PatrickPretty.com

Month: November 2014

  • The Monumentally Alarming Tale Of ‘Secure Investment’

    “Secure Investment lured customers by creating its own good reputation and by publishing a seemingly successful trading record on its elaborate website. It was all a lie. The company’s claims to have offices and a large staff were also false. At least some of its so-called customer testimonials were actually delivered by actors.” — Bloomberg News, Nov. 13, 2014

    From promo for 'Secure Investment' on YouTube.
    From promo for ‘Secure Investment’ on YouTube.

    Dear Readers,

    We’re about to provide you a link to a Bloomberg News story on a purported Forex-trading entity known as “Secure Investment.” Get ready: You’re about to read the maximum tale of how a nation’s security and faith in the legitimate marketplace can be undermined by criminals (or worse).

    We did a quick check. Sure enough, Secure Investment had a presence on Ponzi boards such as TalkGold and MoneyMakerGroup before it disappeared in May, possibly with $1 billion or more. At first glance, the Ponzi-board penetration appears not to have been particularly deep. Still there are “I got paid” posts, including one dated June 18, 2013. It says, “*** Great News ! *** You have successfully received money from a registered SolidTrust Pay member! Keep this email as your receipt.”

    The purported SolidTrustPay sender’s email address was from Yahoo, not from the SecureInvestment.com web domain.

    SolidTrustPay operates from Canada and has been associated with more scams than one has time to count.

    Congressional investigations over Secure Investment are a virtual certainty. The SEC, just yesterday, announced that yet-another scam trading on social media had plundered investors with a fantastical narrative about “1.5% daily returns for 100 days” and accompanying artifices to pull it off — things such as fake business addresses, fake names, fake domain registrations. That “program” was called “Profits Paradise” and allegedly was operating out of India.

    “Profits Paradise” also had a presence on the Ponzi boards.

    In terms of fantastical constructions, Secure Investment crushes Profits Paradise. As things stand, persons or persons unknown have consumed wealth on an epic scale.

    Read the Bloomberg News story, which is being widely quoted by the financial media today. A YouTube promo for Secure Investment appears below. Please note the link to the promo is featured in the very first MoneyMakerGroup post about Secure Investment. The MoneyMakerGroup category was “MoneyMaking: Markets, Real Estate, Banking, and Investments » Forex » Technical & Fundamental Analysis, Daytrading, & Other Strategies.”

  • REPORTS: Paul Burks, Alleged Operator Of $850 Million Zeek Rewards Ponzi, Pleads Not Guilty And Is Released On $25,000 Unsecured Bond

    Paul R. Burks
    Paul R. Burks

    Paul Burks pleaded not guilty this morning and has been released on $25,000 unsecured bond, The Dispatch newspaper of Lexington, N.C., is reporting.

    Burks, 67, was the alleged operator of Zeek Rewards, which federal authorities have described as an $850 million Ponzi- and pyramid scheme.

    He was indicted last month on charges of wire and mail fraud, wire- and mail-fraud conspiracy and tax-fraud conspiracy. In the civil portion of the case, Burks has consented to a civil judgment of $600 million, according to court filings.

    The low bond amount may suggest Burks effectively has been wiped out by his “program,” which prosecutors said created hundreds of thousands of victims and hundreds of millions of dollars in losses. It is believed Burks has cooperated with civil authorities investigating Zeek. Whether he is cooperating with criminal investigators is unclear.

    The office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina did not immediately respond to a request for comment from the PP Blog this morning.

  • URGENT >> BULLETIN >> MOVING: SEC Charges Alleged HYIP Operators Who Ran ‘Profits Paradise’ From India; Scammers Allegedly Used Fake Names And Engaged In Wanton Deception

    From an SEC exhibit in the Profits Paradise complaint.
    From an SEC exhibit in the Profits Paradise complaint.

    URGENT >> BULLETIN >> MOVING: (Updated 9:33 p.m. ET U.S.A.) The SEC has charged two Indian nationals with running an HYIP scheme known as “Profits Paradise” that reached into the United States and offered “extraordinary” returns of up to 480 percent in 240 days, plus “compounding.”

    As is typical in HYIP schemes, the “program” gained a head of steam on social media, the SEC charged. (A quick Google search shows that ProfitsParadise also had a presence on well-known Ponzi forums such as TalkGold and MoneyMakerGroup.)

    ProfitsParadise operated between April 2013 and early February of 2014 and offered “guaranteed” payouts, the SEC alleged.

    The scam “invited investors to deposit funds that supposedly would be pooled with money from other investors and traded on foreign exchanges as well as in stocks and commodities,” the SEC alleged.

    Pitches on Facebook, YouTube and Twitter were “pervasive” and resulted in investors being exploited, the SEC charged.

    The named respondents are Pankaj Srivastava of Mumbai and Nataraj Kavuri of Hyderabad. They also are accused of promoting the scam through Google Plus.

    Srivastava “used the pseudonym “Paul Allen,” the SEC charged. Kavuri called himself “Nathan Jones.”

    It was not immediately clear from the complaint whether the HYIP scammers intended to trade on the name of Microsoft co-founder Paul Allen. HYIP schemes, however, are infamous for trading on the names of prominent individuals.

    “Srivastava and Kavuri used excessive secrecy in their effort to swindle investors through social media outreach and a website that attracted as many as 4,000 visitors per day,” said Stephen Cohen, associate director of the SEC’s Division of Enforcement.  “Our investigation stopped the constant solicitations once the website disappeared, and successfully tracked down the identities of the perpetrators behind those fraudulent solicitations.”

    Bogus names also were used to register websites, the SEC charged.

    Srivastava caused the Profits Paradise website to be registered through GoDaddy in the name of “Jane Roe” of Seattle, the SEC charged.

    “Jane Roe is a fictitious name, and there is no connection between Profits Paradise and the dwelling at 300 Boylston Ave E., in Seattle, Washington, or its residents,” the SEC charged. “The telephone number provided to GoDaddy is a toll-free number for a conference call center that is unrelated to Profits Paradise,” the SEC charged.

    Meanwhile, a Gmail email address linked to the supposed Seattle street address was associated with IPs “located in India, not Seattle,” the SEC charged.

    At the same time, the agency charged, “Kavuri disguised Profits Paradise’s physical location by providing the false ‘whois’ data, indicating that Profit Paradise’s operations were within the United States when they were not.”

    From the SEC’s civil administrative complaint (italics added):

    “The phony name and address served a dual purpose. In addition to concealing the fact that Srivastava and Kavuri were behind the Website, the domain name registration to Jane Roe at a Seattle address was meant to attract American investors. Additionally, to create the illusion that mainly American investors were visiting the Profits Paradise Website, Srivastava instructed the web designer to ensure that the ‘Alexa detail’ showed the Website’s ‘rank in the United States’ rather than its ‘rank in India.’ “Alexa” refers to a website (www.alexa.com) that ranks other websites, by country, based on the amount of Internet traffic directed to the website.”

    Also typical of HYIP scams, payment processors such as Liberty Reserve, PerfectMoney and EgoPay were used. Dates cited in the SEC complaint suggest Profits Paradise opened its Liberty Reserve account just prior to federal prosecutors bringing criminal charges against Liberty Reserve in May 2013.

    Liberty Reserve has been described by prosecutors as a $6 billion money-laundering operation that propped up HYIPs and other frauds.

    Srivastava, in 2005, worked for Quixtar.com in Minneapolis, but returned to India in 2007, the SEC said.

    Read the SEC complaint,  which alleges the Profits Paradise scheme also was “structured so that under certain conditions investors could never recover their principal investments.”

    The SEC also has updated its Investor Alert on fraud schemes that trade on social media.

  • UPDATE: With Purported 100 Percent ‘Repurchase Or Recapitalization Feature,’ BitClub Network Dials Up The Scamming

    bitclub350small1Affiliates of the BitClub Network “mining” scam have taken to Twitter today with news asserted to be glorious: Participants can leave 100 percent of their money in the “program.”

    “The reason why you should consider setting all your bitclub network mining pool repurchases to 100% is the fact that you will build up your amount of bitclub network shares in those different bitclub network pools, hence the amount of bitcoins you will have in your bitclub network e-wallet [over time],” a website accessible through a Twitter link counsels. “What if like some experts claim the bitcoin price will go up to $10.000 a coin in a few years time? What if….?”

    This, of course, is madness that trades on an appeal to greed. Ponzi schemes routinely use artifices such as this to stem the outflow of cash. The fewer cashout windows open to the masses, the better it is for the individual scammers and teams of scammers who race from fraud scheme to fraud scheme to fraud scheme.

    BitClub Network is calling its artifice the “repurchase or recapitalization feature.” Even before planting the seed that good things would come to people who kept 100 percent in the system, the “program” appears to have forced members to make mandatory repurchases of between 30 percent and 50 percent, depending on which of three purported “pools” they purportedly owned “shares” in.

    In addition to being another marker of a scam in progress, the “repurchase or recapitalization feature” also may suggest BitClub Network already is having severe cash-flow troubles. Early adopters already could have plundered the system, and headlines about BitCoin-themed scams and a criminal prosecution in New York sure aren’t helping.

    Some members of the $850 million Zeek Rewards Ponzi- and pyramid scheme are pushing BitClub Network. Advertised buy-in sums have ranged from $500 to $3,500. Recruits are told they’ll earn for 1,000 days. Precisely who is operating BitClub Network is unknown.

    Because that is unknown, it’s also unknown if members could recover anything when the BitClub Network train derails.

    Read the PP Blog’s tag archives that reference BitClub Network.

  • U.S. Postal Service Targeted In Cyber Attack; Customer, Employee Data Breached

    Benjamin Franklin, first Postmaster General. Source: screen shot from USPS illustrated booklet, "The United States Postal Service: An American History, 1775-2006."
    Benjamin Franklin, first Postmaster General. Source: screen shot from USPS illustrated booklet, “The United States Postal Service: An American History, 1775-2006.”

    There have been cyber attacks on banks, retail outlets, U.S. government sites and sites operated by U.S. government contractors.

    And now the FBI is investigating an attack on the U.S. Postal Service.

    In some ways, the attack might be viewed by Americans as the most personally violative to date. Virtually the whole of America — from the largest of cities to the smallest of towns — has contact with USPS six days a week. In 1775, U.S. founding father Benjamin Franklin was appointed by the Continental Congress as the first postmaster general of the fledgling Democracy. The famous “Pony Express” would not begin for another 85 years.

    Early reports have described the attack as massive, one that has affected 2.9 million USPS customers and hundreds of thousands of USPS employees.

    From a statement by USPS (italics added):

    The Postal Service has recently learned of a cyber security intrusion into some of our information systems. We began investigating this incident as soon as we learned of it, and we are cooperating with the investigation, which is ongoing. The investigation is being led by the Federal Bureau of Investigation and joined by other federal and postal investigatory agencies. The intrusion is limited in scope and all operations of the Postal Service are functioning normally.

    Information potentially compromised in the incident may include personally identifiable information about employees, including names, dates of birth, Social Security numbers, addresses, beginning and end dates of employment, emergency contact information and other information.

    Postal Service transactional revenue systems in Post Offices as well as on usps.com where customers pay for services with credit and debit cards have not been affected by this incident. There is no evidence that any customer credit card information from retail or online purchases such as Click-N-Ship, the Postal Store, PostalOne!, change of address or other services was compromised.

    The intrusion also compromised call center data for customers who contacted the Postal Service Customer Care Center with an inquiry via telephone or e-mail between Jan. 1, 2014, and Aug. 16, 2014. This compromised data consists of names, addresses, telephone numbers, email addresses and other information for those customers who may have provided this information. At this time, we do not believe that potentially affected customers need to take any action as a result of this incident.

    The privacy and security of data entrusted to us is of the utmost importance. We have recently implemented additional security measures designed to improve the security of our information systems, including certain actions this past weekend that caused certain systems to be off-line. We know this caused inconvenience to some of our customers and partners, and we apologize for any disruption.

    We began communicating this morning with our employees about this incident, apologized to them for it, and have let them know that we will be providing them with credit monitoring services for one year at no charge to them. Employees also have the personalized assistance available to them provided by the Human Resources Shared Services Center. We are committed to helping our employees deal with this situation.

     

  • Self-Described Missouri ‘Sovereign Citizen’ And Associates Brought ‘Fake Criminal Charges’ Against Banker In Fictitious ‘International Environmental Court,’ Authorities Say

    recommendedreading1UPDATED 2:27 P.M. ET U.S.A. The prosecuting attorney for Greene County, Mo., has publicly thanked a People’s Bank manager for “not succumbing to [John F. Gibson’s] attempts to harass and bully his way out of responsibility for his criminal conduct.”

    Gibson, 61, of Willard, Mo., entered a guilty plea Oct. 29 to a felony charge of forgery, the office of Prosecuting Attorney Dan Patterson said.

    The case traces its roots to a circumstance that occurred in December 2010. That’s when Gibson, according to prosecutors, “created a money order on his personal computer falsely stating that it was to be paid by the United States Treasury. Gibson then presented the forged money order to People’s Bank to pay a debt his son owed.

    “Gibson identifies himself as a ‘sovereign citizen’ and claimed that he had authority to create this money order as a United States citizen,” prosecutors said.

    From a statement by prosecutors (italics added):

    While Gibson’s attempt to pass a forged money order may not seem particularly newsworthy, it is important that the public be aware of the sovereign citizen movement and the danger posed by the movement. Sovereign citizens consist of many loosely associated groups that are located throughout the country. Their beliefs vary widely, but they all share the common belief that the government lacks legitimate authority. Many times individuals involved with sovereign citizens groups intentionally act in a manner to subvert government authority and try to harm those who they view as assisting the government by, among other things, filing false liens against them.

    In this case, Gibson and his associates retaliated against the People’s Bank manager for her cooperation with the State by bringing fake criminal charges against her in a fictitious court. A sovereign citizens group in Taney County operating the
    fictitious “International Environmental Court” charged the bank manager with violating environmental laws and issued a finding that the bank manager was guilty. Gibson filed a copy of the bogus documents with the Greene County Circuit Court Clerk’s Office on the day of his guilty plea. That matter is currently under investigation.

    Also see coverage in the Springfield News-Leader.  Link to News-Leader video showing Gibson meeting with a police detective.

  • President Obama To Nominate Loretta Lynch To Replace Eric Holder As Attorney General

    Loretta Lynch. Source: U.S. Attorney's website.
    Loretta Lynch. Source: U.S. Attorney’s website.

    UPDATED 8:42 A.M. ET NOV. 9 U.S.A. Many Americans will have only a vague recollection of her name. Others will not be able to place her at all. But they’ll remember cases with which she has been involved.

    One of those involved the prosecution of New York City police officers, including Justin Volpe, implicated in the brutal and unthinkable attack against Haitian immigrant Abner Louima in 1997. Americans of all races and creeds were infuriated at the news cops had assaulted Louima  — and then hatched a coverup. The assault and the efforts to hide it embarrassed police agencies and prosecutors in New York and across the land because law enforcement is supposed to safeguard and champion civil rights, not violate and dispose of them.

    The White House announced yesterday that President Obama today will nominate Loretta Lynch, a member of the team that brought justice to one of America’s most famous crime victims, to replace Eric Holder as Attorney General of the United States. Holder, in September, announced that he is stepping down. Lynch currently is the U.S. Attorney for the Eastern District of New York. Local residents think of her as the U.S. Attorney for Brooklyn, Queens, Staten Island and Nassau and Suffolk Counties on Long Island.

    If confirmed by the Senate, Lynch will become the first African American female Attorney General in U.S. history. She was born in North Carolina 55 years ago.

    Here are two statements from Lynch that have appeared on the PP Blog:

    “As alleged in the complaint, the defendant came to this country intent on conducting a terrorist attack on U.S. soil and worked with single-minded determination to carry out his plan. The defendant thought he was striking a blow to the American economy. He thought he was directing confederates and fellow believers.” — U.S. Attorney Loretta E. Lynch, Eastern District of New York, Oct. 17, 2012

    Read the PP Blog story here.

    In 2011, Lynch’s office became involved in the prosecution of Vincent P. McCrudden. He was accused of threatening to to kill 47 current or former market regulators from the SEC, FINRA and others, and of publishing an “Execution List” on his website. McCrudden, later convicted, allegedly also encouraged others to kill regulators.

    Here is what Lynch said when the charges were brought:

    “In this day and age, there is no such thing as an idle threat. Those who threaten injury or worse to the lives of others will be promptly investigated and vigorously prosecuted.” — U.S. Attorney Loretta E. Lynch, Eastern District of New York, Jan. 14, 2011

    McCrudden’s arrest occurred just five days after a gunman in an unrelated incident had opened fire at an Arizona constituent event hosted by U.S. Rep. Gabrielle Giffords. Giffords was critically wounded in the attack. U.S. District Judge John Roll and five others were shot and killed.

    The PP Blog stories below also reference Lynch:

    BULLETIN: FBI Issues Wanted Posters, INTERPOL Issues Red Notices For Alleged International Cybercriminals Who Targeted Americans In Scam That Duped Big-Ticket Shoppers

    BULLETIN: Songkram Roy Shachaisere, Figure In AdSurfDaily Ponzi Story, Indicted With 8 Others In ‘One Of The Largest International Penny Stock Frauds In History’

    BULLETIN: Missing Investment Adviser Named In SEC Civil Complaint Yesterday In Atlanta Has Been Charged Criminally In New York

    BULLETIN: Vincent McCrudden Pleads Guilty To Threatening Regulators, Government Officials

    Accused Scammer And Convicted Felon Eric Aronson, 2 Others Indicted In Alleged Permapave Ponzi Scheme; ‘House Of Cards,’ Top Federal Prosecutor Says

    BULLETIN(S): (1) Missouri Con Man, 72, Charged In Alleged $3.18 Million Ponzi Caper While Jailed In Previous Fraud Scheme; (2) New York Woman Was Running Multiple Ponzi And Fraud Schemes That Gathered More Than $9 Million, Feds Say

    BULLETIN: Feds Say New York Man Was Running $50 Million Real-Estate Ponzi Swindle; Gershon Barkany Arrested By FBI

     

  • UPDATE: Another Bizarre Turn In WCM777 Ponzi Probe

    With a storyrecommendedreading1line 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.”

    “The Receiver is continuing her investigation into the remaining funds disbursed to the other entities and will pursue these matters as appropriate,” Freitag says in an Ex Parte Application for Order to Sell Additional Personal Property.

    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.

    Visit the receivership website.

  • URGENT >> BULLETIN >> MOVING: First U.S. Criminal Prosecution Of Bitcoin-Themed Scheme; Trendon Shavers Arrested

    breakingnews72In the first U.S. criminal prosecution involving a Bitcoin-themed scheme, Trendon Shavers has been arrested and charged with securities fraud and wire fraud.

    Shavers, 32, of McKinney, Texas, was charged civilly by the SEC in July 2013. He is known as “pirateat40,”  and allegedly pushed his Bitcoin Savings and Trust Ponzi scheme from a forum.

    FBI agents arrested him today at his Texas residence.

    “As alleged, Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments,” said U.S. Attorney Preet Bharara of the Southern District of New York.  “This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”

    A top FBI official threw down the gauntlet.

    “Shavers used a new currency, but the same old reprehensible tricks,” said FBI Assistant Director-in-Charge George Venizelos. “He claimed to offer a Bitcoin market-arbitrage strategy. In reality, it was nothing more than an insidious scheme motivated by greed. Today, Shavers’ jig is up. He finds himself under arrest and charged in Manhattan federal court.”

    Some HYIP schemes appear now to have moved away from payment processors such as the now-shuttered Liberty Reserve and are moving toward Bitcoin.

    From a statement by Bharara’s office, which previously prosecuted Liberty Reserve, calling it a $6 billion money-laundering operation that enabled HYIPs and others forms of fraud (italics added):

    From at least September 2011 up through and including September 2012, SHAVERS operated a Ponzi scheme. Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin investment opportunities were posted. SHAVERS’s offer to investors was straightforward: investors who lent Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time. SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-markets transactions – i.e., “over-the-counter transactions.” SHAVERS also personally guaranteed to cover any losses in the event of a market change. In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed upon rates of interest.

    In the end, BCS&T was a Ponzi scheme in which SHAVERS used Bitcoin from new investors to make purported interest payments to existing investors and to cover investors’ requests to withdraw Bitcoin from existing BCS&T accounts. In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay certain of his personal expenses. At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that were then in public circulation. In the end, at least 48 of approximately 100 investors lost all or part of their investment in BCS&T.

    Some Bitcoin enthusiasts have fretted that dark forces and criminal organizations are seeking to use Bitcoin in the same way they used Liberty Reserve. Criminal activities could undermine confidence in Bitcoin and affect its perception in the marketplace.

    In late August, some affiliates of the collapsed $850 million Zeek Rewards Ponzi scheme began pushing a Bitcoin-themed “program” known as BitClub Network, a purported “mining venture” with an investment arm attached that purportedly supplies a payout for 1,000 days.

    Prospects were encouraged to buy in with sums ranging from $500 to $3,500.

    Zeek used traditional forms of payment.

     

  • NORTH CAROLINA: Teen Allegedly Swindled Senior Citizens In ‘Stark Innovations’ Scam That Purportedly Sold Overseas ‘Electronic Consumer Goods In Bulk’

    David Alan Topping. Source: Brunswick County mugshot.
    David Alan Topping. Source: Brunswick County mugshot.

    A North Carolina teenager who allegedly swindled senior citizens in an investment scam known as Stark Innovations was arrested yesterday, North Carolina Secretary of State Elaine F. Marshall said.

    Bond for the suspect, David Alan Topping, 19, of Oak Island, was set at $250,000. The Brunswick County Sheriff’s Office assisted with the case.

    “I am glad the citizens of Brunswick County will no longer be victimized by this individual’s deceit,” said Brunswick County Sheriff John Ingram V.

    Topping was charged with felony securities fraud  and  felony solicitation to obtain property by false pretense. He also was charged with a misdemeanor count of the latter.

    The scam gathered more than $100,000 investigators said.

    Investigators said that Topping already was on probation for previous thefts. Those cases  “involved felony convictions related to larceny and motor vehicle theft,” and Topping did not tell his Stark Innovations investors about them.

    Stark Innovations purported to be a company that “bought and shipped electronic consumer goods in bulk from overseas and sold them at a markup in the U.S.,” Marshall’s office said.

    “Investors told investigators that Topping said they could earn 6.5-percent interest per month with no risk to their principal,” Marshall’s office said.

    The scheme allegedly traded on Facebook and LinkedIn, investigators said.

    Scams regularly use social media to build heads of steam, according to regulators.

    “Calling our Securities Division would have revealed that Mr. Topping was never licensed to sell securities, and that in itself should always raise a huge red flag for potential investors,” Marshall said.

    A Facebook site that appears to be associated with Stark Innovations implies that the company was headquartered in a skyscraper in a bustling city. Other photos, however, suggest that Stark Innovations was renovating a trailer and turning it into a headquarters.

    “Hard at work renovating out [sic] new building!” the Facebook site roars in a post dated Aug. 27. “Will be completed in three months! Come in and talk to us about investing with the highest interest rate anywhere!”

    The site also prompts visitors to “Check out our newly designed site for Stark Card! The only card you can earn a 2.12% monthly interest rate.”

    “We believe that among Mr. Topping’s victims were retirees, some of whom invested tens of thousands of dollars in his scheme that they may well never get back,” Marshall said.

  • Quebec Moves To Shut Down Site That Purportedly Monitors HYIP Programs, Saying Operator Is Aiding Scammers

    cautionflagIf the Autorité des marchés financiers (AMF) gets its way, a website styled maxhyip.com will be shut down and its operator blocked from promoting “products and services relating to various high-yield investment programs (HYIP[s]) to Quebeckers.”

    The alleged operator of the site is Steeve Beaudin, against whom AMF is seeking a cease-trade order and “administrative penalties.”

    Beaudin is “aiding HYIPs with illegal activities as securities advisers in Québec,” AMF alleges.

    Ads that promise preposterous payouts such as 135 percent in a day and 5,000 percent in 90 days appear on the site. There’s also a section that purports to monitor which sites are paying, which sites are not and which sites are experiencing “problems.”

    Many such purported monitoring sites follow largely the same blueprint MaxHYIP appears to be following, a situation that has contributed to HYIPs expanding across the globe and sucking in millions and millions of people. That a scheme is “paying” is not evidence that no fraud is occurring, although disingenuous HYIP promoters often position it as so to keep the Ponzi wheels greased.

    Such sites also may encourage so-called “test spends” as a means of enabling an HYIP scam to gain a head of steam. If a successful payout results from the “test spend,” the recipient can be duped into believing a “program” is real and join the scammers-in-chief in helping the scam gather even more money.

    Payment processors named on the MaxHYIP site have been associated with a sea of scams, including “programs” such as AdSurfDaily, Zeek Rewards and Imperia Invest IBC. ASD was a $119 million Ponzi scheme. Zeek is alleged to have gathered nearly $900 million in a combined Ponzi- and pyramid scheme. Imperia is alleged to have gathered millions of dollars and to have targeted people with hearing impairments.

    Processors referenced on the site include PerfectMoney, EgoPay, Payeer, SolidTrustPay, HD-Money and others. Bitcoin also is referenced, as is an apparent virtual-currency wallet known as ASMoney.

    “Steeve Beaudin is not registered with the AMF and is therefore not authorized to solicit or advise Québec consumers for investment purposes,” AMF alleges.

    From the AMF statement (italics added):

    Caution when dealing with HYIPs

    HYIPs are investment programs in which money is invested for a given period (hour, day, week or month) at a high interest rate. It is a fraudulent scheme where investors are generally asked to entrust the management of their investments to so-called experienced managers and they receive interest according to the period chosen, which they can withdraw as they wish. In addition to being fraudulent, HYIPs are administered by companies which are generally off-shore, making it difficult for consumers to take legal action against them.

    HYIPs, which also often commissions to recruiters, tend to be straight-line Ponzi schemes with no “product” other than the purported investment “opportunity.” In recent years, however, more and more HYIPs may be using purported “products” such as VOIP software, cloud-computing software, “advertising” modules or auction “bids” to disguise the underlying investment elements and the underlying scam.

    If an HYIP scheme advertises a “product,” it typically promotes a lower daily return, perhaps between 1 percent a 3 percent. Even those purported returns are outrageous, however. On an annualized basis, Zeek Rewards, for instance, was touting returns that would have made Bernard Madoff look like a piker.

    HYIPs, whether they feature product claims or not, also offer returns that are unusually consistent. In the ASD and Zeek cases, it was alleged the operators simply manufactured the numbers because they knew that players who did hear a certain number would not play.

    The ASD and Zeek cases alleged the presence of co-conspirators. In such instances, the co-conspirators may be individuals who helped advance cover stories and fraudulent narratives. HYIP schemes also have been known to have silent partners and to launch reload schemes when the original scheme craters — AdSurfDaily to AdViewGlobal, for instance.