Bankruptcy News

Yesterday we told you about the guilty plea of Glen Alan Ward, a former Los Angeles resident who fled to Canada and was a federal fugitive for 12 years. Ward, 48, pleaded guilty to aggravated identity theft and bankruptcy fraud in connection with leading a nearly 15-year foreclosure-rescue scam that fraudulently postponed foreclosure sales for more than 800 distressed homeowners.

As part of the scheme, Ward delayed the foreclosure sales of approximately 824 distressed properties by using at least 414 bankruptcies filed in 26 judicial districts across the country. During that same period, Ward admitted to collecting more than $1.2 million from his clients who paid for his illegal foreclosure-delay services, all of which he has agreed to forfeit.

Today, we share the comments of Justice Department officials on this long-running scam.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division said:

“Glen Alan Ward spent years preying on distressed homeowners and stealing the identities of bankruptcy debtors, all to pad his own pockets. Now he faces years in prison for his crimes. This successful prosecution illustrates our commitment to tirelessly pursuing fraudsters and ensuring that sophisticated schemes that prey on vulnerable homeowners will not go unpunished.”

U.S. Attorney for the Central District of California André Birotte, Jr. said:

“Mr. Ward fled the United States years ago in an attempt to keep his fraudulent foreclosure scheme running. Today’s conviction should serve as a reminder that criminals can run, but they can’t hide. The reach of the federal law is long, and scammers like Ward, who try to take advantage of distressed homeowners, will be tracked down and prosecuted regardless of their efforts to do otherwise.”

Christy Romero, Special Inspector General for TARP (SIGTARP) said:

“With today’s plea, justice is served for the victims of Ward’s long-running bankruptcy fraud scheme. While on the run for 12 years and having fled to Canada to avoid answering for earlier charges of bankruptcy fraud, Ward continued to victimize hundreds of struggling homeowners, steal the identities of unsuspecting U.S. taxpayers involved in bankruptcy proceedings, and exploit civil protections under bankruptcy law to defraud lenders, including numerous TARP recipients. SIGTARP and our law enforcement partners will continue to ensure that those responsible for fraud related to TARP are brought to justice and answer for their crimes.”

Each count of bankruptcy fraud carries a maximum sentence of five years in prison. Aggravated identity theft carries a two-year mandatory sentence, to run consecutive to any other sentence.

Ward will be sentenced on July 29, 2013, before United States District Judge Dale S. Fischer, and will continue to be held without bond.

Milwaukee-based SXP Analytics LLC has filed for Chapter 11 bankruptcy protection. The company is owned by Emmanuel Mamalakis, a 36-year Milwaukee lawyer, start-up financier and major political contributor who said the filing was prompted by litigation and not operational issues.

The firm is a high-frequency stock trader, meaning it uses elaborate mathematical formulas and powerful computers to buy and sell shares quickly, sometimes within fractions of a second. The company’s trading strategy is controversial because it relies on algorithms devised by PhD mathematicians that allow them to swoop in and out of stock positions in fractions of a second. SXP reaps minuscule profits per trade, but it make thousands of trades involving millions of shares each day.

The company has been sued by Houston-based Quant lab Financial, a competitor who has accused SXP of intellectual property theft. The charges are based on two men who partnered in the venture with Mamalakis - Vitaliy Godlevsky, who holds a PhD in physics, and Andriy Kuharsky, who has a PhD in math. Both previously worked for Quant lab which has accused them of stealing its software and other proprietary information around the time they left.

Quantlab’s civil case alleges a conspiracy to steal Quantlab’s trading algorithms, computer code and other trade secrets. The suit remains open, with more than 200 entries on the docket so far. The accusations of business espionage also triggered a three-year criminal investigation that concluded with no charges issued.

Jerome Kerkman, SXP’s bankruptcy lawyer, said the firm remains profitable and in court documents, a former employee put that number at as much as $100,000 net a day as of early 2011.

But Kerkman noted that the Quant lab lawsuit, “is essentially draining the profits and draining the company.” He said that  Chapter 11 gives SXP negotiating leverage and offers “some added protection so you can keep the business.”