Securities Attorneys Investigating Alleged $20 Million Ponzi Scheme Relating to KGTA Petroleum

Tom Abraham (also known as Thomas Abdallah), Kenneth Grant, their company KGTA Petroleum, Ltd., stockbrokers Jeffrey Gainer and Jerry Cicolani, and others are accused of orchestrating and/or helping to promote a Ponzi scheme related to KGTA, a petroleum company that purported to earn profits by buying and reselling crude oil and refined fuel products, according to a complaint filed by the Securities and Exchange Commission (“SEC”).

Cleveland, OH law firm McCarthy, Lebit, Crystal & Liffmanr and its investor protection group — Hugh Berkson and Jay Salamon — have teamed with Cleveland-based securities attorney Alan Rosca and his multi-city firm Peiffer Rosca to investigate the KGTA matter on behalf of KGTA investors. Both firms represent injured investors nationwide, including investors victimized by Ponzi schemes.
According to allegations in a complaint filed by the SEC, Grant and Abdallah, with help from Jeffrey Gainer and Jerry Cicolani, marketed KGTA to investors as a petroleum company that earned profits by buying and reselling crude oil and refined fuel products, including jet fuel. The SEC asserts that Grant and Abdallah falsely informed investor  that they would use investor funds to buy fuel at a discount. This fuel would then be sold at a substantial profit to third party purchasers with whom Grant and Abdallah purportedly had relationships.

The SEC contends that Grant and Abdallah encouraged prospective investors to purchase KGTA promissory notes by promising an important safeguard; the investment funds and the returns supposedly would be kept in and distributed through an escrow account to ensure proper handling.

The KGTA investments were particularly appealing to investors because they offered astronomical returns between 2% to 4% per month with no market risk, according to the complaint. KGTA is said to have raised at least $20.73 million from investors between October 8, 2012 and February 2014, according to the SEC.

The SEC alleges that the KGTA Fraud oil business was a sham and the escrow safeguard was a mirage. Grant and Abdallah is accused of having operated KGTA as a Ponzi scheme. The oil purchase orders never existed and KGTA did not sell fuel or oil to its purported buyers, according to the complaint. In classic Ponzi scheme fashion, KGTA allegedly used some of the funds raised from new investors to pay fake returns to earlier investors.

The SEC says that Grant and Abdallah misappropriated investors’ money for their own personal use. Money was spent on car payments and country club dues, and the pair took more than $200,000 in cash withdrawals, according to the complaint.

Grant and Abdallah offered and sold the KGTA Notes to investors through Jeffrey Gainer and Jerry Cicolani, who are also named as defendants in the SEC’s complaint. The SEC alleged in its complaint that Gainer and Cicolani found investors for KGTA, set up meetings with Grant and Abdallah, relayed information about KGTA to prospective investors, and obtained investor signatures on the agreements that memorialized investments.

The Peiffer Rosca and McCarthy, Lebit, Crystal & Liffman securities lawyers often represent investors who lose money as a result of Ponzi schemes, investment fraud, and stockbroker misconduct. They are currently investigating the possibility of assisting victims with the recovery of their losses. They take most investor-related cases on a contingent fee basis and advance the case costs, getting paid for their fees and costs only out of money they recover for their clients.

Investors who believe they have lost money as a result of investment fraud or misconduct may contact attorneys Alan Rosca  or Hugh Berkson at 800-764-3850 for a free, no-obligation evaluation of their recovery options.