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Author: PatrickPretty.com

  • BULLETIN: Another ‘False Liens’ Case Alleged; Feds Charge Thanh Viet Jeremy Cao With Targeting Federal Judges, SEC, IRS, Secret Service And Prosecutors In Paperwork Scheme

    BULLETIN: Yet-another bizarre paperwork attack on U.S. law enforcement has occurred.

    A California man has been charged with filing “false liens” in Nevada against federal officials and employees of the SEC, the Secret Service, the IRS, four federal judges and staff members of the U.S. Attorney’s Office for the Southern District of California, federal prosecutors said.

    Thanh Viet Jeremy Cao was indicted by a federal grand jury in Las Vegas on charges of filing 22 false liens ranging from $25 million to $300 million against the officials, prosecutors said.

    He also sought $20 billion in fraudulent tax refunds, prosecutors charged.

    Cao resides in Orange County, Calif. If convicted on all counts, he faces up to 223 years in prison and a fine of up to $5.75 million.

    “Cao corruptly obstructed the administration of the federal tax laws, by, among other things, filing retaliatory false liens against IRS employees, filing and attempting to file with the IRS false Forms 1099-OID (Original Issue Discount) that claimed fictitious income tax withholdings, filing and attempting to file false tax returns that claim fraudulent refunds totaling approximately $20 billion, and preparing at least five false tax returns for third parties that claimed fraudulent income tax refunds totaling in excess of $1.1 million based upon fictitious income tax withholdings,” prosecutors said.

    In June, Ronald James Davenport of Deer Park, Wash., was charged with filing false liens against federal officials in Washington state.

    Davenport sought the spectacular sum of nearly $5.2 billion from each of the officials, including U.S. Attorney James McDevitt of the Eastern District of Washington, an assistant U.S. attorney, a court clerk and an IRS agent, according to court records.

    Prosecutors described Davenport as a “tax defier.” Davenport has described himself in court filings as a “sovereign.”

    Some members of the alleged AdSurfDaily autosurf Ponzi scheme and other HYIP schemes have been linked to tax-deniers and the so-called “sovereign” movement.

    See earlier story that references the Davenport action. (The story also provides some background on court filings and other actions by ASD members.)

    In a civil case that preceded the criminal indictment against Davenport, Senior U.S. District Judge Justin L. Quackenbush ruled in May that the liens “were filed to retaliate against the officers for their good-faith efforts to enforce the tax laws against Mr. Davenport.”

    Quackenbush struck the liens, which were filed in the form of UCC Financing Statements with the Washington State Department of Licensing, according to records. The liens not only were fraudulent, but also contained “sensitive personal information” that violated privacy laws, the judge ruled.

    Davenport also filed instruments dubbed “Notice[s] of Claim of Maritime Lien” with the Spokane County Auditor’s Office, according to records. Those, too, were struck.

    The act of filing false liens or sending “demand” letters to officials or litigation opponents in a bid to hamstring civil and criminal prosecutions has been referred to as “paper terrorism” and “mailbox arbitration.”

  • MYTH-SHATTERING CASE: Local Prosecutors Extradite Ronald Paul Shade From Thailand To Face Real-Estate Ponzi Charges; Shade Also Accused Of ‘Financial Elder Abuse’

    Ronald Paul Shade: Source: Interpol

    EDITOR’S NOTE: The PP Blog has covered a number of stories in which U.S. residents living overseas were extradited to the United States to face Ponzi charges. The case against Ronald Paul Shade is another one — and it’s one that demonstrates that an extradition can occur even if a defendant is not charged with a federal offense.

    Indeed, the warrant for Shade’s arrest was issued by a state-level Superior Court judge in California, according to Interpol. Shade’s case is instructive because it defeats some of the myths propagated on Ponzi boards such as MoneyMakerGroup, ASAMonitor, TalkGold and MyCashForums. Among the myths is that “offshore” equals “safe” for both investors and Ponzi perpetrators.

    Don’t tell that to Shade, now jailed in California after being extradited from Bangkok by local — as opposed to federal — prosecutors in California. His bail was set at $3.9 million.

    And don’t tell it to Jeffrey Lane Mowen, extradited from Panama to face federal Ponzi charges in Utah and later indicted in an alleged murder-for-hire plot. Here’s a quick side note on the Mowen case: If you like the recruitment fees paid by HYIP, autosurf and corrupt MLM or commission-based investment programs and make claims about the “due diligence” you’ve performed and try to impress prospects with your insider knowledge, your willful blindness may put you at great risk.

    Mowen had three prior convictions in Utah for securities fraud and two for theft, according to records. Despite Mowen’s criminal record and history as a fraudster, promoters still did business with him. Their faith drained millions of dollars from investors, the SEC said. Using language apt to cause unease in the Ponzi-promoting world, the SEC said at least one promoter “either knew or was reckless in not knowing that Mowen had multiple recent felony convictions involving crimes of dishonesty.”

    Indeed, the SEC said, the promoter learned in approximately late June 2007 that Mowen had been convicted of securities fraud . . . [but] “continued to solicit new investor funds for several months while failing to disclose Mowen’s criminal history to any of the Promoters or their investors.” Downstream promoters who entrusted the promoter “conducted virtually no due diligence in connection with [his] purported investment opportunities, but transferred investor money to [him] without any documentation or limitation on his use of the funds,” the SEC said.

    Perhaps the biggest myth exposed by the Ronald Paul Shade case is that going offshore takes state attorneys general and local prosecutors totally out of play. Longtime PP Blog readers will remember that the “offshore” pitch was pivotal in promotions for AdViewGlobal, AdGateWorld, MegaLido and other autosurfs that surfaced in the aftermath of the seizure of tens of millions of dollars by the U.S. Secret Service in the AdSurfDaily Ponzi scheme case. Some ads claimed that the “offshore” surfs neutralized state-level investigators.

    Shade, however, was brought back to the United States at the request of the San Bernardino County District Attorney’s Office in California to face state charges filed by local investigators.

    Still promoting investment-fraud schemes on the Ponzi boards and supplementing your pitches with myths about “safety” and how the overseas schemes are insulated from prosecution? Perhaps this story on the dramatic extradition of Colombian national David Murcia to the United States will help you snap out of your delusion that Ponzi and pyramid businesses cause no harm and represent “freedom” of choice. Perhaps this story on Robert Hodgins, who goes to bed at night knowing he’s wanted by Interpol, will help you shape your thinking.

    The cases of John and Marian Morgan, U.S. residents extradited from Sri Lanka, also are instructive.

    Finally, it’s worth noting that, after the United States charged Canadian national Nicholas Smirnow in May with operating an HYIP Ponzi scheme, a MyCashForums poster was quick to claim that “the USA has no extridition (sic) agreement ion (sic) place with the Phillipines (sic) . . . “

    The claim was false. Federal prosecutors said they are seeking Smirnow’s extradition. He was accused of operating a $70 million, international fraud known as Pathway to Prosperity (P2P).

    Here, now, the story of Ronald Paul Shade’s extradition . . .

    A California man living in Thailand was extradited to the United States to face charges he ripped off senior citizens in a real-estate Ponzi scheme, authorities said.

    Ronald Paul Shade, 39, formerly of Riverside, was arrested by local detectives Friday at Los Angeles International Airport. He was charged by investigators from the San Bernardino District Attorney’s Office with 29 felonies, including financial elder abuse, filing forged documents with the County Recorder’s Office and grand theft.

    San Bernardino County District Attorney Michael A. Ramos, who also is the president of the California District Attorneys’ Association, led the probe.

    Among the detectives involved in the Shade probe was Michael Leibrich, a senior investigator with the DA’s office.

    “From 2006 to 2008, Shade solicited money from numerous investors for his company, Orange Crest Realty,” investigators said. “Investors were promised a high rate of return for a short-term investment. Elderly victims later discovered that their life’s savings were being used to further a Ponzi scheme.”

    Shade had been living in Thailand for about two years, investigators said.

    In 2008, the California Department of Corporations issued a “desist and refrain” order against Shade and his company after alleging that they were selling unregistered securities and recruiting prospects  by urging them to “Get 18% APR Today” through the company’s “wonderful” investment.

    Shade and the company used a now-defunct website known as OCRFunding.com to pitch the purported program, authorities said.

    Among the misleading claims made to investors, according to authorities, were these:

    • That Orange Crest Realty was founded in 1993. (Authorities said Orange Crest Realty was not incorporated until June 2004.)
    • That Orange Crest Realty is a “registered investment advisor.” (Authorities said neither Shade nor the company and its associates were registered.)
    • That each investment was secured by actual title to specific existing real property. (Authorities said that “each investment was not secured by real property.”)
    • That a Deed of Trust And Assignment of Rents in the Property would be recorded with the Office of the County Assessor/Recorder and the investor would be provided with the recorded deed.  (Authorities said a deed promised an investor who sent in $50,000 was not recorded and the “investor never received a recorded deed.”)
    • That the investor would receive regular monthly interest payments. (Authorities said “payments ceased shortly after the investment was purchased.”)

    San Bernardino County investigators were assisted in the extradition by the Southwest Regional Fugitive Taskforce of the U.S. Marshals Service.

    The scheme, which allegedly gathered $14 million, also fleeced investors who responded to newspaper ads, investigators said.

  • SCAMMER’S GAMBLE BACKFIRES: Fraudster Who Chilled Customer With Lawsuit Threat Pleads Guilty To Mail Fraud; Philip Pestrichello Faces Up To 20 Years In Prison After Plea In ‘Work-At-Home’ Caper

    Source: FBI.Â

    UPDATED 4:51 P.M. EDT (U.S.A.) A convicted felon who emerged from prison and almost immediately launched a $1 million fraud scheme known as PPSN threatened to prosecute and sue a consumer who had filed an online complaint, federal prosecutors said.

    Although the threat caused the consumer to withdraw the complaint against Philip Pestrichello, Pestrichello’s bid to rattle the consumer’s nerves ultimately backfired because he included a “fake lawsuit number” in a letter to the consumer. Prosecutors used the letter and Pestrichello’s checkered past to persuade a federal judge to deny him bail. He has been jailed since his February arrest, and now faces up to 20 years behind bars after entering a guilty plea in the case.

    In the threatening letter, Pestrichello advised the complainant that “we will proceed by filing a lawsuit against you in The State of New York and you will be subject to prosecution, fines and penalties including monetary damages,” prosecutors said.

    Pestrichello also threatened “victim-consumers who lodged on-line complaints warning others that PPSN was a scam,” prosecutors said.

    The Federal Trade Commission and the U.S. Postal Inspection Service worked together in the Pestrichello case, which was brought in February as one of the undertakings of President Obama’s Financial Fraud Enforcement Task Force.

    Pestrichello was running a scam enterprise known variously as “Preferred Platinum Services Network LLC” ; “PPSN LLC”; “Home Based Associate Program”;  and the “Postcard Processing Program,” prosecutors said. They added that he had been running scams since the early 1990s and had been sentenced to three years in prison in 2003 after being convicted of mail fraud in a work-at-home scheme known as “IMXT & Co.”

    His most recent scam began in 2007 while Pestrichello was on federal probation after serving his time for the 2003 mail-fraud conviction, prosecutors said.

    “For nearly 20 years, Philip Pestrichello has preyed on the especially vulnerable — the economically disadvantaged, the unemployed, the disabled, or elderly individuals — who are trying to supplement their income by working from home,” said U.S. Attorney Preet Bharara. “Pestrichello even began committing his work-at-home scam within one year from his release from prison for a prior scam. If Pestrichello thought he was unstoppable, he was wrong.”

    Pestrichello, 38, of Bayville, N.J., now has pleaded guilty to mail fraud in the PPSN case. He faces up to 20 years in prison when sentenced by U.S. District Judge Kimba Wood on Oct. 26. A fraud case against Pestrichello’s wife, Rosalie Florie, is pending, prosecutors said.

    It is common for fraudsters to threaten to sue customers, critics and journalists. Such threats were present in the $1.2 billion Ponzi scheme case of disgraced Florida attorney Scott Rothstein, who eventually was disbarred. He repeatedly threatened to sue a reporter who questioned his business practices in the weeks leading up the the exposure of the scheme.

    Threats against customers and journalists also were part of the alleged AdSurfDaily Ponzi scheme case. ASD President Andy Bowdoin, according to August 2008 court filings, told customers that he had set aside $750,000 to sue critics.

    “These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit,” Bowdoin said, according to federal prosecutors. “Now, we’re ready to do battle with anybody. We have a legal fund set up. Right now we have about $750,000 in that legal fund. So we’re ready to get everything started and get the ball rolling.”

    Less than a month after Bowdoin allegedly issued the threat in July 2008, the U.S. Secret Service raided ASD’s Florida headquarters. Prosecutors said the company was operating a $100 million Ponzi scheme and engaging in wire fraud and money-laundering.

    Even after the raid, some ASD members continued to threaten Bowdoin’s detractors. One ASD member suggested Bowdoin’s critics would be dragged off in handcuffs for speaking out against the autosurf firm, publishing his version of lyrics from the television program “COPS” to put a chill on the purported slanderers.

    “Bad Boys, Bad Boys, Whatcha Gonna Do?” he chanted on the now-defunct AdSurfZone forum, a predecessor site to the Pro-ASD Surf’s Up forum. “Whatcha Gonna Do>WHEN<THEY COME FOR YOU ?!!!”

    In June 2009, while the AdViewGlobal (AVG) autosurf was failing, members were threatened with lawsuits for sharing information that purportedly was “copyrighted.” Members also were told that they risked losing their Internet service for questioning the firm in public. Journalists who published information about AVG were threatened with lawsuits.

    When the Pathway To Prosperity HYIP scheme was collapsing in 2008, members were threatened with “expulsion,” according to court filings.

    “When complaints were made externally to service providers or supposed payment agents,
    scathing rebukes were made to the ‘members,’” according to court filings.

    In February 2010, Hospitalera.com Blogger Sybille Yates announced she had been threatened with a lawsuit for calling the INetGlobal autosurf a “scam” in September 2009.

    On Feb. 23, the U.S. Secret Service raided INetGlobal’s Minneapolis offices. An affidavit by the U.S. Secret Service described the company as operating an international Ponzi scheme. A federal probe into INetGlobal’s business practices is ongoing.

  • CNN Covers Trevor Cook Ponzi: Strippers, Hookers, ‘Ladies Of The Evening’ And ‘Booze Runs’; ‘We Never Have Any Risk,’ Acknowledged Schemer Says

    Trevor Cook: From CNNMoney.

    He wore a suit by day, persuading prospects he was buying commodities at a lower price and selling them at a higher price so quickly that there was no exposure to loss.

    Many of Trevor Cook’s investors identify themselves as Christians. His $190 million Ponzi scheme was centered in Minneapolis/St. Paul, a U.S. heartland region known as the Twin Cities area of Minnesota.

    “We never have any exposure — OK? That’s obviously the methodology that I’m kinda driving home here,” Cook told an audience in a pitch captured on video.

    “We are never actually in the market, so we never have any risk,” Cook claimed.

    But Cook’s own recklessness, penchant for gambling and appetite for excess posed a great, unspoken risk to investors, investigators now say. At night, he traded his role as a responsible, respectable trader-in-chief  for a secret role as a free-spending player who preferred the dark alleys of life. There were “ladies of the evening” — and there were “booze runs,” according to a series of videos released by CNNMoney.com.

    CNN aired a live report on Cook during Campbell Brown’s 8 p.m. newscast on Thursday. The report was part of a package by CNNMoney’s Poppy Harlow, who joined Brown in the studio.

    Victims — some of whom have wondered if America is aware of their plight and worried that Breaking News on CNN might preempt Harlow’s report and delay the airing of their story — still are coming to grips with the magnitude of their losses. Emotions continue to run high.

    R.J. Zayed, the court-appointed receiver in the case, said many of the victims had been rendered destitute. He described the scheme as an “incredible tragedy” that has been “nothing short of devastating” to investors.

    CNNMoney now has posted eight videos from Harlow’s report on the scheme. The package is titled, “Breaking Faith: Fraud in the Heartland.”

    The PP Blog highly recommends that readers visit the CNNMoney site and take some time to view the videos. Kudos to CNN for devoting resources and putting Harlow on airplanes to return to her Twin Cities hometown and also Chicago to report on this important, gripping story.

    See videos from the CNNMoney package by Poppy Harlow on the Twin Cities-based Ponzi scheme of Trevor Cook and the alleged role of former Christian radio host Pat Kiley.

  • REMEMBER PRAEBIUS? Penny-Stock Firm ASD Claimed Would Pump $200 Million Into Its Coffers Was Flogged By California Man In ‘Fraudulent Touting’ Scheme During Month ASD Announced ‘Joint Advertising Venture,’ Records Show

    On Oct. 29, 2008, Andy Bowdoin's AdSurfDaily Inc. announced a purported $200 million joint venture with Praebius Communications. During that same month, Praebius' penny stock was part of a "Fraudulent Touting" scheme operated by Songkram Roy Sahachaisere of Huntington Beach, Calif., the SEC says.

    A California man and his company have been accused by the SEC of running a “Fraudulent Touting” scheme that pumped the penny stock of Praebius Communications, a company the alleged AdSurfDaily Ponzi scheme once claimed would generate $200 million for its coffers through a joint “advertising” venture.

    Charged by the SEC with fraud were Songkram Roy Sahachaisere and InvestSource Inc. of Huntington Beach. The Praebius stock was pumped by Sahachaisere as part of what the SEC described as a “massive” email and newsletter scam.

    “Between January 1, 2008 and March 31, 2009, InvestSource sent nearly 450 email messages to over 24 million recipients,” the SEC charged.

    Praebius was one of seven InvestSource clients whose stock was pumped and dumped to generate illegal profits of more than $276,000, the SEC charged.

    The timing of the alleged touting scheme, according to records, coincided with dates in October 2008 in which ASD, an autosurf company, was announcing a purportedly lucrative  joint venture with Praebius. ASD announced the prospective deal on Oct. 29, 2008. During the same time period, ASD was awaiting a key court ruling on whether it had demonstrated at an evidentiary hearing earlier in October that it was operating lawfully. Using a headline of “ASD-Praebius Venture” on its now-defunct Breaking News website while awaiting the ruling, ASD said it expected to garner revenues of about $200 million “over the first several years” from Praebius.

    Announcement of prospective $200 million deal with Praebius Communications on ASD’s Breaking News website. The announcement was removed after some members questioned it.

    The SEC now says Sahachaisere and InvestSource were pitching Praebius stock during the same month, declaring their business practices to be “Fraudulent Touting” because they “failed to disclose that they were selling the very securities they were recommending investors buy.”

    Sahachaisere and InvestSource received 4.1 million shares of Praebius stock between Oct. 2, 2008, and Nov. 25, 2008, the SEC charged.

    The scheme involving Praebius netted $49,215 for Sahachaisere and InvestSource, the SEC said.

    Five of the seven stocks — including Praebius — experienced “significant increases in trading volume during InvestSource’s promotions,” the SEC said.

    ASD’s name is not referenced in the SEC complaint, and Praebius was not listed as a defendant in the case. Praebius is referenced in the case as a client that paid InvestSource and Sahachaisere in stock “to provide investor relations services.”

    One of the issues in the ASD Ponzi case was whether the company had revenue streams adequate enough to pay “rebates” to members of 1 percent a day or 365 percent a year for viewing “advertising.” During the evidentiary hearing, ASD never produced audited, certified financial statements to prove it could sustain the rebates. Prosecutors described the company as catastrophically insolvent and reliant on revenue from new members to pay “rebates” to older members in classic Ponzi scheme fashion.

    Less than a month after an evidentiary hearing concluded on Oct. 1, 2008, ASD announced the purported joint venture with Praebius. Critics immediately questioned both the $200 million figure quoted by ASD and the timing of the announcement because Praebius did not publish verifiable financial data and ASD was described by federal prosecutors in the Ponzi scheme case as hopelessly under water.

    Although ASD purported to be a professional communications firm, its announcement of the purported $200 million deal did not quote executives of either ASD or Praebius. The announcement led to questions about why Praebius would knowingly associate its name with a company suspected of operating a massive, international Ponzi scheme while it allegedly also engaged in wire fraud and money-laundering while selling unregistered securities.

    Some ASD critics saw the announcement as a cynical means of instilling hope in ASD members that all was not lost while signaling to a federal judge that ASD had a major, new client that single-handedly could wipe away the firm’s alleged insolvency. Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.

    Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.

    According to the SEC’s complaint against Sahachaisere and InvestSource, nearly 4.5 million shares of Praebius traded hands between Oct. 7, 2008, and Jan. 27, 2009, generating less than $50,000 in revenue.

    ASD never explained how Praebius, which did not publish verifiable financial data, could generate the $200 million ASD cited in the announcement.

    Less than a month after ASD issued the Praebius announcement, a federal judge ruled ASD had not demonstrated at the evidentiary hearing that it was operating lawfully and was not a Ponzi scheme. By Dec. 19, 2008, federal prosecutors had filed a second forfeiture case against ASD-connected assets, again citing Ponzi allegations.

    Even as prosecutors were filing the second Ponzi complaint, Surf’s Up members were claiming that the government secretly had admitted ASD was not a Ponzi scheme.

    From the SEC "Fraudulent Touting" court case against Songkram Roy Sahachaisere and InvestSource Inc. The highlight in red shows the alleged illegal touting of Praebius stock.

  • GO FINRA! Regulator Tackles Online HYIPs; Issues Warning On ‘Social Media-Linked Ponzi Schemes’; References P2P, Genius Funds, ‘Con Artists’ And ‘Bizarre Substratum’ Of Internet

    EDITOR’S NOTE: It has become increasingly clear that regulators and the law-enforcement community are rallying around a common theme that web-based promoters are using discussion forums and social-networking sites in bids to sanitize HYIP Ponzi schemes by positioning them as attractive investment opportunities and even a thrilling form of gambling that pays commissions.

    Today the Financial Industry Regulatory Authority (FINRA) launched an awareness campaign aimed at taking the lipstick off financial pigs and exposing them for the economy-killing, filthy hogs they are. FINRA did not mince words, calling the HYIP universe a “bizarre substratum of the Internet.”

    Here, now, the story . . .

    The Financial Industry Regulatory Authority (FINRA) has launched a public-awareness campaign and issued an investor alert on HYIP schemes that use social-media sites such as YouTube, Twitter, Facebook and online forums and “rating” sites to spread Ponzi misery globally.

    “HYIPs are old-fashioned Ponzi schemes dressed up for a Web 2.0 world,” said John Gannon, FINRA’s senior vice president. “Some of these schemes encourage people to bring in new victims, while others entice investors to ‘ride the Ponzi’ by attempting to get in and get out before the scheme collapses.”

    FINRA is supplementing its educational campaign with an advertising campaign.

    “By using Google AdWords, we are hoping to reach anyone searching the Internet for HYIPs before they fall into the hands of con artists,” Gannon said.

    FINRA’s campaign occurs against the backdrop of remarkable law-enforcement actions against the alleged Legisi Ponzi scheme pushed by Matt Gagnon of Mazu.com, the alleged Pathway To Prosperity (P2P) Ponzi scheme pushed on forums such as ASA Monitor, MoneyMakerGroup, Talk Gold and MyCashForums, and the collapse of an HYIP known as Genius Funds.

    It also occurs against the backdrop of “prelaunch” buzz surrounding a mysterious program known as WebsiteTester.biz, which is spreading virally on the Internet through electronic news releases, references on promoters’ websites and daily updates on Twitter.

    Promoters’ advertising is heavy for WebsiteTesterBiz, despite the fact the company’s domain name is registered behind a proxy, its purported parent company’s domain name is registered behind a proxy and there is a paucity of any verifiable information about either firm.

    FINRA specifically referenced the alleged P2P Ponzi in its educational materials. It also provided a link to information published about the collapsed Genius Funds HYIP by the British Columbia Securities Commission. Alarmingly, FINRA said the Genius Funds’ fraud costs investors a staggering $400 million.

    Federal prosecutors who filed criminal charges against P2P operator Nicholas Smirnow declared in May that “[a] large percentage, if not all, HYIPs, are Ponzi schemes.”

    In its resource material, FINRA is building on that theme.

    “[V]irtually every HYIP we have seen bears hallmarks of fraud,” FINRA said. “We are issuing this alert to warn investors worldwide to stay away from HYIPs.”

    P2P gathered more than $70 million. Legisi also gathered more than $70 million, according to court records.

    Separately, the alleged AdSurfDaily autosurf Ponzi scheme gathered at least $80 million and perhaps $100 million or more, according to records. Autosurfing is a form of HYIP fraud. The U.S. Secret Service acted against ASD in August 2008.

    In February 2010, an autosurf known as INetGlobal also came under investigation by the Secret Service. The SEC has acted against autosurfs known as 12DailyPro, PhoenixSurf and CEP, which gathered tens of millions of dollars combined — fueled by online promotions.

    Citing FBI statistics, FINRA said “the number of new HYIP investigations during fiscal year 2009 increased more than 100 percent over fiscal year 2008.”

    The regulator specifically warned about websites that “Rank the latest programs and provide details of ‘payout options.’” At the same time, it warned about sites that “Allow web designers to buy ready-made HYIP templates and set up an ‘instant’ HYIP.” Meanwhile, it warned about sites that “Blog, chat and ‘teach’ about HYIPs.”

    “Some HYIP ‘investors’ proffer strategies for maximizing profits and avoiding losses — everything from videos showing how to ‘make massive profits’ in HYIPs and ‘build a winning HYIP portfolio’ to an eBook on how to ‘ride the Ponzi’ and get in and out before a scheme collapses,” FINRA said.

    “Other HYIP forums discuss how to enter ‘test spends,’ how to identify new HYIPs to maximize one’s chances of being an early stage payee and even how to check when a HYIP’s domain name expires so you can guess how long it might pay returns before shutting down,” FINRA noted.

    One of the tips offered by FINRA was to be on the look out for “typos and poor grammar” in sales pitches.

    “This is often a tip-off that scammers are at work,” FINRA said.

    FINRA said HYIP scammers often don’t share critical information with investors.

    “HYIP operators cloak themselves in secrecy regarding who manages investor money, where the company is located or where to go to get additional information,” FINRA said.

    Claims about being “offshore” also are made, FINRA said.

    “Be aware that generally persons or firms offering securities to U.S. residents must be licensed by FINRA and registered with the SEC,” FINRA said.

    The sky often is positioned as the limit in the HYIP universe, which often relies on “online payment systems” — some of which “have been tied in recent years to criminal activity, including money laundering, identity theft and other scams,” FINRA warned.

    “High-yield investment programs (HYIPs) are unregistered investments created and touted by unlicensed individuals,” FINRA said. “Typically offered through slick (and sometimes not-so-slick) websites, HYIPs dangle the contradictory promises of safety coupled with high, unsustainable rates of return — 20, 30, 100 or more percent per day—through vague or murky trading strategies.”

    Read FINRA’s warning on HYIPs. (Make sure you click on the links in the body of the warning.)

    Read a PP Blog story about an alleged penny-stock scheme that was operated on Facebook and Twitter. Read a PP Blog story on P2P, and also one on Genius Funds and others.

    Read more about P2P. Read more about Legisi.

  • BULLETIN: Charges Upgraded Against Nevin Shapiro In Alleged $880 Million Ponzi Scheme; Prosecutors Say He Used Investors’ Money To Make Illegal Sports Bets And Enjoy Lavish Lifestyle

    Charges against a Florida man accused of running a Ponzi scheme through a bogus wholesale grocery business known as Capitol Investments USA Inc. have been upgraded, U.S. Attorney Paul J. Fishman of the District of New Jersey said.

    Nevin J. Shapiro, 41, of Miami Beach, originally was charged via criminal complaint in April with one count of securities fraud and one count of money-laundering. A grand jury now has returned an indictment charging Shapiro with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, two counts of wire fraud and two counts of money-laundering.

    Three unindicted co-conspirators are identified in the indictment by numbers, as opposed to names. “UC 1” was described as Capitol’s chief financial officer; “UC 2” was described as a Capitol “accountant”; and “UC 3” was described as a Capitol “bookkeeper.”

    Unnamed “others” also are referenced in the indictment, which also seeks forfeiture of criminal proceeds.

    When the Ponzi was collapsing in 2009, Shapiro offered a series of explanations about why payments to investors were delayed, prosecutors said.

    “Shapiro told investors, among other things, that the payments were not being made because Capitol’s vendors were late in making payments, Capitol was suffering from cash flow problems, and that Shapiro’s accountant was on vacation,” prosecutors said.

    In reality, prosecutors said, “Shapiro misappropriated approximately $35 million in investor funds for his personal use, including paying millions of dollars in debts resulting from illegal gambling on sporting events.

    “Using investor money, he also spent, at various times, more than $400,000 for floor seats
    to watch the Miami Heat professional basketball team; approximately $26,000 per month for mortgage payments on his residence in Miami Beach, recently appraised at approximately $5.3 million; approximately $7,250 per month for payments on a $1.5 million dollar Riviera yacht; and approximately $4,700 per month for the lease of a Mercedes-Benz automobile.”

    And, prosecutors charged, “Shapiro also used stolen funds to purchase a pair of diamond-studded handcuffs, which he gave as a gift to a prominent professional athlete, as well as to make $150,000 in donations to the athletic program of a local university in the Miami area. As a result of a 10-year gift to the university, the Nevin Shapiro Student-Athlete Lounge at the university was named for the defendant. Shapiro and Capitol were forced into bankruptcy in November 2009. At that time, they owed more than $100 million to victim investors.”

    Shapiro has been jailed since his arrest in April. He potentially faces decades in prison and millions of dollars in fines if convicted on all counts.

    Court filings suggest the scheme gathered as much as $900 million.

  • BULLETIN: Pedro de Sousa, Guillermo Rosario Arrested By FBI; CFTC Lays Out Yet-Another Florida Fraud Case

    BULLETIN: Pedro de Sousa and Guillermo Rosario of FX Professional International Solutions Inc. (FXP) have been arrested by the FBI. The Commodity Futures Trading Commission (CFTC) said the men operated a Forex fraud that issued false account statements, falsely claimed no losing months between 2005 and 2008 when they had lost money in 31 of 40 months reviewed by investigators and claimed winning months through FXP dating back to 2002 — even though the company did not exist prior to 2004.

    “Rosario and de Sousa falsely represented to customers that since 2002 FXP had annual forex trading profits of 21 percent to 85 percent with no losing years,” the CFTC said.

    “However, FXP did not exist prior to 2004,” the agency said.

    Although de Sousa and Rosario sent customers false monthly account statements showing profits every month from 2005 through 2008, their forex trading “resulted in monthly losses in 31 of 40 months during this period,” the CFTC said.

    Rosario also is known as Guillermo Rosario-Colon. He lives in Coral Gables, Fla. Meanwhile, de Sousa also is known as Pedroiz J. Sanz. He lives in Orlando, according to the CFTC.

    Neither Rosario nor de Sousa was registered with the CFTC. Their company also was known as FX Professional Solutions LLC. Both entities were dissolved for failure to file an annual report, and FXP was never registered with the CFTC, the agency said.

    “Rosario asserted to one of the [c]ustomers that he had devised a system of trading forex that he was confident would, at a minimum, consistently return 20% in annual profits,” CFTC charged.

    “Beginning in May 2005 and continuing to February 2009, Defendants sent false monthly account statements to the Customers,” CFTC charged. “With very limited exceptions, these statements claimed profits of between 0.16% and 2.55% every month when, in fact, actual forex trading conducted by Defendants during this period (with or without the Customers’ funds) resulted in net monthly losses more than 75% of the time.”

    When the scheme was collapsing last year and customers were asking questions and demanding their money back, FXP acknowledged losses to customers, according to the CFTC.

    When a customer asked to see trading records, Rosario refused on the basis of “customer confidentiality,” the CFTC said.

    De Sousa, meanwhile, told customers that the company started sending out bogus account statements because it feared that acknowledging losses would lead to redemption requests it could not fund, the CFTC said.

    “In April 2009, one of the Customers asked de Sousa why FXP continued to send monthly statements indicating profitable trading during the latter half of 2008 if, in fact, FXP was losing money during this period,” CFTC said. “De Sousa replied that Rosario was afraid that if they told customers about the losses, customers would request to withdraw their money, and that Defendants would not have the funds to honor the withdrawal requests.

    “For this reason, according to de Sousa, beginning in or about September 2008,
    Defendants ‘started faking the statements’ that they sent to the Customers,” CFTC charged.

    Investigators determined that the company had been “issuing false statements from as far back as 2005,” CFTC said.

  • FIRST, TRUMP, OPRAH, APPLE: Now, PP Blog’s ‘Breaking News’ Graphic Used In Video Pitch For Data Network Affiliates’ MLM Program

    A rep for Data Network Affiliates, an MLM program, copied the PP Blog's "Breaking News" graphic and used it in a video pitch that claimed DNA offered "Branded" iPhones from Apple. Reps for the company also have claimed Oprah Winfrey and Donald Trump endorse the firm. It is common for some MLM purveyors to claim or imply business ties where none exisit as a means of disarming potential critics and of creating legitimacy by leeching off the brand names of well-known people and entities.

    A sales rep for Data Network Affiliates (DNA) used the “Breaking News” graphic from the PP Blog to supplement a sales pitch for a nonexistent cell-phone plan that  touted “unlimited” talk-and-text service for $10 a month, plus a free phone.

    The unauthorized use of the Blog’s intellectual property in a sales pitch raises troubling, new questions about the company and its purported army of multilevel-marketing (MLM) affiliates. DNA recently has claimed that churches have the “MORAL OBLIGATION” to pitch its products.

    DNA affiliates previously have implied that Donald Trump and Oprah Winfrey endorse the company. Their images appeared for 10 consecutive minutes in a YouTube video for DNA, and affiliates also have implied the company had a special “branding” deal with Steve Jobs-led Apple.

    DNA, which previously used a free Gmail address to conduct customer service, has removed the address from its website. It has been replaced by a prompt that reads in part, “All other question (sic) or issues must be submitted to Data Network Affiliates through our Customer Support area in your DNA Back office available via the Support Tab on the Main Menu in all Affiliate Back Offices.”

    There is no effective way for nonaffiliates to contact the company. Earlier this year DNA affiliates repeatedly spammed the PP Blog.

    In an undated video that promotes DNA, the Blog’s “Breaking News” graphic was used to introduce a pitch for DNA’s purported “See Through IPhone.”

    “It’s (sic) very own Branded Iphones,” the pitch crowed.

    Create your own video slideshow at animoto.com.

    Even as the PP Blog’s “Breaking News” logo is being misused in a video slideshow for DNA, the company is instructing members to “make believe” its March launch never occurred. The firm reinstalled a launch countdown timer on its website, saying it will launch July 26. DNA actually launched March 1 after missing two February launch dates. The firm asked existing members in March to reimagine the launch as a “beta test,” even though it was advertised for weeks as a full launch.

    Dean Blechman, DNA’s original chief executive officer, resigned Feb. 24. The company withheld the news of his resignation for nearly a week, and Blechman later complained about the company’s “bizarre” conduct.

    Because DNA now is advertising a July 26 launch date, incoming members may not know the company actually launched in March — after Blechman’s resignation and after he described the firm’s behavior as puzzling.

    It is not believed that DNA has any affiliation with Trump, Winfrey or Apple. It is clear, however, that a DNA pitchman in a February conference call planted the seed that the company was well-connected.

    “This is the guy,” the pitchman said of the former DNA chief.  “He rolls with the Donald Trumps; he rolls with the big boys. I mean, you know, he has [inaudible] certain people on speed dial that’s incredible.”

    Blechman resigned within two days of the pitchman’s conference-call claim.

    On March 4, in an interview with the PP Blog, Blechman complained about DNA “bull” from a “backdoor guy.”

    He also complained that the company misspelled his name after finally announcing his departure six days after he left and then mangled the facts surrounding his departure.

    Weeks after Blechman resigned, the company suddenly announced in early April that it was in the cell-phone business, declaring “GAME OVER — WE WIN” despite the fact it had no experience in the industry. DNA started out as a company that collected license-plate information for entry in a database that purportedly could help the AMBER Alert program rescue abducted children.

    DNA declared itself the world’s low-cost leader in cell phones, advertising a “free” phone with “unlimited” talk and text for $10 a month. By April’s close, the company announced that it had not even studied cell-phone pricing before releasing its plan, withdrawing the offer and blaming its inability to deliver on a vendor it apparently had not vetted.

    Meanwhile, the firm has done other odd things. An upgrade plan it initially named the Business Benefit Package — using the acronym BBP — later was dubbed the BBB. BBB is the acronym used by the Better Business Bureau.

    “6 OF THE 10 WILL BUY THE B.B.B. AND GET 1 OTHER TO BUY THE B.B.B. WITHIN 24 HOURS,” DNA declared last month.

    Since that time, DNA has repeatedly called the BBP package the BBB package.

  • BULLETIN: Trevor Cook To Be Given Lie-Detector Test; Sentencing In $190 Million Ponzi Case May Be Delayed

    BULLETIN: The FBI will administer a lie-detector test to Ponzi schemer Trevor Cook. Meanwhile, his July 26 sentencing date may be delayed, a source told the PP Blog.

    The date upon which the test will be administered was not immediately clear. The source, however, suggested that Cook could be subjected to the polygraph as early as tomorrow.

    Under the terms of Cook’s April agreement in which he pleaded guilty to mail fraud and tax evasion in a $190 million Ponzi scheme case involving more than 1,000 investors, Cook is required to take a polygraph exam “[i]f requested by the government.”

    Victims have expressed fears that Cook, 38, has hidden money from the scheme and could emerge from prison in his early sixties to reclaim the loot. The scheme was operated out of Minneapolis.

    R.J. Zayed, the court-appointed receiver in the case, has recommended that the government administer the lie-detector test, according to his website.

    Victims arranged a meeting with prosecutors, and the polygraph became a topic of conversation, according to a source who has knowledge about the meeting. Prosecutors have instructed the FBI to administer the test.

    The Cook case has turned into an international paper chase. Zayed has served court orders on more than 400 financial institutions.

    “We also have served subpoenas on approximately 250 individuals and institutions,” Zayed noted on his website. He added that he expects investor losses to top $139 million.

    FBI Director Robert Mueller has warned Congress at least twice this year about the increasing complexities of white-collar crime, including criminals’ reliance on shell companies and a “shadow” banking system to frustrate efforts to detect and unravel schemes.

    Cook was at the center of an international fraud scheme, part of which involved companies with confusingly similar names, according to court filings.

    Victims have said they fear he is incapable of telling the truth.

  • EDITORIAL: MLM’s Great Race To The Bottom? While FTC, SEC, CFTC Warn About Affinity Fraud, Data Network Affiliates Says Its Mortgage-Reduction Program Is A ‘Church Fundraisers DREAM Come True’

    Apparently tithing, bake sales, quilting bees, church-sponsored dinners, flea markets and car washes by Christian teens to raise money for projects have gone the way of the dinosaur.

    Building on an earlier claim that churches have a “MORAL OBLIGATION” to pitch its purported mortgage-reduction program, Data Network Affiliates (DNA) now says the program is a “Church Fundraisers (sic) DREAM Come True.”

    Some DNA members are describing the program as a “Crusade to Help American Families Keep their Homes.”

    Just when you think you’ve seen it all in MLM, the company also claims it has been asked to sell “Funeral Caskets MLM”-style. In a pitch to members, DNA compares itself favorably to “FACEBOOK, GOOGLE & WALMART…”

    The company says churches can benefit from its bid to rid the mortgage world of “toxic” assets, defining its “exciting DNA Mortgage Reduction System” as the “ONLY ONE OF IT’s (sic) KIND” — one that allows “DNA to pay out $300 on The Front End in a TEN LEVEL PAY PLAN and up to $1600 on The Back End in a TEN LEVEL PAY PLAN.”

    “The line for DNA introducing products and services will be just as long” as the lines at Walmart, the company says. “Yesterday we got a call to sell Funeral Caskets MLM…”

    We wonder if selling human body parts MLM-style will be next — and we wonder if livers, kidneys, hearts, lungs and skin will be positioned as a moral imperative for clergy to hawk and wonderful products for churches to sell after registering as “PRO” affiliates for an opportunity to pocket commissions 10 levels deep.

    Although DNA has been pitching the mortgage-reduction program for only days, two testimonials from customers who purport to be happy DNA campers suddenly have materialized on the company’s website.

    “I was lost, and thought I had no where to go,” writes “Trish” on the website. “I was out of options then my real estate broker referred me to your program DNA Mortgage Reduction.”

    “Trish” did not identify the purported broker. Nor did “Trish” explain the purported broker’s affiliation with DNA and how DNA apparently was able in just days to gather her information, get it in the proper hands for a legal review of her case, study it for potential “DEFECTS,” conduct a “Forensic Audit,” draft the paperwork to be mailed to the lender being petitioned to write down her mortgage, wait for the lender’s presumably favorable response after assessing the value of the property and its legal position after being slapped by DNA’s paperwork, arrange for new loan documents to be drafted and vetted by attorneys on both sides, attested to by a notary and formally signed by all parties.

    Regardless, “Trish” described her DNA experience as a “miracle,” claiming that “I now have a new mortgage and my home is $24,000.00 lower principal balance. I am saving over $300.00 a month.”

    Before concluding her testimonial Trish made sure she thanked “Principal Mortgage!” It is unclear if “Principal Mortgage” is the name of DNA’s vendor.

    Meanwhile, in a testimonial purportedly authored by “Nichole,” the “DNA Mortgage Reduction” program and a person named “Mike” were given credit for saving “Nichole’s” home after she “prayed” about the matter.

    “I owe a lot to DNA Mortgage Reduction,” wrote the purported “Nichole.”

    “I now am secure in my home with a affordable mortgage and my kids do not have to move,” Nichole offered.

    Things apparently happened quickly for “Nichole.”

    “When I had gotten letters from the attorney that was going to my bank and copies from the bank responding I knew I was going to all right,” Nichole wrote. “They did exactly what they promised and lowered my principal balance and interest rate.”

    DNA has been pushing the purported mortgage-relief program for only days, including over the long July 4 weekend into which a U.S. banking holiday was sandwiched — and yet both “Nichole” and “Trish” claim their reliance on DNA has resulted in new mortgages with favorable terms.

    Incongruously, DNA’s own website says the process “takes 90 to 120 days.

    “The Lender will have 20 business days per RESPA to respond to the written request and 60 business days to resolve/settle this matter,” DNA says.