BREAKING NEWS: SEC, CFTC Seek To Smash Alleged Florida-Based Ponzi Scheme With Ties To Panama; David F. Merrick Charged With Unlawfully Acting As Investment Adviser And Operating An Unregistered Foreign Investment Firm From Inside The United States

UPDATED 12:39 A.M. EDT (OCT. 16 U.S.A.) In twin actions that may send shockwaves across the offshore autosurfing “industry,” the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission have gone to court to stop an alleged Florida-based Ponzi scheme that claimed a presence in Panama.

Today’s announced actions by the SEC and CFTC expose the vulnerability of autosurfs that register as corporations offshore and arrange web-hosting overseas, but do not comply with securities laws of the United States and foreign countries in which they have a paper footprint or are not regulated in the foreign countries.

The moves also demonstrate that U.S. securities regulators — no matter where a company arranges webhosting — intend to treat American owners who flout laws as issuers of unregistered securities, unregistered investment advisers and operators of unregistered foreign investment companies from inside the United States

Named defendants in emergency actions filed yesterday in U.S. District Court for the Middle District of Florida were David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc.

U.S. District Judge Gregory Presnell entered orders freezing the assets of the defendants and ordering them to repatriate assets to the United States.

Merrick, 61, lives in Apopka, Fla. On its website, TIRN lists the corporate address of Edificio Advanced 099-Piso 13, Calle Ricardo Arias, Panamá City, República de Panamá.

“TIRN has been soliciting U.S. residents, and directing them to deposit their funds in U.S. bank accounts,” CFTC said.

Entities Merrick controls operated a Ponzi scheme that gathered at least $22 million, the SEC said. For its part, CFTC charged Merrick and TIRN with solicitation fraud, accusing them of misappropriating customer funds totaling at least $16.4 million.

At least $3.7 million in customer funds were diverted to pay Merrick’s personal expenses and “to pay credit cards debts of MS and GTT Services,” the SEC said.

Millions of dollars were diverted to a firm that provides debit cards — another allegation that may cause autosurf participants to lose sleep.

“[A]t least $8.8 million was transferred to Anres Technologies Corporation, a privately owned company that issues pre-paid debit cards,” the SEC charged.

“Merrick and TIRN falsely represented that investors requesting a withdrawal of funds would receive a debit card loaded with their initial investment and return on their investments, when, in fact, the money loaded on the cards was money from other investors,” the SEC alleged.

Debit cards have become increasingly popular among autosurf operators. Today’s announced actions by the SEC and CFTC, however, demonstrate that regulators are viewing the money placed on cards as money taken from Peter to pay Paul.

Millions of dollars were moved across borders, the SEC said.

“[A]t least $2.3 million of investor funds were transferred to accounts in Panama, Mexico, Malaysia, Switzerland and the Netherlands,” the SEC said.

Although TIRN purported to engage in forex trading and was not an autosurf, the allegations could send a chill across the so-called “offshore” surfing industry.

TIRN, whose servers appear to resolve to Malaysia, is a registered corporation in Panama. But the Panama National Securities Commission issued a warning that TIRN “is not authorized to act as a financial intermediary for securities and investments and that the [Panama Commission] does not supervise or regulate it,” CFTC said.

See the TIRN warning by the Panama National Securities Commission, which says TIRN “has not been issued any kind of license.”

AdViewGlobal (AVG), a surf with close ties to Florida-based AdSurfDaily, is among a number of surfs that use servers that resolve to Panama. Others include BizAdSplash, which says its chief consultant is Clarence Bubsy.

Busby was the president of Golden Panda Ad Builder, whose assets were seized in August 2008 by the U.S. Secret Service as part of the investigation into ASD and ASD President Andy Bowdoin.

Another surf company with servers in Panama is the now-defunct AdGateWorld.

Merrick was charged by the SEC with acting as an unregistered investment adviser and operating an unregistered foreign investment company from inside the United States.

“From at least July 2008 and continuing through at least October 2009, Merrick and TIRN have raised more than $22 million from approximately 2,500 investors through the fraudulent offer and sale of unregistered securities, in the form of investment contracts in TIRN,” the SEC charged.

“TIRN instructs investors to deposit funds into bank accounts in the names of MS and GTT, entities controlled by Merrick, and falsely states it will invest these funds in securities and other investments such as stocks and bonds. In fact, Merrick then transfers these funds to other entities he controls, including MDD and Go Tourism, and to himself, colleagues and/or entities under these individuals’ direct control, for their own benefit. Merrick has also used investors’ funds to repay other investors. None of the investors’ funds are invested in any securities or other investments described on the TIRN website,” the SEC said.

About the Author

10 Responses to “BREAKING NEWS: SEC, CFTC Seek To Smash Alleged Florida-Based Ponzi Scheme With Ties To Panama; David F. Merrick Charged With Unlawfully Acting As Investment Adviser And Operating An Unregistered Foreign Investment Firm From Inside The United States”

  1. Patrick: This cannot be. Why the people on the Surf’s Up forum constantly remind us that it is a “Constitutional Right to conduct business with anyone you choose. To violate this right is unconstitutional. If it is registered offshore, then U.S. law enforcement authorities have no jurisdiction. I bet the ACLU will be filing a suit any minute to correct this error denying these people from conducting business with anyone they choose, and correcting that U.S. law enforcement does not have any legal jurisdiction over this company. I bet this is all Cowden’s fault.

      (Quote)

  2. Hi Lynn,

    Lynndel Edgington: Why the people on the Surf’s Up forum constantly remind us that it is a “Constitutional Right to conduct business with anyone you choose.

    I had a feeling this story would get your attention, given the fact that you long have worked to expose the autosurf myth of “offshore” protection/shelter from securities regulators.

    As to your observation about one of the strangest conflated realities of the pro se litigants — that businesses may lawfully engage in illegal commerce as long as the parties have a contract and/or that the government may not interfere in illegal commerce because such commerce is Constitutionally protected — well, yes, they do appear to be arguing that it’s impossible to commit a crime in a commercial context.

    Sorry for that whopper of a sentence. :-)

    Lynndel Edgington: filing a suit any minute to correct this error denying these people from conducting business with anyone they choose, and correcting that U.S. law enforcement does not have any legal jurisdiction over this company.

    Gold Quest International (GQI) thought an argument that an unrecognized Indian tribe based in North Dakota and operating a Ponzi scheme with Panamanian registration out of Las Vegas was a winner.

    The “attorney general” of the purported-to-be-sovereign tribe tried to sue the SEC for $1.7 TRILLION. The federal judge hearing the case was so amused that he:

    * Struck a series of pleadings by the “attorney general.”
    * Jailed one of the implicated defendants for contempt.
    * Sent U.S. Marshals after another defendant and then jailed him.
    * Ordered the “attorney general” to be deposed.

    I’m thinking you’re aware that the receiver in the case against the parent company of Noobing was the receiver in the GQI case.

    Patrick

      (Quote)

  3. The name David Merrick sounds familiar. I might be wrong but I think that he is Kath’s partner and was at one time part of the Jaffa/mMougals scam.

      (Quote)

  4. Jack, David Lambert is Kath Danch’s associate not Merrick.

    Here is a comment, purportedly from TINS to explain WHY they arent registered to sell Forex.

    “7. Their reason for not having a securities license in the U.S. is just to avoid the hassle from the banks for the pay out they are giving and the SEC.”

    Nice one. lol

    AND, guess what, just before they were closed down, they say they bought a gold mine. Sound familiar?

      (Quote)

Leave a Reply