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Julia Johnson, CFE
ACFE Research Specialist

When deciding on a business name, it is best to choose one that is unique, grabs attention and conveys meaning. The following fraudsters took that advice to heart when they named the businesses they owned. They each chose business names that allude to riches, steady cash flow and smart money management. In reality, the fraudsters used these companies to orchestrate a variety of fraud schemes. While these company names might sound enticing, before investing in anything, it’s always wise to dig beneath the surface to make sure you understand the true intent and nature of an entity’s operational purposes.

Here’s a closer look at three fraudulent companies with misleading names.

Ponzi scheme

Scott A. Kohn and a business entity called Future Income Payments LLC (FIP), were both charged with operating a Ponzi scheme that targeted pension holders desperate for money, as well as U.S. military veterans. Pension holders would make monthly payments to FIP in exchange for a lump-sum payment or predatory loan with adjusted annual percentage rates that often exceeded 100%. Investors were then strongly encouraged by FIP to purchase “solicited cash flows,” which were the pensioners’ monthly payments to the company. FIP used funds from the most recent investors to make payments to earlier investors to continue the fraud, and actively took steps to conceal the true nature of the transactions to investors. When the company was finally shut down, the scheme had scammed more than 2,600 individuals out of $300 million.

Predatory lending scheme

Think Finance, Inc., a Fort Worth business that claimed to be a financial services firm, engineered a $133 million online payday loan scheme that charged interest rates as high as 15 times the legal limit. The business profited by using shell companies and Native American tribes to shield its loans and lines of credit from state and federal lending laws. Because of multiple class-action lawsuits in 2018 against the company, Think Finance is required to pay a nearly $39.7 million settlement back to 21 plaintiffs who fell victim to its predatory lending. Additionally, the company must cancel the remaining outstanding loans it made to customers using these inflated interest rates.

Bank and securities fraud

Edward Espinal, the founder of Cash Flow Partners LLC, was recently charged with operating a multimillion-dollar bank and securities fraud through his New Jersey company. Espinal carried out the three-year scheme by using flashy internet advertisements and holding informational sessions to target people with low salaries who wished to qualify for loans but could not. The company would then use false information and altered documentation to obtain loans for these people who would otherwise not qualify. Espinal committed securities fraud by soliciting the victims in his bank fraud scheme to make investments in the company using their loan proceeds. Rather than using their funds to invest in real estate, international construction projects, and a gold mine in Ecuador — as he promised — Espinal used investors’ funds for personal expenses, to pay returns to earlier investors and toward marketing expenses for his fraud scheme. The U.S. SEC has also filed a civil complaint against Espinal for falsely claiming the real estate investment fund was made up of licensed securities.

Lessons learned

All of the companies mentioned had one thing in common — their business names contradicted the fraudulent underpinnings of their organizations. While they all had names that sounded promising and enticing, the true purpose of these entities was to take advantage of those already facing a financial hardship. Before entering a loan agreement of any kind, conduct proper due diligence to ensure that you know with whom you are contracting and understand the legality of interest rates being charged. Even though these companies appeared profitable with fancy-sounding names and the guarantee of investment returns, they were all a sham.

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