As one of its operators sits in a Michigan federal prison and the other is listed “at large” by U.S. authorities, Payza today announced a purported “restructuring” as a “European service” that has ceased serving U.S. customers.
“This means that no transactions are allowed for US members at this time and Payza will no longer be servicing businesses registered in the US, neither providing US payout services or US based withdrawals,” Payza said in a Blog post accessible via Twitter.
Precisely who is running things at the company is unclear. The Blog post had a byline of “Payza Writer.”
Ferhan Patel, 37, is listed as an inmate at the federal correctional institute in Milan, Mich. He was arrested Sunday in Detroit. Firoz Patel, his brother and co-defendant in a major money-laundering case announced Tuesday by U.S. prosecutors, appears neither to have surrendered or been arrested. Firoz Patel is 43. The brothers are citizens of Canada and reportedly lived in the Montreal area.
The office of U.S. Attorney Jessie K. Liu of the District of Columbia confirmed Wednesday that Payza’s dotcom domain had been seized.
Prosecutors said Payza had helped fuel Ponzi schemes, pyramid schemes, a child-porn site and other criminal activities. Homeland Security Investigations is leading the probe.
Payza and a predecessor company known as AlertPay have been referenced in Ponzi-scheme litigation dating back at least to 2008’s AdSurfDaily Ponzi scheme, a $119 million fraud. More recent “programs” with ties to Payza include Traffic Monsoon and Zeek Rewards.
BULLETIN: A grand jury in the District of Columbia has indicted the operators of Payza and moved for the forfeiture of the Payza.com domain name.
Ferhan Patel, 37, has been arrested in Detroit and is being held. Firoz Patel, 43, is listed by U.S. authorities as “at large.” The Payza.com domain name appears still to be operational.
Charges include money-laundering and operating an unlicensed money-service business that processed payments for Ponzi schemes, pyramid schemes and child pornography.
The case has been under investigation for years. Homeland Security Investigations led the probe.
“The arrest and indictments in this case demonstrate that we will vigorously enforce laws meant to protect the American consumer,” said U.S. Attorney Jessie K. Liu of the District of Columbia. “Money transmitting businesses are required to be registered federally and licensed in most states and jurisdictions, including the District of Columbia. Consumers should beware of those that do not follow these laws because they could be acting as a cover for other illegal activity.”
Payza, an HYIP-friendly payment processor that recently bragged on Twitter about its attendance at an event for the teetering TrafficMonsoon scheme, has advised a federal judge that it is not responsible for millions of dollars that allegedly went missing in the Zeek Rewards’ scheme taken down by the SEC in 2012.
Zeek receiver Kenneth D. Bell alleged in February that Payza and an outfit known as Payment World “facilitated” the epic cross-border Zeek Ponzi- and pyramid scheme. The PP Blog reported on Feb. 21 that the money at issue — about $13.1 million — may have ended up in one or more collapsed Russian banks after being transferred out of VictoriaBank in Moldova.
Payza acknowledged it was a business partner with Payment World, but maintained the account in Moldova was Payment World’s alone and that it has sued Payment World for more than $20 million because it, too, had been ripped off.
In response to Bell, who is seeking a contempt sanction and to hold Payza jointly liable with Payment World and VictoriaBank for return of the cash, Payza says it never had “dominion and control” over the money and thus should not be held liable.
Payza, which operates out of Canada as part of a company known as MH Pillars of the United Kingdom, further contends with worked cooperatively and proactively with Bell and U.S. authorities tracking the money. The defense filing by Payza was docketed yesterday in the Western District of North Carolina and also claims Payza performed due diligence on Rex Venture Group, the operator of Zeek. The filing contained a declaration by MH Pillars Executive Vice President Firoz Patel.
In a May 15 Twitter post, Payza said Patel was a speaker at a May 15 event in New York for the Traffic Monsoon program.
The Tweet made no due-dilignce claims about Traffic Monsoon, which reportedly is under investigation by PayPal and has been blocked from a sum totaling on the order of $60 million.
Funds from Zeek, which once auctioned sums of U.S. currency, may have ended up in a collapsed Russian bank. Graphic from the PP Blog archives: April 2012.
(Updated 11:14 a.m. ET U.S.A.) Money due victims of Zeek Rewards from transactions involving Payza and Payment World may have been transferred from VictoriaBank in Moldova to JSC TusarBank in Russia in violation of an asset freeze imposed in 2012 by a U.S. court, according to court filings by Zeek receiver Kenneth D. Bell.
Meanwhile, OboPay’s name now has surfaced in filings by Bell. This is in the form of an October 2012 email from a Payment World official to a Payza official questioning Payza’s relationship with OboPay. The U.S. Justice Department last year announced a criminal investigation involving Payza and OboPay. The specific reason behind the probe and the targets are unknown.
Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina last week lifted the seal on Bell’s 258-page filing in which Bell alleged Payza, Payment World and VictoriaBank enabled Zeek’s Ponzi scheme shut down by the SEC in 2012. The filing consisted of a 26-page motion and 232 pages of exhibits, including emails between Payza and Payment World. As noted above, one of the exhibits raises the name of OboPay.
Mullen imposed the asset freeze in August 2012.
Whether the possible transfer of Zeek-related funds from Moldova to Russia is part of the Russian probe is unclear.
Adding to the international intrigue is that a second Russian bank that somehow might have been involved in the Payment World-related money flow reportedly collapsed in 2013. This institution is known as Master Bank and is described in Bell’s exhibits as a “sponsoring bank” of a Payment World entity in Hong Kong.
A sponsoring bank provides processors access to Visa or MasterCard networks
On Sept. 13, 2015, just prior to the collapse of TusarBank, the Moscow Times listed Master Bank as one of “Russia’s Biggest Banking Crashes of the Last 2 Years.” This crash occurred in 2013 and was notable for something beyond the 31.3-billion-ruble bailout.
Even having Igor Putin, a cousin of President Vladimir Putin, on the board of directors could not save Master Bank. The lender’s license was revoked in November 2013 with the Central Bank alleging the bank had violated money laundering legislation and processed large suspicious transactions.
In 2012, just prior to the collapse of Zeek, Zeek figure Keith Laggos claimed he had helped Zeek move payment operations offshore, including to Hong Kong. Specific details of that asserted move are unknown. Zeek had about 15 financial vendors, according to court filings.
Payza, under the leadership of Firoz Patel, has claimed it conducted due diligence on Zeek, according to Bell’s filings. Even if true, it somehow appears to have missed that Zeek was offering an outrageous and unusually consistent return averaging about 1.5 percent a day and also claimed “compounding” was possible.
The SEC has described Zeek as a cross-border Ponzi scheme that gathered nearly $900 million while operating from North Carolina.
From Bell’s filing (italics added):
On August 29, 2010, Paul Burks [of Zeek] onboarded an account with Payza (then, known as AlertPay) in the name of Rex Venture Group LLC that was associated with two websites: www.zeekrewards.com and www.zeekler.com. Prior to the boarding of the account, Payza purportedly conducted due diligence, collecting and reviewing information about Paul Burks and the business. According to Payza, during the course of the relationship, it monitored and mitigated risk. Despite these procedures, Payza did not identify or address the red flags indicating that ZeekRewards was a Ponzi scheme and, instead, together with PaymentWorld and VictoriaBank [of Moldova], facilitated access and payment to and from ZeekRewards by numerous affiliates worldwide.
Bell’s 258-page filing is available on the landing page of the receivership website. It is styled, “Memorandum in Support of the Receiver’s Motion for an Order Directing Payza, Payment World, and VictoriaBank to Turn Over Receivership Assets and/or Find Them in Contempt of the Court’s Order Freezing and Preserving Receivership Assets.”
As one of its operators sits in a Michigan federal prison and the other is listed “at large” by U.S. authorities, Payza today announced a purported “restructuring” as a “European service” that has ceased serving U.S. customers.
BULLETIN: A grand jury in the District of Columbia has indicted the operators of Payza and moved for the forfeiture of the Payza.com domain name.
Payza, an HYIP-friendly payment processor that recently bragged on Twitter about its attendance at an event for the teetering TrafficMonsoon scheme, has advised a federal judge that it is not responsible for millions of dollars that allegedly went missing in the Zeek Rewards’ scheme taken down by the SEC in 2012.