on August 30, 2019, the Securities and Exchange Commission (“SEC”) filed a civil complaint in the U.S. District Court, District of Nevada, against Thomas, Becker, the Debtors, Ostertag, and other related parties, alleging multiple securities violations. As per the report of SEC forensic accountant, only a small fraction of investor funds was used for sports betting. A larger part was used either to pay commissions to sales agents (like Defendant), to pay Thomas and Becker’s personal expenses like rent and home renovations, siphoned off to other entities, or used to make Ponzi payments to earlier investors. On December 4, 2019, Judge Gordon granted the SEC’s motion for a preliminary injunction against the Defendant, as well as the Debtors, enjoining them from defrauding more investors and placing an immediate freeze on their monies and assets.