PatrickPretty.com

Month: February 2015

  • Zeek Figure Robert Craddock’s Fun Club USA Severely Sanctioned In Trademark-Infringement Case; Judge Orders Default For Failure To Follow Court Order

    OfferHubb.net Inc. sued Zeek Rewards figure Robert Craddock in February 2014, alleging Craddock “immediately” embarked on a web-based disparagement campaign after OfferHubb chose in July 2013 not to renew a contract with Craddock and Craddock’s Fun Club USA Inc.

    Co-defendants included Craddock’s wife, Sylvia Salgado Craddock, and Fun Club.

    Craddock was accused in the complaint of cybersquatting, trademark infringement, wrongful use of a computer, misappropriation of trade secrets, wrongful interference with economic relations, breach of contract, unjust enrichment, defamation and hiding behind a shell company.

    Now, a federal district judge in Nevada — following the October recommendation of a magistrate judge   — has ordered sanctions.  This includes the striking of the answer Fun Club filed in February. It also includes a default order against the enterprise.

    Why? Fun Club’s “failure to comply with this Court’s Order to obtain counsel,” Judge Richard F. Boulware II said in the order.

    Boulware also ordered the clerk to enter judgment and close the case. The financial fallout was not immediately clear.

    As the PP Blog reported in October (italics added):

    Fun Club and Craddock are referenced in a blistering memo filed in the Zeek Ponzi- and pyramid-scheme case by the SEC on Dec. 17, 2012. In the memo, the SEC accused Craddock of encouraging Zeek affiliates “not to cooperate” with Kenneth D. Bell, the court appointed receiver. The SEC further alleged that Craddock was spreading misinformation about how the agency viewed its own case against Zeek and that Fun Club appeared to have been formed 11 days after the SEC emergency action against Zeek on Aug. 17, 2012.

    Craddock has not been charged by the SEC with wrongdoing . . .

    The trademark-infringement claim may be particularly concerning to the MLM trade, given that Craddock has asserted he works as a copyright and trademark agent on behalf of MLM “programs.”

    On July 22, 2012, while purportedly working as a “consultant” for Zeek, Craddock filed a copyright- and trademark-infringement complaint against a HubPages website operated by Zeek critic K. Chang. K. Chang, who also posts on publications such as the PP Blog and BehindMLM.com, ultimately prevailed in the action brought by Craddock.

    Less than a month later, the SEC brought the Ponzi- and pyramid action against Zeek.

    Earlier this year, a website known as Changes Worldwide identified Craddock as its copyright agent. Filings by the SEC in June 2014 alleged that Faith Sloan, accused in April 2014 of securities fraud by the agency in its Ponzi- and pyramid complaint against the TelexFree “program,” sent more than $15,000 to an entity known as Changes Worldwide LLC after an asset freeze was imposed against Sloan in the TelexFree case.

    Sloan also was a Zeek affiliate. Whether proceeds that originated in Zeek and/or TelexFree made their way into Changes Worldwide is unclear.

    Craddock also was sued for trademark infringement and other alleged offenses by a firm known as BTG180, which accused Craddock of using the alleged Fun Club “shell corporation” to engage in a “shake-down” bid against affiliates of at least three MLM networks: Zeek, OfferHubb and BTG180.

    NOTE: Our thanks to the ASD Updates Blog.

  • ‘Achieve Community’ Websites Inaccessible

    From a promo for Achieve Community on YouTube.
    From a promo for Achieve Community on YouTube.

    UPDATED 12:20 P.M. ET U.S.A. Two websites associated with the “Achieve Community” — ReadyToAchieve.com and TheAchieveCommunity.com — are inaccessible this morning.

    Achieve Community is under investigation by the Colorado Division of Securities.

    The PP Blog asked the Division this morning if it was aware of the outage and whether the inaccessibility of the sites had anything to do with the investigation.

    “I cannot comment further at this time,” said Lillian Alves, Colorado’s Deputy Securities Commissioner.

    Reports surfaced yesterday on a Facebook site known as the “NonOfficialAchieveCommunity” that Achieve had shut down its own private forum and that a page linked to a purported new payment processor for Achieve was carrying a “server maintenance” message.

    The maintenance message continues to appear today.

    Some Achievers have condemned the NonOfficialAchieveCommunity Facebook site, which also is known as “the Sheepdog” and does not echo the company line. In recent days, one poster made the preposterous assertion that the Sheepdog was responsible for ruining 10,000 lives and could be held financially liable by Achievers.

    Achieve purportedly is operated by Kristi Johnson of Colorado and Troy Barnes of Michigan.  The “program,” backed by hucksters such as Rodney Blackburn, reportedly has not made payouts for nearly three months after encountering trouble with payment processors.

    Blackburn is pushing multiple “programs” with a presence on well-known Ponzi-scheme forums — and even camped out on the website of the U.S. Securities and Exchange Commission to record a promo.

    The SEC last month declined to comment on Blackburn’s commercial.

     

     

  • URGENT >> BULLETIN >> MOVING: Bankruptcy Trustee Says TelexFree Was ‘Pyramid Scheme’ That Gathered As Much As $1.8 Billion

    breakingnews72URGENT >> BULLETIN >> MOVING: (10th Update 8:53 p.m. ET U.S.A.) In his first formal report to the Massachusetts bankruptcy court, TelexFree Trustee Stephen B. Darr calls the company a “pyramid scheme” that may have involved 1 million or more participants globally and gathered as much as $1.8 billion through arms in the United States and Brazil.

    If the numbers hold up, it would mean that TelexFree has surpassed the Zeek Rewards scheme in both victims’ count and haul. Zeek is estimated to have created about 800,000 victims, while hauling about $897 million. Zeek was shut down by the SEC in August 2012.

    The SEC and the Massachusetts Securities Division brought actions against TelexFree in April 2014.

    Darr also revealed that 13 private lawsuits have been filed against TelexFree and/or related principals, including former executives James Merrill and Carlos Wanzeler.

    TelexFree’s Brazilian arm was known as Ympactus and “grew much more quickly than the Debtors and its shutdown by Brazilian authorities in the summer of 2013 was the first of many red flags that the Debtors were operating an unsustainable pyramid scheme,” Darr advised U.S. Bankruptcy Judge Melvin S. Hoffman.

    Darr also strongly implied that a black market existed both internally at TelexFree and externally to the cross-border enterprise. It is known that the U.S. Department of Homeland Security, through its Homeland Security Investigations arm, is deeply involved in the TelexFree probe.

    Today’s report by Darr may — at least in part — explain why. From the report (italics added/minor editing performed):

    The Debtors’ business plan was complicated in and of itself. The scheme’s complexity was expanded further, however, through a web of inter-Participant transactions that permeated the scheme.

    First, a new Participant could purchase a membership plan by making payment directly to the Debtors . . . or by redeeming accumulated credits.

    In lieu of paying funds directly to the Debtors, it appears that many Participants became involved in the scheme by paying their membership fee directly to a recruiting Participant who often did not remit the payment from the new Participant to the Debtors. Rather, the recruiting Participant frequently retained the payment from the new Participant in return for a reduction, or redemption, of their accumulated credits. The mechanics of this transaction were as follows:

    a) After an invoice was issued to the new Participant and marked as pending, the new Participant would forward the invoice through the system to the recruiting Participant for payment;

    b) The recruiting Participant would then pay the invoice using the recruiting Participant’s credits. The Debtors’ database would charge the recruiting Participant’s credits for the invoice and mark the invoice as paid.

    In this manner, new Participants often joined the Debtors’ scheme without any money actually being paid to the Debtors.

    In addition to the two scenarios outlined above, there appears to have been a third type of transaction that did not involve the Debtors at all. This type of transaction involved the transfer of credits by one Participant to another Participant in exchange for cash or other consideration. The motivation for the transfer of credits is not always clear, although in some instances recruiting Participants may have purchased credits so that such recruiting Participant had sufficient credits to be redeemed after receiving payment from a new Participant.

    Growth at the Ympactus arm in Brazil accelerated “in the fall of 2012 through the early summer of 2013,” Darr asserted.

    “The Debtors’ records indicate that by the spring of 2013, Ympactus had cash receipts of more than $100,000,000 per month,” he continued. “These receipts do not reflect inter-Participant transactions that did not involve direct payment to Ympactus.”

    After Brazilian authorities intervened in June 2013, freezing as much as $300 million in that country, the U.S. TelexFree arms — previously underperformers compared to Ympactus — began to surge, Darr alleged.

    “Following the shutdown of Ympactus, the Debtors’ revenues increased dramatically such that by the end of 2013 and early 2014, the Debtors were generating cash of as much as $50,000,000 per month, without regard to inter-Participant transactions for which consideration did not pass to the Debtors,” Darr said.

    TelexFree banking relationships crumbled, Darr said in the report.

    “Multiple banks closed the Debtors’ operating accounts apparently based upon suspicious activity in those accounts,” Darr said.

    A lawyer advised TelexFree in mid-2013 that its business plan constituted a pyramid scheme, Darr said.

    “Although the Debtors were apprised in mid-2013 by counsel that the business plan was a pyramid scheme, they continued to operate using that plan until March 2014. At that time, the Debtors introduced a new business plan, even though the Debtors were apparently advised that the new plan did not rectify the problem. The new plan was unanimously rejected by the Participants, which appears to have precipitated a ‘run on the bank’ inasmuch as $58,000,000 or more was paid out to certain Participants in the several weeks leading up to the filing of the petitions. An additional $100,000,000 was requested by Participants but was not paid.”

    In September 2014, Darr identified MLM lawyer Jeffrey Babener as an attorney who advised TelexFree it was operating a pyramid scheme.  Babener isn’t named in today’s filing, so it is not immediately clear if a second attorney also advised TelexFree that its platform was a pyramid.

    Darr also said in the report that TelexFree “wrote off” a receivable “in the approximate amount of $180,000,000” due from Ympactus. The write-off appears to have occurred in late 2013, after the action in Brazil.

    “Upon information and belief, the Debtors advanced the costs for the voice over internet protocol, or ‘VOIP’, service for both the Debtors and Ympactus,” Darr said. “Ympactus contracted to pay a portion of its revenues to the Debtors as a commission, but it is unclear the extent to which these payments were ever made. In December 2013, six months after the seizure of Ympactus’ assets by the Brazilian authorities, the Debtors established, and then subsequently wrote off, a receivable due from Ympactus in the approximate amount of $180,000,000, purportedly for unpaid commissions and related services.”

    Darr also identified a number of TelexFree subsidiaries or affiliates, noting there could be more. These are among the entities and ownership information listed in the report. (Please note that not all location information is listed):

    • TelexFree International LLC:: Ownership: Wanzeler, Carlos Costa, Merrill:: Location:: Nevis.
    • TelexFree Mobile Holdings Inc.:: Ownership:: Wanzeler and Merrill.
    • Graham Bell Telex LLC:: Ownership:: TelexFree Mobile Holdings LLC and Costa.
    • TelexFree Mobile LLC:: Ownership:: Graham Bell Telex LLC and Infinium Wireless.
    • TelexElectric LLLP: Ownership:: Wanzeler, Costa and Merrill.
    • Bright Lite Future LLC:: Ownership: Wanzeler, Costa and Merrill.
    • Brazilian Help Inc.:: Ownership: Wanzeler.
    • Sunwind Energy Group LLLP: Ownership: 1127 Enterprises LLC and Merchant Enterprises Inc.
    • Sunwind Energy Solutions:: Ownership:: 1127 Enterprises Inc., ACE.
    • LLLP: Ownership:: LLP, Executive Marketing Inc. and Sunwind Energy Group LLLP.
    • Sunwind Energy Doyle North LLC:: Ownership: Sunwind Energy Southern LLLP, ACE LLP, Adams Craft Ewing LLLP, Guasti LLC.
    • ACE LLP:: Ownership:: Undetermined.
    • Executive Marketing Inc.:: Ownership:: Undetermined.
    • 1127 Solutions LLC:: Ownership: Undetermined.
    • Merchant Enterprises Inc.:: Ownership: Undetermined.

    “There may have been other entities formed by the Debtors’ principals to conduct similar operations in other jurisdictions, including TelexFree Ecuador, TelexFree Columbia, TelexFree Dominican Republic, TelexFree Canada, and TelexFree International, Ltd. (Cayman Islands),” Darr alleged.

    And, he noted, “In addition, other entities appear to have been formed by the Debtors’ principals for related or unrelated purposes, including JC Real Estate Investments LLC; JC Real Estate Management Co., LLC; Above and Beyond the Limit LLC; CNW Real Estate LLC; CNW Realty State LLC; Acceris Realty Estate LLC; KC Realty State LLC; Makeover Investments LLC; Eagleview Realty Estate LLC; and Grandview Realty Estate LLC.

    With forensics well under way and with Darr in communication with investigators in the United States and Brazil, how big is the job ahead? (Bolding added):

    “The database identifies more than 2,100,000 electronic mail addresses for Participants in the operations of both the Debtors and Ympactus,” Darr said. “Of this amount, approximately 1,000,000 appear to be provided by Participants of the Debtors, with the balance related to the Ympactus Participants. The database identifies more than 17,000,000 different accounts, of which approximately 12,000,000 are those of Participants and 5,000,000 are those of Ympactus Participants. As referenced earlier, an individual Participant could maintain multiple accounts using a single electronic mail address, and an individual Participant could also maintain more than one electronic mail address. During the period February 2012 to April 2014, the total combined cash receipts for the Debtors and Ympactus were in excess of $1,800,000,000 and combined noncash revenue was approximately $4,200,000,000.

    Oddities abound, according to the report.

    ” . . . the Debtors’ computer system does not link all accounts for an individual Participant, and the Participant name field enabled Participants to use different variations of their name in the input process,” Darr said.

    “Certain accounts do not contain electronic mail address information. Of those accounts that do contain electronic mail address information, in some instances, the information is facially inaccurate, such as the Participant’s use of the Debtors’ electronic mail address as a placeholder such as [deleted by PP Blog]. In other instances, a Participant may have used the same electronic mail address as other Participants, including the sharing of electronic mail addresses with family members. Unlike the computer systems of similar type enterprises, the Debtors’ system did not require confirmation of an electronic mail address.

    “Similarly,” Darr said, “certain accounts do not contain physical address information. Some other accounts contain physical address information that is facially inaccurate, such as the use of a country code that is inconsistent with the address, e.g., ‘San Paulo, USA.’”

    From the report (italics/bolding added):

    Manual credits were credits assigned to a Participant’s account balance on account of money paid to the Debtors for one of several reasons, as distinguished from credits “earned” from the placement of advertisements or other components of the compensation scheme. The Debtors’ records reflect approximately $151,000,000 of manual credits issued to certain Participants. The issuance of manual credits appears to be a fraud within the larger fraud of the pyramid scheme with the Debtors’ insiders adding large amounts of credits to certain accounts whereby the credits could then be sold to other Participants. There appears to be no corresponding payment supporting many of these large manual credits.

  • EXTRAORDINARY! Harper Lee, Beloved Author Of ‘To Kill A Mockingbird,’ Will Publish Second Novel In July; ‘Atticus’ And ‘Scout’ Are Characters, Publisher Confirms

    breakingnews72The publishing world and lovers of American literature are electrified this morning with news that the Harper imprint of HarperCollins is publishing “Go Set a Watchman,” a second novel by Harper Lee.

    Lee, 88, issued a statement through Harper in which she explained that she completed the book before setting out to write “To Kill a Mockingbird” decades ago.

    “In the mid-1950s, I completed a novel called Go Set a Watchman,” Lee said. “It features the character known as Scout [from To Kill a Mockingbird] as an adult woman and I thought it a pretty decent effort. My editor, who was taken by the flashbacks to Scout’s childhood, persuaded me to write a novel from the point of view of the young Scout. I was a first-time writer, so I did as I was told. I hadn’t realized it had survived, so was surprised and delighted when my dear friend and lawyer Tonja Carter discovered it. After much thought and hesitation I shared it with a handful of people I trust and was pleased to hear that they considered it worthy of publication. I am humbled and amazed that this will now be published after all these years.”

    July 14 is the official publishing date.

    Harper, the publisher, described Go Set a Watchman as set “during the mid-1950s.

    “[It] features many of the characters from To Kill a Mockingbird some twenty years later,” the publisher continued. “Scout (Jean Louise Finch) has returned to Maycomb from New York to visit her father, Atticus. She is forced to grapple with issues both personal and political as she tries to understand her father’s attitude toward society, and her own feelings about the place where she was born and spent her childhood.”

    Published by J. B. Lippincott in 1960, To Kill a Mockingbird became an American classic and received the 1961 Pulitzer Prize for fiction. At the 35th Academy Awards in 1963, Gregory Peck was awarded the Best Actor Oscar for his 1962 portrayal of Lee’s “Atticus Finch.”

    Lee is famously publicity-shy. Despite the extraordinary talent she displayed in To Kill a Mockingbird and the reading public’s thirst for more, she never published a second novel.

    Says Jonathan Burnham, senior vice president and publisher at Harper: “This is a remarkable literary event. The existence of Go Set a Watchman was unknown until recently, and its discovery is an extraordinary gift to the many readers and fans of To Kill a Mockingbird. Reading in many ways like a sequel to Harper Lee’s classic novel, it is a compelling and ultimately moving narrative about a father and a daughter’s relationship, and the life of a small Alabama town living through the racial tensions of the 1950s.”

  • Promos By ‘Achieve Community’ Huckster For ‘Military Medical Relief 21’ Go Missing From YouTube

    The MMR21 logo. Source: screen shot.
    The MMR21 logo. Source: screen shot.

    UPDATED 12:11 P.M. ET U.S.A. Two YouTube promos that asked U.S. military personnel and 20-year retirees to enroll in a purported study piggybacking off a purported “compound medication” to treat pain have been deleted.

    The promos were linked last month to “Achieve Community” huckster Rodney Blackburn, who also created a Facebook site to promote “Military Medical Relief 21” (MMR21), the “program” targeted at military members and retirees. The Facebook site now appears to be inaccessible.

    One individual Facebook text promo attributed to Blackburn that remains includes four exclamation marks and screams, “Help our soldiers today! Soldiers are being compensated! Soldiers are finding relief from addictive pain medication! Enroll today or spread the word to millions of soldiers!”

    A link to a YouTube video appears below the text promo. When clicked, this message appears, “This video has been removed by the user.” The promo appears to have been directed to the official Facebook site of “Army Wives,” a television program on the Lifetime cable and satellite network.

    On YouTube, Blackburn asserted that military personnel would be paid for their participation in MMR21, which purportedly is a nonopiate pain cream. MMR21 purportedly is linked to a Wyoming nonprofit registered Jan. 2 and called American Christian Warrior 13 Inc.

    Precisely who is running MMR21 and American Christian Warrior 13 is unclear. Also unclear is how the two are related and why the YouTube promos were deleted.

    At least one of the YouTube promos referenced the U.S. Food and Drug Administration and claimed ingredients contained within the compound had been “approved” without saying whether the medication itself had been approved. On Jan. 16, the FDA said it could not comment immediately. On Jan. 20, the agency declined to comment.

    Blackburn featured an individual described as “Dr. Tony” in one of the promos.

    At least one website Blackburn said was linked to MMR21 is soliciting information from military personnel. Despite the fact that the site is asking for intensely personal medical information, identification documents and even information on employment and medical insurance, it appears to be hosted at an insecure URL.

    Among the questions on the site:

    • Are you pregnant?
    • If pregnant, Due Date[.]
    • Last Menstrual Period[.]

    Prospects are solicited to provide information on whether they suffer from one or more of at least 56 medical ailments listed on the site. Examples include menopause, andropause, stretch marks, migraine, nervous disorder, depression, decreased sexual function, hypertension, hypotension and many more.

    A message on the site claims, “This form encrypts at the time of submission and will remain secured until it reaches your evaluating Doctor.”

    The names of the purported “evaluating” doctors are not disclosed. Also undisclosed is any information on their medical training, licenses held, board certifications and whether they are being compensated by MMR21 or American Christian Warrior. MMR21’s website appears to rotate to CMF10.com, the site that claims forms are encrypted during submission.

    How much military members purportedly could earn through MMR21 is unclear. Facebook sites with military themes appear to have been spammed by more than one individual with links to the “program.”

    Prior to the YouTube deletions of Blackburn’s MMR21 promos, they were mixed in with his promos for at least three money-cycler schemes with a presence on the Ponzi boards. “Achieve Community,” one of the Ponzi-board “programs” Blackburn is pitching, is under investigation by the Colorado Division of Securities.

    Claims about at least two other Ponzi-board “programs” Blackburn is pitching are more absurd than even Achieve claims. Achieve asserts $50 turns into $400.

    One of Blackburn’s MMR21 promos claimed, “The American Christian Warrior 13 Non Profit (ACW13) is actively looking for Soldiers to provide acceptance and need [sic] feedback after using our product. [A]nd for feedback there is compensation!!!

    “Yes[,] you and other military soldiers can be compensated for this!!!!”

    In order to be compensated, military personnel needed to participate in the study and “not be using or agree to stop using your current topical cream,” according to the video by Blackburn.