ONLINE PONZI FORUM BOMBSHELL: Matt Gagnon A ‘Danger To The Investing Public,’ SEC Says; Federal Judge Freezes Assets Of Mazu.com Pitchman Who Promoted Legisi, Other Alleged Scams

Matt Gagnon of Mazu.com

Ponzi forum operator or moderator? Online HYIP aficionado? Think you’re safe pitching fraud schemes because you’re “only” a promoter or forum “expert” and not the operator of the programs?

Have a secret partnership deal with an HYIP fraudster? Using fancy, professional-sounding terms such as “due diligence” in your forum posts? Claiming you’ve done thorough research before recommending an “opportunity.”

Pitching programs that advertise unusually large returns — while at once showcasing your knowledge about investment scams and steering people away from certain programs because they sound too good to be true?

In an action that may send shockwaves across the Web world and Ponzi forums such as ASA Monitor, TalkGold and MoneyMakerGroup, the SEC has gone to federal court and filed an emergency action to halt “a series of fraudulent, unregistered securities offerings” made through Mazu.com.

U.S. District Judge George Caram Steeh of the the Eastern District of Michigan has frozen the assets of Matthew J. Gagnon, 41, of Weslaco, Texas, and Portland, Ore. Gagnon is Mazu.com’s operator.

“From January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight . . . and his company, Legisi Holdings, LLC,” the SEC said.

The Legisi scheme raised about $72.6 million from more than 3,000 investors “by promising returns of upwards of 15% a month,” the SEC said.

“Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment,” the SEC said.

Among other things, the SEC alleged that Gagnon “had no basis for the claims he made about McKnight and Legisi.

“Gagnon also failed to disclose to investors that he was to receive 50% of Legisi’s purported ‘profits’ under his agreement with McKnight,” the SEC said. “Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.”

Then, beginning in August 2007, “Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties,” the SEC said.

In this scheme, Gagnon “falsely claimed that the investment was risk-free and ‘SEC compliant,’ and guaranteed a 200% return in 14 months. In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible,” the SEC said.

Gagnon took in at least $361,865 from 21 investors, the SEC said.

Still unfinished, Gagnon — in April 2009 — began promoting “a fraudulent offering of interests in a purported Forex trading venture,” the SEC said. “Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors. Gagnon’s claims were false, and Gagnon had no basis for making the claims.”

Gagnon next turned to another Forex sceme, the SEC said.

From October 2009 to November 2009, Gagnon “offered another purported Forex trading venture in which he claimed to have a trader in Europe who would trade foreign currencies for investors in exchange for 40% of any profits he generated,” the SEC said. “Gagnon removed this offer from his website in November 2009 when he received notice that the SEC had subpoenaed his bank records.”

Despite his knowledge about Ponzi and fraud schemes, Gagnon repeatedly pitched such schemes, the SEC said.

“Gagnon has been unrelenting in his efforts to raise money from the public through
fraudulent, unregistered offerings,” the SEC said. “He remains a danger to the investing public.”

Despite his sales pitches, “Gagnon has never been associated with a registered broker-dealer and has never been registered with the Commission as a broker or dealer or in any other capacity,” the SEC said.

Among the people to whom Gagnon directed money was the late Bryan K. Foster, who was convicted in 1997 of five felony counts of wire fraud and sentenced to 41 months in prison. These convictions were recorded in U.S. District Court in Montana, according to records.

In 2000, Foster was convicted in Colorado of one felony count of wire fraud and sentenced to five years in prison, according to records.

Between July 13, 2007 and September 17, 2007, Gagnon sent at least $800,000 to accounts in the name of Trails Home LLC, which was controlled Foster, the SEC said. Money from the illegal Legisi program was included in the sum transferred to Foster for his purported investment program, the SEC said.

The Legisi Program

In 2005, McKnight was an underemployed General Motors worker living outside Flint, Mich., the SEC said, adding that he had financial problems.

“In December 2005, McKnight began offering and selling interests in a pooled investment program variously called Legisi.com or Legisi,” the SEC said. “McKnight promoted the offering around the globe through an Internet website at www.legisi.com,” promising monthly returns of up to 15 percent.

By February 2006, “McKnight incorporated a shell company called Legisi Holdings, LLC in the bank-secrecy haven of Nevis in the West Indies,” the SEC said.

“McKnight asserted on the Legisi website that the Legisi program was merely a ‘loan program’ through which investors would ‘loan’ money to Legisi and, in return, Legisi would pay investors high rates of interest.

But Legisi actually was “a classic pooled investment vehicle, in which investors invested money into a common venture with the expectation that the money would be used to generate profits, for McKnight and the investors, solely through the efforts of McKnight or others working on his behalf. The Legisi program was a security in the form of an investment contract,” the SEC said.

“The Legisi program was also a massive Ponzi scheme,” the SEC said.

In January 2006, McKnight and Gagnon discussed a deal by which Gagnon would promote Legisi on the Mazu.com website, the SEC said.

“McKnight and Gagnon had known each other for several years after Gagnon recruited McKnight into a multilevel marketing business called ‘Mannatech,'” the SEC said. “McKnight became part of Gagnon’s ‘down line,’ meaning that a portion of McKnight’s commissions from selling Mannatech products went to Gagnon.”

McKnight paid Gagnon “a total of approximately $4,532,512 between January 29, 2006 and April 14, 2008,” the SEC said. “All of the money Gagnon received from McKnight consisted of investor funds. There were no ‘profits’ generated by Legisi.”

Gagnon netted about $3.8 million in the scheme, the SEC said.

“On behalf of McKnight, Gagnon solicited investors around the world through the publicly available Mazu.com website,” the SEC said. “Gagnon wrote and/or reviewed and approved the content of the Mazu website. No valid registration statement was filed or was in effect with the Commission in connection with Gagnon’s offer and sale of Legisi program investment contracts.”

SEC: Forum Moderators Helped Push Ponzi Scheme

“Between approximately January 2006 and August 2007, Mazu employees working on Gagnon’s behalf and at his direction promoted the Legisi program in emails, in Mazu Business Packs and DVDs they sent to investors, and on the Legisi Forum,” the SEC charged.

“The Legisi Forum was an on-line chat room accessible through the Legisi.com website. Several Mazu employees served as ‘moderators’ on the Legisi Forum. Mazu’s support services also included answering questions over the telephone and email,” the SEC said.

Forum shills performed services for Legisi and deflected concerns when CNN carried a negative report on the company, the SEC said.

“The Mazu employees acting as moderators encouraged readers to invest in Legisi, assisted them in transferring money to Legisi, encouraged investors to bring in new investors, and offered investors personal assistance in bringing in referrals,” the SEC said. “They also encouraged investors to keep their monthly earnings with Legisi, rather than withdrawing them, in order to achieve purportedly higher returns. They made sure transfers of money between investors and Legisi went smoothly. The moderators updated investors on changes to the Legisi program like new minimum investment amounts and referral fee rules.

“The moderators made posts on the Legisi Forum to prevent and diffuse investor rumors and concerns,” the SEC continued. “After an article questioning Legisi’s legitimacy appeared on the CNN Money website on May 8, 2007, one moderator wrote, ‘I think it is worth mentioning that the Forum is probably being read by people who are not Legisi members. So let’s not raise red flags to any bulls out there shall we. . .. Of course so far as any discussion on the [CNN Money] article is concerned I’m sure that everyone is aware that Greg went into Legisi knowing the law and planning for this eventuality. So keep a cool head and stop worrying about what you should do.”

No Due Diligence

McKnight was operating a classic Ponzi scheme fueled in part by Gagnon’s cheerleading on Mazu.com, the SEC said.

Despite the relentless hype, Gagnon performed no due diligence and simply fabricated information or passed along claims as though they were factual, the SEC said.

“Gagnon did not obtain or review any of McKnight’s trading records, bank and brokerage account statements, or e-currency account records at any point prior to, or during, Gagnon’s promotion of Legisi,” the SEC charged.

SEC: Gagnon ‘Recklessly Disregarded’ Scam Warning Signs

“Throughout the time that Gagnon promoted Legisi, he simultaneously warned readers about a type of fraud referred to as a high yield investment program. High yield investment programs, commonly called ‘HYIPs,’ typically involve off-shore companies promising very high rates of interest generated by investment in foreign currencies and a variety of other vehicles, along with repeated hyping of the legitimacy of the program,” the SEC said.

Gagnon understood the HYIP fraud universe, but nevertheless pitched Legisi, which had promoted an unusually high rate of return and had other markers of the exact kind of scam Mazu.com warned about on its website, the SEC said.

“From at least April 2006 through at least May 2007 Gagnon provided on the Mazu website an accurate description of a HYIP by stating that they (emphasis added by PP Blog):

collect funds from lenders as investment capital or deposits and promise a return that is usually extremely high in exchange for ‘borrowing your money.’ The result? Generally after a period of time you are free to withdraw your capital and or your profits, or you can ‘reinvest’ them to earn additional profits. In theory, the compounding can create a crazy return on investment given time . . .

* * * * * *

Sadly, most HYIPs are offshore fronts that don’t lie within U.S. jurisdiction and you have no recourse when they steal your money. Most HYIPs realize this and they bank on it! They’ve got you right where they want you. Most also allude to making their profit in legitimate investment vehicles when in reality, you have no idea where they’re making their profit.

And Gagnon also warned readers about Ponzi schemes.

“On the Mazu website between at least April 2006 and May 2007, Gagnon accurately described a Ponzi scheme as an ‘investment program touting huge returns in a short period of time. Any returns someone sees are paid out of monies gathered from the investors. No real product, investment, or business takes place,'” the SEC said.

The Legisi Ponzi began to unravel by September 2007, its decay brought about in part by “the federal seizure of an e-currency provider that was holding $1.8 million for McKnight,” the SEC said.

Gagnon then “attempted to extort money from McKnight,” the SEC said.

“On September 9, 2007, Gagnon informed McKnight that he was ending the partnership between Legisi and Mazu,” the SEC said. “Gagnon offered McKnight a choice: send Gagnon and several of Gagnon’s associates approximately $2.5 million, tell the Legisi members that Gagnon was starting a real estate fund, and that Mazu and Legisi were parting amicably, or Gagnon would email the entire Legisi membership and tell them ‘the truth’ about McKnight’s fraud.”

Read the SEC complaint.

About the Author

15 Responses to “ONLINE PONZI FORUM BOMBSHELL: Matt Gagnon A ‘Danger To The Investing Public,’ SEC Says; Federal Judge Freezes Assets Of Mazu.com Pitchman Who Promoted Legisi, Other Alleged Scams”

  1. Gee,

    I hope the vicious, nasty SEC people don’t investigate the Mazu/Gagnon connection with the “DXSynergy/GDT/Global Digital Transfers HYIP ponzi “game” run from Vanuatu by the Australian fraudster “Mervyn Copperwaite” back in 2007-2008 and promoted so heavily by Mazu/Gagnon.

    In fact, it would be a r-e-a-l shame if someone was to look back on the halcyon days of the DXSynergy HYIP and question Mr Gagnon about all the DXsynergy “training programs” he and Mazu sold before they retired from the training biz and concentrated solely on recruitment of new sucke…….err…..members into DXS.

    It certainly does make one wonder exactly how much money was made by Mr Gagnon through his HYIP activities over the years.

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  2. Quick note:

    Here is the CNN/Money article referred to in the SEC complaint:

    http://money.cnn.com/2007/05/08/pf/legisi.moneymag/index.htm?postversion=2007050812

    Make sure you read the bullet point about Nevis.

    Then see this from the SEC about its view on “offshore” offers pitched to U.S. residents:

    http://www.sec.gov/rules/interp/33-7516.htm

    Patrick

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  3. Quick note:

    Think MLM programs can’t be held accountable for the claims of affiliates? That errant notion gets kicked around a lot on the Internet. Recently I’ve seen it advanced by affiliates of Data Network Affiliates and Narc That Car, for example.

    At the story above notes, the SEC alleged that Gagnon recruited McKnight into Mannatech.

    Tony H, one of our posters here, long has raised concerns about MLM “snake-oil” cures.

    It turns out that Texas Attorney General Greg Abbott sued Mannatech in 2007, amid claims the company’s products cured Down Syndrome and cancer. The case was settled in 2009. Here is the news release:

    Texas Attorney General Abbott Reaches Agreement To Halt Deceptive Trade Practices

    Mannatech, Caster accused of falsely claiming dietary supplements treated, prevented diseases

    DALLAS – Texas Attorney General Greg Abbott today reached an agreement that resolves the state’s enforcement actions against Coppell-based Mannatech Inc. and its former CEO, Samuel L. Caster. In 2007, the state charged both defendants with orchestrating an unlawful marketing scheme that exaggerated their products’ health benefits. Under the settlement, Mannatech will pay $4 million in restitution to Texas customers. Caster, the company’s founder and largest shareholder, will pay a $1 million civil penalty and is prevented from serving as an officer, director, or employee of Mannatech for the next five years.

    According to the state’s enforcement action, Mannatech, under the direction of Caster and through its multi-level marketing network, exaggerated claims about the therapeutic benefits of its dietary supplements and nutritional products in order to increase sales. Marketing materials falsely claimed that Mannatech’s dietary supplements could cure and treat Down Syndrome, cystic fibrosis, cancer and other serious illnesses. Under state and federal law, drug manufacturers cannot claim their products cure, treat, mitigate or prevent illness unless the product has been approved by the U.S. Food and Drug Administration as a drug. Mannatech’s products are supplements – not drugs – and they have not been approved as drugs by the federal regulatory agency. The state’s enforcement action against Mannatech and Caster involves a referral from the Texas Department of State Health Services for violations of the Texas Food, Drug, and Cosmetic Act.

    Media links

    Final Judgment against Mannatech Incorporated
    http://www.oag.state.tx.us/newspubs/releases/2009/022609mannatech_judgment.pdf

    Final Judgment against Samuel L. Caster
    http://www.oag.state.tx.us/newspubs/releases/2009/022609caster_judgment.pdf

    Attorney General’s lawsuit against Mannatech
    http://www.oag.state.tx.us/newspubs/releases/2007/070507mannatech.pdf

    Under the agreed final judgment, Mannatech agreed not to advertise or otherwise claim that its dietary supplements can cure, treat, mitigate, or prevent disease. The company also agreed to implement a comprehensive monitoring and compliance program that will monitor sales associates’ statements about Mannatech’s products in the future.

    “Texans will not tolerate illegal marketing schemes that prey upon the sick and unsuspecting,” Attorney General Abbott said. “These deceptive practices posed a health risk to seriously ill consumers who may forgo traditional medical attention because of the company’s false claims. Today’s agreements put an end to Mannatech’s deceptive marketing practices in Texas.”

    Mannatech is a self-described “global wellness solutions provider” that manufactures and markets food supplements. Citing its research in the field of glycoscience, Mannatech claimed that its products’ main ingredients, glyconutrients, enhanced the human body’s cell-to-cell communication and therefore cured, treated, mitigated, or prevented diseases. Glycoscience is the academic study of sugars, their structure and how they function.

    The state’s enforcement action also cited Mannatech for encouraging product “testimonials” that exaggerated its products’ healing effects. According to state investigators, Mannatech’s independent sales associates employed misleading “before and after” photos in seminar booths, brochures, videos, sales associates’ personal Web sites and training materials.

    Mannatech Inc. sells its nutritional supplements in 10 countries, including the U.S., through more than 500,000 independent sales distributors worldwide. It is traded on the NASDAQ stock exchange under the symbol, “MTEX.”

    Consumers who encounter a business that is making false claims may file a complaint with the Attorney General’s Consumer Protection Division at (800) 252-8011 or online at http://www.texasattorneygeneral.gov.

    Patrick

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  4. littleroundman: Australian fraudster “Mervyn Copperwaite”

    Now there’s a name that would look good along with the phrase “behind bars”.
    http://www.dailypost.vu/ArticleArchives/tabid/56/articleType/ArticleView/articleId/2777/Post-Interview-with-Mervyn-Coperwaite-DX-Synergy-Internet.aspx

    I think it’s worth mentioning that over at ponzi cesspit MoneyMakerGroup, user ID mmgcjm, a “Global Moderator” is actively and persistently promoting Data Network Affiliates. This is despite any and all “red flags”, including the obvious connection with Phill The Crime Wave.

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  5. This news should send a huge shockwave to all the promoter’s of ASD, AVG, and all the other scams/Ponzi’s they have promoted. If I were them, I would make sure I have a good criminal attorney on my speed dial.

    While this is the first, I believe there are many, many, many more to come; and it won’t be long now until they do.

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  6. Okay, does anyone here think maybe Jake Amedee, Broker Jones and friends are gonna get a good nights sleep anytime soon?

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  7. Gregg Evans: Okay, does anyone here think maybe Jake Amedee, Broker Jones and friends are gonna get a good nights sleep anytime soon?  

    Interesting mention in context. After Greg McKnight’s Legisi Holdings ceased to be the Nevis Islands have had an open spot for a “SEC compliant”(yet unlicensed and unregistered) “pooled forex” investment opportunity and who was there to fill this necessary void? None other than Justin (Broker) Jones and his good friend Justin (JD) Kaiser.

    Their Oceanside Financial Corp. (OceansideForex.com and oceansidenetwork.com) claim that they are exempt from SEC regulations because all their investors sign a form attesting that they are all “sophisticated investors” and despite the copious amounts of advertising they are doing they still claim to be a “private placement” offering. Why these distortions aimed only at evading the laws intended to protect investors should be views as a positive by their potential investors is a question they don’t seem keen on answering.

    They claim to have a “black box” forex robot that performs so well that it places them withing the “top 50” forex investors on the planet and that the people who wrote the program turned down offers of more than 100 million dollars for the software opting instead to let BJ and JD open up an Alertpay account as the only (current) way to fund investment accounts.

    And despite Broker Jones and his new program having more red flags than an old Soviet May day parade the new administrator of scam.com deleted a thread critical of his friend Broker and offers excuses and rationalizations for him in a new one. Feel like opening a forum Patrick? The anti-scam community might soon be in need a new one.

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  8. Justin Jones is one of my favorite idiots, always ready to threaten to sue anyone who says he’s a crook. Okay justin, you’re a crook, your managed forex account scheme may pass the smell test but a “Qualified Investor” is more than just having them sign a form for you, YOU also have to verify they have $2 Million in liquid assets (not including real estate etc…) and income in each of the last 2 years of over $250,000.
    I guess I’ll have to make the offer I made jake to get him to sue me, if he files suit, I’ll pay his legal fees. C’mon Justin, I’m in the 6th Circuit, Southern District of Ohio, or Warren County Ohio….

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  9. And if someone offered him $100 million for his robot (an amount that would allow him to buy Ford Motor Company outright twice at todays price) and he didn
    t take it, he’s too stupid to be trusted with more than pocket change.
    And the guy says he’s gonna buy a bank….

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  10. Gregg Evans: I guess I’ll have to make the offer I made jake to get him to sue me, if he files suit, I’ll pay his legal fees. C’mon Justin, I’m in the 6th Circuit, Southern District of Ohio, or Warren County Ohio….

    Hey, no fair.

    I have first dibs on getting good ol “Broker” to sue.

    As a matter of fact, I suggested it several times back in the day when Scam.com was all about revealing scams. That was before they started inviting “Broker Jones,” his fraudster mates and shady MLM apologists to join the Scam.com forum owners and moderators in holding hands while singing rousing renditions of “Kumbayah” and ABBAs “money, money, money”

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  11. Like thousands of other people I “loaned” money to Legisi. Am I angry at Matt and Greg for what’s happened? NO. Am I friends with them? NO. Did I work for them? NO. When I made the decision to put money into it I did it because I was willing to take the risk. I had no illusions and knew that I could lose everything. People who can’t afford to take the risk should not invest in anything that isn’t legitmately guaranteed (insured/secured by a major financial institution). The SEC does their best to regulate and protect investors but seized all the money from Legisi and are now spending everyones money to the receivership firm. The receivers end up being the real winners. Let’s also not forget that the SEC has done little to protect average people from the sub-prime disaster and “legitimate” investments (i.e. mortgages funds, mutual funds, stocks, etc) that have resulted in significant losses. The bottom line is that anyone who invests in anything should hope for the best but be prepared for the worst. Sometimes you win and sometimes you lose. If you can’t handle the risk then don’t take it!

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  12. Freewill: If you can’t handle the risk then don’t take it!

    But, but, but, these ponzi HYIPs/AutoSurfs are often promoted as “low risk”, with an “honest admin” and a “nice professional site”., And there are the many posts the honest investment forums like talkgold & MMG with posts saynig “WOOOOOOOHHH!!!!! PAID!!!!!! on time!!!! This is the real thing!!!!!” with many clappy-smilies and cheering-smilies. And many posts saying “reinvested in the 60 day plan”.

    Perhaps if the “risks” were properly outlined, perhaps if it were explicitly stated it were a ponzi scheme and not a “program” or “game”, would people still “invest”? Yes, I know that the numpties at TG & MMG would invest in any criminal activity if they thought they could make a fast buck and get away with it.

    Freewill: The receivers end up being the real winners.

    No. The “real winners” are the ponzi friendly payment processors, the ponzi friendly web hosts, the ponzi friendly web forums, and all the ponzi promoters who never invest their own money. Then there are the companies who claim to be able to post the type of drivel I mentioned above.

    So you were willing to take the risk? Why then do you mention the SEC and claim that the receivers are the real winners? If you are willing to take the risk why should it matter to you who gets the money in the end, the scammer or the receiver? Your excuse is yet another very common and old excuse used by ponzi players and scammers alike, which can be summarised as “blame the victim”.

    Perhaps you would be much happier with what has happened to the money seized in the PlexPay scam?
    http://www.scam.com/showpost.php?p=929696&postcount=21

    I have not read anything about the seized money in bank accounts lately, but the prosecuting authority has earlier announced its intention that the Plexpay funds should be confiscated in favour of the Norwegian state.
    As the Supreme Court has made the final decision that Plexpay was an illegal pyramid scheme, and as Norwegian law makes illegal to establish, operate, promote and participate in pyramid schemes, there is no remaining obstacle to the confiscation of the money in these bank accounts.

    The money will be a significant contribution to the cost of the Plexpay investigation and trials, thus saving Norwegian taxpayers (of which I am one) of some money.

    I understand that in the US it is also illegal to participate in pyramid schemes, so you should have no complaints if the US government were to confiscate any funds in favour of the state. Or would you be bleating “evil government money grab” like the ASD numpties were?

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