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Thursday, September 5, 2013

SHIPPING WITH BENEFITS: How Christopher Paganes, a disgraced former investment advisor, is turning a fake charity into real money

On its website, Ship4Charities describes itself as “a shipping logistics company that donates to charity for each package shipped.” 

But an in-depth investigation by Glistening, Quivering Underbelly indicates that the organization may be executing an elaborate charity donation scam, using legitimate charities as its bait.

In the first installment of an exclusive five-part investigative series, Miss Fortune reveals what Glistening, Quivering Underbelly has discovered about the man heading this growing company, Christopher T. Paganes.

Paganes-Facebook photo
Who is Chris Paganes?

Hedge funds, minimally regulated private investment partnerships, are perfect vehicles for fraud. The FBI has investigated a variety of frauds that involve hedge funds. In the Daedalus Capital Partners case, for example, a classic advanced fee scheme was perpetrated by the hedge fund manager; investors received false financial statements claiming large profits, when in fact the money was being siphoned off and used to finance the manager's lavish lifestyle.

In the Global Time Capital Growth Fund case, on the other hand, the hedge fund manager was convicted of trading on material non-public information regarding an impending bank merger--a classic example of insider trading.

And in 2011, the SEC accused suburban Detroit area resident Christopher T. Paganes, his business associate Robert Buckhannon (based at the time in Las Vegas, but now a Battle Creek chiropractor), five cronies and an investment firm of duping investors out of $34 million by bankrupting two hedge funds and skimming more than $16 million off the top. The SEC complaint said the men "looted and bankrupted the hedge funds by steering millions of dollars to themselves." 

Defendants Buckhannon, Terry Rawstern, Dale St. Jean and Gregory Tindall were the managing members of two Bradenton, Florida-based hedge funds, Imperium and Vestium.

Aided by Paganes, defendants Richard Mittasch and Glenn Barikmo and Imperium Investment Advisors, the gang "commingled investor money from three separate offerings and then looted and bankrupted the hedge funds by steering more than $15 million into loans and other deals with companies in which they had undisclosed financial interests" the SEC complaint said.

The SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, alleged that from April 2008 through April 2010, the Managing Members raised funds by promising investors that they would generate substantial returns through conservative investments in high-grade debt instruments and, in some cases, limited physical commodities transactions. Additionally, the offering materials and prospectus for Vestium Equity Funds further assured investors that Imperium would safeguard their funds from impermissible uses.

Contrary to these assurances, however, the SEC alleged that the defendants disregarded the Funds’ respective investment parameters and used investor funds for “illiquid private investments and loans to affiliate entities”.

Additionally, although the Funds incurred investment losses of at least $8.1 million, the Managing Members disseminated monthly statements “falsely depicting consistent profits and paid at least $6 million to investors in alleged profits. The Managing members further paid themselves over $1.3 million in compensation that was improperly based on inflated asset values and fictitious profits.”

The SEC’s complaint further alleged that Buckhannon, Mittasch, Paganes and Barikmo collectively misappropriated at least $734,000 of investor funds to themselves and others.

Christopher Paganes was a managing member of Imperium and held securities licenses. He was CEO of Maximum, but in August 2009 FINRA permanently barred him "from serving in any principal capacity at a securities firm and suspended him from associating with any securities firm for nine months based on his conduct while he was Maximum's chief compliance officer."

No fine was imposed at the time because Paganes “evidenced an inability to pay”, according to an October 2009 FINRA Disciplinary Report.

However, in November 2011, Paganes was ordered by the SEC to “disgorge $650,000 and and prejudgment interest of $90,339.19 and to pay a $650,000 civil penalty".

Paganes and his wife declared bankruptcy on November 30, 2012. Paganes' debts were officially discharged on June 13, except for his SEC fines and penalties.



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