PatrickPretty.com

Day: December 17, 2008

  • MegaLido Autosurf, Pushed By ASD Members, Vanishes

    We’ve written previously that members of an autosurf known as MegaLido had reported their support requests had been ignored and they they were seeking refunds from AlertPay and SolidTrustPay.

    MegaLido members now say the site itself has gone offline.  The paid-to-surf site rose to prominence in the weeks after the government seizure of AdSurfDaily’s assets, with some ASD members touting MegaLido as a safe, offshore alternative. Reports suggest as many as 27,000 people joined MegaLido, whose promoters clearly traded off ASD’s miseries.

    One forum poster said today that all 10 autosurfs in which he was a participant were encountering various problems, meaning they were failing or perhaps on the verge of doing so.

    Here’s the thing about autosurfs:

    • It is a virtual certainty they are operating as Ponzi schemes, a cousin to the type of alleged fraud pulled off by Bernard Madoff.
    • They are virtually impossible to police.
    • The SEC has a history of shutting them down. The Justice Department also is involved in the autosurf fray these days. Witness the civil forfeiture complaint against the assets of AdSurfDaily, including the seizure tens of millions of dollars.
    • You don’t know if your fellow autosurfer is a criminal or terrorist.
    • You don’t know if the autosurf operator is a criminal or terrorist. It is likely that the U.S. government, at least, would view him as a criminal if he is using the Andy Bowdoin/ASD playbook.
    • It is impossible to perform due diligence.
    • Virtually all autosurfs engage in the sale of unregistered securities, calling themselves “advertising companies” that offer “rebates.” Equivalent words also are used, all to avoid regulatory scrutiny.
    • There is nothing to prevent an autosurf operator from gathering a planned amount of funds and then running off with the money. Early “pay-outs” may be designed just to create buzz and keep money flowing into the system.
    • Receivers have a history of suing autosurf participants to force the return of illegal profits. Madoff wasn’t operating an autosurf, of course. But attorneys are lining up to sue institutions and people and who received redemptions from Madoff on the theory of ill-gotten gains.
    • Participating in an autosurf puts you at risk of losing money, being sued or even arrested.

  • SEC Says It Missed Chance To Unravel Madoff Scheme; Probe Indicates Madoff Cooked Books And Falsified Docs

    Christopher Cox
    Christopher Cox

    BLOG UPDATE 12:12 P.M. EST (U.S.A.): A bail hearing for Bernard Madoff rescheduled for today has been canceled. Madoff was ordered last week to produce two additional co-signers to guarantee his $10 million bail, but was unable to come up with them. A federal judge, with consent of the prosecution, now has ordered Madoff placed on electronic monitoring and home detention, with a curfew between 7 p.m. and 9 a.m. His wife, Ruth, was ordered to surrender her passport.

    Here, below, our earlier post . . .

    The Securities and Exchange Commission said late yesterday that it had received “credible and specific” leads about alleged wrongdoing by Bernard Madoff a decade ago and failed to respond properly.

    Meanwhile, the agency has found evidence that Madoff kept multiple sets of books to help his securities firm pull off a Ponzi scheme that could cost investors $50 billion or more.

    In a dramatic concession, SEC Chairman Christopher Cox ordered an internal investigation of the agency to include a probe of contacts the agency had with Madoff family members.

    Shana Madoff, Madoff’s niece, is married to Eric Swanson, a former SEC attorney who once was a supervisor in an SEC unit that made an inquiry into Madoff’s business practices. Shana Madoff is the Madoff firm’s compliance attorney and the daughter of Peter Madoff, Bernard Madoff’s brother, and the firm’s chief compliance officer.

    Swanson, through spokesmen, told the New York Times that he did not begin to date his wife until years after the SEC inquiry and was not a participant in an inquiry during their romantic lives. Swanson and Shana Madoff married in 2007.

    Cox ordered SEC employees who had anything beyond “insubstantial personal contacts with Mr. Madoff or his family” to recuse themselves from the probe.

    “Since commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff’s vast scheme remained undetected by regulators and law enforcement for so long,” Cox said.

    “Our initial findings have been deeply troubling,” Cox continued. “The Commission has learned that credible and specific allegations regarding Mr. Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned  by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them.”

    Rather than use formal investigative powers and subpoena power, Cox said, the agency “relied upon information voluntarily produced by Mr. Madoff and his firm.”

    Madoff might have been cooking the books, Cox said.

    Records investigators have viewed in recent hours are “increasingly exposing the complicated steps that Mr. Madoff took to deceive investors, the public and regulators,” Cox said. “Although the information I can share regarding the ongoing investigation is limited, progress to date indicates that Mr. Madoff kept several sets of book and false documents, and provided false information regarding his advisory activities to investors and to regulators.”