URGENT >> BULLETIN >> MOVING: SEC Charges eAdGear, Alleging $129 Million Pyramid- And Ponzi Scheme

breakingnews72URGENT >> BULLETIN >> MOVING: (12th Update 1:28 p.m. EDT U.S.A.) The SEC has gone to federal court in San Francisco, alleging that the eAdGear “program” was a pyramid- and Ponzi scheme that gathered $129 million. The action against eAdGear is the second major pyramid-scheme prosecution announced by the SEC this week.

The SEC has identified eAdGear’s operators as Charles S. Wang, 52, and Qian Cathy Zhang, 52, of Warren, N.J., and Francis Y. Yuen, 53, of Dublin, Calif. They have been charged with fraud and an asset freeze has been imposed, the SEC said.

Zhang is Wang’s wife, the SEC said, alleging the couple was part of a “ruse” that positioned Zhang as an ordinary “member” who “became hugely successful.”

“During sworn testimony before the staff of the Commission in the investigation preceding the filing of this case, Zhang asserted her privilege against self-incrimination rather than answer questions about her role at eAdGear,” the SEC said in its complaint.

The eAdGear “opportunity” itself, according to the SEC, was a “fiction.”

“eAdGear and its operators falsely claimed that they were running a profitable Internet marketing company when in reality, they were operating a Ponzi and pyramid scheme that preyed on Chinese communities and caused investors to lose millions of dollars,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office.

Though not named a defendant in the eAdGear complaint, Zeek Rewards figure and alleged Zeek “winner” T. LeMont Silver may find himself at the center of yet another Ponzi- and pyramid storm. That’s because eAdGear once tried to sue ZeekRewards.com, amid claims of cyberpiracy, unfair competition and benefiting from copyright infringement.

And it’s also because Silver’s name surfaced in fraud lawsuits between and among eAdGear Inc., GoFunPlaces Inc., Randal Williams and JubiMax LLC.

From an SEC statement on the eAdGear prosecution (italics added):

. . . even though eAdGear claimed to be a successful Internet marketing company, nearly all of its revenue was generated by investors, not its products or services.

The complaint alleges that eAdGear’s operators used money from new investors to pay earlier investors as well as to repay a personal loan and purchase million-dollar homes for themselves. It alleges the operators concealed and perpetuated the scheme by displaying sham websites on eAdGear’s own site to make it appear as if it had real, paying customers and manipulated revenue distributions to investors to appear profitable.

eAdGear began operating in December 2010 and grew to include 66,000 accounts held by “tens of thousands of investors” mostly of Chinese descent, the SEC said.

Corporate defendants include eAdGear Inc of Pleasanton, Calif., and eAdGear Holdings Limited of Hong Kong. The “program” sold “so-called ‘memberships’ or ‘business packages,'” the SEC said.

From the SEC complaint (italics added):

Defendants market eAdGear as a successful internet marketing and advertising company that uses search engine optimization (“SEO”) technology they claimed to have developed to help paying clients increase the page rankings of their websites on various search engines. Defendants claim to share 70% of the revenue generated daily by this business with investors.

In reality, eAdGear’s purported business is a ruse. Instead, well over 99% of the funds eAdGear has received have come from its investors, and eAdGear simply uses new investor money to make payments to — or to credit the accounts of — existing members in classic Ponzi scheme fashion.

Wang, Yuen, and Zhang have perpetrated this fraud by, among other things: installing Wang as chief executive officer, and Yuen as chief financial officer and chief operating officer of eAdGear, Inc., while portraying Wang’s wife, Zhang, as an ordinary “member” who became hugely successful; creating a fiction of a business that has paying customers when it does not; and manipulating daily revenue distributions to credit investors’ accounts, to make it appear as though eAdGear is operating profitably.

Earlier this week, the SEC announced charges against a “program” known as Zhunrize, describing it as pyramid scheme that had gathered $105 million.

Zhunrize presented itself as a “Plan B,” a core fraud signature in the HYIP world. T. LeMont Silver, among others, is a “Plan B” pitchman.

Zeek receiver Kenneth D. Bell has said that MLM may have a problem with “serial” promoters of fraud schemes.

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4 Responses to “URGENT >> BULLETIN >> MOVING: SEC Charges eAdGear, Alleging $129 Million Pyramid- And Ponzi Scheme”

  1. From the SEC’s eAdGear complaint:

    _____________________________________

    To create the appearance of a real business, Wang and Yuen directed eAdGear employees to place fake ads on the Ad Rotator – the program that eAdGear members interface with each day to view websites to supposedly increase those websites rankings on search engines like Yahoo! and Google.

    Wang and Yuen gave these directions so that members viewing the Ad Rotator
    would see notable, English-language advertisers and would therefore believe that eAdGear had succeeded in attracting paying customers.

    _____________________________________

    This sounds very similar to something AdSurfDaily and some of its promoters did in 2008.

    Memory Lane:

    http://patrickpretty.com/2009/03/15/adsurfdaily-promo-cited-ties-to-google-kodak-pepsi-nbc-and-other-prominent-advertisers/

    Patrick

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  2. Also from the eAdGear complaint:

    _______________________________________________________

    The principal benefit investors receive upon making their investments is their allocation of so-called “ePoints”; ePoints are the means eAdGear uses to determine an investor’s 24 share of company revenues. Though business packages are offered at six different levels (at times,$300 has been the lowest, and $6,000 as the highest), the greater the initial account value, the more quickly such “ePoints” are credited to the account.

    Once an investor has an eAdGear account, eAdGear credits the account with value based on the daily “surfing bonuses,” and referral bonuses or commissions, to the extent the investor, or others whom he has previously referred to eAdGear, makes a referral for a new investor.

    But rather than credit the accounts with actual money, eAdGear credits investors’ accounts with so-called “eCash.” Investors could convert a portion of the value of the “eCash” in their accounts – generally not more than 50% – into actual cash to withdraw. Investors are required to reinvest the remainingeCash to purchase additional ePoints and to thereby increase their investment in eAdGear.

    The required repurchase is but one means defendants used to manage eAdGear’ s increasing liability.

    _______________________________________________________

    This system sounds very Zeek- and WCM777-like, what with “points” and all.

    Some background:

    http://patrickpretty.com/2014/03/28/urgent-bulletin-moving-sec-takes-down-wcm777-says-purported-opportunity-is-worldwide-pyramid-scheme-ponzi-and-offering-fraud-federal-judges-signs-asset-freeze/

    Patrick

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  3. From the SEC’s statement on eAdGear:

    “The SEC appreciates the assistance of the United States Attorney’s Office for the Northern District of California and the Federal Bureau of Investigation. It also appreciates the assistance of the Hong Kong Securities and Futures Commission, the China Securities Regulatory Commission, the Ontario Securities Commission, and the Financial Conduct Authority in the United Kingdom.”

    One wonders if other shoes will drop, especially given the presence of the FBI, which has the power of arrest. The U.S. Attorney’s Office has the power of criminal prosecution.

    It’s also nice to see that authorities in Hong Kong, China, Canada and the U.K. got a reference, given the increasing complexity and cross-border nature of these insidious schemes.

    Patrick

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  4. At one point, years ago before the inception of eadgear, Francis Yuen was a business associate of mine. He was always a very smart business man. I never saw the negative side of him. It is a serious disappointment to learn of his involvement in this illegal activity. What a disappointment.

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