SOUTH CHINA MORNING POST: American Among 5 Detained In Hong Kong Pyramid-Scheme Investigation; Unidentified Firm Said To Promote ‘Cloud-Based’ Internet Apps And To Have Gathered Nearly $100 Million

ponziblotterFLASH: The South China Morning Post is reporting that an American and four others have been detained in a pyramid-scheme investigation involving HK$750 million (about U.S. $96.7 million). The publication did not identify the detainees. Nor did it identify the company, which is said to promote “cloud-based internet productivity and communications applications” and to be headquartered in the United States.

The arrests occurred Wednesday in the Hong Kong area of Hung Hom, after a police raid, the SCMP reported, citing unidentified police sources. (NOTE: The PP Blog has established a tentative identification of the company, but is not publishing the name until it can be fully confirmed.)

From the SCMP (italics added):

 

Investors were lured with the promise of lucrative returns and told the company had investments in information technology in various countries and plans for a public listing, the source said. (Emphasis added by PP Blog.)

Initial investigations showed each of them was required to pay a HK$25,000 membership fee to join the company, which in return would give them lucrative dividends when the firm was listed on a stock market,” he said.

The American “is understood to be from another firm,” and authorities are seeking to determine if the firms are linked, the SCMP reported.

Schemes in which investors are recruited based on assertions that they’ll receive a handsome payout when a firm later  “goes public” may be on the uptick.

In October, the SEC charged five companies, three executives and eight promoters in what it described as a “worldwide” pyramid scheme operating through entities from Hong Kong, Canada and the British Virgin Islands.

At the center of the scheme were entities known as CKB and CKB168, the SEC said. Investors were told they’d accumulate “profit rewards points” that could be converted “into shares of CKB stock when the company conducts an initial public offering (“IPO”) on the Hong Kong Stock Exchange sometime during 2014, the SEC said.

“Despite Defendants’ representations to the contrary, the Prpts are worthless and cannot be meaningfully traded, sold or exchanged. Nor has CKB taken required steps to prepare for the promised IPO and, in fact, does not meet the Hong Kong Exchange’s current listing requirements. Even if the IPO were to occur, CKB would have to go public as one of the world’s largest companies in order to honor conversions of the ever-expanding universe of Prpts,” the SEC said.

 

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28 Responses to “SOUTH CHINA MORNING POST: American Among 5 Detained In Hong Kong Pyramid-Scheme Investigation; Unidentified Firm Said To Promote ‘Cloud-Based’ Internet Apps And To Have Gathered Nearly $100 Million”

  1. Patrick,

    BLGM and WCM777 seemed to be opetating at full speed.

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  2. Oh sweet china, you know what the maximum penalty for financial fraud there ?

    yeap, DEATH

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  3. Found the original source for you:

    http://www.singpao.com/xw/gat/201311/t20131107_470393.html

    I’ll just translate the summary:

    ????????????????????????
    Recently there was media report that a tech company in Hung Hom looking for members

    ???????????????????
    Claimed that when the company goes public, members can get huge profit to tunes of 1 million yuan (HK Dollars? RMB?)

    ??????????????
    Attracted large groups of interior (Chinese mainland) citizens lined up outside overnight

    ??????????????????????????
    Commercial crime division investigation service, after full investigation, perform a takedown last night

    ???????????????????????????
    Four men and one woman was arrested, and charged with alleged violations of “anti multi-level pressure plan ordinance”

    ??????????18????????
    And obtained in their office about 180000 (HK Dollars?) and large amounts of evidence.

    ??????????????????????
    Police reminds all citizens to be on guard against “make money fast” opportunities.

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  4. The “New News” (XingPao) also mentioned that the American’s first name is “Edward”, and he’s the heavyweight, performing lawyer like stuff, but may or may not be the boss. The other four arrested were just junior employees. As the fraud is targetting mainlanders, investigation may be harder than usual.

    Top penalty for violations is 7 years jail and 1 million HKD in fines.

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  5. FINALLY found the name of the darn company. It calls itself Interush

    http://news.chinanews.com/ga/2013/11-07/5474836.shtml

    Apparently on 1-NOV-2013 there was 400 people lined out hoping to buy shares / join up. That really caught attention of the authorities, who conducted the raid on 6-NOV-2013.

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  6. One final note, the term they used: ?????, is actually more in-line with Ponzi scheme, not a pure pyramid scheme, according to some articles I read. Though it’s clear that it’s fraud. I guess it’s really a Ponzi pyramid hybrid.

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  7. K. Chang: One final note, the term they used: ?????, is actually more in-line with Ponzi scheme, not a pure pyramid scheme,

    Damn,

    if recent history is anything to go by, the usual suspect HYIP players will fill blogs and forums for months with endless discussions of whether or not we are talking about a “ponzi” or a “pure ponzi” a “pyramid,” or a combination of both and whether or not the fraud fits within the Wikipedia definition/s of each.

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  8. It’s also funny that they used ?????, which literally translates as “level pressure style marketing”. it probably translates better as “recruitment driven scheme” which is like you are HEAVILY encouraged to recruit as many people as possible, with incentives to do so. My rough estimation is 67% pyramid scheme and 33% ponzi scheme. Just call it ponzi/pyramid hybrid.

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  9. Wow, Interush was a pretty legitimate company… It has a US branch in Irvine and Taiwan branch as well… Supposedly had a marketing campaign with NASCAR at one time.

    Here’s a video: jump to 16:35, and you’ll see this explanation:

    When you join, your job is, ostensibly to sell this “Iris suite”, at 3600 (not sure what price, I’m guessing RMB), you can sell one or set of three (huh?) then build down your left and right legs. If you do 7 on both left and right sides, you get a bonus of 2680.

    http://www.youtube.com/watch?v=lAqnaq8o62g

    The video mentions ad revenue sharing, retail profit, etc. etc.

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  10. littleroundman: whether or not we are talking about a “ponzi” or a “pure ponzi” a “pyramid,” or a combination of both

    They are regulated by different types of laws, so the difference is quite important.

    Traditional pyramids = gambling / lottery laws.
    Promotional pyramid = Commercial laws, Consumer Protection laws
    Ponzi scheme = Financial laws.

    It’s not very important if the discussion is about whether or not something is illegal, but there’s quite a big difference between “financial fraud” and “deceptive trade practice”.

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  11. Morten: They are regulated by different types of laws, so the difference is quite important.

    Actually, they are all treated as “fraud” by the justice system.

    Ponzi and pyramid are merely descriptive terms for particular types of fraud.

    For example, in the recent ponzi / pyramid hybrid, AdSurf Daily / Andy Bowdoin case, the charges were of “fraud, wirefraud, conspiracy to commit both and money laundering”

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  12. @KChang, Do you remember when Andy Bowdoin of ASD was telling everyone that he was also getting involved with NASCAR, in a bid to legitimize the Ponzi? Seems they all work off of the same scripts.

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  13. Wizzard7: Do you remember when Andy Bowdoin of ASD was telling everyone that he was also getting involved with NASCAR

    Actually, it was Indy Car — unless there was a corresponding misrepresentation that ASD also had the backing of NASCAR.

    On July 30, 2008, this post appeared on the TalkGold Ponzi forum:

    ” == Flash News Item === ASD will have not one but two
    cars in the Indy 500 with the ASD logo wow that means they will be around . . .”

    Two days later — upon application by the U.S. Secret Service — a federal judge froze 15 ASD-related bank accounts. Within days, the actions by the Secret Service were described by Andy Bowdoin as the work of “Satan.”

    Patrick

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  14. On July 31, 2008, one day before the bank freeze, someone at TalkGold posted this funny counter to ASD’s Indy Car claim:

    “Just figured out the car sponsoring gig. Ole Unca Andy I bet ya has sponored 2 cars for now, but has offered the 2 cars a 200% match if those 2 cars sponsor another 2 cars, as well as a 10% referral commision!!! Then those new 2 cars can sponsor another 2 cars getting a 300% match, with a 20% referral, that way, by the end of the car racing season, ASD will be sponsoring every single race car!!!”

    Patrick

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  15. Further update from Apple News out of Hong Kong:

    Security at the Interush’s office had to turn away at least 20 potential recruits while reporter was there. There’s a sign on the door that says “System upgrade, closed today”. People are coming from China, Hong Kong AND Taiwan.

    Apparently people have to pay 24000 annual fee to join to expect that profit split for 1 million.

    Many were just telling the reporters that they have thousands of downlines

    http://hk.apple.nextmedia.com/news/art/20131108/18498582

    Another post revealed an recruitment blog:

    http://blog.sina.com.cn/s/blog_ad57926b0101kso9.html

    Pay 2400 HKD a month (for Iris Suite), which generates “points” (toward virtual stock options?) the more points generated, the better the company looks, and the higher the price it can list for when it goes IPO. It even has diagrams, like how to generate more points via “cycles”

    Apparently each point is equal to one virtual stock option.

    This is sounds JUST LIKE the Vantone scam in China that Ming Xu and his buddy Tiger Zhi Liu was involved in (allegedly, from afar) See my blog for details.

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  16. Wizzard7:
    @KChang, Do you remember when Andy Bowdoin of ASD was telling everyone that he was also getting involved with NASCAR, in a bid to legitimize the Ponzi?Seems they all work off of the same scripts.

    No, but this thing’s involved in i-Racing, Indy Car, NASCAR, AND 24 Hours of Rolex.

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  17. And I do mean actually involved, not just claim to be.

    Reports out of Hong Kong revealed mania level participation

    People on 24-hour straight train trip to sign up before October ends
    http://hk.apple.nextmedia.com/news/art/20131101/18488734

    HK Investment Experts point out illegal behavior
    http://hk.apple.nextmedia.com/news/art/20131101/18488736

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  18. I’ve pretty much confirmed that Interush is the company that got busted.

    Interush’s website confirms that their office in Hong Kong is that building, that region in Kowloon, 17th floor.

    Checking Youtube vids confirms that Interush is promising virtual stock options through buying their IRIS suite services (2400 HKD / month, or 24000 HKD / year) to generate points, and if you get 7 downlines on “each leg” to do the same, you get bonus money and points, and if you hold it long enough (3 years) you are expected to get over million HKD assuming 10000 pts.

    The vids are using the Interush logo, named the CEO (matches Interush info), and all the products match too.

    I took screenshots of their Youtube vid and did some translations:

    http://amlmskeptic.blogspot.com/2013/11/breaking-news-interush-hong-kong-closed.html

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  19. Apparently all arrested have made bail and will not have to show up in front of a judge until January 2014.

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  20. Interush was previously in legal trouble in Taiwan (ENGLISH link!)

    http://www.chinapost.com.tw/taiwan/business/2010/01/28/242599/Online-multi-level.htm

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  21. I am not having any luck finding anything on Interush in English media. It’s all about their racing stuff and press releases. However, searching its Chinese name: ??? found another article in China where Chinese police have already identified it as pyramid selling scheme, dated 11/7/2013

    http://news.hexun.com/2013-11-07/159446234.html (link in Chinese)

    Which brought up articles dated 2012 and EARLIER that Interush was ALREADY illegal in China.

    http://finance.sina.com.cn/chanjing/gsnews/20120820/100512895571.shtml

    Thus, if they tell people they have to register in Hong Kong, they are INTENTIONALLY skirting Chinese laws.

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  22. I think someone tried to troll me, claiming to be detective in Hong Kong Commercial Crime Bureau via my blog’s feedback address. I wrote him a reply in Chinese that reads like Gobbledygook with Google translate, but makes sense if he’s really from Hong Kong. We shall see!

    (may post text later if he doesn’t reply in 24-48 hours)

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  23. Just for grins (don’t answer if you actually read Chinese)

    Try Google translate this:

    ?Sir ???
    ???????????????????
    ????????????????????

    It makes perfect sense if you read it in Cantonese. :D

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  24. Never heard back. Must be a troll.

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  25. Evidently no one would go in for Interush Irish suites without a groundwork of lies about IPO and stock market. Asians love cheap communication and biz tools and many abound there, so no sense in paying 2400HKD monthly without IPO Scam. Baby can you imagine how much money the company has made over the years from forced monthly payments? What future is there or prospects to be listed in the wake of these revelations? Hongkong authorities already know their biz model. Would they allow an underground pyramid scheme that has defrauded many to be listed on the Hongkong stock exchange? What more evidence do Hongkong authorities need to save those who are still hanging on with hopes of making big money, but losing money instead? Seems clear that sponsorship of car racing is just to launder their shady pyramid defrauding scheme and nothing more.

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  26. But what happened to the hearing scheduled in January 2014?

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