by Structured Settlement Watchdog®
Unlicensed New York City Charlatans Take Advantage of Seniors
No sooner had the retired seniors learned they were lottery winners when they were beset with unlicensed charlatans from lottery purchase industry. A central figure in the unlicensed lottery and structured settlement factoring "scum show" has been Advance Funding LLC out of New York City. Advance Funding has been led by a convicted felon, Dan Cevallos. Cevallos also had the dubious honor of earning a lifetime ban from FINRA. Yet Advance Funding and its sordid cast of charlatans have been ripping investors off. The victimized investors include seniors and personal injury victims.
A representative of Advance Funding came calling on the senior lottery winners, wined and dined them and convinced them to sell their lottery payments in 2013 and invest the discounted proceeds, $1,000,000 in an investment fund that they were told would pay them a 10% return on principal. The number was "from the moon". By comparison, the average yield for high yield junk bonds in 2013 was 7.53%. The seniors even asked the Advanced Funding LLC reps if they were licensed and they said no. But the seniors still invested the discounted lump sum that they would otherwise been due to receive for the transfer of their future lottery payments, because they believed it would change their lives.
Madoff Securities Seemed Normal, Until It Began to Unravel
Everything seemed normal for several years the seniors received both statements and received payments. Advance Funding let the seniors make withdrawals. Nothing seemed amiss.With Bernie Madoff everything was cruising along fine, nothing unraveling until Madoff's investors started to pull out. In order for a Ponzi scheme to work, there need to be inflows to cover the crooked outflows. See How to Run A Successful Ponzi Scheme
For the senior lottery winners everything seemed as it should until the past 12 months when they say there have been no statements. Furthermore payments started to be less reliable. Payments are now always months past due, they have to call and hound them for the payments and management is increasingly harder to reach. That is not how a legitimate financial institution is supposed to work. Five years in, the seniors have received back 90% of their principal but effectively no interest. Just a simple 10% on a million is $100,000 annually. I estimate that they are out $100,000 in principal and over $500,000 in interest.
Dan Cevallos is on the lam, according to industry sources. He/Advance Funding appear, based on the above described and anecdotal instances of failure to pay money in defiance of a Court Order in Bronx County and to counterparties in other deals, to be in the end stages of what appears to be a Ponzi Scheme. He/they owe a lot of people a lot of money, from investors to other structured settlement factoring companies.
State Legislators and Regulators Shoulder Some of the Blame
Somehow the lax non existent regulation of people soliciting the public in structured settlement factoring and lottery factoring industries has continued unabated and citizens of New York and other states are victims as a result. According to one of my secondary market sources the New York attorney general was approached about Cevallos and Advance Funding, but didn't proceed because of a lack of resources (case wasn't big enough) as the excuse.
In my December 2015 blog post Sell Your Structured Settlement But You Have to Sign a Non Disclosure Agreement?, I wrote about, without then naming Daniel Cevallos, that it " emerged that one structured settlement purchaser, apparently associated (common ownership/control) with a then NASP member (Northeastern Capital Funding), apparently required that a seller sign a non disclosure agreement and is purportedly pitching a guaranteed rate of return of 10% on investment. When the company was contacted last week, a company representative would not confirm that they guaranteed 10%, a simple yes or no answer, before getting to "How?" He stated that they had various investment programs insisted that a non disclosure agreement be signed before he would discuss them. Well done, that just simply raised the hackles, particularly since the name of the firm did not come up under FINRA Broker Check or in the SEC Investment Adviser data base.
In the 2015 case I became aware of an annuitant sold structured settlement payment rights to Advanced Funding LLC for $1,500,000. The effective discount rate was very competitive. but the deal was peculiar in that only $500,000 in cash was paid to the annuitant, the balance $1,000,000 was placed in a purported fund that "earned 10% guaranteed". Lawyer Eddie Stone, was retained by the annuitant and upon information and belief, the return of the $1,000,000 was negotiated.
How is it that an individual felon that is barred from FINRA, who in 2002 pled guilty to a felony and served prison time for wire fraud for selling non existent vending machines, before a Federal Judge, is able to thumb his nose at FINRA with an office right on effing Wall Street?
Cevallos a Tax Cheat As Well?
According to an affidavit submitted by his former common law wife, Dan Cevallos pled guilty to Judge Richard Conway Casey and served prison time for wire fraud for selling non-existent vending machines. [ see Download Dan Cevallos Affidavit of Julia Ashirova p 1 of 6 #6 Also see United States Southern District of New York 1:00 cr-01309-RCC-2, the plea was made March 6, 2002]. According to the affidavit Cevallos agreed to serve 18 months in jail and 36 years of probation. Furthermore Cevallos had to pay restitution in the amount of $278,720.50
According to the Ashirova affidavit, Cevallos decided to cheat the government with respect to the restitution by agreeing to pay maintenance due under a support agreement instead as a marketing consulting agreement drafted in September 2012 with his business, so he could report it is a business expense and lower the income he reported to the government from his business. The marketing consulting agreement purportedly contained no obligation on the part of Julia Ashirova and purportedly required installment payments to 2028.
*Cevallos signed a notarized declaration that he was managing member of Advance Funding LLC in connection with another lawsuit, BOFI Federal Bank v Advance Funding LLC et al. US District Court Western District Washington 2:14:-cv-00484-BJR Document 31
If it seems too good to be true, it probably is.
Steps You Can Take to Protect Yourself From Lottery and Structured Settlement Investment Scams
- Ask About Licenses and Verify If They Are Active When first approached always ask for evidence of of professional licenses. If you are confronted with an individual who does not have an active license simply hang up. You can verify insurance licenses by checking online with your state insurance department. You can verify securities licenses with FINRA broker check or Investment Adviser Public Disclosure. Securities license public disclosures detail prior reportable events. Had anyone simply looked up Dan Cevallos on FINRA Broker Check there would have been ample reason to question his trustworthiness.
- Resist the temptation to override #1 and proceed "because the rate is good". Do not give that person any information about you or your finances unless they hold an active license and valid relevant professional credentials. You're only asking for trouble. "If It Seems To Go Good to Be True, It Probably Is". Representatives of Advance Funding were pushing the 10% rate at a time when both safe and junk bond interest rates weren't even close. A legitimate financial adviser will set you straight right away. I came to know about the 2015 event described above (the one which fortunately had a successful outcome), when a structured settlement industry colleague contacted me after he learned that his client had entered into one of these deals with Cevallos and he questioned it. After the phantom shopper routine further raised the hackles, attorney Eddie Stone was brought in.
- Avoid participation in any financial surveys over the phone. Many of them are simply cold callers looking to sell your information.
- If you're coming into Sudden Money, consider working with a Financial Transitionist.