BULLETIN: An investigation by the U.S. Secret Service, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and the Miami Police Department has led to criminal charges against nine defendants in three Florida fraud schemes that allegedly were interconnected.
Seven of the defendants were indicted. Two others were charged via criminal information, and the investigation is ongoing. The probe demonstrates that, in an era of seemingly ceaseless white-collar crime, investigators are using leads uncovered in one case and following them to discover fraud schemes that perhaps would have gone undetected were it not for the discovery of an initial scheme.
Charged with conspiracy to commit bank fraud connected to a Ponzi scheme were Maria Baksh, 50, of Hollywood; Juan Cardenas, 48, of Miami; Gabriel Cifuentes, 63, of Hialeah; Maureen Cifuentes, 35; of Hialeah, Lucia Garcia, 58, of Pembroke Pines; Roberto Hernandez, 66, of Miami; Maribel Roman, 47, of Hialeah; Reinaldo Roman Jr., 39, of Hialeah; and Roberto Rodriguez, 43, of Miami.
The case is tied to the purported “jewelry” Ponzi scheme of Luis Felipe Perez, 38, of Fort Lauderdale. Lopez was charged both civilly (SEC) and criminally last year (Secret Service/ICE). He was sentenced to 10 years in federal prison after pleading guilty to securities fraud.
Investigators said he pocketed $6 million from his Ponzi scheme, which gathered $40 million. Investors were told they were financing his purported jewelry business and pawn shops in New York, authorities said.
Perez, investigators now say, recruited “many” of the new defendants and referred them to Berta Sanders, 61, of Miami Lakes. Sanders, a CPA, helped them secure $12 million in commercial lines of credit by preparing false tax returns and false income statements submitted to Wachovia Bank. Proceeds from the loans were diverted to the Perez Ponzi scheme.
“When Perez’s Ponzi scheme ultimately collapsed in May 2009, most of the fraudulent loans obtained from Wachovia defaulted,” prosecutors said, noting that the scheme cost Wachovia $10 million.
Sanders, who has pleaded guilty to conspiracy to commit bank fraud, is scheduled to be sentenced Feb. 22 by U.S. District Judge Paul C. Huck.
Viewed as a whole, the case featured the Perez Ponzi scheme and a related bank-fraud scheme over which Sanders allegedly presided for a 10 percent cut of the bogus loans she engineered, prosecutors said.
It also featured a conspiracy by which other defendants fleeced the bank by allowing Sanders to prepare fraudulent documents so they could get the money to plow into the Ponzi scheme, prosecutors said.
The investigation was undertaken by elements of the Financial Fraud Enforcement Task Force.
While investors were imagining “guaranteed annual returns of 18 percent to 120 percent through monthly interest payments,” the SEC said last year, Perez spent $3.2 million of their money on a home, $1 million on jewelry for himself and his wife, $400,000 to lease luxury cars, $300,000 on clothing for his wife, $300,000 for travel by private jet and $100,000 on artwork.
UPDATED 2:37 P.M. ET (U.S.A.) If you’re a modern-day commodities fraudster and Ponzi schemer, be prepared to have massive criminal and civil exposure. The recent cases against Charles E. “Chuck” Hays of Minnesota tell a tale of significant prison time, a huge criminal restitution order and civil fines that effectively exposed him to treble damages while also holding him accountable for his ill-gotten gains. Indeed, his legal problems didn’t end even after he was sentenced to jail in May 2010.
Here is some of the notable math from the criminal case against Hays, who pleaded guilty in April 2009 to running a commodity-pool Ponzi scheme.
Jail sentence ordered by U.S. District Judge Donovan Frank: 117 months.
Restitution ordered by Frank in criminal case: $21.6 million.
The criminal case against Hays, who operated a company known as Crossfire Trading LLC, was brought by federal prosecutors and the U.S. Postal Inspection Service.
Now, the math of the civil side of the Hays’ prosecution has been released:
Civil fine against Hays ordered by Frank: nearly $64.8 million. (The amount was arrived at by totaling the proceeds of the Ponzi scheme ($40.4 million) and subtracting the Ponzi payments to victims ($18.8 million) to arrive at the figure of $21.6 million — and then trebling that number to determine the fine.)
Disgorgement of ill-gotten gains ordered by Frank: $19.9 million. (The amount is a bit less than the $21.6 million figure noted above because Hays was given credit for slightly more than $1.6 million he lost while trading. Even so, the full amount of $21.6 million is due in the judgment in the criminal case.)
Additional penalty imposed by Frank in civil case: lifetime ban from trading.
Although Hays argued he didn’t deserve a lifetime ban after running a Ponzi scheme that gathered more than $40 million and issuing false statements to investors, the judge didn’t buy it.
“Hays’ activities justify a permanent trading ban because Hays has shown himself to represent an inherent threat to the integrity of the futures market,” Frank wrote.
The CFTC brought the civil case and persuaded Frank the steep fine and disgorgement order were warranted.
“In light of the egregiousness and continuing nature of the fraud in this case, which spanned over eight years, such an assessment is appropriate,” Frank wrote. He also left the door open for victims to sue Hays, meaning that the orders in the federal cases did not bar private litigants from seeking their own remedies against Hays.
Fraudsters could take a clue from the federal litigation and severe penalties against Hays, Frank suggested.
“Given that Hays must repay his criminal penalty before turning to his civil penalty, the imposition of a civil monetary fine (or for that matter, disgorgement) is largely academic,” he noted in his order. “Nonetheless, the Court was persuaded by the CFTC’s comments at the motion hearing that this action is necessary to adequately address Defendants’ violations and deter against future violations while the events leading to this lawsuit are fresh in people’s minds.”
UPDATED 12:21 P.M. ET (U.S.A.) In a case that outlines allegations of intimidation reminiscent of efforts undertaken by some members of AdSurfDaily to frighten investors, a Utah federal judge has frozen the assets of a Texas man and entered an order prohibiting the destruction of books and records.
Robert J. Andres and an unincorporated firm known as Winsome Investment Trust of Houston have been accused of conducting a $50.2 million commodity-pool solicitation fraud and Ponzi scheme. CFTC originally filed the case under seal last week, alleging that the scheme affected at least 243 investors.
“Recently, Andres personally contacted participants asking them to verify their investments purportedly as part of the process to return funds to participants,” the CFTC alleged. “In a blatant effort to intimidate, Andres is demanding that in order to obtain repayment, participants must acknowledge that they have not taken or assisted others in taking legal action against Winsome. If any participants indicate they have, the return of their funds would be ‘handled by an Attorney.’”
Some members of AdSurfDaily, a Florida firm accused of operating a Ponzi scheme involving tens of millions of dollars, have sought in recent months to intimidate members who contemplated filing remissions claims with the claims administrator approved by the U.S. Department of Justice.
An email received by some ASD members included a purported “legal opinion” and implied that ASD members who filed for restitution may face legal action from a “group” of ASD members.
In the CFTC case, Andres also is accused of misappropriation and providing false statements to customers to cover up the fraud.
Also accused with misappropriation and proving false statements to customers were Robert L. Holloway of San Diego, and a company known as US Ventures LC (USV) of Salt Lake City.
Senior U.S. District Judge Bruce S. Jenkins has frozen the assets of all of the defendants in the case.
BULLETIN: In an argument that almost certainly will give comfort to operators of some of the most corrupt and insidious businesses on the Internet, AdSurfDaily President Andy Bowdoin has advised a federal judge that his company and business practices are legitimate because they stand up to scrutiny when the “Howey Test” is applied.
Bowdoin, 77, made the argument despite the fact the government claims that he signed a proffer letter at least two years ago in which he acknowledged ASD was operating illegally and that the prosecution’s material allegations were all true. In 2009, Bowdoin acknowledged in his own court filings that he had made statements against his interests over a period of at least four days in the hopes of avoiding a prison sentence by cooperating with investigators.
But Bowdoin now says criminal charges of wire fraud, securities fraud and selling unregistered securities as investment contracts brought against him last year “must” be dismissed. It is believed that hundreds — if not thousands — of autosurfs are operating over the Internet at any given time.
Separately, Bowdoin filed a motion to transfer the case to the Northern District of Florida’s Tallahassee Division from the District of Columbia, saying that trying the case in Florida was the fair and most cost-effective thing to do. The government is expected to oppose Bowdoin’s bid to move the case from Washington to Tallahassee.
U.S. District Judge Rosemary Collyer, who was assigned the civil forfeiture case against Bowdoin’s assets after the U.S. Secret Service raided ASD in August 2008 and ordered $65.8 million found in Bowdoin’s personal bank accounts ceded to the government after nearly a year and a half of litigation, also was assigned the criminal case. Criminal charges against Bowdoin were announced in December 2010.
Although Bowdoin previously claimed Collyer was biased against him and sought unsuccessfully to have her removed from the civil case, he has not raised the issue of bias so far in the criminal case. Instead, he petitioned Collyer for an order that would remove the case from her courtroom and put it in the hands of a federal judge in Florida, arguing that most of the witnesses in the case resided in Florida and that hearing the case in Collyer’s court would force unnecessary costs and transportation burdens on both Bowdoin and witnesses.
An affidavit signed by Bowdoin requesting the transfer was filed yesterday. It appears to have been notarized by Judy Harris of Tallahassee, whom some ASD members said operated the AdViewGlobal (AVG) autosurf with her husband, George Harris. George Harris is the son of Bowdoin’s wife, Edna Faye Bowdoin, and a Tallahassee home owned by the Harrises was seized in an ASD-related forfeiture complaint filed in December 2008.
Both George and Judy Harris benefited from the ASD Ponzi scheme because a $157,000 mortgage on their house was retired with Ponzi proceeds, prosecutors said in December 2008.
The Harrises also received a car valued at nearly $30,000 from the scheme, and the car also was paid for with Ponzi proceeds, prosecutors said.
Florida records show that Judy Harris has been a licensed notary since at least October 2008. Why she would notarize a document for Andy Bowdoin when she, her husband and her mother-in-law were alleged to have been a beneficiaries of the ASD Ponzi scheme was not immediately clear.
AVG, which purported to be headquartered in Uruguay and launched after the seizure of assets linked to Bowdoin and the Harrises, suspended payouts to members in June 2009. The surf blamed members’ greed for its problems. The name of Judy Harris also appears in a document filed in April 2009 with the Florida Department of State that canceled the fictitious registration of AVG, which also was known as the AV Global Association.
Andy Bowdoin’s New Argument
Prosecutors have not responded to Bowdoin’s new assertion filed yesterday that ASD can stand up to Howey Test scrutiny. A blistering response is expected in the days ahead because a ruling in Bowdoin’s favor to dismiss the case or an outright win by Bowdoin at trial could have grave economic and security implications for the United States.
Autosurfs operate in the darkest corners of the Internet, fueled by corrupt promoters and scammers who position them as legitimate “advertising” businesses that share revenue with participants. Untold sums of money — believed to be in the billions of dollars — have disappeared in recent years, and prosecutors say the enterprises operate as virtually pure Ponzi schemes.
Purveyors almost certainly would view any win by Bowdoin as a mandate that legalized Internet-based Ponzi schemes and created a virtual license to collect vast sums of money and simply pocket it by claiming member payouts, which ASD called “rebates,” were not guaranteed.
“[N]o guarantee or promise of any profits, any specific level of rebate payouts, or return on an alleged ‘investment’ occurred during the AdSurfDaily operation,” Bowdoin claimed. He also asserted that the allegations against him were Constitutionally vague and that none of the four civil cases brought against autosurfs — 12DailyPro, PhoenixSurf, CEP Holdings and the forfeiture case against ASD’s assets filed in 2008 — has clarified the legal issues.
“As none of these actions has proceeded to final judgment, no judicial opinion has yet clarified whether payment of membership fees by advertisers into auto-surf businesses constitute unregistered sales of ‘securities,’ as alleged by the government,” Bowdoin claimed.
The criminal charges “must be dismissed because the ad-surf business model employed by AdSurfDaily, Inc. and [Bowdoin’s] related businesses, as alleged in the indictment, cannot constitute an SEC-regulated ‘investment contract’ security as defined under the three-prong test established” by Howey, Bowdoin argued.
The Howey Test is a threshold securities test and litigation benchmark from the 1946 U.S. Supreme Court decision in S.E.C. v. W.J. Howey Co. The decision spoke to the issue of what constitutes an “investment contract.”
Bowdoin now claims the entire case against him is fatally flawed because he never sold investment contracts as defined under Howey.
“[T]he Howey test,” Bowdoin argued, “determines whether a particular instrument or transaction is a prohibited, unregistered ‘investment contract’ by searching for the presence of three factors: ‘(1) the investment of money (2) in a common enterprise (3) with an expectation of profits to be derived solely from the efforts of the promoter or a third party.”
ASD did not meet any of the three prongs of the Howey Test, Bowdoin argued.
It was not an investment because ASD was an advertising company, not an investment company through which participants placed money at risk in anticipation of profit, Bowdoin argued. Therefore, he asserted, ASD did not meet the first Howey prong.
Meanwhile, Bowdoin argued that ASD did not meet the second prong because participants did not place their money in a “common pool” put at risk in expectation of a profit.
“[T]here was no ‘common enterprise’ at work here,” Bowdoin argued.
And because ASD members had to click on ads and view them to get paid, they performed “actual efforts,” taking the third prong of the Howey Test out of play, Bowdoin claimed.
“Here, the payment of both rebates and referral commissions were directly tied to the actual efforts of the advertisers,” Bowdoin argued.
Prosecutors, though, asserted in the ASD forfeiture case that ASD told investors that rebates “will” be paid until investors received back 100 percent of the money they plowed into the scheme, plus a profit of 25 percent.
Gerald Nehra, an attorney and expert witness for ASD in the forfeiture case, conceded under cross examination in 2008 that the ASD Terms of Service specified that rebates “will” be paid.
Bowdoin’s most recent arguments also put him with odds with dozens of ASD members who claimed in court filings that the government had no “evidence” and no “witnesses.”
In his filings yesterday, Bowdoin said he believed that the “vast majority” of the prosecution’s witnesses resided in Florida. He said he planned to counter them with witnesses of his own — as many as 136 — including George and Judy Harris, Rob Cefail of InTouch Marketing of Clearwater, and Tari Steward, who also provided Clearwater-based marketing services.
At least 56 of ASD’s witnesses were ASD employees, Bowdoin said. The document was notarized by Judy Harris.
BULLETIN:(UPDATED 3 P.M. ET (U.S.A.) The first experience some people seeking to become U.S. citizens had was to be duped by Americans, the Federal Trade Commission has alleged. After a probe involving multiple government agencies, the FTC has gone to federal court in Nevada to block what it described as an “immigration scam.”
3 P.M. UPDATE: The alleged scheme also resulted in three arrests on criminal charges of Obtaining Money Under False Pretenses in the Course of a Technological Crime, six counts of Conspiracy and two counts of Criminal Racketeering.
Charged criminally by the office of Nevada Attorney General Catherine Cortez Masto were Charles Doucette, Deborah Stilson and Cybil Duran Berti, authorities said.
The scammers posed as government agencies, used the symbols and language of government, used websites that mimicked government sites, used the American flag, the Statue of Liberty and answered phones by using the acronym of the U.S. Citizenship and Immigration Service (USCIS), a division of the Department of Homeland Security, the FTC alleged.
Charged in the case were companies known as “Immigration Center,” a nonprofit based in Colorado, and “Immigration Forms and Publications” of Missouri.
A federal judge has frozen the assets of the companies and co-defendants, including Charles Doucette; Deborah Stilson, also known as Deborah Malmstrom; Alfred Boyce; Thomas Strawbridge; Robin Meredith; Thomas Laurence; and Elizabeth Meredith.
Domains used by the fraudsters included www.uscis-ins.us and www.usgovernmenthelpline.com, the FTC said. The phrase “uscis-helpline” also was used in a domain name, the agency added.
“The sites directed consumers to call a toll-free number that an automated voice answered, ‘Immigration Center,’” the FTC charged. “Consumers were then transferred to a live person who answered, ‘USCIS’ or ‘U.S. Immigration Center,’ and identified him or herself as an ‘agent,’ ‘immigration officer,’ or ‘caseworker.’”
Consumers were duped into paying fees of up to $2,500, the FTC said, alleging that telemarketers were illegally conducting business by posing as immigration counselors.
“[T]he defendants charged fees for application forms that were the same amount as the government processing fees, leading [customers] to believe the fees covered the cost of USCIS processing,” the FTC said. “Some consumers who applied for the forms were told to send checks by overnight mail to cover the costs. Others paid with checks or money orders on delivery.
“Consumers ended up paying for applications that were never processed by the USCIS for failure to pay the official processing fee, or, in some cases, they were charged twice, once by the defendants and once by the government after the defendant forwarded their bank account information to USCIS,” the FTC said.
Assisting in the case were the U.S. Department of Homeland Security; the U.S. Customs and Immigration Services; Immigration and Customs Enforcement; the Office of the Attorney General of Colorado; the Office of the Attorney General of Missouri; the Office of the Attorney General of Nevada; the Pettis County, Mo., Sheriff’s Office; the Department of Justice and Executive Office for Immigration Review; and the U.S. Postal Inspection Service.
“These egregious actions by scammers who impersonate Federal employees and prey on innocent people who are trying to work within the system to achieve citizenship is particularly distressing,” said Cortez Masto.
Five people — including a father, three sons and a pitchman who doubled as an executive — have pleaded guilty to their roles in orchestrating a $68 million securities-fraud and Ponzi scheme involving fraudulent Texas oil-and-gas investments, federal prosecutors said.
The father — William Anthony “Tony” Rand, 69, of Plano — is a recidivist felon who previously had spent nearly seven years in prison for money-laundering, bank fraud and other crimes, prosecutors said.
Tony Rand was the financial manager and bookkeeper for Aspen Exploration Inc., which prosecutors described as corrupt from top to bottom. Sons Gregory Keith “Greg” Rand, William Nicholas “Bill” Rand and Mark Albert “Mark” Rand were Aspen’s owners and principals.
Greg Rand, 46, pleaded guilty last week to conspiracy to commit mail fraud and securities fraud and three counts of securities fraud. Under a plea agreement, he faces up to 216 months in prison.
Bill Rand, 41, pleaded guilty to three counts of securities fraud. His plea agreement exposes him to up to 168 months in prison.
Mark Rand, 45, pleaded guilty in October 2010. Details about his plea were not available immediately.
Tony Rand, meanwhile, faces up to 78 months in prison after pleading guilty last week to conspiracy to commit mail fraud and securities fraud and one count of securities fraud.
A fifth Aspen employee — Joel William Petersen, 54, of Frisco — also faces up to 78 months in prison after pleading guilty last week to conspiracy to commit mail fraud and securities fraud and one count of securities fraud. Peterson was an Aspen vice president and pitchman.
The Rands “will be required to forfeit substantial money judgments and property to the government, including real estate, boats and other personal water craft, luxury vehicles, artwork, including an original Picasso, furniture, antiques, musical instruments, jade, expensive jewelry and wine,” prosecutors said.
Despite the fact Aspen was insolvent, investors were told “they could receive profits equal to the return of their cash investment within three years with potential production revenues lasting up to 20 years and multi-fold returns on their investment funds,” prosecutors said.
The case was brought by elements of the Financial Fraud Enforcement Task Force.
Ronald E. Satterfield, the South Carolina pastor accused in a November lawsuit filed by the CFTC of operating a Forex Ponzi scheme from church property and elsewhere, now has been arrested on criminal charges of bank fraud.
The Charleston Police Department confirmed Satterfield’s arrest yesterday to the PP Blog. The arrest occurred Thursday, according to the department. The Charleston Post and Courier broke the news about the arrest and jailing of Satterfield, and the newspaper supplemented its coverage by publishing a PDF of a strange, potentially damning letter Satterfield wrote to a federal judge in November.
Satterfield, 63, was the rector and pastor of St. John’s Reformed Episcopal Church in Charleston. The church property traces its roots to 1850, 10 years before Abraham Lincoln was elected President of the United States and 11 years before the first shots were fired in the Civil War.
In November, the CFTC accused Satterfield in civil filings of being part of a $3.3 million solicitation fraud and Forex Ponzi scheme that operated in part from the historic church facility. Co-defendant Nicholas Bos, a pitchman from Ludington, Mich., was accused of selling the scheme with a business card that depicted a “one million dollar bill” and presenting it as an opportunity to earn “24% a year.”
Bos was paid at least $550,000 in commissions or fees from the scheme, CFTC said. His overall compensation exceeded $800,000 because Bos also received a separate allocation of $295,000 to purchase a home, according to court filings.
If the allegations are true, it means Bos alone received about 40 percent of the proceeds of the alleged scheme.
In court filings in the CFTC case, Satterfield said he did not “agree” with the agency’s charges, asserting he had no intent to defraud and suggesting that economic factors beyond his control and “greed” were to blame for the collapse of the program.
“Some began to see this almost like an automatic ATM mechanism from which to draw a deluded sense of endless money,” he advised U.S. District Judge Richard M. Gergel in a letter.
Despite the fact the CFTC had accused him of never registering with the agency in “any capacity,” instructing participants “to make their investment checks payable to him personally” and commingling their money with his money, he advised Gergel that customers had been dutifully advised by the alleged scheme’s pitchmen not to spend more than they could afford to lose.
Although Satterfield said customers were encouraged by the pitchmen to conduct “due diligence,” he did not explain how it was possible to do so in an environment the CFTC had described as filled with “fraudulent misrepresentations” and omissions of material facts customers needed to make informed investment decisions.
Satterfield claimed he traded Forex between 3 a.m. and 6 a.m., went back to bed until 8 a.m., and then resumed trading until 10 a.m. or 11 a.m.
Mixing Forex trading with his ministry worked well, he said, because most church activities were in the afternoon or evening. And because Forex is a 24-hour activity, he advised Gergel, he had the “ability to respond even in the morning hours if a pastoral need or commitment emerged.”
In a possible bid to prove to Gergel that he was a competent trader — despite the fact the CFTC had said his trading “typically resulted in a loss each month,” that “some or all” of his customers were not eligible participants and that he had misappropriated customer funds — Satterfield prepared a copy of a Forex “demo account” he opened after the CFTC brought its charges. The “demo account” was part of an “exhibit” Satterfield, who claimed to have no money to hire an attorney, presented the judge.
“Sir, I beg the mercy of the court,” he advised the judge. He also told Gergel that Bos received $823,136 from the alleged scheme, which the CFTC said had gathered about $3.3 million from about 70 customers.
Satterfield said that $295,000 of the compensation Bos received was in a form of a loan “to purchase a retirement home,” claiming that Bos had pledged to repay the loan “within a few days” but never did.
The failure to repay the loan, Satterfield said, crippled his ability to trade with “adequate leverage.”
Although CFTC had alleged that the $295,000 came from customer funds , Satterfield did not explain how providing the loan was a prudent business practice. Instead, he focused on the alleged failure of Bos to repay the loan, saying the failure had an “overwheming impact” on his ability to trade.
The scam operated “at least” between March 2006 and March 2009, CFTC alleged.
Police now say Satterfield forged documents in September 2006 to take out a loan for $250,000 in the name of the church. Citing police documents, the Post and Courier reported that Satterfield transferred the money from the church account to his personal account in September 2010, two months before the CFTC brought its civil charges.
In its lawsuit, CFTC said Satterfield used customer funds to make monthly payments to his church that totaled more than $28,000. Because the sum allegedly came from fraud proceeds, the church could be forced to return it and to incur even higher costs because of the sudden need to hire an attorney to guide it through the post-Ponzi waters, which often are choppy.
An apparent investment and banking website whose domain registration is hidden behind a proxy appears to be preparing to accept money from investors worldwide by planting the seed it is a charitable enterprise.
The website of OnlineInvestmentBank.org appears to have been registered just days ago — on Jan. 21. The site suggests it is both “private” and eager to do business with Americans and others worldwide. Meanwhile, the site suggests it does not have to comply with U.S. law when soliciting U.S. residents.
Examples of fractured English syntax appear across the site.
“Don’t post bad vote on Public Forums and at Gold Rating Site without contacting the administrator of our program FIRST,” the site prompts prospects. “Maybe there was a technical problem with your transaction, so please always CLEAR the thing with the administrator.”
Other examples of the awkward use of the English language appear on the site. At the same time, OnlineInvestmentBank.org appears to be issuing an appeal for customers to embrace a culture of both spamming and secrecy.
“You agree that all information, communications, materials coming from onlineinvestmentbank.org are unsolicited and must be kept private, confidential and protected from any disclosure,” the site advises prospects.
The site also claims an exemption from U.S. law:
“As a private transaction, this program is exempt from the US Securities Act of 1933, the US Securities Exchange Act of 1934 and the US Investment Company Act of 1940 and all other rules, regulations and amendments thereof,” the site claims. “We are not FDIC insured. We are not a licensed bank or a security firm.”
Money can be sent to the firm via Liberty Reserve and Perfect Money, according to the website.
Why a purported investment company and banking firm would use a .org domain was not immediately clear. On its website, OnlineInvestmentBank.org says it is offering a referral program and promises to pay participants “5% of your referrer’s deposit.”
“Everyone can participate in this program,” the website claims in its FAQ section. “We accept members from any country in the world.”
The site says it accepts a minimum deposit of “USD 10” and a maximum of “USD 500000.”
How it purportedly earns money and is able to give away 5 percent of its deposits in the form of commission payments are unclear.
Bizarrely, the website also appears to claim that customer deposits are locked down, but earn spectacular sums of interest daily — in addition to the 5 percent commissions paid for referrals.
Under an FAQ that reads, “What do you mean xxx% on your plans? can (sic) I withdrawal (sic) Principal (sic) too?”, the website notes:
“You can’t withdrawal (sic) your principal money. For example 102% after 1 day is (sic) means 100% which is your principal money plus 2% as profit.”
And the website also says it favors “e-currencies” because they attract less attention from two notable groups of potential meddlers: “hackers” and “any of the governmental organizations (like tax structures).”
BULLETIN: The Commodity Futures Trading Commission has gone to federal courts in New York, Chicago, the District of Columbia and Kansas City and simultaneously filed 14 lawsuits against Forex companies to enforce registration requirements and provisions of the Dodd-Frank Act.
One of the lawsuits — one filed in the District of Columbia against a Nevada company known as Kingdom Forex Trading and Futures Ltd. that claims to be a “legally registered company in Belize and Nevis” — alleges that the firm was not registered with the CFTC but that U.S. customers were instructed to send money via wire and credit/debit cards. Money also can be sent by Liberty Reserve, a payment processor favored by online financial schemes. Liberty Reserve says it operates from Costa Rica.
The case against Kingdom Forex has been assigned to U.S. District Judge Rosemary Collyer, the same judge assigned to hear the AdSurfDaily autosurf Ponzi scheme cases.
This morning, Liberty Reserve was advertising on its website a company known as FXOpen.com. FXOpen.com, according to the CFTC, is the website of a firm known as FXOpen Investments Inc. — yet-another of the defendants sued in the sweep.
FXOpen is described in the complaint as “company of undisclosed origin” that claims “its headquarters is located at Ebene Heights No. 34, Cybercity Ebene, Mauritius.”
It also claims to have “worldwide regional offices” in Cairo, Egypt; Paris, France; Kuala Lumpur, Malaysia; Jakarta, Indonesia; Almaty, Kazakhstan; and Moscow, Russia, CFTC charged.
“FXOpen’s websites, including www.fxopen.com, are hosted on servers” in the United States, CFTC charged in the complaint.
The firm, whose website would not load this morning when visitors clicked the link at the Liberty Reserve page, is accused of directly soliciting U.S. investors and claiming U.S. law does not apply to it.
“[I]n the ‘Forum’ section of its website, FXOpen representatives specifically solicit United States residents to open accounts with FXOpen, in part by advertising that potential customers in the United States can escape United States laws and regulations by opening accounts with FXOpen,” CFTC charged.
“For example, on October 5, 2010, in response to a question regarding whether FXOpen could accept applicants from the United States after October 18, 2010 following recent CFTC rulings, an FXOpen representative answered with a post, stating, ‘Since we don’t have an office in the US, nor are we an affiliate of a US based broker, we are not bound by CFTC rulings. Rest assured we will be able to accept US clients for the foreseeable future unless a legal impediment appears,’” CFTC charged in the complaint.
All of the companies named defendants in the sweep are accused of “illegally soliciting members of the public to engage in foreign currency (forex) transactions and that they are operating without being registered with the CFTC,” the agency said.
Among the defendants are domestic and offshore companies.
Here is the lineup of defendants in what the CFTC described as a major nationwide sweep:
EuroForex Development LLC, a Delaware LLC.
FIG Solutions Limited Inc., a Delaware corporation.
ForInvest, a Delaware corporation.
FXOpen Investments Inc., a Delaware LLC.
FXPRICE, a Delaware LLC.
GIGFX LLC., a Delaware company.
InovaTrade. Inc., a company with purported offices in Florida.
InstaTrade Corp., d/b/a InstaForex, a British Virgin Islands company.
InvesttechFX Technologies. Inc., a Canadian corporation located in Toronto.
J&K Futures. Inc., a company with purported offices in California and New York.
Kingdom Forex Trading and Futures. Ltd., a Nevada company.
The assets of an Arizona man who allegedly mixed a Forex Ponzi scheme with a cash-gifting scheme and claimed his software system let clients “profit every time” from trades have been frozen by a federal judge after the CFTC filed an emergency court action.
Anthony Eugene Linton of Tucson told investors that entrusting their money to him posed “no risk whatsoever” because of his miraculous trading abilities, personal wealth and software system, the CFTC charged.
Some customers were told their profits under Linton were not taxable because the enterprise was structured as a “tax free gift plan in which participation interests would be considered to be gifts” to Linton’s company, known as “The Private Trading Pool” (PTP).
Returns from PTP were positioned as “gifts” back to participants, “with the result that the transactions would not have to be disclosed to the Internal Revenue Service . . . and would be considered ‘tax free’ by the IRS,” CFTC charged.
Linton told one whopper after another, CFTC said.
“[W]hat little forex trading Linton did using customer funds resulted in consistent net losses, and, in the aggregate, he lost more than 90 percent of the funds traded,” CFTC charged.
When the scheme began to unravel, CFTC charged, Linton blamed purported “new restrictions” on Forex trading imposed by the U.S. Congress and the National Futures Association (NFA) for his inability to make payments, CFTC charged.
He also told some investors that a “Permanent Injunction” placed against him in his divorce case prevented him from making payments, CFTC charged.
The alleged scheme gathered at least $650,000 from at least 19 investors. Some of the funds were used in Ponzi scheme fashion, CFTC said.
Linton also used customer funds to make his “personal mortgage, car and credit card payments,” CFTC charged.
At the same time, he used customer funds “to buy and sell items on Ebay and converted large sums of customer funds into cash and stashed it in a safe in his home,” CFTC said.
U.S. District Judge David C. Bury ordered the asset freeze.
Arthur Heffelfinger, the Montana man accused criminally under state law last year of operating a pyramid promotional scheme and using clients’ money to sustain a Ponzi scheme that had gathered more than $2 million from at least 20 clients, has been sentenced to prison.
Heffelfinger, 64, pleaded guilty to Ponzi and theft charges in July 2010. But he disputed a charge of Exploitation of an Older Person, amid allegations he had raided the account of a 97-year-old widow afflicted with advanced dementia. The widow was living out her final days in a nursing home. She died in 2009.
Prosecutors said she was a nurse who had spent much of her life as a missionary in Africa. Heffelfinger also was accused of ripping off her husband, who had died in 2002 after suffering from Alzheimer’s disease. The husband also was in his 90s.
Lewis and Clark County District Judge Kathy Seeley found Heffelfinger guilty of the exploitation charge in October 2010. Sentencing on all of the charges to which Heffelfinger either pleaded guilty or was found guilty occurred yesterday.
Heffelfinger was given concurrent sentences of 10 years each on the pyramid/Ponzi and exploitation charges, and a suspended sentence of 10 years on the theft charge. The Helena Independent Record reported that Heffelfinger, a Vietnam veteran who argued he was driven to commit the crime by post-traumatic stress from the war, could be eligible for parole after serving 30 months of the sentence.
Prosecutors said Heffelfinger began using the elderly couple’s money to make Ponzi payments just days after receiving it in March 2001, setting aside $36,000 of the couple’s initial deposit of $97,000 for his own use.
After the woman’s husband died, prosecutors said, Heffelfinger continued to manage money for the woman. Subsequent funds entrusted to him also went to Ponzi payments. Records in the case suggest a tax-refund check for the woman in the amount of $28,776 received in June 2003 and entrusted to Heffelfinger immediately was used to make Ponzi payments and pay Heffelfinger’s bills.
BULLETIN: An investigation by the U.S. Secret Service, U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and the Miami Police Department has led to criminal charges against nine defendants in three Florida fraud schemes that allegedly were interconnected.
