PatrickPretty.com

Month: November 2014

  • BULLETIN: Zeek-Like Situation Surfaces In TelexFree Case — Dishonored Cashier’s Checks; Trustee Seeks Authority To Subpoena Banks, Including Bank In Puerto Rico

    newtelexfreelogoBULLETIN: The court-appointed trustee in the TelexFree bankruptcy case is seeking authority to issue subpoenas and obtain information from eight financial institutions, including Puerto Rico-based Oriental Bank.

    The other seven are Digital Federal Credit Union, based in TelexFree’s headquarters city of Marlborough, Mass., Bank of America, JPMorgan Chase, Citizens Bank, Santander, TD Bank and Wells Fargo.

    All of the banks ended up in the TelexFree stream of commerce, but precise details of the relationships are not known publicly. What is known is that some TelexFree bank accounts were seized in criminal or civil forfeiture actions and that a cascading avalanche of litigation continues to roar down the mountain.

    Why MLM firms continually tempt this ruinous fate is one of the great business mysteries of current times.

    In the instances of Bank of America and TD Bank, it is known that TelexFree affiliates were given instructions to make walk-in deposits at the banks, some in the name of TelexFree Inc., others in the name of TelexFree LLC. Those instructions were highly similar to instructions given to members of the $119 million AdSurfDaily MLM Ponzi scheme in 2008.

    Court filings by Trustee Stephen B. Darr say he is trying to get to the heart of TelexFree-related money flow and communications involving the banks. Notably, one of the concerns is that all eight of the banks allegedly issued TelexFree-related cashier’s checks prior to the firm’s April 2014 bankruptcy filing, and later dishonored some of the checks.

    Cashier’s checks also were an issue in the ASD case. At the time of the ASD related actions in 2008, the enterprise was the largest known MLM HYIP Ponzi scheme. It since has been surpassed by Zeek Rewards, TelexFree and others.

    Dishonored cashier’s checks became one of the earliest issues in the $850 million Zeek Rewards MLM scheme in 2012. Citing the Uniform Commercial Code, Zeek’s receiver and lawyers have been been pursuing remedies from the banks for more than two years — at a cost of money and time.

    Kenneth D. Bell, the Zeek receiver, has said that “[i]f a bank refuses to pay a cashier’s check or teller’s check presented by the Receiver, it may be required to pay for the Receiver’s expenses and loss of interest resulting from the nonpayment, as well as consequential damages.”

    In the Zeek case, the Virginia Bankers Association provided guidance to member institutions that “the court’s order relied on the Uniform Commercial Code to establish that the uncashed cashier’s checks in the receiver’s possession were receivership assets, and that the receiver was required to present those cashier’s checks for payment and had no discretion not to.”

    Now, the TelexFree trustee appears to be wading into the same or highly similar MLM waters. Among the information Darr is seeking is “information respecting the remitters of the cashiers’ checks and the reasons for the dishonor of such checks.”

    Because MLM Ponzi- and pyramid schemes spread virally, have common promoters and often rely on cashier’s checks, it is conceivable that some promoters might have bought their way into both “programs” with cashier’s checks, possibly even with cashier’s checks recruits paid to their upline sponsors, rather than to the “programs” themselves.

    In the case of Zeek, tens of millions of dollars in checks allegedly had backed up at Zeek’s office in North Carolina in the weeks prior to the SEC’s August 2012 Ponzi- and pyramid action.

    The TelexFree case may add a new wrinkle. Indeed, nearly $38 million in cashier’s checks from Wells Fargo allegedly were found in TelexFree’s Marborough office in the possession of Joseph Craft two days after TelexFree’s April 13 bankruptcy filing. Craft, who has denied wrongdoing, was a TelexFree executive. He has been charged civilly with securities fraud.

    In April, the SEC said that a check dated April 3 in Craft’s possession was “remitted to” TelexFree principal Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000.”

    One check for more than $2 million in Craft’s possession was made out to Katia B. Wanzeler, Wanzeler’s wife. She later was arrested at JFK Airport in New York and detained for more than a week as a material witness.

    The SEC alleged that Carlos Wanzeler was amassing a small-real estate empire in Massachusetts and Florida. He is alleged to have ducked out of the United States via Canada in April, ultimately flying to his native country of Brazil. The United States describes him as an international fugitive.

    Darr now is seeking not only information about the cashier’s checks, but also information on communications between the banks and TelexFree or its principals James Merrill and Carlos Wanzeler, and information on any TelexFree-related investigations conducted by the banks, including “information related to ‘Know Your Customer’” rules and regulations.

    In addtion, Darr is seeking bank statements, canceled checks, deposit slips, wire-transfer communications and remittances, documentation concerning fees and contracts, minutes from bank board meetings at which TelexFree matters were discussed, documentation on why the banks ended relationships with TelexFree, documentation on communications the banks had with the SEC and state regulatory bodies, documentation the banks may have on the Massachusetts Securities Division TelexFree investigation and documentation “concerning whether the remitters have been refunded any amounts advanced to purchase” the dishonored checks.

  • RIPPLING NIGHTMARE: Has TelexFree Been Dwarfed By Another MLM Ponzi Scheme? Better Living Global Marketing Reportedly Says It Has Taken In $3.3 BILLION — And Is Experiencing ‘Cash Flow Problem’

    ponzinews1EDITOR’S NOTE: In a story dated today, BehindMLM.com has broken down claims made in a recent video in which Better-Living Global Marketing (BLGM) figure Luke Teng appears. The potential criminality at BLGM, purportedly based in Hong Kong, not only is alarming, it is stunning. Even more disconcerting is the level of disconnect surrounding the scheme, which had a Zeek Rewards-like business model and purportedly was in the penny-auction business . . .

    Hang on to your hats! There could be an active MLM HYIP Ponzi scheme that is even larger than TelexFree, which allegedly reached across national borders to take in $1.2 billion before collapsing in April 2014.  The alleged TelexFree sum would rival the epic Scott Rothstein Ponzi and racketeering scheme in Florida and potentially would make TelexFree the fifth largest Ponzi scheme of all time, regardless of the Ponzi business model used. (Like the shrimp delicacies memorably recounted by “Bubba Blue” in the movie “Forrest Gump,” Ponzi schemes come in many forms.)

    In 2012, prior to the actions against TelexFree by various law-enforcement agencies, PonziTracker.com rated Rothstein’s caper as the 4th largest of all time in terms of investor losses, estimated at $1.4 billion. Only the Bernard Madoff (est. $17.3 billion), Allen Stanford (between $4.5 billion and $6 billion) and Tom Petters schemes (est. $3.7 billion) were larger.

    BehindMLM.com is reporting today that BLGM’s Luke Teng claims to have set a “world record” for intake in his particular sphere of MLM.

    If the claim attributed to Teng is correct — that BLGM has taken in $3.3 billion — it could blow both Rothstein and TelexFree out of the water and put BLGM in the same Ponzi seas as Tom Petters and his $3.7 billion scheme. Put another way, BLGM could be the fourth-largest Ponzi scheme of all time, regardless of form.)

    If an online Ponzi scheme operating across national borders (including the borders of the United States) can put $3.3 billion on the table in two or so years of operation and creep up on Petters, are we on the cusp of the once unthinkable? Could MLM HYIP schemes rival or even eclipse Stanford and Madoff?

    At $1.2 billion, TelexFree already has created a litigation quagmire that rivals the quagmires surrounding the Madoff, Stanford, Petters and Rothstein schemes. BLGM could go the same way. Both BLGM and TelexFree even could eclipse the Top 4 in terms of litigation and logistical nightmares, because millions of victims from dozens and dozens of nations are apt to exist. That condition was not present in the Madoff, Stanford, Petters and Rothstein schemes.

    Zeek Rewards — the sixth-largest Ponzi scheme in history, according to the 2012 PonziTracker list — created a litigation monster that could be surpassed by both BLGM and TelexFree.

    And yet willfully blind MLM hucksters and serial scammers still are pushing cross-border fraud schemes. The numbers alone show that the world never has seen such felonious self-indulgence at the street level of dealers:

    • Zeek. Collapsed in 2012 after less than two years of operation. Victims: 800,000 to 1 million (est.). Dollar volume: $897 million. Source for dollar volume: U.S. court filings.
    • TelexFree. Collapsed in April 2014 after operating for a little better than two years. Victims: 700,000 to 1.5 million (est.). Dollar volume: $1.2 billion. Source: TelexFree figures cited in Massachusetts Securities Division action in April 2014.
    • BLGM: Operational, but reportedly experiencing cash-flow problem and not paying out or making selective payouts. Victims: Unknown number, but may rival Zeek and TelexFree. Dollar volume: $3.3 billion. Source: Luke Teng video cited by BehindMLM.com.

    A Rippling Nightmare

    The numbers are hardly the sole concern. As Behind MLM.com reported today, citing remarks made by Luke Teng in the BLGM video (italics added):

    [8:13] Some leaders are still making good money. Because the leaders are taking cash from the new members and they use it to give them ecash.

    So, that’s still a way for you to make money.

    Our take: If true, this is beyond horrifying. It is alleged TelexFree created conditions that permitted members to transact business outside of the system, and some members even may have created an exceptionally dangerous black market for TelexFree’s earning units, which were known as “AdCentrals.”

    As the PP Blog reported on March 24, 2014, an ad offering TelexFree AdCentrals at a firesale price appeared on an auction site. Viewers were encouraged to buy a bundle of 550 AdCentrals for $16,760. The asking price purportedly reflected a discount of $8,190 (33 percent), and the purchaser purportedly would earn $110,000 from TelexFree in the next year.

    The situation in both TelexFree and BLGM is reminiscent of the truly disturbing Evolution Market Group/FinanzasForex scheme described in 2010 by federal prosecutors in the Middle District of Florida.

    As the PP Blog reported at the time (italics added):

    . . . there were schemes within schemes in a tangled web of domestic and international deception that featured dozens of bank accounts, shell companies and various fronts for money-laundering enterprises, including companies purportedly in businesses such as real estate and car washes.

    The scheme was so corrupt, according to court filings, that some investors were told that, in order to leave the program whole, they had to recruit new investors, have the new investors pay them directly — and use the proceeds from the new investors to “recover” their initial outlays.

    In short, if you wanted to recover your EMG/Finanzas money, you had to steal your way out of the “program” by gathering new cash from incoming recruits and keeping it.

    Some of the money in the EMG/FinanzasForex case allegedly was tracked to the narcotics trade.

    Based on the BehindMLM.com report, it also appears that BLGM may be trying work a second form of Ponzi fraud into its existing scheme. This would appear to involve an adverting rotator of some sort, something consistent with the AdSurfDaily MLM Ponzi scheme in 2008. In 2012, while sharing promoters in common with Zeek, a “program” known as JSSTripler/JustBeenPaid appeared to be trying to transition from a straight-line HYIP fraud into a fraud named “ProfitClicking” that would introduce an “advertising” function. Part or all of the earlier JSS/JBP fraud appears later to have morphed into something called “ClickPaid.”

    So, in some ways, BLGM could be modeling ASD, JSS/JBP and other reload schemes to sustain its Ponzi deception.

    Teng also may be channeling a notable delusion of now-jailed ASD Ponzi schemer Andy Bowdoin.

    Indeed, according to the BehindMLM.com report, Teng is suggesting he may start his own bank.

    Before Bowdoin was arrested in 2010, he claimed ASD was looking at acquiring an interest in a bank in South America and creating its own payment processor.

    BLGM appears to have gained a head of steam in part from cash-gifting schemers in a “program” called “BlessingGoldClub” and also from former enthusiasts of the Zeek and Profitable Sunrise fraud schemes.

  • SEC: Penny-Stock Scammers Used ‘Intricate Web Of Offshore Corporations, Foreign Accounts, And Financial Institutions . . . In Canada, Nevis, Panama, Switzerland, And The Turks And Caicos Islands’

    breakingnews72Two Canadians have been charged by the SEC in an alleged pump-and-dump scheme that included a reverse merger between a “shell public company” and a startup, “blast emails” and a concerted hype campaign, the U.S. agency said.

    Named defendants are Bruce D. Strebinger, 38, of Vancouver, and Brent Howard Chapman, 38, who “is or has been residing in Antigua,” the SEC said. The complaint is filed in U.S. District Court for the Northern District of Georgia.

    “Strebinger and Chapman rigged a penny stock in their favor while staging a massive promotional campaign,” said William P. Hicks, associate director for enforcement in the SEC’s Atlanta Regional Office. “They disguised their scheme by dumping their shares in relatively small amounts over extended periods of time, and they attempted to hide their proceeds from U.S. regulators by routing them through offshore accounts.”

    The shell was known as Americas Energy Company-AECo. Its stock was suspended, with the company being liquidated in bankruptcy, the SEC said. The other company was a startup coal mining and oil and gas exploration business based in Nashville, Tennessee” that became known as Americas Energy Company Inc.

    From the complaint (italics added):

    The promotion began in September 2009 and continued through April 2010. While the promotion continued and the Stock price soared, Strebinger and Chapman sold their Stock for $17 million through offshore accounts, including accounts with Swiss financial institutions in the names of three entities: (1) Muskateer Investments, Inc. (“Muskateer”), beneficially owned by Strebinger; (2) Furla Blue SpA (“Furla”), beneficially owned by Strebinger’s wife, Anne Strebinger (“Strebinger’s Wife” ); and (3) Lance Investments S.A. (“Lance), beneficially owned by Chapman.”

    The promotion increased investor demand for the Stock and enabled Strebinger and Chapman to reap huge profits through sales of the Stock while simultaneously concealing from investors not only that Strebinger and Chapman owned a significant portion of Americas Stock, but also that it was Strebinger and Chapman who were together marketing and funding a multi-million dollar promotional campaign related to the Stock.”

    All in all, the SEC charged, the duo sold their shares “through an intricate web of offshore corporations, foreign accounts, and financial institutions located in Canada, Nevis, Panama, Switzerland, and the Turks and Caicos Islands.”

    Assisting in the probe were the British Columbia Securities Commission, the Swiss Financial Market Supervisory Authority and the Financial Industry Regulatory Authority, the SEC said.

  • Judicial Panel Of United States Moves TelexFree-Related Lawsuits To Massachusetts

    Carlos Wanzeler. From YouTube.
    Carlos Wanzeler. From YouTube.

    The United States Judicial Panel on Multidistrict Litigation has moved TelexFree-related litigation pending in federal courts in other states to Massachusetts. A directive ordering the transfers for the sake of judicial efficiency was issued on Oct. 21.

    Some plaintiffs from outside of Massachusetts sued TelexFree and other defendants in federal courts in Florida, Georgia and North Carolina. The order moves all of these cases to federal court in Massachusetts and puts them in the hands of U.S. District Judge Timothy S. Hillman, who is presiding over the criminal cases against TelexFree figures James Merrill and Carlos Wanzeler.

    Wanzeler has been deemed an international fugitive by U.S. federal prosecutors. He was born in Brazil, a country that has its own TelexFree-related investigations at both the state and federal levels.

    The U.S. Judicial Panel order provides yet another example of how cross-border MLM HYIP schemes that involve hundreds of thousands of people can lead to severe economic fallout and tidal waves of litigation that strain the resources of all parties involved. There are at two government actions against TelexFree and at least six private actions, all occurring while a court-appointed bankruptcy trustee for TelexFree is conducting an investigation.

    The great irony of the cases is that TelexFree, while operating, was presented as a means of making lives easier, a rising tide that would lift all boats. Serial promoters of fraud schemes continue to push similar “programs,” often using appeals to religious faith and lost economic opportunity as a lure

    From the order (italics added):

    On the basis of the papers filed and the hearing session held, we find that the actions listed on Schedule A involve common questions of fact, and that centralization in the District of Massachusetts will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.

    These actions share factual questions relating to the allegation that the TelexFree companies operated a Ponzi pyramid scheme involving the recruitment of investors in marketing TelexFree’s telephone service plan and that defendants directly participated in or aided and abetted the alleged scheme. Centralization will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.

    Weighing all factors, we are persuaded that the District of Massachusetts is the most appropriate location for this litigation. The events giving rise to the alleged claims primarily occurred in Massachusetts, which is the principal place of business of the TelexFree companies. The federal and state enforcement actions against TelexFree and affiliated individuals are pending there. Thus, the primary witnesses and other evidence likely will be located in Massachusetts. Additionally, transfer of actions to this district will facilitate coordination with the TelexFree bankruptcy cases, which also are pending in this district. The Honorable Timothy S. Hillman, to whom we assign this litigation, presides over the related criminal action and thus is familiar with the factual and legal issues presented by these actions. We are confident he will steer this litigation on a prudent course.

    Current cases listed in Schedule A that began outside of Massachusetts and now have been moved there include:

    GUEVARA v. MERRILL, ET AL., C.A. No. 1:14-22405 (Southern District of Florida).

    COOK v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 2:14-00134 (Northern District of Georgia).

    Cases already residing in Massachusetts include:

    GITHERE, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 1:14-12825.

    MARTIN, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04044.

    CELLUCCI, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04057.

    FERGUSON, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 4:14-40138 (transferred from the Eastern District of North Carolina).

  • Foreign Office Asks U.K. Travelers To Be ‘Vigilant’ In Wake Of Ongoing Military Campaign Against ISIS; North Carolina Man Pleads Guilty To ‘Attempting To Aid’ Terrorist Organization Linked To Beheadings

    Citing a generalized global terrorism threat, the United Kingdom’s Foreign Office says it is updating its travel advice and has asked U.K. travelers to be “vigilant.”

    From the Foreign Office (italics added):

    “There is considered to be a heightened threat of terrorist attack globally against UK interests and British nationals from groups or individuals motivated by the conflict in Iraq and Syria. You should be vigilant at this time.”

    Put another way, if you are a Brit, ISIS or ISIS sympathizers may attack you on that basis alone.

    The United Kingdom, like the United States, Canada and Australia, is a member of the military coalition arrayed against ISIS. Australian authorities have said ISIS or its sympathizers planned random attacks against members of the Australian public to demonstrate the reach of the terrorist group.

    ISIS, also known as ISIL or the Islamic State, has beheaded Brits and Americans and appears to be inciting people from multiple nations to join ISIS campaigns in Iraq and Syria. ISIS also appears to be inciting nationals from multiple countries to make war against their own governments or own fellow citizens to broaden the terror.

    On Oct. 30, federal prosecutors in North Carolina announced that Donald Ray Morgan, a 44-year-old local man from Rowan County, pleaded guilty to attempting to provide material support to a designated foreign terrorist organization and possession of a firearm by a felon.

    “Today’s plea is a sad reminder that those who wish to aid foreign terrorist organizations can come from any community and from any background,” said Ripley Rand, U.S. Attorney for the Middle District of North Carolina.

    From a statement on the Morgan case by federal prosecutors (italics added):

    According to court documents, Morgan knowingly attempted to provide support and resources beginning in January 2014 until on or about Aug. 2, 2014, including his own services, to al-Qa’ida in Iraq, also known as Islamic State of Iraq and the Levant (ISIL) and the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization. On at least one occasion Morgan unsuccessfully attempted to travel from Lebanon to Syria to join ISIL/ISIS. Morgan also frequently used social media and an interview with an American journalist to express his support for ISIL/ISIS and violent terrorist activities.

    A look at the agencies that participated in the Morgan probe shows that terrorism-related activities have become not only a concern for national agencies such as the U.S. Department of Justice and the FBI, but also local agencies. Indeed, the names of the Greensboro Police Department, the Guilford County Sheriff’s Office, the High Point Police Department and the Winston-Salem Police Department all appear in the Justice Department’s statement on the Morgan case. The local agencies are are members of Joint Terrorism Task Forces.

    “We will continue to do everything we can to work effectively with our law enforcement partners and protect innocent people from terrorist activity, whether here in the United States or abroad,” Rand said.

    “Preventing individuals from joining ISIL and holding accountable those who attempt to provide material support to the terrorist organization remains one of our highest priorities,” said John Carlin, assistant Attorney General for National Security.

    In the United Kingdom, MailOnline, citing extracts from a U.N. study, is reporting concerns that “a new breed of terrorist was being attracted by the [ISIS] ‘cosmopolitan’ use of social media.”

    The report suggests that terrorists could making war or inciting it in one moment — and posting “kitten photographs” on Twitter in the next.

    In recent days, individuals have carried out alarming attacks against Canadian soldiers, the Canadian Parliament, New York City police officers and a police officer in Washington, D.C. The precise motives for the attacks and the degree to which mental-heath issues may have played a role are less than clear, which makes the overall circumstance murkier.

    Weaponry has ranged from guns (Canada) to a hatchet (New York) to an ax (Washington).