News came early this morning that the SEC had moved against Traffic Monsoon, calling it a Ponzi scheme. Both the “program” and alleged operator Charles Scoville were charged civilly yesterday in Utah federal court with securities fraud and selling unregistered securities to unaccredited investors.
Scoville also was the braintrust behind AdHitProfits, a Ponzi-board “program” in part targeted at people who also were targeted in the egregious 2013 Profitable Sunrise cross-border scam in which millions of dollars appear to have vanished overseas.
As the PP Blog reported on June 2, 2013 (italics added):
A spammer hit a Profitable Sunrise Facebook site yesterday with five drive-by offers for “AdHitProfits.” All five of the machine-gunned theft bids claimed the same thing: “make money every half an hour…100% commission let your money grow for you at high speed.”
The AHP “program” also is being pitched on the Ponzi boards, with the thread-starter at MoneyMakerGroup bragging that “Payza, []STP & Liberty Reserve Accepted !!”
LibertyReserve was described last week by federal prosecutors in New York as a criminal enterprise that had laundered more than $6 billion for Ponzi schemers, credit-card fraudsters, identity thieves, investment fraudsters, computer hackers, child pornographers and narcotics traffickers.
In its complaint against Traffic Monsoon and Scoville, the SEC says PayPal restricted Traffic Monsoon during the winter, in January 2016.
Our research shows that Scoville then turned to Payza for the heavy lifting and that Payza attended a Traffic Monsoon event in May 2016, during the spring and while funds in PayPal had been frozen by PayPal.
From the SEC complaint (italics added):
After the PayPal freeze, Scoville began using other payment processors more extensively: Solid Trust Pay, headquartered in Ontario, and Payza, headquartered in London with offices in New York. He has also used an account at JPMorgan Chase to receive investor funds.
Zeek used both SolidTrustPay and Payza, as did the AdSurfDaily Ponzi scheme before it.
Traffic Monsoon’s haul appears to have exceeded $200 million, potentially making it one of the largest advertising “revshare” schemes of all time. As things stand, it is larger than other well-known revshare frauds such as AdSurfDaily ($119 million) and Banners Broker ($156 million). Some of the Banners Broker cash reportedly ended up in KulClub, yet another Ponzi-board MLM scheme.
Ponzi-board schemes are eviscerating wealth globally. It is not unusual for such schemes to use multiple payment processors and to target vulnerable population groups. Agencies from the U.S. Department of Homeland Security have been involved in a number of major investigations of Ponzi-board “programs.”
It is unclear if DHS or other U.S. agencies with the power of arrest are involved in a Traffic Monsoon probe. History has shown, however, that when the SEC brings a civil case, other agencies sometimes carry out criminal investigations on a parallel track.
The U.S. Department of Homeland Security has issued a terror “Bulletin.” The issuance coincides with an update to the National Terrorism Advisory System (NTAS).
A “Bulletin” describes “general developments or trends regarding threats of terrorism,” DHS Secretary Jeh Johnson said today.
Two other advisory levels exist:
An “Elevated Alert” warns “of a credible terrorism threat against the United States.”
An “Imminent Alert,” meanwhile, warns “of a credible, specific and impending terrorism threat against the United States,” DHS says.
The Bulletin issued today expires June 16, 2016, and reads as such (italics added):
We are in a new phase in the global threat environment, which has implications on the homeland. Particularly with the rise in use by terrorist groups of the Internet to inspire and recruit, we are concerned about the “self-radicalized” actor(s) who could strike with little or no notice. Recent attacks and attempted attacks internationally and in the homeland warrant increased security, as well as increased public vigilance and awareness.
Though we know of no intelligence that is both specific and credible at this time of a plot by terrorist organizations to attack the homeland, the reality is terrorist-inspired individuals have conducted, or attempted to conduct, attacks in the United States this year.
DHS is especially concerned that terrorist-inspired individuals and homegrown violent extremists may be encouraged or inspired to target public events or places.
As we saw in the recent attacks in San Bernardino and Paris, terrorists will consider a diverse and wide selection of targets for attacks.
In the current environment, DHS is also concerned about threats and violence directed at particular communities and individuals across the country, based on perceived religion, ethnicity, or nationality.
Here’s how Johnson began his remarks today (italics added):
“In the period of weeks following the terrorist attacks in Paris on November 13 and the terrorist attack in San Bernardino on December 2, officials of Homeland Security, the FBI, the intelligence community, state and local law enforcement and homeland security officials have been in a heightened state of readiness to protect our homeland. People are anxious now. They should know, they need to know what their government is doing to protect our homeland.”
The TelexFree probe continues in the United States, with prosecutors revealing today that federal agents served a search warrant on Google on Oct. 16 that sought a “substantial amount” of content on YouTube.
Precisely what content prosecutors are seeking was not immediately clear.
Google told agents that “compliance will take several weeks,” according to the prosecution filing.
Regulators have warned for years that HYIP scams are spreading through promos on social media such as YouTube, Facebook and Twitter.
Today’s prosecution filing also revealed that undercover agents attended multiple TelexFree functions, not just a conference in Boston in March.
In the government’s possession, prosecutors said, are “[v]arious recordings made by undercover [Homeland Security Investigations] agents at TelexFree conferences and in conversations with a TelexFree promoter.”
The information eventually will be provided through discovery, prosecutors said.
The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is leading the TelexFree probe.
According to today’s prosecution filing, other material pending processing and production for discovery includes:
About 40 boxes of documents seized from TelexFree’s offices in Marlborough, Mass., in April 2014. These materials are being scanned and processed by a vendor, a process that will take several weeks.
About 81 gigabytes of data (about 355,000 pages) received in October 2014 from the Trustee supervising TelexFree’s affairs in bankruptcy. (PP Blog note: Stephen B. Darr is the court-appointed TelexFree trustee.)
Additional financial records received from the U.S. Securities & Exchange Commission pursuant to an access request, and from Homeland Security Investigations, totaling approximately 12 boxes of material.
The results of five email search warrants served on or about Sept 25, 2014. As of this date, the government has only received materials for one of the email accounts and is following up with the other internet service providers.
Through the discovery process so far, according to the prosecution filing, the government has “produced an electronic database containing most of the data and records the government has collected via subpoena while investigating this case (about 100,000 pages). The government has also made several productions of additional material in response to specific requests from counsel, including all bank and brokerage records, and has made available the electronic evidence seized during execution of search warrants in April 2014.”
In the aftermath of last week’s attacks on Canadian soldiers, the Canadian Parliament and New York City police officers, Secretary Jeh Johnson of the U.S. Department of Homeland Security issued this statement today (italics added):
DHS Secretary Jeh Johnson.
Today I am announcing that I have directed the Federal Protective Service to enhance its presence and security at various U.S. Government buildings in Washington DC and other major cities and locations around the country. The precise actions we are taking and the precise locations at which we will enhance security is law-enforcement sensitive, will vary and shift from location to location, and will be continually re-evaluated.
The Federal Protective Service is responsible for the protection of over 9500 federal facilities owned or leased by the General Services Administration, through which 1.4 million visitors and occupants pass daily.
We are taking this action as a precautionary step, to safeguard U.S. government personnel and facilities, and the visitors to those facilities. The reasons for this action are self-evident: the continued public calls by terrorist organizations for attacks on the homeland and elsewhere, including against law enforcement and other government officials, and the acts of violence targeted at government personnel and installations in Canada and elsewhere recently. Given world events, prudence dictates a heightened vigilance in the protection of U.S. government installations and our personnel.
As we have stated in prior advisories, we urge state and local governments and their law enforcement personnel, along with critical infrastructure owners and operators, to be equally vigilant, particularly in guarding against potential small-scale attacks by a lone offender or a small group of individuals. Likewise, we continually urge the public at large to be vigilant and report any suspicious activities to appropriate authorities.
Only in MLM: In a head-scratching promo earlier this year, TelexFree cheerleaders used an image of the Pyramids of Giza during an active pyramid-scheme probe in Brazil. Red highlight by PP Blog.
If you’ve been following TelexFree developments, you’ve probably heard about “Operation Orion,” the code name for the investigation that led to raids against TelexFree’s Ympactus arm last week by the Brazilian federal police. The Orion name was chosen, police said, because it fit splendidly within the context of a pyramid-scheme case.
How so? The Pyramids of Giza in Egypt were aligned with the Orion constellation, police explained.
Our analysis of the “Operation Orion” name is that it shows heady messaging by Brazilian police. It is direct in the sense that TelexFree, after all, may be the world’s largest MLM HYIP pyramid scheme. And it’s subtle in the sense that so many pyramid-scheme participants have bright stars in their eyes that blind them to the realities of mathematics.
Here we’ll point out that, for whatever reason, someone within the TelexFree sphere got the head-scratching idea earlier this year to use an image of the Pyramids of Giza in a promo for TelexFree during an active pyramid-scheme probe in Brazil.
We believe it notable that Brazilian police also referenced the Pyramids of Giza, given their presence in a TelexFree promo.
For newer readers, we’ll also point out that the HYIP sphere is infamous for taunting the law-enforcement community. Like TelexFree, a “program” known as WCM777 also came under investigation in multiple countries earlier this year. Naturally someone within the WCM777 sphere shoved an image of a pyramid down the throat of law enforcement after word of the investigations became public.
Second Tour (At Least) For ‘Operation Orion’
Did you know that the code name “Operation Orion” chosen by Brazilian police previously had been used by the United States in a major law-enforcement action, albeit in a completely different context? (More on the 2012 U.S. action below.)
What’s your thinking? Are two Operation Orions in two years coincidence?
And did you know that the U.S. Department of Homeland Security (DHS), which has its own TelexFree probe, has an office in Brasilia and a history of cooperating with Brazil’s federal police — and that some criminal investigators from outside the United States receive training at the DHS Federal Law Enforcement Training Center in Glynco, Ga? (The U.S.-sponsored training also sometimes occurs in countries that host the United States. Some Brazilian investigators, for example, have received U.S. training in Peru. See photo below.)
U.S. prosecutors did not respond to a request for comment on whether there was any coordination between the United States and Brazil last week on TelexFree-related events: the indictment of TelexFree figures James Merrill and Carlos Wanzeler in the United States, and the public announcement of “Operation Orion” in Brazil.
What’s In A Code Name?
U.S.-based police, prosecutorial and regulatory agencies regularly conjure up operational names to distill the essence of the law-enforcement goal and to send a message that fraudsters never should be confident. Agencies also sometimes engage in something we’ll describe as reverse black comedy whose purpose is to accent the absurdities of scams and scammers. In New Jersey last year, for example, a law-enforcement action targeted at alleged booze diluters was memorably named “Operation Swill.”
It was an instant classic.
A long-running FBI operation targeted at dozens of penny-stock fraudsters a few years ago was dubbed “Operation Shore Shells,” in part because the probe occurred near the sea and in part because the fraud involved the use of shell companies, often a nemesis of legitimate commerce. The SEC, which regulates the U.S. securities markets, once dubbed an action directed at hundreds of companies ripe for pump-and-dump swindles “Operation Shell Expel.”
To out illegal gambling conduits reaching into the United States, DHS once set up a sting operation and “obtained a business address near Atlantic City, New Jersey” to bolster undercover operatives’ street cred. As part of the operation, the Feds created a bogus “payment processor” known as Linwood Payment Solutions to “negotiate contracts and terms of the processing, and to handle the intricate movement and processing of collection and payment data from the gambling organizations to the banks.”
These well-dressed greeters actually were part of a federal undercover operation dubbed “No Such Thing as a Free Lunch.” Source: U.S. Marshals Service. Red blocks by PP Blog.
The U.S. Marshals Service, in charge of rounding up fugitives, once famously conjured up a sting dubbed “No Such Thing as a Free Lunch” that operated as part of a larger sting dubbed FIST — for Fugitive Investigative Strike Teams.
As part of a six-year FIST operation in the 1980s, marshals created a fake business known as “Flagship International Sports Television Inc.,” obtained the last-known addresses of more than 3,000 wanted persons and sent brunch “invitations” that promised free food and free National Football League game tickets to those addresses. The marshals also offered a shot at free Super Bowl tickets.
The free-food sting netted 100 arrests. FIST overall netted more than 14,700.
Undercover TelexFree Probe
It is known that DHS conducted a TelexFree-related undercover operation that lasted for months. Whether the operation extended to foreign soil and had a formal name is unclear. Based on its research, the PP Blog believes that undercover stings (named and unnamed) operated by U.S. government agencies and aimed at HYIPs have been operating continuously in the United States since at least 2006.
One of the reasons is that the schemes put banks in the line of fire and often target disadvantaged populations. Beyond that, HYIP schemes have a history of trading on the names of the White House and U.S. government agencies, thus confusing people across the world. TelexFree promoters, for instance, traded on the names of President Obama, the cabinet-level office of the U.S. Attorney General, the SEC and Massachusetts Commonwealth Secretary William Galvin. Why? To cloak themselves in a veneer of legitimacy and to drive money to a scheme that purportedly returned $1,040 in a year to people who paid in $289, $5,200 to people who paid in $1,375 and $57,200 to people who paid in $15,125.
Even Bernard Madoff would gag at the thought.
Female police officials from multiple countries, including Brazil, received U.S. training in Peru in 2012. Photo source: DHS.
With the Internet emerging as the favored delivery vessel of both clever and unclever fictions aimed at transferring great sums of wealth and putting unwarranted financial power in the hands of criminals and criminal enterprises, the need has arisen to pursue cross-border frauds aggressively. The only way to minimize the mushroom effect of fraud schemes operating on the Internet is through international cooperation at the highest levels of government and law enforcement.
Put another way, your latest recruit could be a Fed. The person you instructed not to “call it an investment” (as part of a ham-handed cover-up bid) could be a Fed. The person sitting next to you at a hotel “extravaganza” of some sort could be a Fed. So could the person in the cabin next to you on the scammers’ cruise ship. So could the recruit who, at your direction, paid you personally while joining, instead of paying the company. That upline guy — the one who sponsored you and asked you to pay him personally — could have one or more Feds in his downline. Those Feds could be “placing ads” for the program and keeping notes on whether anybody signed up under them.
Channeling?
Could Brazilian authorities who selected the name “Operation Orion” and referenced the Pyramids of Giza perhaps been channeling their U.S. counterparts and engaging in some reverse black comedy to point out the absurdity of scams? Man, we hope so.
As noted above, someone within the TelexFree sphere showcased the Pyramids of Giza during a pyramid-scheme probe in Brazil. Apparently no one in TelexFree thought it prudent, say, to stop the scheme during the Brazilian probe.
Because the HYIP sphere is populated by the most disingenuous “businesses” and people you’ll ever encounter, it’s easy enough to read such an act as telling law enforcement to shove it. Fractured thinking and taunts at law enforcement are core signatures of HYIP frauds, perhaps characteristics every bit as defining as preposterous daily payout rates of between .50 and 2.75 percent.
Good fortune certainly did not shine down on TelexFree from Orion on July 23, the date of the U.S. indictments. Nor did it shine down on July 24, the date the “Operation Orion” pyramid probe was announced in Brazil.
In our view, the name “Operation Orion” selected by Brazilian police was practically perfect.
In addition to being a star constellation, Orion is the great hunter from Greek mythology. With Brazil’s “Operation Orion,” alleged pyramid schemers became the hunted.
Alleged child predators were the hunted in the U.S. version of “Operation Orion,” a 2012 sting engineered by DHS. Arrests were made in the United States, Spain, the Philippines, Argentina and the United Kingdom. The DHS agency that launched the 2012 version of “Operation Orion” is known as Immigration and Customs Enforcement — or ICE for short. Homeland Security Investigations (HSI) is an ICE directorate.
From ICE (italics/bolding added):
HSI investigates immigration crime, human rights violations and human smuggling, smuggling of narcotics, weapons and other types of contraband, financial crimes, cybercrime and export enforcement issues. ICE special agents conduct investigations aimed at protecting critical infrastructure industries that are vulnerable to sabotage, attack or exploitation.
In addition to ICE criminal investigations, HSI oversees the agency’s international affairs operations and intelligence functions. HSI consists of more than 10,000 employees, consisting of 6,700 special agents, who are assigned to more than 200 cities throughout the U.S. and 47 countries around the world.
U.S. court records show that HSI started the undercover investigation into TelexFree at least by October 2013. Other records show HSI has an attaché office in Brasilia, the capital of Brazil.
In May 2014, ICE and HSI announced they had cooperated with federal police in Brazil in a sting known as “Operation Proteja Brasil,” described as aimed at protecting against child porn.
From ICE (italics/bolding added):
Some of the warrants executed during this operation were the direct result of leads provided by HSI Brasilia and the National Center for Missing & Exploited Children (NCMEC).
In this TelexFree promo, former President James Merrill posed with a giant SUV.
The FBI and the U.S. Department of Homeland Security have established a website for individuals who believe they were defrauded by TelexFree, an alleged pyramid- and Ponzi scheme the Massachusetts Securities Division says gathered more than $1.2 billion.
Alleged TelexFree co-owners James Merrill and Carlos Wanzeler have been charged criminally with wire-fraud conspiracy. Merrill, 53, of Ashland, Mass., is jailed in the United States. Wanzeler, 45, of Northborough, Mass., is alleged to have fled to Brazil. The U.S. Department of Justice describes him as a fugitive.
TelexFree, Merrill, Wanzeler and six other alleged TelexFree managers, executives or promoters also are defendants in a major civil prosecution by the U.S. Securities and Exchange Commission.
By some accounts, TelexFree had between 700,000 and 1.5 million participants.
From the FBI/DHS statement (italics added):
The large number of possible victims necessitates that we ask for your assistance by completing the secure questionnaire online. Your responses are voluntary, but would be useful in the federal investigation and to identify you as a victim.
The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is prosecuting the criminal cases against Merrill and Wanzeler.
Some TelexFree members sent doodles to the federal judge presiding over the SEC’s fraud case. Redaction by PP Blog.
(UPDATED 9:24 am EDT MAY 14 U.S.A.) The PP Blog previously has reported on campaigns by members to petition judges to “bail out” TelexFree and consider the purported upside of the “program,” which may be the largest combined Ponzi- and pyramid scheme in MLM HYIP history. (Campaigns referenced in this May 10, 2014, PP Blog editorial.)
The docket of U.S. District Judge Nathaniel M. Gorton of the District of Massachusetts now shows that members have written letters to the court in support of TelexFree. Gorton is presiding over the SEC’s civil case against TelexFree. The complaint was brought on an emergency basis on April 15. Assets of TelexFree and alleged managers and certain promoters have been frozen.
At least one TelexFree supporter contended in a letter to Gorton that he can “assure” the judge that “media disinformation” is responsible for the problems at TelexFree and that the company “revolutionized” MLM in a manner that “put out of extreme poverty thousands and thousands of people around the world, if not millions.”
TelexFree, according to the sender, was like a drop of “heaven for poor families.”
Some of the letters appear to be in Spanish, sent to the judge via fax. Some are handwritten. Some are typewritten. A few of them include doodles.
There are letters from the United States. There are letters from the Dominican Republic. Some of the letters appear to have used a shared template, which likely means TelexFree upline/downline groups organized the campaign.
In the 2008 AdSurfDaily case, shared litigation templates were used by certain members who appeared to be more interested in advancing conspiracy theories than understanding the facts of the case. Some of the letters/emails of “support” submitted by ASD in 2008 were used by the government to undermine ASD’s assertion it was not selling securities and was not a Ponzi scheme.
At least one TelexFree member asserted in a letter to Gorton that the “program” gave him an opportunity to earn money from TelexFree by posting ads on the Internet.
On Friday, it became known that the U.S. Department of Homeland Security was involved in an undercover probe of TelexFree that began at least by October 2013.
In a criminal complaint and affidavit filed in support of wire-fraud conspiracy charges against TelexFree figures James Merrill and Carlos Wanzeler, a DHS agent involved in the probe alleged an intelligence research specialist within DHS placed more than 700 ads for TelexFree online.
“The ads have resulted in no retail sales of TelexFree’s VOIP product,” the agent alleged.
And, the agent asserted, “the sites on which these ads were posted contained page after page after page of hundreds of nearly identical ads placed by various TelexFree promoters for the identical VOIP service.”
Zeek Rewards, an $850 million Ponzi- and pyramid scheme shut down by the SEC in 2012, also had an “advertising” component. So did ASD, a $119 million Ponzi scheme shut down by the U.S. Secret Service in 2008.
MLM HYIP schemes have defrauded billions of dollars from participants in recent years. The combined hauls of TelexFree, Zeek and ASD alone may exceed $2.169 billion. That’s nearly double the size of the epic Scott Rothstein Ponzi and racketeering scheme in Florida in 2009.
MLM HYIP swindles typically are aimed at vulnerable populations, with MLMers who have big email lists and experience in one fraud scheme after another scoring tremendous windfalls.
From yesterday’s national infrastructure report by the U.S. Department of Homeland Security. Red highlight by PP Blog.
TelexFree — specifically the Ponzi- and pyramid complaint filed against it Tuesday by Massachusetts Commonwealth Secretary William Galvin — was the top story yesterday in the U.S. Department of Homeland Security’s daily infrastructure report.
DHS was formed after the terrorist attacks of Sept. 11, 2001. Galvin alleged that TelexFree had gathered more than $1.2 billion in a massive, international fraud scheme.
Yesterday’s infrastructure briefing singled out four “Top Stories” in the United States, with TelexFree listed at the top of the thumbnail reports.
“The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally,” the thumbnail read.
DHS pointed to a story by Jordan Maglich in Forbes on the Massachusetts action. The agency listed the TelexFree matter in the infrastructure category of “Financial Services.”
Yesterday’s infrastructure report did not mention that DHS itself had a role in executing a search warrant and securing the premises of TelexFree’s headquarters in Marlborough, Mass.
Agents were at the site Tuesday, the same day Galvin filed a state-level action and the SEC filed a federal action. An SEC affidavit credits DHS and a Bristol County Sheriff’s Deputy with stopping a bid by an accused TelexFree executive to remove nearly $38 million in cashier’s checks from the premises.
The DHS infrastructure report is culled from various media reports. Although yesterday’s report highlighted four top stories across a broad spectrum, it also listed stories in various categories of infrastructure protection.
These include:
Energy
Financial Services
Chemical
Transportation Systems
Nuclear Reactors, Materials, and Waste
Information Technology
Critical Manufacturing
Communications
Defense Industrial Base
Commercial Facilities
Dams
Government Facilities
Food and Agriculture
Emergency Services
Water and Wastewater Systems
Healthcare and Public Health
The DHS Daily Open Source Infrastructure Reports are available here.
This claim appears today on a website styled obopayusa.com. Precisely when it began to appear is unclear.
With Cyber Monday and the traditional online sales coming up a few days from now on Dec. 2, this is what we know: Payza, the successor brand to Montreal-based AlertPay, a Ponzi-forum darling and chronic HYIP- and fraud-enabler, suddenly says this in a headline on its Community forum: “US Funds Frozen | Obopay/Ultralight FS. issue.”
The announcement is dated yesterday, Thanksgiving Eve in the United States.
Today is Thanksgiving Day. U.S. government offices are closed. Black Friday, another day of brisk U.S. sales activity in which retailers cater to door-busting holiday shoppers, is tomorrow.
We also know that the U.S. government has established a tradition of taking down counterfeiting and piracy scams and their enabling websites on Cyber Monday. Moreover, we know that U.S. Immigration and Customs Enforcement (ICE), a division of the U.S. Department of Homeland Security, issued an alert two days ago that it is working with partners and “will be conducting increased operations during the holiday season targeting the importation and distribution of counterfeit and pirated products.”
Beyond that, we know that the United States — the U.S. Secret Service, ICE and other agencies — took down the Liberty Reserve payment processor over the 2013 Memorial Day holiday period and the U.S. Department of the Treasury identified Liberty Reserve as a “Financial Institution of Primary Money Laundering Concern.” The bust was announced on May 28, the day after Memorial Day.
Backing up a few years, we also know that AlertPay and SolidTrustPay enabled the $119 million AdSurfDaily Ponzi scheme and the $70 million Pathway To Prosperity fraud scheme — to name just two of many.
Meanwhile, we know that the court-appointed receiver in the Zeek case is going after money allegedly tied to Payza and SolidTrustPay. The most recent affirmation of this occurred on Nov. 14, when the receiver advised a federal judge that his efforts to gather $10 million from Payza “persisted” and that “new information has come in” that affects his analysis of Zeek-related Payza funds. Whether the $10 million sum would go up or down based on the new information was not revealed in the filing.
Analysis of “transactional data from Payza is not yet complete,” the receiver advised the judge. He also noted that the Payza funds were held in a “foreign bank account” in an undisclosed country. Based on its research, the PP Blog believes the country is in Eastern Europe.
We also know that AlertPay effectively became Payza in May 2012, even as Zeek was conducting auctions for U.S. currency and experiencing trouble with U.S. banks. Payza operates through a New York entity known as MH Pillars Inc., which in May 2012 announced the “recent acquisition of AlertPay’s existing online payment platform.” Payza also is associated with a U.K. entity known as MH Pillars Ltd. of London.
Thanksgiving Confusion
Although Payza’s headline uses the word “Frozen,” the text below it does not identify the party that purportedly froze the funds. At the same time, the text appears to be at least slightly at odds with the headline claim that the money was “Frozen.” Indeed, the text describes the funds as “withheld.”
Although the word choices may or may not be important, one thing seems obvious: Either word is apt to be unsettling to Payza’s U.S. customers who want their money.
“As you may or may not already know, we are unable to complete any requests to withdraw or transfer funds for a part of our U.S. members at this time, since they are being withheld [emphasis added by PP Blog] by Ultralight Financial Services (formerly known as Obopay Inc.) a licensed U.S. money transmitter of which Payza was an agent,” the announcement begins.
“We have tried to resolve this problem by contacting their management, their legal team and State regulators,” the announcement continues. “Their management and legal team were unresponsive. However, State regulators are willing to help us, but they have told us that they will not intervene unless they hear from you, the owner of your funds.
“In this case, Payza is asking all affected members to demand action from both Ultralight FS and your State regulator . . .”
At the time of this PP Blog post, the full Nov. 27 announcement is available at the Payza Community Forum. [See Update at bottom of this PP Blog post.]
These Thanksgiving Eve claims by Payza are at odds with other claims online.
In short, Payza seems to be saying that Ultralight/Obopay Inc. is responsible for its inability to serve U.S. customers because the entities either froze or withheld the money.
But here is where the information diverges and becomes even more fractious: At least two websites that state they’re associated with Obopay claim that “[t]he US Department of Homeland Security has seized all MH Pillars dba Payza money on deposit with UltraLight FS.” Both of these sites are cheesy in appearance. Both also have have copyright notices: One, styled obopayusa.com, says “Content copyright 2013. Obopay, Inc. All rights reserved.” The other, styled ultralightfs.com, says “Copyright @ UltraLight Financial Services. All rights reserved.”
Neither site says when the money purportedly was seized. Nor does either site say how much was seized.
So, the apparent obopay and UltraLight entities are saying the money was seized by the U.S. Feds. Payza is saying it was “frozen” or “withheld” by obopay/ultralight.
What’s the truth? Well, it’s unclear at this time.
There’s also a website styled obopay.com that appears to have the same logo as obopayusa.com. The obopay.com site asserts an association with Obopay Mobile Technology India Pvt. Ltd. of Bangalore and says its partners include Societe Generale, Essar Telecom Kenya Limited and Union Bank of India.
The obopay.com site appears to make no reference to Payza or MH Pillars, but does reference Obopay Inc. of Redwood City, Calif., as its parent company. When the PP Blog clicked on a “State License” tab at the bottom of the obopay.com site, however, it received this error message: “An error occurred during a connection to www.obopay.com. Peer’s Certificate has been revoked. (Error code: sec_error_revoked_certificate).”
So, another layer of the curious.
Searching the database of the Financial Crimes Enforcement Network (FinCEN), the PP Blog located a document that suggests Obopay Inc. of Redwood City, Calif., is a registered Money Services Business in all 50 U.S. states, plus the District of Columbia. FinCEN is an arm of the U.S. Treasury Department. Its stated mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”
Information on MH Pillars Inc. of New York also appears in the FinCEN database. The information suggests the firm is a registered Money Services Business in at least 48 of the the 50 U.S. states. (California and New Hampshire appear to be possible exceptions.) MH Pillars also appears to be registered in venues such as American Samoa, the Federated States Of Micronesia, the Marshall Islands, the Northern Mariana Islands, Palau and the U.S. Virgin Islands.
It seems clear that both Obopay Inc. and MH Pillars Inc. are registered MSBs. Why, then, can’t U.S. Payza customers get their cash? Could it be because UltraLight isn’t registered? The FinCEN database appears to have no information on UltraLight.
But a Florida Department of State database does, and that information suggests Obopay Inc. is changing its name to ULTRALIGHT FS Inc. The Florida document is date-stamped Oct. 15, 2013. A phone number listed in the document comports with a phone number in Louisiana and Mississippi records as the number for Obopay Inc. of Mountain View, Calif. Like Redwood City, Mountain View is a Silicon Valley community.
Why FinCEN records show Obopay in Redwood City while state records show the enterprise in Mountain View was not immediately clear.
What does seem clear is that some or all of Payza’s U.S. customers can’t get their money and that whatever dispute exists between Payza and OboPay/Ultralight is about money that either was frozen/withheld by OboPay/Ultralight or seized by U.S. law enforcement.
Payza claimed in July 2012 to be cleaning up its act. This claim was made about a month prior to the August 2012 Zeek action by the SEC and an accompanying confirmation from the U.S. Secret Service that it also was investigating Zeek. Whether the Payza claim was just lip service remains to be seen.
When the United States took down Liberty Reserve, the Secret Service changed Liberty Reserve’s domain nameservers to a “sinkhole” URL at ShadowServer.org. This initially caused Liberty Reserve to go offline. When the domain returned, the logos/badges of the U.S. Department of Justice, the Global Illicit Financial Team, the Secret Service, the Treasury Department and Homeland Security Investigations were published on the site to let the world know that crime doesn’t pay in the United States.
Payza’s website loaded quickly this morning, with full Payza branding and services appearing. DNS settings appear not to have been altered, suggesting at least to this point that the domain has not been seized by the United States. Whether the United States intends to seize it now or ever is not known.
But seizing money is an altogether different matter. One of the ways to choke off HYIP and counterfeit-goods/pirating scams is to stop the fuel supply and to starve them out. If the United States desired to cripple criminal HYIPs and counterfeiting enterprises, it theoretically could attack them by seizing money that had been routed through Payza and the AlertPay predecessor.
Whether that’s what’s happening here remains unclear. At the same time, it would be catastrophically foolish for an enterprise such as Obopay or UltraLight (or some combination thereof) to attribute a seizure of Payza funds to the U.S. Department of Homeland Security if it were not true. It also would be catastrophically foolish for Payza to claim that Obopay/UltraLight froze or withheld the money from U.S. Payza customers if that were untrue or not the complete truth.
Seizure of money by the U.S. government requires a court order. Obopay/UltraLight either hasor has not received such a court order or notice that one was on the way.
If the United States has court-worthy evidence that Payza was facilitating online criminal enterprises, then it should become apparent in the coming days. If Obopay/UltraLight played any role, it also should become apparent.
It could be a very interesting Black Friday or Cyber Monday.
Update 7:31 p.m. Nov. 28: The original Payza announcement appears to have been removed this afternoon or this evening and replaced by this considerably shorter one. There’s also a post on the Payza Blog. It is dated today and titled, “Important Update: Limited Services for Certain U.S. States.” Those states are not identified in the Payza Blog post.
BULLETIN: A deputy U.S. marshal was shot and killed this morning while serving an arrest warrant in a drug case at a home in Elkins, W. Va., a law-enforcement official said.
Two other deputy marshals were wounded in the attack. Their conditions were not immediately known. Charles E. Smith, the alleged assailant, reportedly was killed by return fire from law enforcement.
Smith, 50, used a shotgun in his attack on the marshals, officials said.
The attack on the marshals in West Virginia followed by a day an attack on two U.S. Immigration and Customs Enforcement (ICE) agents in Mexico.
Special Agent Jaime Zapata was shot and killed in the attack, and a second ICE agent was wounded by gunfire. The agents were assigned to ICE’s attaché office in Mexico City, and were ambushed while driving between Monterrey, Mexico, and Mexico City, officials said.
ICE is an agency within the U.S. Department of Homeland Security (DHS).
“[A]ny act of violence against our ICE personnel — or any DHS personnel — is an attack against all those who serve our nation and put their lives at risk for our safety,” said DHS Secretary Janet Napolitano.
Elkins, a city of about 7,000 in North Central West Virginia, is about 163 miles south of Pittsburgh, Pa.
EDITOR’S NOTE: This developing story on the alleged actions of accused securities schemer Christopher Love Blackwell is apt to cause paranoia among HYIP and prime-bank fraudsters, including criminals who populate online forums such as TalkGold and MoneyMakerGroup.
It features the presence of a Department of Homeland Security (DHS) undercover operative who allegedly infiltrated Blackwell’s scheme and was so good at keeping his identity secret that Blackwell pitched him repeatedly over a period of months in a Hooters restaurant and bar as other agents worked to unmask the complex caper. The undercover agent eventually returned an “investment contract” prepared by Blackwell and plunked down $1,000 of government money as a down payment on a purported $500,000 investment. Blackwell allegedly later contacted the undercover agent repeatedly via email and telephone to collect the outstanding “balance” of $499,000. Blackwell even left a voicemail on the agent’s phone, according to court filings.
BULLETIN: The SEC has gone to federal court in Dallas and is seeking an emergency injunction to halt an alleged Ponzi scheme involving Christopher Love Blackwell of Euless, Texas, and Roswell, N.M., AV Bar Reg Inc. of Colleyville, Texas, and Millers A Game LLC of Chandler, Ariz.
Blackwell, 31, and his companies initially came on the Feds’ radar screens last year when the U.S. Department of Homeland Security (DHS) was alerted that he was wiring large sums of money and conducting cash transactions that raised terrorism concerns, according to court records.
In the end, the SEC dryly advised a federal judge, “it became clear to DHS that Blackwell was not a terrorist — just a thief.”
Regardless, the SEC said, the fraud was ongoing and Blackwell still appeared to be selling the scheme as recently as Jan. 19.
DHS operatives kept Blackwell under surveillance, assembled documents, conducted interviews and “made video and audio recordings of meetings during which Blackwell offered investments to undercover agents,” the SEC said in court filings.
Records show that Blackwell was on the receiving end of a default judgment of $24 million in a civil fraud case filed in July 2008 and sought Chapter 7 protection in U.S. Bankruptcy Court on Christmas Eve 2008.
Despite the lawsuit, judgment and bankruptcy filing, Blackwell continued to operate what he described as a “Fixed Income Trading Program” that offered returns of up to 30 percent a month, according to the SEC.
To pull off his Ponzi and fraud scheme, Blackwell bragged about his “academic pedigree,” falsely claiming to have Master’s and PhD degrees “from a prestigious university in Spain” and also falsely claiming once to have been employed by Goldman Sachs and the Bank of Madrid.
In 2007, with the scheme unknown to law enforcement, Blackwell stole $750,000 from an investor. In 2008, according to court filings, he swindled $200,000 from another investor, returning $9,926 in bogus “profits” to the investor. This investor was introduced to Blackwell by “an intermediary who claimed to run a faith-based business and investment development firm,” according to the SEC complaint.
The purported faith-based intermediary assured the investor that Blackwell’s program in “foreign bank instruments” was “totally safe,” the SEC alleged. Despite the assurance of the intermediary, Blackwell immediately began to distribute the $200,000 provided by the investor to other companies and people, including Blackwell’s former business partner and Blackwell’s father.
By late 2008, according to the SEC, Blackwell was engineering a scheme to rip off a former football player for the Dallas Cowboys. The player had been introduced to Blackwell by another player, according to the complaint.
Neither player was identified in the complaint. The former player, lured by the promise of safe returns from an experienced international trader, gave Blackwell $250,000 in the belief that he was purchasing an investment note from HSBC Bank, one of the largest financial firms in the world.
Blackwell “never” purchased an HSBC note. Instead, according to the SEC, he instructed an attorney exercising control over the escrow account to which the former Cowboy had wired the funds to transfer nearly all of the $250,00 to a Phoenix company controlled by a friend of Blackwell.
When confronted by the SEC, Blackwell allegedly told the agency that he had “earned” the money despite his assurances to the player that the sum would be used to purchase a safe bank note.
Although Blackwell showed the former football player a document on HSBC letterhead as purported proof he had purchased a bank note with the player’s money, “HSBC’s Security and Fraud Risk group has confirmed that the letter was fraudulent.
“In other words,” the SEC said, “it was a forgery.”
The former player appears to have been ripped off for the entire $250,000 investment, the SEC said.
News came early this morning that the SEC had moved against Traffic Monsoon, calling it a Ponzi scheme. Both the “program” and alleged operator Charles Scoville were charged civilly yesterday in Utah federal court with securities fraud and selling unregistered securities to unaccredited investors.
