UPDATED 3:11 P.M. EDT U.S.A. A report dated today at ShanghaiDaily.com says an individual “surnamed Xu” and associated with “World Capital Market Inc.” is “now in custody” after a police action against a “pyramid scheme” in China.
The PP Blog has contacted the U.S. Securities and Exchange Commission to determine if the person reportedly under arrest in China is “Phil” Ming Xu of the World Capital Market/WCM777 scheme from 2014.
If the individual proves to be the Xu in the SEC case, it would mean that Xu left the United States sometime after being charged civilly by the SEC in March 2014 with a fraud alleged to have gathered tens of millions of dollars. It also potentially means the scheme, which allegedly operated under different names and resulted in the appointment of a receiver by a U.S. federal court, continued offshore after the U.S. action.
Phil Ming Xu resided in Temple City, Calif., the SEC said in 2014.
Last June and August, police received alerts from the People’s Bank of China and the Guangdong branch of China Securities Regulatory Commission that the company and its owners were not qualified to conduct public financing, and a criminal investigation began.
The WCM777 story in the United States has been consistently bizarre. MLM hucksters, for example, pitched the “program” in churches and claimed the company had given loans for spectacular sums to some top American businesses.
UPDATE 2:03 P.M. EDT MAY 17 U.S.A. The SEC said today that it didn’t have anything on whether the Xu reportedly under arrest in China is the Xu from the agency’s March 2014 case.
What is known is that about 11,900 claimants have come forward. The number is included in a Dec. 4 report filed by Krista L. Freitag, the court-appointed receiver. The deadline for filing originally was Nov. 9. But Freitag, in October, asked the court to extend the deadline in part because too few claimants had surfaced.
U.S. District Judge John F. Walter of the Central District of California extended the deadline until Dec. 24 and empowered the receiver to take other actions “to increase the number of investor claims submitted,” according to the court docket.
The order seems to have aided the cause.
Noted Freitag in her report: “As proposed in the Receiver’s application, in addition to a reminder email blast notifying investors of the extended bar date and steps approved by the Court, the steps taken by the Receiver include opening a live telephone line for investor calls (which can be answered in six different languages), allowing investors to submit their supporting documents by mail, mailing physical notices to investors whose addresses are available from checks, and holding an in-person meeting in Los Angeles at which investors were able to submitting claims with assistance from the Receiver and her staff. As a result of these efforts, the response rate and number of claims received have increased significantly.”
As of Nov, 27, the number of claimants stood at approximately 11,900, the receiver noted.
From a filing by the receiver in the Steve Chen/USFIA case.
“Initially, Defendant Steve Chen aka Li Chen (“Chen”) was not present at the Company Offices. Shortly after the Receiver arrived and the U.S. Marshals secured the Company Offices, Chen arrived. He was wearing a security guard uniform and carried a loaded gun, which was not concealed. The U.S. Marshals seized the weapon and also found $46,150 in cash in Chen’s car. The funds are being held by the Receiver.” — Thomas Seaman, receiver in the USFIA pyramid-scheme case filed by the SEC, Nov. 13, 2015
UPDATED 1:24 P.M. ET NOV. 21 U.S.A. Back in September, the SEC civilly charged Steve Chen, USFIA Inc. and other entities with operating a “worldwide pyramid scheme” from Arcadia in Greater Los Angeles. Chen since has invoked his Fifth Amendment right not to incriminate himself, hinting at an underlying criminal probe.
The amber-themed USFIA scheme pushed a purported cryptocurrency known as “gemcoins” and was alleged to have gathered on the order of $32 million. Thomas Seaman was appointed receiver.
Seaman now alleges in court filings that he entered with the U.S. Marshals Service the two-story office USFIA was using at 135 E. Live Oak [Ave.] in Arcadia to take “control and possession of the premises.” The Arcadia Police Department also assisted.
Chen was not initially present at the office when the takeover began, but up to 50 other individuals were, including 32 Chen employees, according to a Nov. 1 report by Seaman. The alleged scammer showed up “shortly” thereafter.
In this setting involving dozens of employees and office subtenants, federal agents, police officers, the receiver and presumably receivership staff, two very strange things happened.
Chen, according to the receiver, arrived “wearing a security guard uniform and carried a loaded gun, which was not concealed.”
And, according to Seaman, “The U.S. Marshals seized the weapon and also found $46,150 in cash in Chen’s car. The funds are being held by the Receiver.”
Ponzi and pyramid narratives often are strange to the point of being unnerving. With USFIA so far, we have the alleged presence of a purported financial titan hauling around a large wad of cash during an active investigation and, yes, allegedly appearing at headquarters with a “loaded gun” with dozens of people in the area.
Why Chen allegedly was wearing the uniform of a security guard was not explained in the report, but Seaman did note he also discovered “a weapons safe with ammunition, and owner’s manuals for two rifles (but not the [rifles] themselves)” in the company offices.
BehindMLM.com reported in September that some USFIA investors were worried about threats involving firearms.
Like Krista L. Freitag, the receiver in the WCM777 Ponzi- and pyramid scheme also operating from Greater Los Angeles and also targeting Asian population groups and other peoples who may lack command of English, Seaman suddenly finds himself in the real-estate business.
From the receiver’s report (italics added/formatting not precise/light editing performed):
2. Hills Garden Hotel
In the days following his appointment, the Receiver also took possession of the Hills Garden Hotel located on Ostrem Boulevard in Rancho Cucamonga. The 112 unit hotel was formerly a Days Inn, but had recently lost its flag with Days Inn. The Receiver is in financial control of the hotel and manages the hotel with the assistance of the on-site employees, many of whom had been employed by the hotel for many years prior to its purchase by the Receivership Entities on August 1, 2015. The Receiver confirmed that adequate insurance for the hotel is in place. It appears the hotel was going to be used by Defendants to conduct fundraising activities.
3. Other Real Properties
The Receiver also took possession of the following real properties:
A 36-unit apartment building located in Alhambra . . . A mansion located in Bradbury that was not used as a residence and appears to have been used for fundraising and investor relations. The home is apparently called the “Clubhouse.” . . . A single family home and a condominium, both located in Arcadia. Finally, the Receiver has also identified several other single family homes purchased with funds from the Receivership Entities and vested in other individuals or entities. The Receiver is further investigating and evaluating potential claims to recover these assets.
Meanwhile, the receiver says he has found two new large Mercedes vans, five diamonds located in Chen’s desk, a “bag of 1,160 Chinese New Year cards each containing a $5 bill” and “several designer (Chanel, Louis Vuitton, etc.) women’s bags, some of which appear to have authentic receipts. There is also an inventory of ornamental jewelry, none of which is characterized as either precious or semi-precious in nature.”
And what about gemcoins and claims of fabulous mineral wealth?
“Although the Receiver’s investigation is ongoing, at this point there is no indication of any legitimate Gemcoin or other viable business,” Seaman advised U.S. District Judge R. Gary Klausner. “There is also no indication the Receivership Entities had any significant sources of income other than monies raised from investors. Rather, based on documents located at the company headquarters and gathered from other sources, it does not appear that the assets described in online and written marketing materials actually exist. Instead of mines located around the world, millions of dollars in precious gems, and houses and cars available to be awarded to investors, the Receiver has found only costume jewelry and bins filled with rings of nominal value.”
Like alleged Ponzi-schemer Ming Xu at WCM777, Chen appears to have been involved in one way or another with dozens of business entities foreign and domestic.
Seaman has identified these to date, with his investigation ongoing:
Aborell Realty Advisors LLC
Aborell Realty Corporation
AFG Holding Company
Ahome Real Estate USA LLC
Alhambra Gardens LLC
Ally Investors LLC
Ameritra Inc.
Amkey Global
Ammine Inc.
Apollo Investors LP
Chenne Corporation
China-US Consultation Association
First Investment Holding Company
Great Wall Mountain LLC
Hills Garden Hotel Inc.
Hills Garden Hotel LLC
International Gemstone Mining Association
L’BE Group
LH Investment LLC
One World Currency Fund
Quail Ranch Golf Club LLC
Steamfont Capital Investment Group LLC
Steamfont Investment Group LLC
The New World Currency Fund
To Quang Duan
US Fovictor Jewel Investment LLC
US-China Consultation Association Liaison/Consulting Services
Weimar International Group Inc.
In California these days, Ponzi- and pyramid-schemers running offering frauds in which cash is siphoned and used to prop up a network of interrelated businesses may be targeting you if you have money or the dream of having money. And you may be particular target if you’re of Asian or Hispanic descent and if English is not your first language, making such schemes a form of affinity fraud.
The schemes may use shell companies and create a thicket of entities through which money may be laundered.
EDITOR’S NOTE: The story about Phil Ming Xu’s asserted cooperation with the government appears below the subhead. We’ll lead with the news of extension of the claims deadline for WCM777 victims.
If you’re a victim of the World Capital Market/WCM777 Ponzi- and pyramid scam shut down by the SEC last year, you now have until Dec. 24 — Christmas Eve — to file your claim.
The original claims deadline had been Nov. 9. On Oct. 26, court-appointed receiver Krista L. Freitag asked for an extension. U.S. District Judge John F. Walter of the Central District of California granted the request on the same day, extending the deadline until Dec. 24 and empowering the receiver to take other actions “to increase the number of investor claims submitted,” according to the court docket.
Among other things, the WCM777 case demonstrates the logistical challenges posed by cross-border fraud schemes operating over the Internet and involving cash transactions and potentially thousands of domestic and international bank accounts, including at least 100 linked to accused WCM777 Ponzi schemer Phil Ming Xu alone. Victims from multiple countries piled up potentially by the tens of thousands. Not all of them spoke the same language and, as in similar scams, not all of them paid WCM777 directly. Rather, they paid their “upline” sponsor, making the task of following the money and filing a claim more difficult. (See March 15, 2015, PP Blog story: “WCM777: More Theft And Money Laundering MLM-Style.”
Phil Ming Xu Says He Cooperated With Government
The opening of a Phil Ming Xu declaration originally filed under seal in April 2014. The seal was lifted at the request of an investor and after federal prosecutors did not object.
Messina is alleged to have come into possession of $5 million in proceeds from the WCM777 fraud, some of which allegedly was directed to International Market Ventures, a company operated by Gary Messina, his nephew. Gary Messina formerly worked as the chief information officer for the Bureau of Citizenship and Immigration Services, an arm of the U.S. Department of Homeland Security.
Messina has been ordered to return the $5 million, and IMV — the recipient of a transfer from Messina — is on the hook for $941,505 of it.
The effort to lift the seal on Ming Xu’s April 2014 filings began more than a year later, on Aug. 21, 2015, with a filing by an alleged victim of Xu from Daly City, Calif. This individual asserted he’d wired $2,000 to HSBC Bank in Hong Kong as his initial investment in WCM, a company that “represented itself as a leader in China based business and finance.”
Walter lifted the seal in an order dated Sept. 14, after the office of U.S. Attorney Eileen M. Decker of the Central District of California did not object. Precisely what Decker’s office is investigating remains unclear, although tens of millions of dollars are alleged to have flowed through WCM and related entities.
How dangerous is the world of HYIP Ponzis? Well, the Press Democrat of Santa Rosa, Calif., reported in January 2015 that investigators believe a murder might be tied to WCM777 and a companion scam known as Kingdom777.
Ming Xu also was concerned about being harmed, according to his now-unsealed motion from April 2014 to file under seal. He did not list a source of harm, but with so much money and so many tentacles involved, it could be anybody — from a person down the street to a person overseas.
From the motion (italics added):
“Xu is making this request because public disclosure of his cooperation with the government, including the U.S. Attorney’s Office for the Central District of California and the Securities and Exchange Commission, could jeopardize potential criminal investigations and the use of proactive covert operations. If Xu’s cooperation was disclosed, potential subjects of the ongoing investigations may take certain steps to hide evidence and proceeds of criminal activity, flee the jurisdiction or potentially harm Xu or his family.”
As for what Ming Xu said in his actual declaration docketed in May 2014 and now public . . .
If you were pushing WCM777 during hotel pitchfests and in your church and continue to have doubt WCM777 was a Ponzi scheme, put those doubts to rest. The huckster conceded the Ponzi in his declaration, while alleging Messina also knew it was a Ponzi.
From the declaration (italics added):
“Mr. Messina knew the $5 million transferred to him was proceeds of an illegal Ponzi scheme and is being investigated by SEC and knew I was sending him the money to avoid detection and seizure of the funds by the federal government. I transferred the $5 million to Mr. Messina’s IOLTA account because he warned me the government would seize the money as illegal proceeds of the Ponzi scheme. Mr. Messina told me on several occasions that WCM had serious criminal and civil liability issues, and that he expected federal agents to show up at our office in Pasadena, execute a search warrant, seize all the computers, and other business records of WCM’s business operations.”
Ming Xu continued (italics added):
On or about February 27, 2014, Mr. Messina sent me a document to sign stating that the transfer of the $5 million was a non-recourse loan payable in full in five years. I executed the loan document after being advised to do so by Mr. Messina. The money I transferred to Mr. Messina was not truly a loan and the two-line document purporting to be a loan agreement is false.
On or about March 20, 2014, I wrote and sent a letter to Mr. Messina, wherein I demanded return of the $5 million transferred from the ToPacific bank account into Mr. Messina’s IOLTA account for SEC settlement. Mr. Messina refused to return the monies.
I have subsequently learned that Mr. Messina has disbursed some of these funds to an entity, International Marketing Ventures, a company that is controlled and operated by Gary Messina, his nephew.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
It is unclear if Ming Xu currently is cooperating with the government and how much his asserted cooperation in April 2014 helped in pursuit of the WCM777 case or other cases.
What is clear is that the WCM777 story has included a series of bizarre developments — everything from a pledge of love for the people of Peru written on the letterhead of a suspended California company and a recitation of the importance of “blood moons” to the appearance of a “Jesus sword” and the apparent involvement of a former CIA operative.
Strangest of all, though, may be the Ming Xu claim he was taking over a company linked to the film “Innocence of Muslims” as part of a bid to “transform nations” and “train a group of Josephs to bless the world.”
Who constituted the “Josephs” and how they would “bless the world” always has been unclear, as has the nature of the purported “training” they required. This particular segment of the WCM777 narrative is deeply strange in other ways. For example, a former reputed member of the Mafia named “Dr. Bruno Caporrimo” is part of the narrative and a purported Ming Xu associate.
So is a purported California university known as the “Joseph Global Institute” of which Ming Xu purportedly was “dean” and Caporrimo reportedly was “chancellor.” As the PP Blog reported last year, one promo for the institute appeared to rip off video footage from Liberty University, a well-known Christian college in Virginia.
‘Joseph Global Institute’ Narrative Evolves
Something that curiously calls itself “Southwestern University” even though it uses the four-letter acronym SWIU (at www.swiu.edu) now claims online that it has absorbed the Joseph Global Institute. Best we can tell, SWIU stands for “Spirituality Wisdom Inspiration Understanding” and appears not to be affiliated with Southwestern University of Georgetown, Texas, which uses www.southwestern.edu. SWIU purports to have a campus at 4040 Saltburn Drive in Georgetown, but the city does not have such a street, the Georgetown Police Department told the PP Blog today. (The city of Plano, nearly three hours from Georgetown, has a Saltburn Drive.)
The Joseph Global Institute previously planted the seed it was affiliated with Harvard.
Some people have blamed the “Innocence of Muslims” film for the Sept. 11, 2012, attack on U.S. outposts in Bengazi, Libya, that killed Ambassador Chris Stevens and three other Americans. The issue has dogged former Secretary of State Hillary Clinton, now a Democratic candidate for President of the United States.
The WCM777 Ponzi-scheme story has proceeded through all sorts of tortured twists and turns, creating nonfiction that reads like fiction. Although it not unusual for bizarre narratives to accompany Ponzi schemes, the narratives surrounding WCM777 are particulary bizarre — and Americans should be concerned and follow developments closely.
UPDATED 9:44 P.M. EDT MARCH 14 U.S.A. How strange were things in the universe of WCM777, an MLM “program” accused by the SEC last year of pulling off an $80 million, cross-border Ponzi swindle?
Would you believe that a former CIA operative with two felony convictions ended up on the payroll?
Robert Sensi, the former operative, received $403,000 from companies linked to WCM777, according to an amended lawsuit filed against Sensi in U.S. District Court for the Central District of California.
WCM777 was operated by Ming Xu of Temple City, Calif. A forensic accounting has determined that the WCM777 entities used 77 domestic bank accounts and 23 foreign ones, according to filings by court-appointed receiver Krista L. Freitag.
Sensi was paid six times through ToPacific Inc. and one time through World Capital Market Inc. between Jan 30 and March 25, 2014, according to court filings.
Alleged payments to Robert Sensi from WCM777-related firms. Source: Screen shot from federal court filing.
Freitag is suing Sensi for return of the money. She initially sued him for the return of $385,000 (excluding interest and costs) in November 2014, alleging that he claimed he “used to work” for the CIA and was hired by WCM777-related companies to address complaints about the program by authorities in Peru, Taiwan and Dubai. She further alleged that Sensi was “well aware” that various WCM777-related business were engaged in a Ponzi scheme.
Sensi responded to the November complaint on Feb. 9. He did not expressly deny Freitag’s claim that he had claimed to have worked for the CIA, but he did deny the allegations he’d been hired by the Xu entities to address the concerns about WCM777 in Peru, Taiwan and Dubai. He further denied he had knowledge of a Ponzi scheme.
In his answer, Sensi admitted “services were rendered pertaining to Peru, Taiwan, and Dubai.” But he did not describe the services. On March 12, Freitag filed an amended complaint, asserting in the filing that Sensi had received $403,000 from the WCM777 entities, not the $385,000 specified in the original complaint.
Court records or published reports from the past two decades show that Sensi has been sentenced to prison twice — once for stealing millions of dollars from Kuwait Airways, a second time for a “Nigerian letters” scam in which a German businessman was swindled.
Larry J. Kolb, an author and former CIA agent, has written extensively about Sensi, his ties to the CIA and further ties to Republican politicians and Republican political causes, including fundraising.
Chapter 1 of “America at Night,” a 2007 book by Kolb, is available for free on Kolb’s website. The chapter references a meeting Kolb had in California with attorney “Vince Messina” in May 2004.
A snippet (italics added):
Vince was late for lunch, and I wish he’d never shown up. But, then again, all indications are if Vince hadn’t sucked me back into the secret world, somebody else would’ve. So I don’t hold it against him. Vince Messina. Washington tax and immigration attorney, international dealmaker, bon vivant. Based on what I know of his background, he has to be as old as the hills. But somehow he doesn’t seem it. Bald on top, short dark hair on the sides, olive skin, smiles a lot, constantly on the move. Vince is on the up and up, but spends much of his time in strange lands working for mysterious clients.
During the lunch meeting, Messina asked Kolb if he knew Sensi, a somewhat startling question, Kolb wrote.
After Kolb answered yes, Messina called his nephew, Gary Messina, a U.S. Department of Homeland Security official, to enable Gary to listen in, Kolb wrote.
Ten years later, in May 2014, Vincent Messina would become a relief defendant in the WCM777 Ponzi case. The SEC alleged that Messina was WCM’s asserted “general counsel” and had come into possession of $5 million from the fraud scheme.
More than $941,000 of the $5 million went to International Market Ventures (IMV), a company operated by Gary Messina, according to court filings.
U.S. District Judge John F. Walter declared the $5 million that flowed to Vincent Messina “ill gotten” and ordered it disgorged. IMV was held jointly liable with Vincent Messina for disgorgement of $941,505 of the $5 million sum.
“Many investors gave cash to the company and to their leaders (or upline sponsors) who then deposited the cash along with other investor funds.” — Krista L. Freitag, court-appointed receiver in the WCM777 pyramid- and Ponzi case, Feb. 27, 2015
EDITOR’S NOTE: Tens of millions of dollars allegedly flowed through WCM777 and related entities. At the bottom of this column, you’re going to read that an apparent apologist for accused Ponzi schemer Ming Xu is claiming the U.S. Securities and Exchange Commission is violating his human rights. Fair warning: You might want to have your vomit bucket at the ready . . .
UPDATED 10:31 A.M. ET U.S.A. Here’s how you rob the Christians in an offering fraud that involves the sale of tens of millions of dollars in unregistered securities across state and national borders: You start an MLM “program,” get it in the churches and on YouTube, permit “leaders” to gather money from their enraptured audiences and put out the word that $1,999 returns $3,200 in 100 days.
It might help if you have a storefront in, say, Peru. It also might help if you have, say, promoters willing to tout the “program” in webinars and from a “function room in a hotel in Massachusetts.” At the same time, it might help if you have promoters willing to steal the intellectual property of the “Rocky” movie franchise to drive dollars into any of the “77 domestic and 23 foreign bank accounts” you’re using. (The bank-account information is sourced from a forensic accounting by Krista L. Freitag, the court-appointed receiver in the WCM777 case. It was filed Feb. 27 in U.S. District Court for the Central District of California and is the basis for part of this PP Blog column. Links to exhibits are provided near the bottom of the column.)
Along the way, it might help if you follow the standard blueprint from one MLM scam after another that calls for you to disarm skeptics by dropping the names of plenty of famous businesses, perhaps with the aim of hoping your “leaders” will follow your lead and do the same thing. Damn! Wouldn’t you know it! They did exactly that! (See link in first paragraph of this story.)
It might be particularly helpful if you make a calculation that a bank such as HSBC in Hong Kong might frown upon a subpoena issued in the United States and clam up when it comes to assisting the receiver appointed to your case after the SEC moves in.
“To date, HSBC-Hong Kong has not responded to the Receiver’s requests/subpoena,” Freitag advised U.S. District Judge John F. Walter in her forensic accounting.
Or maybe HSBC doesn’t want to open a new can of worms after it settled with the Justice Department in December 2012 by forfeiting $1.256 billion and entering into a deferred-prosecution agreement after it was accused of “willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating [the International Emergency Economic Powers Act] and violating [the Trading with the Enemy Act].”
“Vincent,” the alleged Ming Xu email to Messina began. “We have lots of members for our social capital company, WCM777 in Brazil. They paid us in Brazil. How to move the money legally from Brazil to USA or Hong Kong?”
Whether Messina provided guidance on how to get money out of Brazil and move it to the United States and Hong Kong is unclear. Ming Xu’s email, however, suggests that WCM affiliates in Brazil, like their U.S. counterparts, also were collecting money directly from MLM recruits and that Ming Xu needed to find a way to get the cash under his control.
Freitag says she has traced $5 million in Ming Xu proceeds to Messina, and Walter ordered Messina to return it. Only $2.133 million has been returned, Freitag says.
Messina wasn’t just a lawyer; he was a WCM777 “insider,” the receiver alleges.
Because Freitag has access to certain WCM777 banking records, she has been able to determine that “$29,404,996” went to HSBC in Hong Kong “for 7 Receivership Entities and 1 individual.”
Ming Xu used numerous companies as part of his overall money-moving scheme, the receiver contends.
Here’s how she describes one transaction that occurred after WCM777 got in trouble with the Massachusetts Securities Division in late 2013 and agreed to return money to the fleeced investors in that state (italics added):
“ . . . rescission payments were made to WCM777 investors in accordance with the Consent Order issued by the Massachusetts Securities Division. Bank records show that funds from ToPacific bank accounts were used to make payments to the Massachusetts WCM777 investors.”
“ToPacific” was a company in the WCM777 fold.
How circuitous were things within WCM777 (italics added):
“the payment methods with which investors payments were made varied from third-party electronic disbursement (primarily Global Payout) to physical checks written directly on Receivership Entity bank accounts. There does not appear to be any consistency in the bank accounts from which investor checkswere written. Rather, bank records indicate payments were made to investors from whichever accounts happen[ed] to have funds available at the time the payments were made.”
The FBI has been warning about shell companies involved in crime and how banks and payment processors can get caught up in it since at least 2010. Even so, the WCM777 entities somehow managed to open at least 100 bank accounts while also gaining access to bank wires and at least one payment processor.
Here’s how Freitag describes the overall scheme (italics added/light editing performed):
“The Receivership Entities’ primary source of income was investor deposits, which was also the primary source of virtually all funds distributed to the investors; [t]he vast majority of the Receivership Entities’ business activities revolved around raising and distributing investor funds; [i]nvestor funds were so materially commingled between and among the Receivership Entities that the entities operated as a unitary enterprise, rather than as separate entities.”
And while WCM777 recruits thought they were joining an MLM “program,” their money financed the purchases of two golf courses in California, several pieces of real estate, including one with live koi, and a series of purported investments elsewhere. These allegedly included jewelry or gold, oil and gas — and even piles of “jeans, shorts, pants and leggings” stored by Ming Xu’s sister.
Ming Xu’s Mom allegedly got a new house, but not until after the cash to purchase the home had passed through bank accounts linked to Ming Xu and his sister.
The Ming Xu Twitter account, which once claimed all would become known when “blood moons” appeared in the sky and published a picture of Apple co-founder Steve Wozniak, whom Ming Xu had corralled at a networking event in California, now includes a link to a website that claims (italics added):
U.S. Securities and Exchange Commission was wrong to close down the company and confiscate about $43M cash asset and oil reserve asset of $50M. It has violated the company’s legal interests and human rights of Ming Xu.
Read the exhibits from Freitag’s forensic accounting. (Here’s one; here’s the other.)
As noted above, you might want to have a vomit bucket handy if you’re contemplating how certain MLM “programs” are operating these days in the era of epic white-collar fraud and while terrorism, beheadings and attacks on police are occurring.
EDITOR’S NOTE: The MLM “program” known as Wings Network is alleged to have operated through two business entities that used the name “Tropikgadget.” The SEC’s case, announced Friday, is filed in U.S. District Court for the District of Massachusetts. That’s the same venue in which the agency’s epic TelexFree case was filed last year.
There can be no doubt — zero, none — that vulnerable immigrant populations in Massachusetts are being targeted in one MLM scheme after another. Speakers of Spanish or Portuguese may be particularly at risk. It’s also apparent that Asian, Haitian and African population groups are being targeted and that the risk is not unique to Massachusetts residents. The WCM777 “program,” for example, brushed through Massachusetts, where it was aimed at speakers of Portuguese and was stopped by the Massachusetts Securities Division in late 2013.
MSD also has squared off against a “program” known as EmGoldEx. In this scam, investors were promised returns of up to 1,105% and photos of children “getting paid” were used as lures to drive dollars.
One of the Tropikgadget entities — Tropikgadget Unipessoal LDA — allegedly was set up in the Madeira Free Trade Zone in November 2013 and later abandoned. Madeira, whose largest city is Funchal, is a North Atlantic Portuguese archipelago slightly closer to continental Africa than continental Europe. It is worth pointing out that the SEC publicly thanked both Portugal’s securities regulator (Comissão do Mercado de Valores Mobiliários) and the office of Portugal’s Attorney General (Procuradoria-Geral da República of Portugal) for assistance in the American probe.
The other Tropikgadget entity — Tropikgadget FZE — appears to have been set up in Sharjah, United Arab Emirates, also in November 2013. Sharjah, on the Persian Gulf, is the UAE’s third most populous city, behind Dubai and Abu Dhabi, according to WikiPedia. The paper presence of these companies at geographic points on the North Atlantic and the Persian Gulf more than 4,300 miles away from each other and how they enlisted Massachusetts residents to do their bidding probably is a story unto itself, but it is a story for another day. What’s news today is that Wings Network was operating in Massachusetts at Ground Zero for TelexFree after the TelexFree action and, like TelexFree, is accused of fleecing vulnerable immigrant populations.
At least seven of the 12 charged Wings Network promoters had addresses in Marlborough, Mass. This is potentially important because TelexFree’s U.S. operations were based in Marlborough. TelexFree operated through various U.S. entities and a Brazilian entity known as Ympactus. Brazil-based TelexFree/Ympactus figure Carlos Costa has TelexFree business partners in Massachusetts, waved the flags of Madeira and Portugal in a 2013 TelexFree promo and invoked God in appeals to support TelexFree. Sann Rodrigues, a charged TelexFree promoter associated with an MLM entity known as iFreeX that also operated in Massachusetts and has come under scrutiny, has claimed “God” invented MLM and “binary.” Rodrigues, according to the SEC, is a recidivist pyramid-schemer.
There’s also evidence that the Zeek Rewards “program” taken down by the SEC in 2012 targeted vulnerable people.
**____________________**
Funchal, Madeira, to Sharjah, UAE. Source: Google Maps.
UPDATED 11:32 A.M. ET U.S.A. The SEC’s “Wings Network” case announced Friday is the latest example of the MLM world’s intolerable capacity to deceive. Though the facts alleged by the SEC are alarming, the action against two companies, three officers and 12 promoters is not an indictment of the trade. Indeed, the agency worked with the Direct Selling Association to expose one of the most mind-numbing lies.
But you still have to wonder if MLM and network marketing in general are on the road to perdition. This is because the horrifying abuses and thematic lies that propped up Wings Network are so common across the larger MLM trade that one can be forgiven for wondering if targeting vulnerable population groups and institutionalizing prevarication is Rule No. 1.
How DSA Got Involved In The Wings Network Case
Adolfo Franco, the trade association’s executive vice president and chief operating officer, sits at the intersection of commerce and government affairs. He’s an old political hand and has worked as a Republican strategist and assistant administrator for Latin America and the Caribbean for the U.S. Agency for International Development (USAID). Franco wants the MLM industry to prosper, and he wants to make sure he has a wholesome story to tell in government corridors.
Wings Network didn’t give him one, to be sure.
You see, Wings Network is accused by the SEC of using the DSA’s name to sugarcoat a creeping, cross-border fraud scheme that ultimately gathered at least $23.5 million. What actually happened, according to the SEC and an affidavit prepared by Franco, is that DSA received an “e-mailed request” for a DSA membership “application.” It then sent out the application, which was never returned. Not only was the application not returned, according to the affidavit, DSA never even heard back from Wings Network.
What allegedly happened next will surprise no one who follows the bizarre dramas MLM has been serving up for the past several years. This simple request for a membership application was conflated by Wings Network and affiliates as an endorsement by DSA of Wings Network.
By April 2014, according to the SEC, DSA became aware of this ribald deception. The association reacted by sending Wings Network a cease-and-desist letter, directing Wings Network and affiliates to stop claiming membership in DSA and stating point-blank that “any indication that Wings Network is a member of the DSA is fraudulent.”
Multiple Layers Of Deception
Could it get worse? Sure. Wings Network hucksters also are accused of duping participants into believing the “program,” which advertised guaranteed income, had the additional benefit of insuring them against loss.
Anyone who’s been following the unbelievably noxious example of TelexFree can tell you that the same thing allegedly happened there. The same thing currently is happening in a “program” known as “MooreFund,” and it previously happened in the AdSurfDaily Ponzi scheme in 2008 broken up by the U.S. Secret Service.
The MLM scammers look for a tiny kernel of truth and then wrap a lie around it: A “program” may have a bank account, for example. Money in the account may be insured by the FDIC in the event of a bank collapse.
From this, the “programs” themselves and affiliates conflate a fantastically malignant construction by which no one can lose money because of the “insurance.” It is just a contemptible lie. It’s also one that has been bettered by new versions of the lie. These versions — as is the case with Wings Network, TelexFree and MooreFund — hold that private insurers or even software companies such as Symantec have the companies’ backs and that these private insurers never would do business with a fraud scheme.
Supplementing this lie are companion lies — advanced by Wings Network, TelexFree and others — that a business registration with a Secretary of State or equivalent agency domestically or overseas is proof that there is no underlying scam. (One need only to look at Bernard L. Madoff Investment Securities LLC to understand just how preposterous this type of lie is.)
Here’s the thing: The type of lies advanced by Wings Network are not unusual for “opportunities” using an MLM or network-marketing business model. DSA happened to be the victim of brand-leeching and runaway disingenuousness in this case, but other cases show it’s hardly alone. Even the names of the U.S. government and various U.S. agencies have been dropped in this fashion.
Not even the “brands” of God and Jesus Christ are off-limits in the MLM sphere. Sometimes an asserted endorsement by a deity is supplemented by suggestions that living legends of entertainment and business have piled aboard a “program” train.
This is a short summary of these tactics as employed by recent MLM or network-marketing schemes that either cratered on their own or collapsed after regulatory intervention. (Note: Some background information also appears in the summary):
WCM777. Operated by Ming Xu. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Dropped names of God, “Yahweh,” Jesus Christ, Al Gore, Steve Wozniak, Sylvester Stallone, “Rocky,” Eric Garcetti, Siemens, Goldman Sachs, the Denny’s restaurant chain and many, many more famous companies. (As many as 700.) Basic sales message: Send us money. Get rich. Estimated haul: $80 million in less than a year. Estimated number of victims: tens to hundreds of thousands.
TelexFree. Operated by James Merrill, Carlos Wanzeler and Carlos Costa. Largely targeted people in the United States and internationally who spoke Spanish, Portuguese and English. Global penetration at an almost unfathomable level. Appears to have created black market and back-alley economy in Massachusetts. Became subject of undercover investigation by the U.S. Department of Homeland Security. Dropped names of God, Jesus Christ, MLM Attorney Gerald Nehra, President Obama, Massachusetts Commonwealth Secretary William Galvin, the SEC, the U.S. Attorney General. Basic sales message: Send us money. Get rich. Estimated haul: $1.82 billion in about two years. Estimated number of victims: hundreds of thousands to more than 1.8 million.
Zeek Rewards. Operated by Paul R. Burks. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Global penetration at an almost unfathomable level. Affiliates targeted Christians. Dropped names of the Association of Network Marketing Professionals, MLM attorneys Gerald Nehra and Kevin Grimes, plus MLM consultants Keith Laggos and Troy Dooly. Basic sales message: Send us money. Get rich. Estimated haul: $897 million in less than two years. Estimated number of victims: hundreds of thousands. “Clawback” cases to return alleged ill-gotten gains may affect 10,000 or more affiliates.
eAdGear. Operated by Charles Wang and Francis Yuen. “Primarily” targeted “investors in the U.S., China, and Taiwan,” according to the SEC. Dropped names of Google, Yahoo, Target Corp., Lbrands (Victoria’s Secret), Avon, Sears, Nordstrom, eBay, QVC, HSN, J.C. Penney, Banana Republic, Dillard’s, Kohl’s, Macy’s, Amazon.com, Men’s Wearhouse, Kmart, New York magazine and many, many more. (As many as 253 brands were abused.) Basic sales message: Send us money. Get rich. Estimated haul: $129 million. Estimated number of victims: tens of thousands.)
Wings Network now stands accused of targeting “many members of the Brazilian and Dominican immigrant communities in Massachusetts” in a combined pyramid- and Ponzi scheme that raised at least $23.5 million.
If that sounds familiar, perhaps it is because the TelexFree “program” was accused last year by the SEC of doing the same thing in the same place. Like Wings Network, TelexFree reached across national borders to plunder investors. Recent filings by the court-appointed trustee in the TelexFree bankruptcy case — and these filings are subject to amendment in part because there are more than 1 trillion disparate data points involved in the reverse-engineering of TelexFree — list the “nature” of the company’s business as “pyramid scheme.”
Other filings by Stephen B. Darr, the trustee, suggest that TelexFree gathered more than $1.8 billion in about two years of operation through a series of entities in the United States and an affiliate in Brazil known as Ympactus. The dollar volume alone is simply mind-boggling, more so when one considers the records so far denote “1,894,940 Participant names, spanning 35,110 pages.”
Some readers who sift through the TelexFree material will need a name-pronunciation guide and a world atlas. TelexFree didn’t just mow down Americans. The records suggest, for example, that the “Embassy Of Nigeria P O Box 1019 Addis Ababa Ethiopia” has contacted Darr. One document lists “Baker Island,” which WikiPedia says is an uninhabited Pacific atoll tended to by the U.S. Fish and Wildlife Service, as the “country” of an investor.
It is clear that TelexFree had investors (at least) in Argentina, Australia, Belarus, Belgium, Bolivia, Cambodia, Canada, Chile, China, Colombia, Croatia, Cyprus, Dominican Republic, Ecuador, Egypt, El Salvador, France, French Polynesia, Germany, Ghana, Guatemala, Honduras, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Jordan, Kenya, Lebanon, Luxembourg, Malaysia, Mexico, Moldova, Netherlands, New Zealand, Nigeria, Norway, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Rwanda, San Marino, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Tanzania, Thailand, Togo, Turks and Caicos, U.S. Virgin Islands, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, “Unknown” country, Uruguay, Uzbekistan and Venezuela.
MLM in this form is “fraud creep” running wild. It is posing dangers to individual participants, including those who can ill afford to take a financial hit. Beyond that, it is posing a danger to the U.S. financial infrastructure.
Economic security is national security, friends. These MLM HYIP “programs” pose an untenable security threat. Many of them are shrouded in multiple layers of mystery.
DSA Needs To Do More
It is good to see that the DSA worked with the SEC on the Wings Network case. It would be better yet if the organization studied why so many MLM HYIPers appear to move from fraud scheme to fraud scheme to fraud scheme.
Where did these people start their “MLM journeys?” Did they start at, say, Herbalife or Amway after buying into the dream and the attendant hype? And did they get churned by those “traditional” MLMs, only to become shark bait for the HYIPs?
With so many of the scams selling the message that it’s nearly impossible to make money in “traditional” MLMs and that 97 percent of people who latch onto the MLM dream of riches emerge as losers or highly vulnerable treaders of water in rough seas, isn’t it time for those traditional MLMs to question whether they are creating the refugees and providing the training for the targeting?
Herbalife is not an HYIP. But it sells a dream and has a high burn rate. The most recent scheme to sell against traditional MLM is “Achieve Community,” taken down by the SEC last month.
Whether or not “the 97 percent” claim is precisely true is immaterial. What’s material is the ready availability of vulnerable population groups and refugees from “traditional” MLMs.
TelexFree even may have channeled Herbalife, calling its cheerleading sessions “extravaganzas” and latching onto the sport of soccer.
Stemming this hurtful tide should be a top priority at DSA. The wave of scams is not docile. It very well might be eroding protective shores in violent fashion and creeping up on the road to perdition.
URGENT >> BULLETIN >> MOVING: (5th Update 5:35 p.m. ET U.S.A.) The “Achieve Community” money-cycling scheme is under investigation in Colorado.
“We do have an open investigation,” said Lillian Alves, Colorado’s Deputy Securities Commissioner.
It is the first official public confirmation that Achieve Community, a Ponzi-board program that claims to turn $50 into $400, is under investigation in the United States. In Colorado, the Division of Securities operates as part of the Department of Regulatory Agencies (DORA).
In a story earlier today, BehindMLM.com reported that Colorado appeared to be setting the stage to open a probe. Alves confirmed the investigation to the PP Blog at 4:23 p.m. today.
For the time being, she said, Colorado would not provide additional details. In January 2014, Colorado issued a cease-and-desist order against the WCM777 “program” operated by Ming Xu. The U.S. Securities and Exchange Commission later accused Xu of orchestrating a massive fraud scheme.
Achieve Community purportedly is operated by Kristi Johnson of the Denver area and Troy Barnes of the Detroit area.
At least one Achieve Community promoter recorded an ad for Achieve and two other Ponzi-board “programs.” The ad included footage from the SEC’s website. The SEC declined Jan. 12 to comment on the ad, which implied Achieve would have no trouble with securities issues.
Colorado officially confirmed a securities investigation 10 days later.
The buyer of the property, Xiaomei Deng, is the mother of Xu and Wang, Freitag said in court filings.
Wang is associated with an entity known as MaNa Fashion, Freitag alleged last month. She further alleged that Xu, who did not initially disclose that Wang was his sister, effectively had transferred $1 million to her in February through an entity known as ToPacific Inc. Wang likewise did not initially disclose that Xu was her brother.
Freitag now has discovered that Deng is the mother of Xu and Wang, Freitag alleged.
MaNa initially tried to wire the $730,000 on March 13 to purchase the property, but the wire was rejected, according to Frietag. One day later, on March 14, MaNa “initiated a wire in the same amount of $730,000 from MaNa Fashion’s account to Deng’s personal checking account at East West Bank . . . ” Freitag alleged.
“On the same day the $730,000 was wired to Deng, Deng transferred $700,000 of those funds” to an escrow company. She later transferred additional sums to complete the purchase of the property, Freitag alleged.
Tens and tens of thousands of MLMers appear to have joined the Ming Xu WCM777 scam, which the SEC described in March as a “worldwide” Ponzi- and pyramid scheme that had gathered tens of millions of dollars by posing as a “cloud” services business.
The WCM777 tale has been marked by a series of bizarre events, including a declaration of love to the people of Peru that was written on the letterhead of a suspended California company linked to Xu.
With a storyline that has included claims that $14,000 would turn into $500,000 in a year, a declaration of love to the Peruvians it had fleeced and additional claims that all would become clear when “4 blood moons” appeared in the sky in April, the WCM777 “cloud computing” MLM scam has served up a symphony of the bizarre. For now, at least, the storyline only is getting stranger.
Here’s the latest . . .
Very early on in her investigation of the WCM777 MLM “program” and the financial activities of accused Ponzi schemer Ming Xu, court-appointed receiver Krista. L. Freitag discovered that a Xu/WCM777-linked entity known as ToPacific had transferred $1 million to an entity known as MaNa Fashion.
This transfer, according to court filings, occurred “on or around” Feb. 28. On March 28, the SEC announced pyramid- and Ponzi charges against Xu. Freitag was appointed receiver.
Shortly thereafter, according to court filings, Freitag tried unsuccessfully to contact and to serve a subpoena on MaNa operator Sue Wang, according to court files.
Freitag, however, was able to identify Wang’s accountant, who provided an email address for Wang.
The receiver’s counsel then “e-mailed Ms. Wang a copy of the subpoena and a demand for information,” according to court filings. On May 23, nearly two months after the SEC action and Freitag’s appointment as receiver, “Ms. Wang finally acknowledged the Receiver’s attempts to contact her.”
Wang “thereafter engaged counsel to respond to the subpoenas,” according to the receiver. “After further delays and demands for additional time, Ms. Wang produced limited documents on July 18, 2014.”
In court filings, Freitag now says MaNa’s Wang is Ming Xu’s sister and that Ming Xu did not disclose this during an interview with the receivership. In fact, according to Freitag, the receivership did not learn this until September 2014.
That’s not the only surprise.
Freitag now finds herself seeking court approval to liquidate apparel in bulk as a means of recovering funds for WCM777 participants affected by the scheme. That’s because Freitag, on Oct. 13, met with Wang and her counsel and visited “two 10′ x 20′ storage sheds” that included an estimated 100,000 garments.
Wang has acknowledged the apparel belongs to the receivership, Freitag says.
These garments mostly were “stored in disorganized fashion, with much of the articles of apparel stuffed in large plastic bags and boxes with limited recognizable form of organization either by style, size or other methods generally acceptable in the [fashion] industry.”
The items, Freitag says, are “non-branded” and will not fetch the $1 million Xu supplied his sister to acquire them. The best that can be hoped for is between $100,000 and $250,000, but their value will decrease over time because the merchandise is aging. “Most” of it was acquired for “previous seasons.”
It might be helpful to sell them in bulk ASAP with the holiday season quickly approaching, Freitag says.
So, she has asked the judge for permission to do exactly that. And, Freitag notes that she “has direct experience running a design and wholesale footwear and accessories company, and will utilize that expertise and experience to market the Garments and negotiate with potential buyers for the highest per unit price.”
It also turns out that Wang was associated with two other entities that received another $1 million combined from Xu. These were identified as JJ Sparkles Inc. and Yuanhao Inc.
“These entities are interrelated as their public registrations with the California Secretary of State show that Ms. Wang (who is also named as a salesperson for MaNa Fashion) is the named agent for service of process for both MaNa Fashion and JJ Sparkles, and Yuanhao’s registered business address is that of JJ Sparkles.”
Because Ming Xu also bought golf courses, the receivership also has found itself in the golf business. And because Xu, the purported cloud-computing chieftain, used WCM777-linked funds to acquire real estate, the receivership also has found itself in the property-management business.
The receivership even became a part of the fish-management business when Freitag discovered “live Koi” at a WCM777-linked property in California.
Ming Xu is called “DPMX” in this purported contract with a lobbying firm. Source: Federal court files. Red highlight by PP Blog.
BULLETIN: (7th update 6:59 p.m. EDT U.S.A.) The court-appointed receiver in the SEC’s WCM777 pyramid- and Ponzi-scheme case says she is seeking court approval to pursue claims against a California lobbying firm that allegedly received $750,000 from accused scammer Ming Xu and performed no work.
Ming Xu also is known as Phil Ming Xu and Dr. Phil Ming Xu. The receiver, Krista Freitag, has shown a federal judge a document that purports to be a contract between Governmental Impact Inc. (GII) and Xu, who is described in apparent shorthand as “DPMX” in the contract.
James Dantona is listed on the contract as the president of GII. Under the contract terms, either party could terminate the agreement with 30 days’ notice and no refunds would be given Xu by GII.
“DPMX shall not be entitled to any refund for any reason,” the document allegedly specified. Given the nature of the allegations against Xu and WCM777, such an agreement could have deepened the Ponzi.
Xu was photographed in 2013 with celebrities such as former Vice President Al Gore and Apple co-founder Steve Wozniak. He also purportedly was listed as a member of the Inauguration Committee of Los Angeles Mayor Eric Garcetti, son of the famed prosecutor Gil Garcetti.
Filings by Freitag suggest Xu, through the 2014 GII contract, was seeking to buy access to American politicians. It is not unusual for Ponzi schemers to seek to surround themselves with politicians and to use politicians and famous companies to create a veneer of legitimacy. WCM777 and its purported parent — World Capital Market Inc. — also claimed ties to scores of famous companies.
One of them — Siemens — specifically refuted WCM777’s claims in October 2013, during a period in which WCM was being pitched in California churches.
Some of the money Xu directed toward GII ended up at a company called ZHB International Corp. and was used to pay for the personal mortgage of ZHB’s Zayda Aberin, Freitag contends.
Through GII, Freitag contends, Xu sought help in “locating and securing legislators, obtaining access to such legislative leaders in California and Washington, D.C., and communicating and recommending advocacy strategies and effective public relations programs with the government.”
Xu’s plan appears to have backfired. After actions by Massachusetts and California, the SEC sued Xu, alleging he was at the helm of a massive international fraud.
UPDATED 3:11 P.M. EDT U.S.A. A report dated today at ShanghaiDaily.com says an individual “surnamed Xu” and associated with “World Capital Market Inc.” is “now in custody” after a police action against a “pyramid scheme” in China.
