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Jan. 2011 Blotter

Diamonds Aren't Forever

Investors who thought they were investing in a diamond trading program were actually investing in a Colorado man's Ponzi scheme, according to the Securities and Exchange Commission. The assets of Richard Dalton and his company, Universal Consulting Resources, have been frozen by the SEC, which says he raised about $17 million from investors in 13 states. The asset freeze includes the home purchased in the name of his wife, Marie Dalton.

While investors were receiving monthly payments, these were paid through funds from new investors; the SEC said the $10 million in profits claimed by the business did not come from profit-generating activity. In addition to the new home, Dalton blew the funds on a vehicle, and his daughter's wedding reception.

Many of Dalton's investors came through referrals from friends or family members who had been receiving monthly payments. Under the Diamond program, Dalton claimed investors' money would be held in an escrow account and that he could deliver monthly returns of 10 percent, or 120 percent per year. The SEC investigation is ongoing.

Unlucky “Starrs”

The Securities and Exchange Commission has charged Jonathan Star Bristol with aiding and abetting the fraud scheme of Kenneth Ira Starr, the financial advisor to the stars who has been accused of defrauding investors out of $30 million. Bristol, Starr's attorney, has been accused of allowing Starr to use his attorney trust accounts as conduits when Starr defrauded advisory clients.

The SEC believes more than $25 million in funds from Starr's clients went through Bristol's attorney trust accounts. When the funds were transferred into the attorney trust accounts, Bristol would then transfer the funds to Starr for his personal use. This included buying a $7.5 million condo on Manhattan's Upper East Side, the SEC said. Starr and his companies, Starr Investment Advisors and Starr & Company, have been charged with violating securities laws related to the custody of client assets and misusing client funds.

Meanwhile, Bristol never told the law firm where he worked at the time about the attorney trust accounts; instead, Bristol sent monthly statements to his home address. Bristol has been added as a defendant in the SEC's complaint against Starr, which has been filed in federal court in Manhattan. A criminal complaint said Starr's victims, who were not named, included a former hedge-fund manager and well-known philanthropist, an actress “with whom he had a long-standing and close relationship,” and an heiress who was nearly 100 years old.

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