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  • Indicted Payza Announces ‘Restructuring’

    As one of its operators sits in a Michigan federal prison and the other is listed “at large” by U.S. authorities, Payza today announced a purported “restructuring” as a “European service” that has ceased serving U.S. customers.

    “This means that no transactions are allowed for US members at this time and Payza will no longer be servicing businesses registered in the US, neither providing US payout services or US based withdrawals,” Payza said in a Blog post accessible via Twitter.

    Precisely who is running things at the company is unclear. The Blog post had a byline of “Payza Writer.”

    Ferhan Patel, 37, is listed as an inmate at the federal correctional institute in Milan, Mich. He was arrested Sunday in Detroit. Firoz Patel, his brother and co-defendant in a major money-laundering case announced Tuesday by U.S. prosecutors, appears neither to have surrendered or been arrested. Firoz Patel is 43. The brothers are citizens of Canada and reportedly lived in the Montreal area.

    The office of U.S. Attorney Jessie K. Liu of the District of Columbia confirmed Wednesday that Payza’s dotcom domain had been seized.

    Prosecutors said Payza had helped fuel Ponzi schemes, pyramid schemes, a child-porn site and other criminal activities. Homeland Security Investigations is leading the probe.

    Payza and a predecessor company known as AlertPay have been referenced in Ponzi-scheme litigation dating back at least to 2008’s AdSurfDaily Ponzi scheme, a $119 million fraud. More recent “programs” with ties to Payza include Traffic Monsoon and Zeek Rewards.




  • Payza Site Seized By Feds

    The website Payza.com has been seized, the office of U.S. Attorney Jessie K. Liu of the District of Columbia confirmed tonight. It was not immediately clear how the action will affect Payza customers worldwide, but Liu’s office has updated an information site here.

    In the update, authorities provided an email address for persons who have questions or concerns about their Payza accounts.

    Payza was mostly mum today about prosecutors’ announcement yesterday that Payza and its operators had been indicted.

    A Facebook post today under a Payza account said this:

    As some of you may be aware of already, Payza is currently dealing with some legal matters in the United States. We cannot give any specific details at this time, but please be aware that this is an accusation and it is NOT evidence of guilt. Right now, this is affecting our Website, Blog and Reference Center, but we are working on a solution and we do not want you to worry. Unfortunately, we cannot share any more information right now.

    Thank you for your patience and understanding, 
    Team Payza

    Payza unlawfully processed more than $250 million in transactions for Ponzi schemes, pyramid schemes and a child-porn site, authorities said.

  • BULLETIN: Payza, Patel Brothers Indicted; Feds Move To Forfeit Payza.com Domain Name

    BULLETIN: A grand jury in the District of Columbia has indicted the operators of Payza and moved for the forfeiture of the Payza.com domain name.

    Ferhan Patel, 37, has been arrested in Detroit and is being held.  Firoz Patel, 43, is listed by U.S. authorities as “at large.” The Payza.com domain name appears still to be operational.

    Charges include money-laundering and operating an unlicensed money-service business that processed payments for Ponzi schemes, pyramid schemes and child pornography.

    The case has been under investigation for years. Homeland Security Investigations led the probe.

    “The arrest and indictments in this case demonstrate that we will vigorously enforce laws meant to protect the American consumer,” said U.S. Attorney Jessie K. Liu of the District of Columbia. “Money transmitting businesses are required to be registered federally and licensed in most states and jurisdictions, including the District of Columbia.  Consumers should beware of those that do not follow these laws because they could be acting as a cover for other illegal activity.”

  • Proposed Class Action Alleges Traffic Monsoon’s Scoville Told PayPal He Was In ‘Investments’ Business

    From a proposed class-action lawsuit against PayPal sparked by the alleged Traffic Monsoon/Charles Scoville Ponzi scheme. Red highlights by PP Blog.

    In the aftermath of the SEC’s securities-fraud action against him last year and a judicial ruling this year that he was opertaing a Ponzi scheme, Traffic Monsoon’s Charles Scoville has blanketed social media with claims he was not offering investments.

    But Scoville told PayPal that “Traffic Monsoon’s business was “Investments – general” when he opened an account for the “program” in 2014, according to a proposed class-action lawsuit against the payment processor for aiding and abetting Scoville’s alleged fraud.

    This happened after PayPal had “previously banned Scoville from using its services following allegations that his prior pay-to-click businesses, which also purportedly sold advertising businesses with revenue sharing, were Ponzi/pyramid schemes,” according to the lawsuit.

    Whether the SEC would seize on the claim as the agency’s case against Scoville and Traffic Monsoon works its way through the courts was not immediately clear. Investigators potentially could argue that Scoville was telling investors one thing while telling PayPal another.

    Likely because of a court-imposed stay of litigation against Scoville and Traffic Monsoon while Scoville appeals judicial findings against him in the SEC case, neither Scoville nor Traffic Monsoon is named a defendant in the proposed class action.

    Named defendants are PayPal Inc. and PayPal Holdings Inc. Plaintiffs are Chukwuka Obi and Kingsley Ezeude. The case was filed May 4 in U.S. District Court for the Northern District of California.

    From the complaint (italics added/light editing performed):

    The [Traffic Monsoon] scheme lasted from September 2014 through July 2016. During this time, Traffic Monsoon duped investors into believing it was “a specialized advertising and revenue sharing company” that operated a pay-to-click and Internet traffic exchange program. On its website, Traffic Monsoon falsely told investors that it was not selling investments or operating a Ponzi/pyramid scheme that would pay returns to existing investors with money from new investors . . .

    Traffic Monsoon also concealed from its investors that Scoville, its sole member and operator, had a prior history of defrauding investors through similar pay-to-click investment “businesses.” Unbeknownst to investors – but known to PayPal – Traffic Monsoon was not Scoville’s first fraudulent investment scheme disguised as a “pay-to-click” program. In fact, just as he did with Traffic Monsoon, Scoville ran his prior pay-to-click schemes with PayPal’s support and through PayPal’s infrastructure. Indeed, in 2011 PayPal had banned Scoville from using its services following allegations that Scoville was operating a substantially similar – and similarly fraudulent – “pay-to-click” investment scheme. Yet, despite its knowledge of Scoville’s past pay-to-click schemes and its knowledge that pay-to-click websites have Ponzi/pyramid scheme features, PayPal failed to enforce its own ban and allowed Scoville to open an account for Traffic Monsoon in September 2014, using PayPal’s infrastructure to perpetrate and profit from his new – but similar in its material respects – “pay-to-click” investment fraud.

    The 52-page complaint argues that the left hand at PayPal didn’t know what the right had was doing with respect to doing business with and applying policies to Scoville.

    From the complaint (italics added/light editing performed):

    PayPal was aware that Scoville had previously operated similar pay-to-click businesses that PayPal banned from using its services following allegations that the businesses were Ponzi/pyramid schemes. PayPal is also aware that pay-to-click businesses raise concerns regarding fraud and that some have Ponzi/pyramid scheme features. Indeed, PayPal has placed holds or bans on other pay-to-click businesses. Yet PayPal did not enforce its own ban on Scoville’s use of its services.

    By knowingly allowing Scoville’s new pay-to-click scheme, Traffic Monsoon, to use its services, PayPal departed from its own policy that prohibits the use of its services for “transactions that . . . support pyramid or ponzi schemes.” (PayPal Acceptable Use Policy.) . . .

    PayPal was aware that Traffic Monsoon was falsely representing to investors that it sold advertising services, not investments. Scoville told PayPal (but not investors) that Traffic Monsoon offered investments, which PayPal noted in PayPal Account 7752. When PayPal reviewed Traffic Monsoon’s website to verify the information provided by Scoville, PayPal learned that Traffic Monsoon was a pay-to-click scheme; represented to investors that Traffic Monsoon sold advertising services, not investments; and promised to make payments to investors in pyramid scheme fashion . . .

    PayPal also knew that Traffic Monsoon was a Ponzi/pyramid scheme. PayPal actively monitored Traffic Monsoon’s PayPal account. It was aware of each investment and each withdrawal from the account. PayPal was aware that Traffic Monsoon was making Ponzi/pyramid scheme payments to investors and that Traffic Monsoon’s Ponzi/pyramid scheme was growing exponentially in classic Ponzi/pyramid scheme fashion.

    PayPal told Bloomberg that it looked forward to refuting the claims.

    The complaint is posted on Dropbox.




  • Zeek’s Paul Burks Now In Federal Custody

    Paul Burks, the 70-year-old operator of the Zeek Rewards Ponzi scheme, now is listed as prisoner No. 29723-058 at FMC Lexington. The facility is an administrative security federal medical center with an adjacent minimum security satellite camp in Lexington, Ky.

    After being sentenced in February to more than 14 years, Burks was ordered to report to the facility no later than yesterday. He reportedly is suffering from significant medical issues.

    Burks has become the third and senior-most Zeek executive sent to jail. Dawn Wright-Olivares and Daniel Olivares earlier began serving respective terms of 7.5 years and two years.

    U.S. District Judge Max O. Cogburn Jr. of the Western District of North Carolina was the sentencing judge in all of the cases against the Zeek braintrust.

    Zeek’s operations were similar to the AdSurfDaily Ponzi scheme, which sent ASD President Andy Bowdoin to federal prison in 2012. Bowdoin, now 82, is scheduled to be released in February 2018. He is listed as a prisoner at Butner Medium FCI in Butner, N.C. The Butner prison also has a medical facility. Bowdoin, like Burks, had health issues prior to sentencing.

    Like ASD, Zeek was a Ponzi-board “program.”

    Troy Barnes, one of the principals of “The Achieve Community” (TAC) scam, was sentenced in April to 33 months in prison. TAC also was a Ponzi-board “program.”

    Barnes’ Achieve colleague Kristi Johnson was sentenced to 21 months.




  • Troy Barnes, ‘Achieve Community’ Ponzi Schemer, Sentenced To 33 Months

    Troy A. Barnes ran “The Achieve Community” (TAC) scam along with Kristine L. “Kristi” Johnson.

    Barnes, 53, of Riverview Mich., now has been sentenced to 33 months in federal prison, the office of U.S. Attorney Jill Westmoreland Rose announced. Johnson, of Colorado, earlier was sentenced to 21 months.

    Achieve was a Ponzi-board program that used a “triple algorithm” cover story to fleece investors, the SEC said in  a February 2015.

    Through Rose’s office, the U.S. Secret Service later charged Barnes and Johnson criminally.

    Similar to other schemes, Achieve participants were told they were not making an investment and the company wasn’t offering one, despite dangling a return.

    From a statement by prosecutors (italics added):

    According to court filings, as the scheme grew in size and scope, Barnes and Johnson concealed the true nature of the scheme through multiple misrepresentations. According to court records, when the conspirators became concerned that the use of the term “investment” would draw scrutiny from regulators, they instructed victim-investors, “We ARE NOT an INVESTMENT program, please don’t use that term when you speak or post about our re-purchase strategy.” Even when TAC was unable to operate because their payment processor concluded that TAC was indeed operating a Ponzi scheme and ceased doing business with the company, Barnes and Johnson lied to victims, falsely stating that, “The only reason that [TAC] is not paying out today is that our processor can’t handle the volume of money we are paying our members.”

    Achieve created more than 10,000 victims worldwide, prosecutors said.

    Barnes also was sentenced to three years’ probation after his release, ordered to forfeit $4.7 million and to pay $302,297 in restitution, prosecutors said.




  • In Atmosphere Of Murkiness, Are Violations Of The Traffic Monsoon Asset Freeze Taking Place?

    EDITOR’S NOTE: Traffic Monsoon is a Utah company. The firm also has purported business operations in the United Kingdom and Dubai. Details about the offshore operations are murky.

    A claim from an apparent Traffic Monsoon affiliate appeared Monday (April 3) on Facebook that “Allied Wallet is making refunds of [Traffic Monsoon]  purchases made by credit cards or debit cards. Many people are getting this [sic] refunds.”

    In the same thread on the TrafficMonsoonupdates Facebook site, a poster claimed, “I received this in my bank today . . . 10.04% of my initial deposit to TM.” The apparent partial refund was marked “AW*TRAFFICM.”

    In July, U.S. District Judge Jill N. Parrish ordered all assets of Traffic Monsoon and operator Charles Scoville frozen. An October report by court-appointed receiver Peggy Hunt said that Allied Wallet had claimed it had approximately $7 million in Traffic Monsoon funds on deposit when the SEC filed its Ponzi action against the “program.”

    The asset freeze imposed by Parrish was further reinforced last week when she issued a preliminary injunction at the request of the SEC.

    From the preliminary injunction, which names Allied Wallet and other Traffic Monsoon vendors, including PayPal, Payza, Solid Trust Pay and JPMorgan Chase Bank (italics added):

    Each of the financial or brokerage institutions, debtors, and bailees, or any other person or entity holding Defendants’ Assets shall hold or retain within their control and prohibit the withdrawal, removal, transfer, or other disposal of any such assets, funds, or other properties.

    Why, then, are Traffic Monsoon members claiming Allied Wallet is issuing at least partial refunds? And if the refunds are taking place, are they in violation of the asset freeze?

    Allied Wallet did not respond to a request for comment Monday. Neither did the SEC or Hunt.

    But the docket of the SEC’s case against Traffic Monsoon now shows that Hunt filed a notice of a subpoena naming Allied Wallet on Tuesday. How things would proceed was not immediately clear.

    Hunt previously informed the court about a statement Scoville allegedly made about how Traffic Monsoon hooked up with Allied Wallet prior to the SEC action via a company that purportedly was given to him.

    From the statement, as contained in a transcript filed by Hunt last year (italics added):

    Well, the thing is is Traffic Monsoon in the UK was kind of formed in a way because, when we were in Dubai, that’s when we got set up with someone who knew people inside of Allied Wallet to help us get an Allied Wallet account set up. And when we were setting up Allied Wallet, Allied Wallet required us to have a registration in the UK.

    Scoville went on to say, “We had somebody who was there with us who said, I’ve got a UK company. We can change it to the Traffic Monsoon, and then we could use that registration so you can use Allied Wallet. So that’s Taheer and Amir, both of them are on that business registration, but technically they don’t own any of the company.”

    And, according to the transcript, Scoville said, “they were just giving me a company that they had already registered as a speedy process of just making sure that we have a business registration in the UK. But they put me on as the owner.”

    Scoville, according to the transcript, grew to have doubts about the U.K. operation because he could not confirm that staff or security personnel for which he was paying 6,000 pounds per month actually were working at the U.K. office of his own company.

    From the transcript (italics added):

    I went over there, and apparently, the person at the front desk didn’t know who I was, who asked to see the people that were working for Traffic Monsoon, and they said that there’s nobody there. So I don’t know all of the ins and outs of what’s going on there. I may have been scammed. I don’t know.

    Parrish has found that Traffic Monsoon operated as a Ponzi scheme, according to court documents. Scoville has said he will file an appeal.




  • ‘Traffic Hurricane’ Members Beware: Preliminary Injunction Prohibits Traffic Monsoon, Scoville From Benefiting From ‘AdPack’ Businesses

    2ND UPDATE 6:58 P.M. EDT U.S.A. Here’s a news flash for individuals who joined a “program” called Traffic Hurricane with the belief they somehow were helping the defense of Charles Scoville and Traffic Monsoon: Both Scoville and Traffic Monsoon  are “prohibited from soliciting, accepting, or depositing any monies obtained from actual or prospective investors, individuals, customers, companies, and/or entities, through the Internet or other electronic means for Traffic Monsoon or a business model substantially similar to Traffic Monsoon’s sale of AdPacks.” (Bold emphasis added.)

    The quoted passage is from the very first paragraph of a preliminary injunction issued by U.S. District Judge Jill N. Parrish March 28 against Traffic Monsoon and Scoville. The order effectively bars Scoville from being an owner, silent partner or beneficiary of an adpack business.

    Though the passage doesn’t specifically reference Traffic Hurricane, it is known that Traffic Hurricane operates over the Internet and surfaced after the SEC brought Ponzi charges against Traffic Monsoon in July 2016 and that Traffic Hurricane traded on a theme of assisting Scoville and Traffic Monsoon with defense costs.

    In August 2016, the PP Blog reported that Traffic Hurricane was a reload scheme targeting Traffic Monsoon participants.

    Huyugadal!!

    Ernie Ganz, a onetime associate of Scoville’s, reportedly is the operator of Traffic Hurricane. Earlier this month BehindMLM reported on a falling out between Ganz and Scoville.

    Peggy Hunt, the court-appointed receiver for Traffic Monsoon, once subpoenaed Ganz, according to BehindMLM.

    Hunt today published the March 28 preliminary injunction that includes the adpack ban.

    Because the prohibition appeared in the very first paragraph of the preliminary injunction, it appears as though the judge, the receiver and the SEC are aware of reload schemes aimed at members of Traffic Monsoon.

    The receivership website today announced that Parrish had “found that Traffic Monsoon, LLC operated as a Ponzi scheme.”

    Some supporters of Traffic Monsoon and Scoville have claimed on Facebook that that never happened.

    This document on the receivership website today says that it did happen, and Hunt urged Traffic Monsoon members to review the March 28 court rulings against Traffic Monoon and Scoville “in their entirety.”




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  • URGENT >> BULLETIN >> MOVING: Judge Maintains Traffic Monsoon Receivership And Asset Freeze, Grants SEC’s Request For Preliminary Injunction

    URGENT >> BULLETIN >> MOVING: A federal judge in Utah has denied the request of Charles Scoville and Traffic Monsoon to set aside the Traffic Monsoon receivership and has granted the SEC’s motion for a preliminary injunction that continues an asset freeze ordered in July 2016.

    “The evidence clearly points to the fact that Traffic Monsoon’s explosive growth was driven by members purchasing and repurchasing AdPacks in order to obtain the incredible returns on their investment, not by intense demand for Traffic Monsoon’s services,” U.S. District Judge Jill N. Parrish ruled. “Indeed, many AdPack purchasers had no interest in the website visits Traffic Monsoon offered, and Traffic Monsoon only ever delivered a fraction of the clicks it promised to deliver. In short, the economic reality of the AdPack purchases is that they were investments.”

    From a footnote in the judge’s ruling (italics added/light editing performed):

    One of the unique aspects of Traffic Monsoon that differentiates it from other Ponzi schemes is that members had to continually reinvest in the scheme by rolling over the profit from fully matured AdPacks into the purchase of new AdPacks. This amounted to a shell game in which an initial investment of a sum of money would continually cycle among the members’ accounts.

    A large portion of an initial investment would be distributed to other members as either revenue sharing or a commission. Then the members that received the revenue sharing payments or commissions would reinvest it by rolling it over into new AdP[a]ck purchases. Under this system, the same dollar could be distributed to member accounts as revenue sharing or a commission many times, until either Traffic Monsoon withdrew it as profit or a member withdrew it from his or her account.

    This explains why the members had a relatively small amount in their accounts when the court entered the TRO—$34.2 million—while the number of outstanding AdPacks, if allowed to mature, would amount to $243.9 million. So long as the members, encouraged by a continual flow of money into their accounts, reinvested most of their money rather than withdrawing it, a relatively small amount of money continually redistributed among the members through revenue sharing could fuel much greater expectations as to the near-future value of the AdPacks.

    But once the money ceased to continually recycle among the member accounts, as happened when the court entered the TRO, there wasn’t enough money to pay what experience had led the members to believe their AdPack investment would be worth after a short 55-day wait. That is why Traffic Monsoon had only about $60 million in assets to cover outstanding AdPacks that would be worth $243.9 million if they had matured, even though member account balances amounted to only $34.2 million.

    More . . .




  • SEC Charges Zeek Figure Keith Laggos With Publishing Fake News To Sanitize Ponzi/Pyramid Scheme

    In December 2013, these plaques of Network Marketing Business Journal Zeek puff pieces were put up for auction by the court-appointed receiver for Zeek. On March 22, 2017, the SEC charged former NMBJ publisher Keith Laggos with securities fraud.

    Keith Laggos, an AdSurfDaily Ponzi scheme figure and the onetime publisher of Network Marketing Business Journal, has been charged by the SEC with securities fraud for illegally touting the Zeek Rewards scheme and using NMBJ to sanitize the egregious fraud that gathered hundreds of millions of dollars.

    Among the agency’s allegations is that “Laggos’s favorable editorials of the scheme contained material misstatements and omissions. Laggos published theses misstatements despite being made aware of their inaccuracy and otherwise being in a position as a paid consultant for ZeekRewards to know of their falsity.”

    The former .com site for NMBJ now is showing a “For Sale” sign.

    Plaques commemorating NMBJ’s Zeek puff pieces on Zeek were listed as auction items by the court-appointed receiver for Zeek in December 2013.

    From an SEC statement on March 23, 2017 (italics added):

    The SEC alleges that, from at least June 2011 through July 2012, Laggos, through NMBJ and while acting a paid consultant for ZeekRewards, was paid at least $64,000 for publishing several editorials providing crucial publicity to the ZeekRewards scheme. These publications promoted ZeekRewards as the “company of the month” and touted, among other things, the scheme’s supposed record earnings and opportunity to generate income for participants. Laggos failed to disclose the fact that he was paid for the favorable editorial coverage, the amount that he was paid, and that he was a paid consultant for ZeekRewards.

    Laggos, a prior defendant in an SEC touting case, agreed to pay $79,190.68 to settle the Zeek matter, the SEC said. In addition, he agreed to a permanent injunction from future violations of Sections 17(a) and 17(b) of the Securities Act, from participating in future securities offerings and from providing paid publicity to securities.

    The SEC moved against Zeek on Aug. 17, 2012. (See Aug. 12, 2012, PP Blog editorial that references Laggos: “Karl Wallenda Wouldn’t Do Zeek.”)

    See BehindMLM’s March 25, 2017, story on the charges against Laggos.

    See the SEC’s litigation statement.

    Whether other outlets that publish fake news to sanitize fraudulent MLM schemes would learn from the case against Laggos was not immediately clear.




  • BULLETIN: James Merrill of TelexFree Sentenced To 6 Years In Federal Prison

    James Merrill

    BULLETIN: (8TH UPDATE 3:57 P.M. EDT U.S.A.) James Merrill, the former president of the TelexFree Ponzi- and pyramid scheme, has been sentenced to six years in federal prison.

    U.S. District Judge Timothy S. Hillman ordered the sentence, which was four years less than what prosecutors in the office of Acting U.S. Attorney William D. Weinreb of the District of Massachusetts sought.

    Robert Goldstein, Merrill’s lawyer, argued that his client deserved no more than a year.

    The PP Blog is awaiting comment from prosecutors. (See below.) Also see the Boston Globe’s early story on Merrill’s sentence.

    Merrill, 55, of Ashland, Mass., also was sentenced to three years’ supervised release after he completes his sentence and agreed to forfeit about $140 million and other assets, Weinreb’s office said. He was given until May 15 to report to prison. The former TelexFree officer pleaded guilty in October 2016 to eight counts of wire fraud and one count of conspiracy.

    “Despite knowing that Telexfree was a pyramid scheme, Mr. Merrill profited for years at the expense of the hard-working individuals who invested in the fraudulent company,” Weinreb said in a statement. “For the hundreds of thousands of investors, here and around the world, who were taken in by the lies promoted by Mr. Merrill and Telexfree, today’s sentence provides a measure of justice. Mr. Merrill’s greed damaged the livelihoods of thousands of people who were simply struggling to make ends meet.”

    Added Matthew Etre, special agent in charge of Homeland Security Investigations in Boston:

    “While the harm and damage James Merrill caused by stealing more than $3 billion from innocent investors can never be repaired, his victims in more than 240 countries around the world can take some small measure of satisfaction that he is now looking at six years in federal prison and a substantial forfeiture as repayment for his crimes. HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

    Separately, police action against TelexFree figures in Brazil continued today, with Brazilian prosecutors formally announcing criminal charges against 22 people accused of operating a clandestine financial institution. (Google translation from Portuguese to English here.)

    Two of the Brazilian defendants — Carlos Costa and Carlos Wanzeler — are known business associates of Merrill. Wanzeler fled the United States for Brazil when investigators were closing in on TelexFree in 2014, U.S. prosecutors said.

    There are at least two major investigations of TelexFree under way in Brazil, including one about money-laundering. It was announced earlier this month.

    More . . .