Silent Coup? Regulators Confront False Nation-States In Burgeoning Battle Against Large-Scale Ponzi Schemes

Have the brick-and-mortar media largely missed an important political, legal and financial story — one that features nation-states being declared within U.S. borders and satellite, U.S.-style democracies being declared on paper overseas in a bid to skirt securities laws and financial regulations and make Ponzi schemes “legal?”

It seems so. There has been spot coverage in local newspapers, but no major, sustained coverage on a national scale — not even when bogus “Supreme Courts” were being founded in Utah doughnut shops, bogus “attorneys general” were being appointed in North Dakota and entities that did not submit to the authority of the U.S. government were attempting to force the U.S. Marshals Service to serve fraudulent court documents calling for the arrest of legitimate federal judges.

A disturbing trend is emerging — and it is not easy to peel back layers of the onion despite the fact enormous sums of money are involved.

In the weeks prior to the seizure of at least $79 million last year from Florida-based AdSurfDaily Inc. and related autosurf companies in a wire-fraud and Ponzi scheme probe, the Securities and Exchange Commission shut down a Las Vegas-based operation that thumbed its nose at U.S. law by falsely claiming it derived its Nevada powers from a sovereign “Indian” tribe based in North Dakota.

Regulators claimed a fraud of at least $27 million was under way in the Nevada case.

Gold-Quest International, which purported to be registered in Panama but was conducting operations from Las Vegas, was conducting a Ponzi scheme in the United States and Canada that promised a yearly return of 87 percent, the SEC said.

“Gold-Quest and its owners claim they are not subject to the jurisdiction of the United States or Canada because they are members of the Little Shell Nation Indian tribe, purportedly headquartered in North Dakota,” the SEC said in May 2008, about three months prior to the seizure of ASD’s assets.

“However,” the SEC continued, “the Little Shell Nation is not in fact recognized as a sovereign tribe or nation.”

The Nevada litigation was bizarre, and featured the presence of a nonlawyer who had been appointed “attorney general” of the tribe, and a non-notary public who had “notarized” documents used by the tribe but had no legitimate credential to do so.

“You are in an imaginary world where you belong to an unrecognized Indian group,” a federal judge advised Robert Neilson Baker, the nonnotary notary.

It only got stranger from there.

Despite the fact one of the uttered defenses in the case was that the tribe was immune to U.S. law and thus was permitted to sell unregistered securities, one of the defendants left the court room to feed a parking meter, according to the Las Vegas Review-Journal.

Why even bother to plug a meter if your aim is to return to the court room to explain why the law does not apply to you?

A common thread in recent securities litigation is that the U.S. government has no authority to act over anyone and that the government is guilty of interference with commerce even if the commerce is illegal.

In November 2008, California resident Curtis Richmond attempted to intervene in the AdSurfDaily case, but his initial efforts to have court submissions docketed were unsuccessful. Richmond ultimately succeeded in having pro se submissions from his Utah-registered religious entity — Pacific Ministry of Giving International — entered into the record, but the filings did not tell the entire story.

It turned out that Richmond, too, was associated with an “Indian” tribe — one a federal judge had declared a “complete sham” in a separate case  — and Richmond had purported to be a sovereign being who answered only to Jesus Christ.

Richmond’s tribe was known as Wampanoag Nation, Tribe of Grayhead, Wolf Band. It had harassed public officials in Utah by filing enormous fraudulent judgments against them, including a judgment of $250 million against a county prosecutor. Richmond himself tried to force U.S. District Judge Stephen Friot to recuse himself from the Utah case, claiming the judge owed him $30 million and could not make a fair decision.

Friot ruled that Richmond and other members of the bogus tribe had engaged in racketeering against the public officials, ordering them to pay more than $108,000 in damages and costs to the injured parties.

Richmond appealed the decision in the Utah case, claiming poverty. Months later he filed court documents in the ASD case that declared Pacific Ministry of Giving International had $41,000 at stake in the autosurf.