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Tag: Financial Fraud Enforcement Task Force

  • RealScam.com, Antiscam Site, Is Under DDoS Attack

    recommendedreading1UPDATED 11:39 A.M. EDT (MARCH 21, U.S.A.) RealScam.com reports that the DDoS attack is continuing, but that measures have been taken to restore accessibility. The site is back online. Here, below, our earlier story . . .

    RealScam.com, a site that concerns itself with international mass-marketing fraud, is experiencing a DDoS attack, a source told the PP Blog this afternoon.

    “We’re seeing what we can do about it,” the source said.

    On the plus side, the source noted, the DDoS attack suggests RealScam is meeting its mission of informing the public about scams.

    The attack is occurring against the backdrop of government actions against the Profitable Sunrise HYIP “program.” RealScam posters have been following Profitable Sunrise developments closely. Forum posters also are monitoring developments concerning “Banners Broker,” another mysterious online “program.”

    Precisely why RealScam.com has been targeted is unclear. At least one purported member of Profitable Sunrise — writing on another site on Saturday — said he wished the hacker’s group “Anonymous” was paying attention to negative coverage of Profitable Sunrise on the web. The poster did not reference RealScam.com in his apparent call for a DDoS attack. Instead, he referenced another site carrying negative news about Profitable Sunrise.

    The attack against RealScam.com also occurs against the backdrop of remarks in Washington today by Michael J. Bresnick, executive director of President Obama’s Financial Fraud Enforcement Task Force. In an address to the Exchequer Club of Washington, D.C., Bresnick referenced mass-marketing fraud.

    “. . . the Consumer Protection Working Group has prioritized the role of financial institutions in mass marketing fraud schemes — including deceptive payday loans, false offers of debt relief, fraudulent health care discount cards, and phony government grants, among other things — that cause billions of dollars in consumer losses and financially destroy some of our most vulnerable citizens,” Bresnick said. “The Working Group also is investigating the businesses that process payments on behalf of the fraudulent merchants — financial intermediaries referred to as third-party payment processors.”

    Both Profitable Sunrise and Banners Broker — like many purported “opportunites” before them — have relied on banks and payment processors to keep cash flowing to the schemes. Bresnick did not mention either company in his remarks.

    “The reason that we are focused on financial institutions and payment processors is because they are the so-called bottlenecks, or choke-points, in the fraud committed by so many merchants that victimize consumers and launder their illegal proceeds,” Bresnick said. “For example, third-party payment processors are frequently the means by which fraudulent merchants are able to get paid. They provide the scammers with access to the national banking system and facilitate the movement of money from the victim of the fraud to the scam artist. And financial institutions through which these fraudulent proceeds flow, we have seen, are not always blind to the fraud. In fact, we have observed that some financial institutions actually have been complicit in these schemes, ignoring their BSA/AML obligations, and either know about — or are willfully blind to — the fraudulent proceeds flowing through their institutions.”

    Despite the absurd payout advertised by Profitable Sunrise (and claims that Banners Broker doubles money), some Profitable Sunrise members have complained on forums about credit unions in North Carolina and Alberta that have raised serious questions about Profitable Sunrise, a “program” that advertised a “Long Haul” plan purported to pay 2.7 percent interest a day.

    Zeek Rewards, which the SEC described in August 2012 as a $600 million Ponzi and pyramd scheme operating online, complained on its own Blog about credit unions raising questions about the Zeek “program.”

    The SEC later said that Zeek scammed hundreds of thousands of people by duping participants into believing that the “program’s” payout of about 1.5 percent a day came from legitimate means.

  • EDITORIAL: As Financial Fraud Enforcement Task Force Website (StopFraud.gov) Spotlights AdSurfDaily Prosecution, Bizarre Email Circulating Among ASD Members Raises New Conspiracy Theories

    UPDATED 10:31 A.M. EDT (U.S.A).

    ASD case subject of discussion in Washington’s highest power corridors: The Financial Fraud Enforcement Task Force was formed by President Obama in November 2009. U.S. Attorney General Eric Holder, a member of the President’s cabinet and the chief law-enforcement officer of the U.S. government, presides over the Task Force.

    Secret Service is charter member of Task Force. The U.S. Secret Service, whose duties include protecting the President of the United States, the integrity of the economy and the financial infrastructure of the nation, is a member of the Task Force.

    Among the allegations in the ASD case is that members were falsely trading on the name of then-President George W. Bush to sanitize a $110 million Ponzi scheme, that ASD President Andy Bowdoin encouraged the false claims and arranged to spend Ponzi proceeds to retire the $157,000 mortgage on a home in Tallahassee occupied by his wife’s son and the son’s wife, purchase a lakefront home in Florida, purchase an $800,000 building (for cash), purchase jet skis, a Cabana boat, haul trailers and marine equipment — all while owing restitution to victims of an Alabama securities caper in the 1990s and “thousands of dollars” to an ex-wife.

    Some of the purchases occurred within days of Bowdoin’s return from a May 2008 ASD “rally” in Las Vegas at which he defined himself as a Christian “money magnet” and encouraged others to follow him in thanking God and becoming like-minded “money magnets.” At the rally, Bowdoin urged members not to miss the opportunity to provide ASD with money by the tens of thousands or hundreds of thousands of dollars at a time, according to records.

    “Thank you, God, for destining me to great wealth,” he exhorted the Las Vegas crowd to internalize and recite during the day.

    And he exhorted members to picture themselves wealthy.

    “See a big check coming in from AdSurfDaily,” he urged. “I signed a check the other day, about $22,000. See those checks like that coming for you constantly, just flowing to you.”

    One of Bowdoin’s business partners — Walter Clarence Busby Jr., the operator of the Golden Panda autosurf — was implicated by the SEC in three prime-bank schemes in the 1990s, according to records. Golden Panda, according to Busby, was hatched after he went fishing with Bowdoin on a Georgia lake in April 2008. Just days after the fishing expedition, Bowdoin boarded a plane and flew to Costa Rica, according to court filings.

    Weeks after his return from Costa Rica, Bowdoin headed to Washington, D.C., to rub elbows with politicians, according to court filings.

    Read the full news release on the AdSurfDaily case here. It is published on StopFraud.gov, the Task Force website.

    New conspiracy theory emerges after government compensates ASD victims. As often has been the case, some ASD members appear not to have taken the clue that top Justice Department officials and perhaps the White House itself are being briefed on developments in the ASD case. The ASD case became a national-security case when the U.S. Secret Service discovered in 2008 that Andy Bowdoin, a recidivist securities swindler in his seventies who allegedly had “earned no significant income from legal employment in the twenty years prior to his commencement of ASD’s operation,” suddenly was sitting on tens of millions of dollars and had handed out some of it to political rainmakers.

    Some of the handouts, which came in the form of contributions to the National Republican Congressional Committee (NRCC), occurred in early 2007, even as the first Ponzi scheme iteration of ASD was collapsing and the firm’s original members were left holding the bag while Bowdoin explained $1 million had been stolen by “Russian” hackers. Bowdoin did not file a police report about the purported theft because he did not want to draw the attention of law enforcement, according to court filings.

    The NRCC handouts continued in 2008, after Bowdoin had changed the name of his collapsed autosurfing venture from AdSurfDaily to ASD Cash Generator, plumbed it with new cash from a new group of suckers, started a second Ponzi venture known as LaFuenteDinero, arranged with Busby to form a third Ponzi-in-waiting  (Golden Panda) and had flown to Costa Rica with a “North Carolina lawyer” (and co-owner) of LaFuenteDinero, according to court filings and Federal Election Commission records.

    In a bizarre email that began to circulate among ASD members yesterday, the seed was planted that that the government was trying to recruit witnesses by luring them with remissions payments — and that prosecutors might claw back the remissions money if  the member “did not cooperate in testifying against ASD.”

    The date upon which the email was written could not immediately be determined, but the email appears to be the second in a two-part series sent after ASD members began to receive remissions payments late last week.

    The content of the email, which was described as “insider information” and attributed in part to an unamed third party who purportedly overheard a conversation involving a federal prosecutor at an unspecified location, was titled, “Important Warning: ASD/Golden Panda.”

    Among the suggestions in the email was that the government planned to “force” ASD members who received remissions distributions to testify against Bowdoin in his upcoming criminal trial on charges of wire fraud, securities fraud and selling unregistered securities. The email was signed “Sara.”

    Here is the email verbatim (italics added):

    “Hi Everyone-

    Since I sent the last email update about ASD/Golden Panda monies being received by members, I received some very important insider information you should know. This is an important warning.

    The information (these are not quotes) I am sharing with you was spoken by and was heard directly from an attorney for the government, in relation to the ASD legal case. I must protect the source but I can assure you it is reliable (it is not Andy). I was told that the person heard the government attorney say they had hired the Rust Company to send a remission form by email and US-mail to ASD and Golden Panda members. The form was to be sent under the pretense that the member would get their money back if they filled out the form to request a remission of their ASD/Golden Panda monies seized by the government on 8/1/08. Those members would then receive their remission monies directly into their bank accounts, but the attorney said that their names would go onto a list and they would then be summoned by the court (at the members own expense) to testify against ASD. They would be forced to testify against ASD even if they did not believe that ASD was illegal, because the form they signed was set up in such a way that the member was essentially stating that ASD victimized them in an illegal business. I’m imagining a typical scenario in court would be: The attorney for the government would read statements from the form and the member’s answers and then say something like, “Is this your signature?” to force the member into saying that the statements were theirs.  And, take note, that it was also mentioned by the attorney that the direct deposit into the member’s account could be reversed at any time if ASD should eventually lose the case or if the member did not cooperate in testifying against ASD. If the money isn’t in the account anymore, it would be money owed back to the government, so moving the money would not help. The addendum that I was advised to suggest to you if you were drawn to fill out the form (sent by the Rust Company on behalf of the government) that stated that you did not make an investment in ASD/Golden Panda, but rather bought advertising, would apparently protect you from the government’s tactics, but I honestly do not know that for sure.

    Many of us had major red flags when we read the form as it was obvious what the government was trying to do. That’s why it was advised that members add the addendum to their form, to protect themselves from the government’s deceptive practices. So pray about how you should proceed. Please don’t ask me. I can’t make this decision for you.

    God’s Blessings,

    Sara

    The email appears to have followed the email below, which divines a construction by which  the government seized ASD money illegally and set up the remissions program only because ASD members outraged at the illegal seizure demanded the return of their funds (verbatim/italics added):

    “Dear ASD & Golden Panda Members-

    I have some news! ASD and Golden Panda Members have recently received a “remission” of the money that was in their ASD and/or Golden Panda accounts, deposited directly into their personal bank accounts by the government; amounts like $50,000 and $60,000 and it was apparently 100% of the money that was owed to them!

    Personally, I am stunned. My experience over the last decade or more has been that the government has never fulfilled their obligation to return money they have seized from programs they deemed illegal. My opinion is that they are scrambling to do this in order to diffuse the outrage ASD members have felt toward the government from their (in my opinion, illegal) seizure of members’ account funds, so that members will have less opposition toward the government during the eventual ASD trial.

    But, for whatever reason the government is doing it, it is irrelevant to those relieved members who are finally receiving justice from this (in my opinion, illegal) seizure.

    If you have not received your remission, you can go to this website to fill out the form there: adsurfdailyremission.com. You can also call the following toll free information line for more information and even talk to a customer service agent in person to ask any questions you might have about this process: 888-398-8214. The following email address has also been provided to communicate about this: info@adsurfremission.com You will notice that, in the recorded message, the government does NOT back down in their assertion that Golden Panda and ASD were illegal ponzi schemes, but that is obviously not stopping them from returning members’ funds.

    Some of you will notice that this form is the one that many of you did not feel inspired to fill out when it was first presented to us. It really puts members in an uncomfortable position of stating that they were victims of ASD/Golden Panda when they don’t believe they were and many felt as if they were also being set up to incriminate themselves.

    At the time, I was advised to suggest to you that, if you felt drawn to fill it out, you include an addendum that stated that you understood that you were purchasing advertising, not making an investment. That continues to be the advice. Now that people are actually receiving their money back, perhaps some of you may feel more motivated to risk filling out the form. Just be careful not to incriminate yourselves. Be alert as you do it. Do not leave any question unanswered or it will be rejected. You must also provide documentation so hopefully you kept good records.

    You will notice on that website (upper left corner) that it says that you must fill it out and submit it by a date in January, 2011. The way around this may be to say that you just found out about it (you didn’t get their letter in the mail or an email from them) and therefore you are only responding to it now. You might want to make that clear to the Customer Service agent at the number above BEFORE you take the time to fill it out, to confirm that they are still accepting them. If not, take a stand for your right to your monetary remission and ask for a supervisor. I am hearing that they are swamped trying to keep up with the communications they are receiving from members, so please be patient.

    Blessings,

    Sara

    Read a January 2011 story about ASD-related emails. Read a November 2010 story. Read another November 2010 story. Read a December 2009 story.

  • URGENT >> BULLETIN >> MOVING: AdSurfDaily Ponzi Scheme Example Of ‘Insidious’ Financial Crime, Head Of Justice Department’s Criminal Division Says; Top Officials, U.S. Secret Service Issue Statement In Support Of Victims; Obama Task Force Monitoring ASD Case

    Assistant Attorney General Lanny Breuer, head of the Justice Department's Criminal Division.

    URGENT >> BULLETIN >> MOVING: The AdSurfDaily Ponzi scheme is an example of an “insidious” financial crime, the head of the U.S. Department of Justice’s Criminal Division said moments ago in a special statement on how forfeiture laws were used to protect ASD victims.

    Meanwhile, a top official of the U.S. Secret Service described Florida-based ASD as a “criminal enterprise.”

    ASD members who filed approved claims through the government’s remissions program will receive back tens of millions of dollars owing to the quick actions of the U.S. Secret Service and federal prosecutors in the District of Columbia in 2008, officials in Washington said.

    Victims who filed remissions claims and demonstrated losses will be compensated at 100 percent, a rare total, a source with knowledge of the process told the PP Blog last week.

    “[F]orfeiture is a powerful tool for ensuring that victims of financial fraud are made whole,” Assistant Attorney General Lanny A. Breuer said today. “Returning funds to victims is a key goal in our mission to combat financial crimes. We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.”

    Breuer was backed by U.S. Attorney Ronald C. Machen Jr. in the District of Columbia.

    U.S. Attorney Ronald C. Machen Jr.

    “We are putting $55 million back into the pockets of innocent victims of this online Ponzi scheme,” said Machen.  “As we did in this case, we will continue to work with our law enforcement partners to recover every penny we can find for victims of financial fraud.”

    A top Secret Service official said today that ASD was a “criminal enterprise” and that the remissions program represented a positive outcome for victims of an elaborate fraud scheme.

    “With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned,” said Assistant Director A.T. Smith of the Secret Service’s Office of Investigations. “This substantial remittance not only emphasizes the cooperation between the Secret Service, U.S. Attorney’s Office, and the Department of Justice, but promotes positive community impact by returning these funds to innocent victims.”

    The U.S. Secret Service “safeguards the nation’s financial infrastructure and payment systems to preserve the integrity of the economy,” said Smith.

    Today’s statement by the officials confirmed that President Obama’s Financial Fraud Enforcement Task Force, which was created in November 2009 to root out fraud, has been monitoring ASD developments and assisting in the case.

    Information for ASD victims is accessible by dialing this number:

    1-800-644-1535

    Victims who use the mail and have questions should contact:

    Basizette Stribling
    Victim Witness Assistant
    Re: AdSurf Daily
    United States Attorney’s Office for the District of Columbia
    555 Fourth Street NW
    Washington, D.C. 20530

    ASD President Andy Bowdoin was arrested by the Secret Service in December 2010. He was charged with wire fraud, securities fraud and selling unregistered securities. Bowdoin, 76, is free on bail and awaiting trial.

  • BULLETIN: Man Whose Invesment License Was Revoked 6 Years Ago Arrested In California; Janamjot Singh Sodhi Suspected Of Hatching Swindle That Gathered At Least $2.4 Million, Feds Say

    BULLETIN: A California man whose license to deal in investments was revoked in 2005 and was the subject of a desist-and-refrain order four years later has been arrested on charges be was operating a fraud scheme, federal prosecutors said.

    Janamjot Singh Sodhi, also known as Jimmy Singh, was arrested yesterday and will make a court appearance today in California, prosecutors said.

    Sodhi also is known as “Jimmy Sodhi,” according to records in California.

    Sodhi, former owner of a company known as Elite Financial Inc., gathered $2.4 million from investors despite his dubious history, according to prosecutors.

    Some of the money was used to pay off previous investors and personal bills, prosecutors said.

    He and Elite are named in a January 2009 desist-and-refrain order issued by the state of California. The order alleged that Sodhi wrote bad checks to an investor after being permanently banned from the New York Stock Exchange in 2005 for misappropriating $474,700 belonging to a client.

    The new charges against Sodhi were not immediately clear. The Financial Fraud Enforcement Task Force said this afternoon that the office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California is prosecuting the case and that the arrest evolved from an investigation by the FBI and the Fresno Police Department.

  • BULLETIN: New Jersey Ponzi Scheme Figure Jenifer Devine Pleads Guilty To Wire Fraud; Case Was Brought By Financial Fraud Enforcement Task Force

    A New Jersey woman accused of operating an $8 million Ponzi and investment-fraud scheme has pleaded guilty to wire fraud.

    Jenifer Devine, 39, of Fair Lawn, was accused in November 2010 of ripping off investors in a purported wholesale business  known as Devine Wholesale, which purportedly offered clothing and electronics.

    But it was a promissory-notes Ponzi scheme that featured bogus inventory lists and caused investors to lose more than $2 million, federal prosecutors said.

    Investors were lured by promises of returns of up to 25 percent every 30 to 60 days, but Devine’s company was fraudulent and she spent some of the money on a Royal Caribbean cruise and purchases at luxury retailers such as Burberry, Gucci and Coach.

    Devine faces up to 20 years in federal prison.

    The case was brought by elements of the Financial Fraud Enforcement Task Force and prosecuted by the office of U.S. Attorney Paul J. Fishman.

     

  • David R. Lewalski Pleads Guilty In $30 Million Botfly LLC Ponzi Caper; Case Had ASD-Like Twists, Including Efforts To Demonize Government; Attorney Seeking Relief For Victims Was Called Vile Name

    UPDATED: 3:07 P.M. EDT (U.S.A.) David R. Lewalski, a Florida man who ran a $30 million Forex Ponzi scheme through a firm known as Botfly LLC, has pleaded guilty in federal court in the Middle District of Florida.

    Lewalski, 47, formerly resided in Gainesville. Parts of the Botfly case are reminiscent of the AdSurfDaily case. Public officials and others involved in the case were called names, and Lewalski is alleged to have discussed a plan by which he’d get investors to pay for his defense.

    An attorney working for the court-appointed receiver in the Botfly case was called a Nazi and a “c[$%!],” and case filings also include a reference to an “FDLE chick.”

    FDLE stands for Florida Department of Law Enforcement. Both the Botfly and ASD cases started with civil complaints, followed by criminal charges.

    Like Botfly, ASD also was based in Florida. ASD President Andy Bowdoin now is trying to get members of his autosurf scheme to pony up $500,000 for Bowdoin’s defense. He previously described federal prosecutors and the U.S. Secret Service as “Satan,” and some ASD members described public officials as “Nazis” and “goons.”

    Even as Lewalski was under investigation, at least one person gave Lewalski $50,000 to pay for a lawyer — and this occurred after Lewalski had chartered a private Gulfstream IV jet at a cost of $172,744 to fly from the United States to Belgium one day after he was charged civilly in Florida, according to court records.

    In court filings, prosecutors argued that Lewalski also sought to tamper with witnesses and told “family members and other potential witnesses to stay quiet and not cooperate with law enforcement.”

    Some members of AdSurfDaily advised other members not to fill out victims’ forms and not to file a restitution claim. Bowdoin has blamed his legal predicament on a federal judge, federal prosecutors, his former attorneys and the U.S. Secret Service.

    Lewalski faces up to 20 years in federal prison.

    Involved in the Botfly investigation were the Financial Fraud Enforcement Task Force, the U.S. Postal Inspection Service, the Florida Office of Financial Regulation and the Florida Office of the Attorney General.

  • URGENT >> BULLETIN >> MOVING: KABOOM! Feds, SEC, CFTC Move Against Alleged U.S. Huckster Who Ran Forex Ponzi Scheme From Panama And Fled To Peru; Self-Styled ‘Christian’ Jeffery A. Lowrance Registered Business In New Zealand And Routed Ponzi Payments To And From The Netherlands, Officials Say

    URGENT >> BULLETIN >> MOVING: A U.S. citizen who told investors he was a “Christian” who shared their political philosophy of “limited government” ripped off hundreds of people in a $21 million Forex Ponzi scheme involving “fictitious trading,” used some of the cash to start an alternative newspaper, preyed on followers of U.S. Rep. Ron Paul and fled to Peru when his Panama-based scheme collapsed, U.S. officials said today.

    Jeffery A. Lowrance, 50, was arrested in Lima earlier this year. He was extradited to the United States yesterday and arraigned today on criminal charges filed in the Northern District of Illinois, federal prosecutors said. Separately, the SEC charged Lowrance with fraud in a civil complaint, as did the CFTC.

    The office of U.S. Attorney Patrick J. Fitzgerald of the Northern District of Illinois said this afternoon that Lowrance operated his Forex swindle from Panama, involving as many as 400 investors and causing losses of at least $5 million.

    Fitzgerald is perhaps the most famous prosecutor in the United States, and has served during both Republican and Democratic administrations in Washington. Lowrance was jailed in the United States today after his arraignment in Chicago on charges of wire fraud and money laundering.

    In bringing the case, government officials described Lowrance’s alleged crimes as a form of affinity fraud targeted at Christian voters with a keen interest in politics. Investigators have fretted that certain types of schemes have been designed deliberately to trade on sentiment against big government and that scammers have lined up to take advantage of the sentiment while leaving investors holding the bag.

    Investors in 26 states, including California, Oregon, Illinois and Utah, were targeted in the scam, the SEC said.

    Paul, R.-Texas, is an advocate for limited government and is a candidate in a crowded GOP field for next year’s Presidential nomination.

    During the 2008 U.S. election cycle, Lowrance showed up at a Paul political rally in Minnesota, placing a copy of a newspaper Lowrance produced with investor funds he had “secretly” diverted “on every seat at the rally,” the SEC charged.

    Even as he was touting his newspaper and his investment program at the Paul rally, the Ponzi scheme already was in a state of collapse, the SEC charged.

    And, the SEC added, Lowrance’s purported investment firm — First Capital Savings & Loan Ltd. — actually was registered in New Zealand. Investors were instructed to send money to a “money converter” in Maryland, where it was whisked overseas to the Netherlands.

    Ponzi payments were made from the Netherlands, the SEC alleged.

    A Lowrance predecessor entity known as Mentor Investing Group had been ordered by the state of California in 2006 to “cease and refrain” from selling commodities and Forex contracts, according to records.

    “[Lowrance]  used a significant portion of the money he raised from investors to fund the creation of his alternative newspaper, USA Tomorrow, which claimed to promote ‘truth in journalism’ and contained articles and advertisements advocating a limited government ideology,” the SEC charged. “He then included in at least one edition of USA Tomorrow a flyer advertising the First Capital investment opportunity which he distributed at the September 2008 Ron Paul Rally for the Republic in Minneapolis, Minnesota. USA Tomorrow was placed on every seat at the rally,” the SEC charged.

    Lowrance specifically targeted Christians and inexperienced investors in his sales pitches, the SEC charged.

    Along the way to ruin, “Lowrance and First Capital knowingly and/or recklessly made the materially false claim that First Capital used investor money to trade foreign currency and in return, pay them a high,  fixed, monthly rate of return,” the SEC charged.

    “Before February 2008, First Capital offered monthly rates of return ranging from 4% to 7.15% (resulting in annual rates of return up to 85.8%),” the SEC charged. “It also offered to pay referral fees for new investors ranging from 5% to 6% of the amount invested. As of July 2010, First Capital’s website offered monthly rates of return ranging from 1.104% to 1.558% (resulting in annual rates of up to 18.7%) and referral fees ranging from 1 % to 2%.”

    Like other investment scams, the Lowrance Forex Ponzi used “a chart and spreadsheet purporting to show its multi-year history of profitable trades,” the SEC alleged.

    But “First Capital never entered into the trades detailed on First Capital’s website,” the SEC charged. “Moreover, First Capital never was profitable.”

    Even after the scheme collapsed, Lowrance continued to solicit funds, telling some investors in early 2009 that “the millions lost [did] not shake [him],” the SEC charged.

    He urged investors that he had just acknowledged swindling to continue to have faith in him and said that he would trade foreign currency “to pay them back,” the SEC charged.

    When some of his investors told others that Lowrance had swindled them, Lowrance sent “purported updates to other investors disparaging the character of those persons who circulated his earlier admissions and disparaging the character of anyone who questioned L[o]wrance’s integrity,” the SEC charged.

    What he did not do was stop soliciting prospects for money and take his website offline. The site remained active until “at least” July 2010, despite the scheme’s 2008 collapse, the SEC charged.

    On March 5, 2009, a month after Lowrance acknowledged that investors had lost their money, the Netherlands bank account contained $121, the SEC charged.

    “In addition to failing to disclose First Capital’s true financial condition and operations to investors solicited between June 2008 and February 2009, Lowrance did not use any new investor money to trade foreign currency,” the SEC charged. “Rather, he used new investor money to pay himself, pay some 6 investors’ returns, and to pay for expenses associated with his start-up newspaper.”

    Also involved in the probe are the FBI and the IRS. Elements of the investigation were assembled by member agencies of the interagency Financial Fraud Enforcement Task Force created by President Obama in 2009.

  • OH, UTAH: SEC Alleges Business Executives Used Bogus Press Releases — And Disbarred Attorney — To Sanitize Precious Metals Fraud Scheme

    BULLETIN: The SEC has gone to federal court in Utah to seek penalties against a precious metals company and associated firms and individuals,  amid spectacular allegations that a PR firm sold the unregistered securities of its own corrupt penny-stock client and a disbarred attorney enabled the scam by issuing a bogus opinion letter.

    Utah has been identified by the interagency Financial Fraud Enforcement Task Force as a hotbed of fraud, and the SEC’s allegations against Copper King Mining Corp. and its co-defendants read like a work of fiction — but the agency says they are true.

    Charged along with the company was its former President and Chief Executive Officer Mark D. Dotson, 52, of Milford. Also charged were Alexander Lindale LLC, a Salty Lake City PR firm; PR executive Wilford R. Blum, 58, of Salt Lake City, and Stephen G. Bennett, 52, of of Merrimack, New Hampshire.

    Bennett formerly was licensed to practice law in Utah, but was disbarred in November 2001 for commingling clients’ money with his personal bank accounts, the SEC said.

    Blum is the general manager of Alexander Lindale, the PR firm.

    Despite Bennett’s disbarment, he provided “stock tradability opinion letters to Copper King which stated Alexander Lindale could have unrestricted Rule 504 stock issued to it pursuant to a purported transactional exemption provided under Minnesota state securities law,” the SEC charged.

    Because of Bennett’s bogus opinion letter and manipulations by Dotson and Blum, the PR firm sold unregistered securities issued by Copper King and profited handsomely, the SEC charged.

    “Bennett’s stock tradability opinion letters were used as the legal authority that enabled Copper King’s stock transfer agent to issue and distribute the company’s stock pursuant to Blum’s instructions,” the SEC said.

    All in all, the SEC said, the PR firm and Blum raised more than $12.2 million in proceeds from Blum’s improper sales of Copper King stock from 2008 through 2010.

    Meeanwhile, “Blum provided Copper King with approximately $9,063,567 in cash or services while Alexander Lindale received approximately $3,291,352 from Blum’s sales of Copper King stock,” the SEC said.

    Among other things, the PR firm is accused by the SEC of improperly paying contractors with unrestricted Copper King stock and hiring “television celebrities to appear on radio talk shows and in infomercials endorsing and touting the merits of investing in the company.”

    The firm and Blum also “arranged for Copper King to be publicized on billboards throughout various Western states and to author and issue press releases that emphasized the purported value and quantity of precious metals that could be extracted and processed from Copper King’s mining and milling operations,” the SEC charged.

    Dotson was accused of posting “false and misleading” information on the copper company’s website and of providing false information to the PR firm, which allegedly regurgitated Dotson’s lies and made millions of dollars by hyping the company and selling its stock .

    Investors were misled by Dotson into believing the copper firm would be capable within five years of processing  2,500 tons of ore per day and extracting $1.21 billion in precious metal, including 230 million pounds of copper, 11.5 million ounces of silver and 115,100 ounces of gold, the SEC charged.

    As president and CEO, the SEC said, Dotson “knew that the mill had no operational history or process to extract copper, gold, and silver from the ore.

    “As a result, Dotson knew that it was misleading to assign recovery amounts and market values to these supposed recoveries,” the SEC charged. “In addition, Dotson knew the mill could not process 2,500 tons of ore per day as the mill did not have, among other things, a sufficient water supply to process the ore through the milling cycle.”

    Meanwhile, the SEC charged, Dotson also knew that “Copper King was permitted to mine only a single twenty acre parcel and that the productive life of the mine site was only two years, not ten as stated on the company’s Internet website.”

    Among the allegations against the PR company is that it issued issued false press releases, including one in which it was claimed that Copper King had found a single customer to purchase “all metals produced at the mine” for the life of the mine.

  • BULLETIN: Nevin Shapiro, Operator Of $930 Million ‘Grocery’ Ponzi Scheme, Sentenced To 20 Years In Federal Prison; Fraudster ‘Used Other People’s Money To Live A Fantasy Life,’ U.S. Attorney Says

    BULLETIN: Nevin Shapiro, the Florida-based operator of a bizarre “grocery” Ponzi scheme that gathered nearly $1 billion and caused losses approaching $100 million, has been sentenced to 20 years in federal prison.

    Shapiro, 42, was charged by federal prosecutors in New Jersey last year after investigations by the FBI and the IRS. He pleaded guilty in September to one count of securities fraud and one count of money-laundering. All in all, the scheme brought in $930 million, prosecutors said.

    The SEC also sued Shapiro.

    “Nevin Shapiro used other people’s money to live a fantasy life built on false promises to unsuspecting victims,” said U.S. Attorney Paul J. Fishman.

    Elements of the case were brought by the interagency Financial Fraud Enforcement Task Force established by President Obama in November 2009.

    Shapiro operated a company known as Capitol Investments USA Inc., which purported to be in the wholesale grocery business.

    In reality, prosecutors said, Capitol “had virtually no income-generating business” between January 2005 and November 2009 — and Shapiro was running a colossal Ponzi scheme to fund his extravagant personal spending and penchant for gambling.

    At least $5 million evaporated when Shapiro stole from investors to pay illegal sports bets. He stole $26,000 a month to pay the mortgage on his Miami Beach home, which has been appraised at $5 million. Meanwhile, he stole $400,000 to pay for floor seats to watch the Miami Heat play basketball, while stealing $7,250 a month to make payments on his yacht and $4,700 a month to make payments on a leased Mercedes.

    Shapiro also lavished celebrities and sports figures, including college athletes, with gifts, prosecutors said.

    By the time the scheme collapsed and investor losses were totaled, Shapiro had stolen more than $82 million. He was ordered by U.S. District Judge Susan D. Wigenton to make restitution in the amount of $82.6 million.

    Prior to his arrest, he told investors one of the reasons they weren’t getting their payments was that his accountant was “on vacation,” prosecutors said.

  • BULLETIN: SEC Employee Was Member Of Collapsed Imperia Invest IBC Fraud Scheme That Targeted Deaf Investors And Drained Millions Of Dollars; ‘Headquarters’ Worker Placed On Administrative Leave

    BULLETIN: An employee of the SEC at its Washington headquarters was a member of a fraud scheme under investigation by the agency and shared misleading information about its ongoing probe with other investors, according to a report to Congress by SEC Inspector General H. David Kotz.

    The document does not reveal the employee’s name or his job title. Nor does it  identify the scheme by name.

    But a date cited in the document matches the date of a dramatic action the SEC’s regional office in Utah filed in October 2010 against Imperia Invest IBC, an extremely murky firm that used “fake” offshore addresses, targeted thousands of deaf investors and stole millions of dollars without returning “a single penny,” according to records. A second date cited in the Kotz document matches the date the SEC obtained a judgment against Imperia.

    The Imperia case has been discussed in Washington’s highest power corridors. It was specifically referenced by President Obama’s Financial Fraud Enforcement Task Force in December 2010 as a firm targeted in Operation Broken Trust, a government action aimed at a broad array of investment-fraud schemes that had drained the U.S. economy of billions of dollars.

    Kotz opened a probe into the matter after receiving information from “a regional office senior official that an employee at SEC headquarters was providing false, misleading, and nonpublic information to investors about an active enforcement investigation and litigation from as early as October 2010 to February 2011,” according to Kotz’s semiannual report to Congress made public yesterday.

    “The regional office senior official was concerned that the employee’s actions not only threatened to jeopardize the ongoing investigation, but also misled several investors into believing that the purported company was legitimate,” according to the Kotz report. “Moreover, some or all of the investors knew that the employee worked at the SEC and, therefore, believed incorrectly that he had first-hand knowledge of the SEC’s investigation and that his representations were credible. After the regional office senior official e-mailed the employee and inquired as to whether he was communicating with investors about the investigation, the employee was placed on administrative leave.”

    Kotz’s office reviewed “nearly 10,000 e-mails” as part of the probe and “took the employee’s sworn testimony,” according to the report. Internet postings also were reviewed, along with transcripts, court records and “other relevant information.”

    “The [Office of Inspector General] found that the employee, by his own admission, communicated with several investors during the SEC’s investigation of, and litigation against, the purported company,” according to the report. “In so doing, the employee shared nonpublic, false, and misleading information with investors.

    “As a result, the OIG found that his conduct not only confused certain investors and gave them a false sense of hope, but it also had the potential to adversely affect an ongoing enforcement investigation,” according to the report.

    Imperia Invest was accused by the SEC of siphoning the money into offshore accounts.

  • As Promos On Ponzi Forums Continue And Members Claim IRS Recognition, Club Asteria Acknowledges That Its Members Used PayPal ‘To Cheat Fellow Members’; Says Fraudsters Were Turned Over To Unidentified ‘Authorities’; Existing Members Of Virginia-Based Firm Told To Use Offshore Processors

    This May 1 promo for Club Asteria describes its as an "investment company" and instructs prospects that "you will not again anything unless you invest." The promo advertises returns of up to 7 percent a week. "I am happy because even if I am not doing anything I still manage to earn from it," the promo claims.

    In June 2010, the U.S. Department of Justice used its Blog to warn about the emerging threat of “mass marketing fraud,” specifically citing the criminal allegations of a $70 million Ponzi fraud against Nicholas Smirnow of Pathway To Prosperity (P2P).

    P2P was promoted on the TalkGold and MoneyMakerGroup Ponzi forums.

    A little over a month later, in July 2010,  the Financial Industry Regulatory Authority (FINRA) described the HYIP sphere as a “bizarre substratum of the Internet” and issued a fraud alert. FINRA also referenced the P2P case. At the same time, it pointed to the collapsed Genius Funds Ponzi, believed to have consumed $400 million.

    Genius Funds also was promoted on TalkGold and MoneyMakerGroup.

    In December 2010, the interagency Financial Fraud Enforcement Task Force led by U.S. Attorney General Eric Holder specifically warned the public to be wary of social-networking sites and chat forums. The warning was part of “Operation Broken Trust,” a law-enforcement initiative in which investigators described more than $10 billion in losses from recent fraud cases.

    One of the cases described was the SEC’s action against Imperia Invest IBC, a murky offshore business accused of stealing millions of dollars from the deaf.

    Imperia Invest also was promoted on TalkGold and MoneyMakerGroup.

    Last week, promoters of a Virginia-based company known as Club Asteria (CA) announced on the Ponzi boards that PayPal had frozen CA’s funds and blocked its access to the PayPal system. Although CA has been presented as a wholesome “opportunity” recognized by the Internal Revenue Service as a nonprofit organization (see graphic below), the CA promoter who announced the PayPal news last week on MoneyMakerGroup simultaneously was promoting two “programs” that purportedly pay 60 percent a month.

    Some CA promoters claim CA pays 520 percent a year. Even jailed Ponzi schemer Bernard Madoff would blush at such advertised rates of return.

    MoneyMakerGroup is referenced in federal court filings as a place from which Ponzi schemes are promoted. So is TalkGold, another well-known forum in the HYIP world.

    This morning — also on the MoneyMakerGroup — a different CA promoter announced that CA’s Andrea Lucas had responded to last week’s PayPal news. Even as the CA member was announcing on a known Ponzi scheme and criminals’ forum that Lucas had issued a statement on the PayPal matter, he simultaneously was promoting two HYIPs and something called One Dollar Riches.

    “OneDollarRiches allows you to parlay a small investment of just one dollar into a constant stream of cash, day in and day out!” according to its ad. “You can make 100 times your investment in just a few days by following our simple step by step instructions.”

    The mere presence of CA promotions on the Ponzi boards leads to questions about whether the firm’s receipts are polluted by Ponzi proceeds. Paying members from such proceeds would put CA members in possession of tainted money — and banks into which they deposited those proceeds also would be in possession of tainted money.

    Lucas, according to the CA website, now has publicly acknowledged last week’s actions by PayPal. Details, though, were spartan. CA did not say how much money PayPal had frozen. Meanwhile, the firm instructed members to fund their accounts by using offshore processors.

    At the same time, CA urged members not to spread bad news about the company on forums. Members who shared negative information were subject to having their CA accounts revoked, according to the company.

    “Members shall not publically (sic) disparage, demean or attack Club Asteria, its members, services or charitable activities,” CA remarks attributed to Lucas on the CA website read. The remarks were dated May 16 and appeared in the “News” section of the site.

    In the same announcement, Lucas acknowledged that a “small group” of CA members “used their PayPal accounts to cheat fellow members.”

    The company claimed it had turned the members “over to the authorities,” but did not identify the authorities or say whether they were based in the United States or elsewhere.

    CA, which said PayPal was “acting with integrity,” then counseled its members to rely on offshore processors.

    “First, if you have been paying for your membership through PayPal, please discontinue your subscription with PayPal immediately and start using one of the other approved payment processors AlertPay, Towah or CashX to ensure that your membership stays current,” the remarks attributed to Lucas read.

    “Second, Do NOT use online forums, websites or social networks to lodge blame or complaints about PayPal or your Club Asteria team,” the remarks continued. “There is no benefit or purpose in this, and it only serves to create discord and spread rumors. Not only that, doing so is a direct violation of Code of Ethics & Conduct, Rule 8 and can result in immediate revocation of your membership.”

    CA’s bizarre announcement occurred against the backdrop of thousands of bizarre promos for the firm that appear online. Some promos claim $20 spent with CA monthly turns into a lifetime income of $1,600 a month. Others claim CA is a “passive” investment opportunity, which raises questions about whether CA — whose members claim the program typically pays out about 3 percent to 4 percent a week or up to 208 percent a year — is selling unregistered securities as investment contracts.

    Lucas has been referred to in promos as a former “chairman” and “vice president” of the World Bank. Several promos have described her as a Christian “saint.”

    CA’s claims that only a “small group” of members is causing problems may be dubious. Wild claims have been made in promo after promo for the firm, which says it is not in the investment business.

    This promo for CA contains a link that resolves to an active CA affiliate site. The affiliate site has a low affiliate ID number, suggesting the affiliate was one of CA's earliest members. The promo claims CA is a 501 (c)(3) nonprofit organization recognized by the IRS.