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Author: PatrickPretty.com

  • News, Notes And Updates: Jailed And Disbarred, Former Massachusetts Attorney Who Fleeced 95-Year-Old Client Arrested On New Charges

    EDITOR’S NOTE: This post distills recent news and development on the fraud and Ponzi fronts.

    CHARGED: Six people — including a disbarred attorney already in prison — have been charged in Massacuusetts in an elaborate mortgage-fraud scheme.

    Bruce Namenson, the former lawyer, was charged with 18 counts of of larceny for arranging bogus loan closings, sham notarizations and pocketing fraudulent proceeds from real-estate deals.

    Namenson, 47, of Walpole, Mass., already was in prison when arrested on the mortgage-fraud charges. In an earlier case, he was convicted of operating a complex scam in which both clients and insurance companies were bilked.

    One of the victims in the insurance-fraud case was a 95-year-old man, Massachusetts Attorney General Martha Coakley said.

    In the insurance case, which involved victims young and old, Namenson defrauded the 95 year-old client out of a $20,000 bodily injury settlement check.

    “The client had been injured in a car accident, and instead of paying the client a portion of the settlement, Namenson forged the client’s signature on a settlement release and settlement check, kept the money, and repeatedly told the client that his case had never been settled,” Coakley’s office said in 2008.

    Namenson also fleeced an injured, 15-year-old client out of most of a $100,000 settlement, prosecutors said.

    Charged in the new case with Namenson were Joshua Brown, 29, of Brockton, Mass; Brian Frank, 32, of New Hartford, N.Y.; John Sweetland, 28, of Yorba Linda, Calif; Linda Defeo, 28, of Springfield, Mass; and Brian Arrington, 39, of Boston.

    Brown, Frank and Sweetland are real-estate investors, Coakley’s office said yesterday. Defeo and Arrington are mortgage brokers.

    The real-estate scheme fleeced banks and borrowers out of $12.5 million, and involved bogus appraisals, submissions of bogus loan documents and misrepresentations to virtually every party in transactions tied to 26 distressed properties, prosecutors said.

    Brown, Frank and Sweetland skimmed $2 million from corrupt transactions, Coakley’s office said. Defeo and Arrington arranged for bogus loans, and Namenson presided over corrupt closings and pocketed money that was supposed to pay for title insurance.

    INDICTED: If you’re a Forrest Gump fan, this case might be one to add to a Bubba Blue list of the various ways to have a Ponzi scheme, instead of the various ways to have shrimp.

    John D. Terzakis, 52, of Hinsdale, Ill., and Robert E. Estupinian, 47, of San Jose, Calif., have been indicted in California on 12 felony counts of wire fraud, money laundering, and conspiracy to commit wire fraud and money laundering.

    A company operated by Terzakis and  Estupinian — Vesta Strategies of San Jose — was a Ponzi scheme, U.S. Attorney Joseph P. Russoniello said. Terzakis was the majority owner of Vesta and controlled its business activities. Estupinian, was the chief executive officer and minority owner of Vesta until December 2007.

    The scheme, according to prosecutors, involved the business of being a “qualified intermediary” in tax-deferred, real-estate exchanges under section 1031 of the Internal Revenue Service Code.

    “In general, a Section 1031 exchange allows taxpayers to avoid paying tax on capital gains by depositing the proceeds from an investment real estate sale, that would otherwise qualify as a taxable capital gain, with a qualified intermediary for up to 180 days,” prosecutors said.  “Under Section 1031, if the taxpayer purchases another investment property within those 180 days, the proceeds from the first sale may be rolled over into the new investment without being taxed as capital gains.”

    Although Vesta promised to hold funds as a qualified intermediary, Terzakis and Estupinian “stole client funds for their own use” and and also “used new client deposits to pay redemptions owed to earlier clients,” prosecutors said.

    Terzakis was arrested in Illinois. He made an initial appearance before a judge, who placed him on home confinement with electronic monitoring, pending a second appearance Jan. 13. Estupinian was arrested in California. He also made an initial appearance before a judge, and was placed on home confinement with electronic monitoring secured by a $1 million bond. His next appearance is scheduled Jan. 20.

    CONVICTED: Oren Eugene Sullivan, 63, of Rock Hill, S.C., has pleaded guilty to mail fraud in a Ponzi scheme.

    U.S. Attorney Walt Wilkens said Sullivan admitted that he ran a Ponzi scheme between 1995 and 2008 in which he sold false investments to 35 different individuals or groups of investors.

    “Sullivan told clients that he was managing their investment accounts, and paid small dividends to his investors,” prosecutors said. “However, he was actually converting their invested money for his own use, and paying the dividends with money he received from new investors. Over the course of the scheme, Sullivan took in approximately $2.5 million from unwitting investors.”

  • Now, A ‘Concert’ Ponzi Scheme: FBI Says Miko Dion Wady Of Arizona Claimed Bogus Tie To The Rolling Stones, Barbra Streisand, Mary J. Blige To Lure Investors

    If this were Forrest Gump and the subject were Ponzi schemes instead of shrimp, Benjamin Buford “Bubba” Blue might say something along these lines:

    There are ‘advertising’ Ponzi schemes, ‘printing’ Ponzi schemes, CD Ponzi schemes, ‘billboard’ Ponzi schemes, Ponzi schemes claiming that ‘uniforms’ are being purchased for prisons and police agencies, ‘Big-Box Retailer’ Ponzi schemes, real-estate Ponzi schemes, ‘kiosk’ Ponzi schemes, ‘autosurf’ Ponzi schemes, ‘HYIP’ Ponzi schemes, ‘Charitable Giving’ Ponzi schemes, commodities-trading Ponzi schemes, precious-metal Ponzi schemes, and insurance Ponzi schemes. That . . . that’s about it.

    Except the FBI said today it was not.

    Today the FBI announced a “concert” Ponzi scheme, saying Miko Dion Wady, 34, of Chandler, Ariz., and others gathered at least $50 million from 250 investors by telling them he promoted concerts for some of the top acts in the world.

    Here is the short list:

    • The Rolling Stones.
    • U2.
    • Barbara Streisand.
    • Faith Hill.
    • Tim McGraw.
    • Mariah Carey.
    • George Strait.
    • Billy Joel.
    • Jamie Foxx.
    • Jimmy Buffet.
    • Mary J. Blige.
    • Pearl Jam.

    The trouble with the claim, the FBI said, was that Nady “had no association or contractual arrangement with any of the significant concerts or tours.”

    In fact, the FBI said, “Wady appears to have actually promoted fewer than 10 concerts, all involving only local or lesser known artists.”

    Victims may be out $25 million, the FBI said.

    Wady, according to the FBI, represented that he “operated and had an ownership interest in various business enterprises that purportedly were engaged in the business of promoting concerts or tours of well known entertainers and artists.”

    Among the enterprises were Dezert Heat Entertainment Inc.; Dezert Heat Inc.; Dezert Heat Worldwide LLC; NATO Enterprises LLC; and NATO Entertainment LLC. Investors typically were promised interest rates of 4 percent per month for a maximum of six months or 24 percent for one promoted event, the FBI said.

    When the Ponzi scheme collapsed in 2007, about 140 victim investors still had not been repaid their outstanding “investment” loans of approximately $25 million, the FBI said.

    Between 2004 and March 2007, the FBI said, “Wady used no less than $3 million of victim investor funds to pay for a lavish personal lifestyle.”

    Wady bought at least 30 vehicles for himself and others, including a Lamborghini, a Ferrari and a Bentley, the FBI said. He also purchased a $175,000 luxury boat and $800,000 in real estate.

    Wady was arrested yesterday in Tempe, Ariz. He was indicted on 37 counts of wire fraud and transactional money laundering.

  • EDITORIAL: In The End, Surf’s Up Demonstrated That All Its Members Were Expendable And That Its Heart Beat Only For Bowdoin And A Limited Few

    Surf's Up wore its heart on its site: Was there complete intelletual detachment -- or was it for the love of money?
    Surf's Up wore its heart for ASD on its site: Was there complete intellectual detachment — or was it for the love of money or for another reason?

    On Nov. 27, 2008, just eight days after a federal judge ruled that Florida-based AdSurfDaily had not demonstrated it was a lawful business and not a Ponzi scheme, ASD gave its official endorsement to the Surf’s Up forum, which suddenly went missing last week after shilling for ASD President Andy Bowdoin 24/7 for more than a year.

    After the endorsement, Bowdoin, whom federal prosecutors said was at the helm of a $100 million autosurf Ponzi scheme that had moved “several million” dollars offshore, then largely ceased having direct contact with ASD members. His infrequent messages were released through Surf’s Up.

    Surf’s Up was famous for enforcing what it described as a “Poof!” penalty that caused countless posts to be deleted if readers shared unflattering opinions of Bowdoin or provided links to external sources of information to help others shape their opinions. On one hand, Surf’s Up railed against Big Brother; on the other, it served as the Thought Police.

    In the end, though, Surf’s Up proved to be expendable without notice — apparently even without notice to the members or all of the Mods. There is a chance that some of the Mods had been lying to the other Mods all along, perhaps never revealing that the forum itself would go missing one day.

    The “Poof!” penalty, in the end, applied even to Surf’s Up. The whole of it — 1,005 threads that had managed to survive — simply vanished like so many posts from individuals who dared to question Bowdoin or the ASD enterprise. Someone — and it’s unclear if that person was acting as an individual or at the behest of ASD or another entity or person — had the power of maximum “Poof!” and made the decision that the forum had outlived its usefulness.

    The root of the word usefulness is “use.” Indeed, the forum’s rank-and-file members were viewed as simpletons and used as pawns in a concerted effort to confuse and cloud the issues. After they were misinformed and used, the entire forum was discarded  — just like the ASD “ad-packs” that Bowdoin was permitted to display after the seizure of tens of millions of dollars from the firm amid Ponzi, money-laundering, wire-fraud and securities allegations.

    Bowdoin never displayed the ads. ASD simply put them on ice and shoved them in a corner. It was as though they never existed; it was as though the plan all along was to use as many members as possible for as long as possible — until they became expendable en masse, until they became something that could be poofed like a critical post about Bowdoin on Surf’s Up.

    ASD’s endorsement of Surf’s Up always had more than just a whiff of a plan. The “tell” was that  Surf’s Up embraced the endorsement, rather than repudiating it. Why would any person or entity that values intellectual honesty ever accept the endorsement of a man with a felonious history, a man surrounded by felons when he was operating the company, a man surrounded by more than just a few scofflaws, a man consumed by trouble, a man who was the target of an active criminal investigation by the top law-enforcement agencies in the United States?

    Andy Bowdoin deserved only the same business loyalty accorded Bernard Madoff, which is to say none. Madoff had no apologists. Bowdoin had them by the hundreds — in the earliest days by the thousands. The disconnect was so stunning it almost defied description.

    The clear purpose of some of the Mods and members was to shill voluntarily and unapologetically for a man implicated in a criminal investigation by the U.S. Secret Service, the IRS and the Justice Department. The frequent deletions were just another form of shilling.

    Bowdoin also was under investigation by the state of Florida. Just days before Surf’s Up accepted the endorsement, Bowdoin was sued in Florida for racketeering by three ASD members seeking class-action status. The Florida RICO case later was dismissed by the plaintiffs — only to be refiled in the District of Columbia. Bowdoin never responded to the complaint, and yet the shilling continued.

    It also is believed that the Securities and Exchange Commission and state-level securities regulators and attorneys general are at least tangentially involved in the ASD probe. Their involvement might be deeper than is commonly believed. It is known, for example, that the SEC has information on at least four ASD members who had previous run-ins with the agency.

    To say Bowdoin has trouble no matter which way he looks is to state the obvious. His legal and PR dangers are clear and present. They are obvious to all observers, including his supporters, apologists and the Mods at the Surf’s Up forum.

    This, of course, begs the question of why any person would have chosen to champion Bowdoin. To do so was just plain madness, especially given the fact that Bowdoin was arrested in Alabama in the 1990s for fleecing investors and entered guilty pleas to felonies. A business partner, Clarence Busby of Georgia, was implicated by the SEC in a prime-bank scheme in the 1990s.

    In the Busby case, the SEC said he fraudulently represented to investors that the investments in three prime-bank schemes were risk-free and that the ventures would pay returns ranging from 750 percent to 10,000 percent.

    Yes, three prime-bank schemes. Yes, 10,000 percent.

    “In total, Busby raised nearly $1 million from more than 70 investors,” the SEC said. “None of the investors earned the exorbitant returns promised by Busby.”

    The answer to the question of why any person would shill for Bowdoin under these exceptionally weighty circumstances might be simple: total intellectual detachment/dishonesty or money or the promise of money to come. After ASD endorsed Surf’s Up, some of the Mods and members peeled off and created a cheerleading site for the AdViewGlobal (AVG) autosurf.

    Some ASD members now say Bowdoin was the silent head of AVG, which launched after two forfeiture cases and a racketeering lawsuit were brought against ASD. Public records show that AVG launched after Bowdoin had met with federal prosecutors and members of law enforcement over a period of at least four days in December 2008 and January 2009 to discuss a possible plea deal in an ASD criminal prosecution.

    AVG itself listed Bowdoin family members George and Judy Harris as its owners. AVG’s onetime chief executive officer was Gary Talbert, an ASD executive who filed sworn court documents in the ASD case. The two surfs had other employees, promoters and members in common, including the Surf’s Up Mods who peeled off to start the AVG forum.

    In June 2009 — after earlier having provided a tortured explanation that bizarrely both confirmed and denied that ASD and AVG were interconnected — AVG ceased paying members. ASD, in at least one previous iteration, had done the same thing, according to members.

    Read about AVG’s denial/confirmation: It was one for the ages.

    Surf’s Up deleted post after post about the AVG autosurf, thus shielding Bowdoin family members and perhaps Bowdoin himself from criticism. Few people seem to believe there was anything that approached an arm’s length between ASD and AVG. No one has said precisely how much money AVG took in and how much members lost through a second potential entanglement with a Bowdoin enterprise — an entanglement promoted by some of the Surf’s Up Mods.

    The operative word is “some.” At least one of the Surf’s Up Mods appears not to have become entangled in AVG, but the fact remains that none of the Mods publicly divorced themselves from the ASD circus. Rarely in life is one witness to such a circus. It is almost impossible to contemplate the circus without cracking a smile, even though the ASD case is an extremely serious matter. Various efforts to defend ASD were just plain bizarre.

    An organization known as ASD Members International (ASDMI) was launched with the stated mission of litigating against the government even if it was behaving legally. There were efforts to destroy the careers of civil servants, career prosecutors and political appointees.

    Various letter-writing campaigns ensued — all aimed at neutralizing public officials charged with the responsibility to investigate and prosecute ASD. If a person brought up the subject of AVG on Surf’s Up, the post was deleted. If a person raised the prospect of forming a militia and storming Washington with guns, the post stood — unless the entire thread later got deleted because someone had the temerity to take his or her brain out for a walk and opine that maybe, just maybe, Bowdoin was a con man who happened to get caught in a very big way.

    Mixed in with claims that people who questioned Bowdoin were “rats,” “maggots” and “cockroaches” were claims that God was on his side. Accompanying these starkly mixed messages were discussions aimed at getting AARP, which advocates for senior citizens, to advocate on behalf of ASD. No one seems to have made the calculation that so many fraud schemes fleece so many senior citizens that there was not a prayer of AARP entering the case  on ASD’s side. In fact, the organization joined in an effort to strengthen Florida’s securities laws after the ASD case was brought.

    A federal judge now has signed a final forfeiture order in the ASD case. The order gives the government title to tens of millions of dollars seized from the company. Prosecutors have said all along — in news releases, in court filings and on a Justice Department website — that they intended to implement a restitution program to compensate ASD victims from seized funds.

    This apparently mattered little to some of the Surf’s Up Mods and members and brought out what perhaps was the most bizarre thing about the forum: the continued advocacy and promotion of surf programs despite what had happened to ASD, Golden Panda and LaFuente Dinero. Some of the members even had the gumption to assail the government for “slow” ASD refunds when Bowdoin himself had caused the delays.

    At the very same time they were excoriating the government, they were promoting new surf sites, including the ASD-connected AVG. Those positions were irreconcilable. Period.

    One cannot at once be both a person expecting compensation for Bowdoin’s illegal actions and a promoter of the next scheme with Bowdoin ties — unless one is willing to discard any association with intellectual honesty and simply ignore facts that are inconvenient.

    In the end, Surf’s Up poofed itself, demonstrating for the ages that those hundreds of thousands of words in the 1,005 threads that managed to survive before the forum itself went offline meant nothing.

  • Judge Signs Forfeiture Order In AdSurfDaily Case; Gives Government Title To $65.8 Million In Bowdoin Bank Accounts; Case Resolved In ‘Entirety’

    Andy Bowdoin

    After more than 17 months, more than 165 court filings and more than $1 million in legal fees, ASD President Andy Bowdoin has lost the August 2008 civil forfeiture case and the government has been granted title to $65,838,999.70 seized from Bowdoin’s 10 Bank of America accounts.

    U.S. District Judge Rosemary Collyer, whom Bowdoin attempted to have disqualified from the case last month, has entered a default judgment and final order of forfeiture in the case.

    In a footnote, Collyer said the order decreeing forfeiture “resolves all remaining issues and this forfeiture action in its entirety.”

    As PatrickPretty.com first reported last year, three of Bowdoin’s accounts contained the exact same sum: $1,000,388.91. Why the accounts contained the exact same sum remains a mystery.

    Another mystery is why Bowdoin, 75, initially submitted to the forfeiture on Jan. 13, 2009 — a year ago next week — but then changed his mind more than a month later and attempted to reassert his claims as a pro se litigant. Bowdoin’s former attorneys, Akerman Senterfitt, said in court filings that Bowdoin began to file pro se “without consulting with counsel and without bothering to advise counsel that he would be submitting motions on his own.”

    Akerman Senterfitt filed a motion to withdraw as Bowdoin’s counsel, saying its representation of him had become unreasonably difficult.

    Bowdoin’s pro se re-entry in the case coincided with the shift by the AdViewGlobal (AVG) autosurf to a “private association” structure. This shift was announced to AVG members on Feb. 26, 2009, after AVG said it had consulted with a company known as Pro Advocate Group.

    Bowdoin signed the first of his pro se pleadings just one day before, on Feb. 25, 2009. Pro Advocate Group, which says it can help people practice law and medicine without a license through a private-association structure, is associated with Karl Dahlstrom.

    In 1997, Dahlstrom was sentenced to 78 months in federal prison for his participation in a securities scheme. In court documents in a tax case, Karl Dahlstrom is described as having  “been in the abusive trust business for many years.”

    Bowdoin has not publicly revealed the identities of his pro se advisers, describing them as members of a “group.” Nor has Bowdoin revealed how much he paid for the pro se advice.

    Bowdoin, however, told members in a letter published on the now-defunct Pro-ASD Surf’s Up forum in March 2009 that he had paid his professional lawyers $800,000 before firing them. In September 2009, Bowdoin said his legal fees had exceeded $1 million.

    “Now I’ve spent over a million dollars in legal fees to get your money back, and to stay out of prison,” Bowdoin said on Sept. 21, according to a transcript by the U.S. Secret Service. Bowdoin made the remark in a conference call with members. The Secret Service transcribed the call, and then filed the document  in court.

    Collyer refused to disqualify herself last month, saying Bowdoin no longer had standing in the case.

    Read the final order of forfeiture in the August 2008 case against assets connected to ASD.

    Collyer earlier ordered the forfeiture of more than $14 million from the bank accounts of Golden Panda Ad Builder, whose assets also were seized in the ASD case.

    Bowdoin did score a win of sorts in the forfeiture litigation. He asked for — and was granted — an evidentiary hearing in 2008 to refute the government’s Ponzi allegations and to ask for the emergency release of $2 million because the company could not pay its rent and hosting bills and needed money to implement a new business plan.

    Prosecutors did not object to the hearing, but pointed out that Bowdoin had $1 million in a bank on the Caribbean island nation of Antigua in an account under a different name.

    Bowdoin asserted his 5th Amendment right against self-incrimination, advising the court through counsel that he would not testify at the evidentiary hearing he had requested. Surf’s Up described the performance of ASD’s witnesses at the hearing as uniformly “excellent,” while at once describing the government’s case as “not so much.”

    At the same time, the forum helped spread the rumor that the government had admitted that ASD was not a Ponzi scheme.

    In November 2008, Collyer ruled that ASD had not demonstrated at the hearing that it was a lawful business and not a Ponzi scheme. A month later, prosecutors filed a second forfeiture complaint against ASD-connected assets, restating the Ponzi allegations despite the Surf’s Up claim that prosecutors had admitted ASD was not a Ponzi scheme.

    The AVG autosurf was laying the groundwork for launch within days of Collyer’s November 2008 ruling against ASD. Promoters highlighted its purported location in Uruguay as a reason to join.

    AVG suspended cashouts in June 2009, exercising its version of a “rebates aren’t guaranteed” clause.

    Dozens of pro se litigants attempted to intervene in the ASD case, largely causing the court docket to swell from about 40 entries in January 2009 to its current total of 166.

  • Massachusetts Secretary Of State Seeks C&D Order, Disgorgement Against Individuals, Company That Helped Richard Elkinson Sell Alleged Ponzi Scheme

    In a case that may cause worry among autosurf and HYIP enthusiasts who earn sales commissions, Massachusetts Secretary of State William Galvin has sent the state Securities Division after the profits earned by two individuals and a company that recruited investors into the alleged Richard Elkinson Ponzi scheme.

    Galvin’s office filed civil papers today that accused two individuals and their company of selling unregistered securities and acting as unlicensed broker-dealers.

    Elkinson, 76, was arrested in Mississippi yesterday by federal agents. Federal prosecutors in Massachusetts said he had been running a Ponzi scheme — perhaps for 20 years — in which he told investors he was a broker for government uniforms and sports uniforms. Investors are out nearly $30 million.

    Casino records in Las Vegas show that Elkinson “conducted a total of more than $3.7 million in currency transactions over $10,000″ since 1998, prosecutors said.

    Now Galvin has opened a second legal front — this one at the state level — that is aimed at promoters of the alleged scheme and seeks a cease-and-desist order. Galvin said promoters were serving as unregistered broker-dealers, or unregistered agents of broker-dealers or issuers of securities.

    They also were serving as unregistered investment advisers or unregistered investment adviser representatives, Galvin said.

    Named in the state administrative complaint were Jay Lawrence Fialkow, Jeffrey P. Ross and their company, RossFialkow Capital Partners LLP.

    Galvin is seeking the disgorgement of illegal profits and a financial penalty. At the same time, he is seeking an accounting of all the proceeds Fialkow, Ross and the company received from Elkinson in the alleged scheme. Subpoenas already have been served.

    Separately, the FBI said Fialkow and Ross — who are not defendants in the Elkinson criminal case — referred “numerous investors” to Elkinson and that their referrals dumped as much as $10 million into the scheme.

    The state, Galvin said, began to receive complaints about Elkinson Dec. 21, after investors were unable to contact him to inquire about overdue money they were owed in the scheme. “Several” investors identified RossFialkow as the source of their referrals, and the state “immediately sent several staff members” to the RossFialkow office in Newton.

    Both Ross and Fialkow were at the office, and met with state investigators for an hour, according to Galvin’s filing. The state said it believes Ross and Fialkow received “at least” $319,000 in commissions.

    In December, Elkinson “disappeared,” Galvin said, claiming at different times to be in Philadelphia, Chatsworth, Calif., and San Francisco, while also claiming he was “on the verge of obtaining a large sum of funds” to satisfy investors.

    “In reality, Galvin said in the Massachusetts filing, “[Elkinson] was on the run from federal and state law enforcement authorities.”

    When interviewed by the state in December, Galvin said, Fialkow said the company had accepted Elkinson’s assertions that his business had a “handshake” agreement with the purported supplier of uniforms in Japan.

    Fialkow and Ross — who were Elkinson investors as well as promoters — “also never received any tax documentation from their investments with Elkinson,” Galvin said. “While Fialkow told the Division he found this odd, he never pressed the issue with Elkinson, while RossFialkow continued to refer investors into Elkinson’s scheme.”

    Read the Massachusetts Securities Division filing.

  • Toronto Police Department Seeks Assistance In Locating Alleged Ponzi Suspect Weizhen Tang; Says He Purported To Be The ‘Chinese Warren Buffet’

    Weizhen Tang Ponzi scheme Toronto Police.
    Weizhen Tang: Wanted by Toronto Police.

    Police in Canada are looking for Weizhen Tang, 51, to arrest him in an international investment-fraud case.

    The Toronto Police Department says investigators believe Tang duped more than 100 investors in a $30 million Ponzi scheme. A warrant has been issued for Tang’s arrest.

    Investigators say fraud victims exist “across Canada,” and in the United States and China.  It is believed Tang operated the fraud scheme at least between January 2006 and March 2009.

    Police say Tang billed himself as the “Chinese Warren Buffet” and engaged in “online trading.” He also is in trouble with Canadian regulators and the U.S. Securities and Exchange Commission, which sued him in April 2009

    Here are Wang’s vital statistics, according to Toronto police:

    • Lived/lives in Toronto
    • Chinese descent
    • 5 feet, 2 inches tall
    • 130 lbs.
    • Short black hair
    • Glasses

    Anyone with information is asked to contact police at 416−808−7238, Crime Stoppers
    anonymously at 416−222−TIPS (8477), online at www.222tips.com, or text TOR and your message to CRIMES (274637).

    Along with suing Tang, the SEC also sued also Plano, Texas-based investment adviser WinWin

    Tang

    Capital Management LLC. Two other Tang entities were named relief defendants: WinWin Capital Partners LP and Bluejay Investment LLC, which did business as Vintage International Investment LLC.

    The SEC’s complaint alleges that Tang told investors in February 2009 that in an effort to conceal substantial trading losses and attract new investors to the Oversea Chinese Fund, he posted false profits on investors’ account statements and used funds from new investors to return principal and pay out at least $8 million in “fake” profits to other investors.

    According to the SEC’s complaint, Tang raised capital for the hedge fund from U.S. investors by offering and selling limited partnership interests in WinWin Capital Partners since November 2007.

    WinWin Partners had raised, as of March 10, 2009, almost $17.3 million in principal investments from approximately 75 U.S. investors, most of whom are located in the Dallas area but also in California.

    At least $9.6 million of the money raised from U.S. investors remains unaccounted for, the SEC said in April 2009.

  • BLOCKBUSTER ARREST: MLM Pyramid Scheme Operator Charged With Laundering Drug Money; David Murcia Extradited From Colombia To Stand Trial In New York

    EDITOR’S NOTE: Finding the United States an unfriendly environment, the so called autosurf and HYIP “industries” increasingly are relying on offshore money-exchange businesses and debit cards to entice participants, advising them that the offshore locations are “safe” havens that “shelter” U.S. residents from regulators and law-enforcement agencies.

    In August 2009, we reported that a Dallas-based company, Virtual Money Inc., which  provided debit cards to Florida-based AdSurfDaily Inc., was indicted on charges of helping a Colombian cocaine operation launder money by providing cards that were used to convert drug proceeds to cash at ATMs in Medellin. ASD is implicated in an alleged $100 million Ponzi scheme.

    In a follow-up story, we asked if autosurf and HYIP enthusiasts who describe the enterprises as harmless despite the fact they steal wealth from a large group to give it to a smaller one had yet felt a “lump” in their throats because law enforcement also had tied the offshore debit-card business to international narco-trafficking.

    That lump only should be getting bigger.

    The story below is about D.M.G. Group (DMG) and its operator, David Eduardo Helmut Murcia Guzman (David Murcia). DMG used debit cards as the principal part of a pyramid scheme that largely targeted the poor in Colombia. The scheme is believed to have collected hundreds of millions of dollars from as many as 400,000 people before collapsing in 2008.

    Murcia, who owned two airplanes, three yachts and at least 12 luxury vehicles, was arrested in Panama in 2008, just as he was attempting to flee to Costa Rica to avoid extradition to Colombia. He was convicted of money-laundering in Colombia in December 2009, sentenced to 30 years in prison and fined $12.5 million. Viewed as a Robin Hood figure by some people, Murcia portrayed himself as a man simply interested in creating wealth for others. His arrest initially led to rioting in Colombia.

    Police used tear gas to disperse protesters, and the government launched a nationwide crackdown on Ponzi and pyramid schemes and declared a state of emergency. Dozens of schemes using various corrupt business models were operating simultaneously, sucking wealth from the economy and placing it in the hands of a small number of people. At least 12 people reportedly were killed in Colombia during Ponzi/pyramid-related rioting. Only the people who got into the schemes first made money. By some estimates, 90 percent or more of the participants lost money.

    One of the fraudulent companies operating at the same time as DMG was known as DRFE (Dinero Rapido Facil en Efectio), which means “Rapid Money, Easy Cash.” It, too, collapsed.

    DMG, for its part, had 59 offices in Colombia; the government shuttered them all in a single day, after linking DMG money to international drug traffickers.

    Here, now, the story about the dramatic extradition of Murcia to the United States yesterday . . .

    David Murcia

    His jailers at La Picota prison in Bogota placed him in handcuffs. They wrapped him in a heavy, bullet-proof jacket. From there they took him to the Catam military airport under heavy guard. He was led to a plane owned by the U.S. Drug Enforcement Administration (DEA). Officials made sure that the moments were captured on film and videotape. They were sending a simple message: We will come after you, no matter where you are, even if you pretend you are Robin Hood.

    And with that David Eduardo Helmut Murcia Guzman (David Murcia), known as the “Bernie Madoff of Colombia” for his collapsed financial scheme, was whisked to Miami. He’ll be tried in New York on charges of conspiring to launder millions of dollars in narcotics proceeds through his company, D.M.G. Group (DMG), a house of cards propped up by a pyramid-scheme involving debit cards and promises that participants would get back 100 percent of what they paid in and perhaps more.

    “Extradition signals Colombia’s continuing commitment with the U.S. in fighting drug dealers,” said New York City Police Commissioner Raymond Kelly. “It is also important in attacking the money laundering that accompanies drug trafficking. The black market peso exchange is just one of many schemes to launder drug money and corrupt once legitimate business in the process. Left to their own devices, narcotics traffickers would undermine entire economies through drug trafficking, money laundering, extortion and corruption. This was an auspicious victory in a continuing fight.”

    U.S. prosecutors yesterday pointedly called DMG “a vehicle for a multi-level marketing scheme.” Participants were told to buy prepaid debit cards that operated on a points system and would permit them to buy electronics and other merchandise at DMG retail stores and enable them to get back 100 percent of what they paid in and perhaps more.

    Points accumulated when purchases were made and participants introduced others to the scheme, which was sold as an opportunity to buy anything they wanted — from groceries to flat-screen TVs and motorcycles — while getting the products and at least 100 percent of the purchase price back in six months.

    Murcia, 28, founded DMG in Colombia’s coca-growing region. The complex scheme ultimately led to questions about how Murcia, a high-school graduate, had figured out a way to give back at least 100 percent of the purchase price of products without operating a shell game in which money was taken from new participants to pay returns to the original participants. Murcia never could explain clearly how the program worked, and sometimes used accounting terms such as “cash flow” to deflect questions. He had assembled a massive following of devotees, many of whom zealously defended the program, saying Murcia was helping people rise out of poverty.

    At first it was speculated that DMG bought merchandise in bulk and sold it to debit-card customers at grossly inflated prices to create a hugely profitable spread. That all changed, however, when investigators found $3.2 million in cash stuffed in cardboard boxes in the coca-growing region — and linked the cash to Murcia — and later linked Murcia to a reputed drug smuggler.

    U.S. prosecutors now say Murcia had acquired so much money that it created a problem for him — the classic dilemma faced by corrupt operations. In the fall of 2007, Murcia and Margarita Leonor Pabon Castro, a 35-year-old co-defendant in the U.S. case, “approached another individual in Colombia and said that they had cash — apparently in U.S. dollars — that they could not deposit into the Colombian banking system.”

    Murcia and Castro asked the unidentified person to set up an account in the United States. A U.S. account was opened at Merrill Lynch in the name of Blackstone International Development. Neither Murcia nor Casto was listed as owners of the account.

    In March 2008, Murcia and Castro told the person who had opened the account that they had “provided $2.2 million worth of Colombian Pesos to German Enrique Serrano-Reyes, 45, in Colombia, and, in exchange, Serrano-Reyes had caused nearly $2.2 million to be wired into the Blackstone Account through 18 separate wire transfers.”

    Prosecutors seized the Blackstone Account in May 2008.

    When Murcia was informed of the seizure of the Blackstone Account, he “told the individual who set up the account that he should not attempt to retrieve the contents of the account, and should not under any circumstances inform the authorities of [Murcia] or [Castro’s] interest in the Blackstone Account, prosecutors said.

    Also indicted in the United States was William Suarez-Suarez, 41, whom prosecutors said was the head of DMG’s Colombian operations and attempted to bribe officials in Colombia.

    Suarez-Suarez, according to prosecutors, helped Murcia and “others” establish “hundreds of subsidiary and affiliated companies linked to DMG in countries including Colombia, Panama, and the United States.”

    DMG also had links to the drug trade in Mexico, prosecutors said. Murcia, Santiago Baranchuk-Rueda, 34, Daniel Angel Rueda 36, and Luis Fernando Cediel Rozo, 34, “coordinated the pick-up and transportation of millions of dollars in narcotics proceeds in Mexico,” prosecutors said.

    “The defendants concealed narcotics proceeds by investing them in legitimate real estate
    and limited liability companies in the United States,” prosecutors said.

    U.S. Attorney Preet Bharara said prosecutors and their law-enforcement colleagues would leave no stone unturned in fighting international money-laundering and drug-trafficking.

    “David Murcia Guzman is charged with using his namesake company as cover for the laundering of illicit drug proceeds,” Bharara said. “[He] allegedly played a shell game with dirty money, masking millions for narco-traffickers as legitimate transfers. This extradition affirms that we will not tolerate the abuse of the U.S. banking system to stimulate the black market economy.”

    John P. Gilbride, DEA Special-Agent-in-Charge, said investigators have the experience and the patience to peel back layers of the onion to expose the corruption.

    “Hiding behind a corporation name did not make this business legitimate,” Gilbride said. “In fact, it was facilitating millions of narco drug dollars into pesos for drug traffickers worldwide. This extradition highlights law enforcement’s international efforts to identify and arrest those who profit from the sale of illegal narcotics.”

    Bharara thanked the government of Colombia for its cooperation.

    Murcia faces a prison term of 20 years in the United States, if convicted. He’ll serve any sentence that emerges in the United States, and then will be sent back to Colombia to serve his 30-year sentence there.

  • Massachusetts Man, 76, Becomes Latest Senior Citizen Implicated In Ponzi Scheme; Richard Elkinson Accused Of $29 Million Fraud; Investigators Find Millions Of Dollars In Las Vegas Casino Transactions

    A Massachusetts man has been arrested in Mississippi and charged with orchestrating a $29 million Ponzi scheme by tricking people into believing they were investing in a company that provided uniforms for the Winter Olympics, the Pan American games and the government.

    Ironically, Richard Elkinson told investors he provided prison uniforms — and also uniforms for police officers, federal prosecutors said.

    It was not immediately clear how much of Elkinson’s purported uniform business was legitimate. Investigators say the Ponzi scheme might have been operating for 20 years before flaming out in December.

    The FBI was working the case on Christmas Eve, according to the criminal complaint. After securing purchase orders claiming the states of Connecticut and Georgia were among Elkinson’s customers, an agent called the phone numbers on the purported purchase orders.

    “In each instance, I encountered ‘disconnected’ messages,” the agent said.

    The investigation also revealed that Elkinson had an affinity for Las Vegas and claimed to have credit lines of $25,000 each at the Venetian, MGM Grand and Caesars Palace casinos.

    Elkinson, 76, of Framingham, was charged with mail fraud. The SEC and the Securities Division of the Massachusetts Secretary of State are assisting in the probe.

    Records in Las Vegas casinos show that Elkinson had “conducted a total of more than $3.7 million in currency transactions over $10,000” since 1998, prosecutors said. The Ponzi scheme began to collapse last year, and Elkinson missed a meeting with investors in December, and stopped answering his phone.

    Records suggest he was at the Wynn casino in Las Vegas Dec. 22, and canceled a reservation at the Venitian Dec. 23.

    The Alleged Scheme

    One of the elements, according to the complaint, was that the purported Japanese garment manufacturer, which purportedly had an office in Chatsworth, Calif., would do business with only Elkinson “personally,” a possible signal that agents believe Elkinson was attempting to keep investors from asking too many questions or performing thorough due diligence.

    In 2003 or 2004, according to the FBI, Elkinson showed investors a 1998 letter purportedly written by “Alan Shimuka” on the California office’s letterhead that said, “My Honorable Father, once again, requires me to state that we do business with Mr. Richard Elkinson of Northeast Sales.”

    “Elkinson allegedly represented that his business involved entering into contracts directly with large purchasers (such as government entities), in which Elkinson had to pay 50 percent of the contract amount as a down payment to the manufacturer in order to initiate the manufacturing process,” prosecutors said.

    “[U]pon completion and delivery of the uniforms, Elkinson reported that he would receive payment from the purchasing entity,” prosecutors continued. “[He] claimed that banks were unwilling to lend funds to his business based upon unexecuted contracts, so he needed to borrow a portion of the funds required to pay the 50 percent down payments.”

    As has been common in recent Ponzi schemes, Elkinson lulled investors with promissory notes, prosecutors said. In his specific case, Elkinson’s notes “generally required repayment within a term of 330-360 days, and with interest rates that ranged from 9 percent to 13 percent.

    “Upon maturity of the notes, investor/lenders were given an option to take a return of their principal and interest, to take interest only, or to roll the principal and interest over into a new note,” prosecutors said.

    In April or May of 2009, Elkinson began to default on the notes, providing investors “a variety of excuses,” prosecutors said.

    Among the excuses was that Elkinson’s wife was ill and he had to accompany her to Houston for treatment. Elkinson also told investors that government budgetary problems at the state level were delaying payments.

    The wheels fell off in December, when Elkinson missed a meeting with two investors and stopped answering his cell phone.

    In the early stages of the probe, investigators have identified about 130 investors and calculated that Elkinson owes them $29 million.

    U.S. Attorney Carmen M. Ortiz said that prosecutors will post information on a website to update victims. Here is the website:

    http://www.usdoj.gov/usao/ma

    Victims may also call the U.S. Attorney’s Office’s victim assistance toll-free number at 888-221-6023 to obtain status information.

  • Local Police In California Uncover Ponzi Scheme While Investigating Woman For Unrelated Crime; Ponzi Targeted At Latin Immigrants

    Police in Redondo Beach, Calif., say they were investigating Mariana Montes for a separate crime and seeking her arrest on a warrant, but discovered during their probe that she had wiped out investors by running a Ponzi scheme targeting Latin immigrants.

    Montes, 41, now is jailed on the original warrant, and the Ponzi investigation is proceeding as a separate matter.

    Police said the Ponzi was operated through a bogus company known as “Fast Results Investments.” Montes met with individual investors beginning in 2007, and promised clients who invested a minimum of $5,000 returns of 25 percent within 30 to 90 days.

    At least 55 victims have been identified in the opening days of the probe, police said today.

    Some of the victims “invested their entire life savings or complete retirement account balances,” police said.

    “Montes used the investors’ money to purchase designer clothing, a new vehicle and to fund her daily activities,” police said.

    Police said their preliminary estimate of $500,000 in losses likely would rise, perhaps significantly.

    “It is believed that there are many more victims of Montes’ Ponzi scheme that have not yet been identified,” police said, noting that they already have evidence that Montes was conducting business in Arizona.

    Investigators at the Redondo Beach Police Department have established a special telephone line for possible victims. The phone line has information in both English and Spanish.

    The Police Department is urging any possible victims of this Ponzi scheme to call 310- 379-2477 Ext. 2332.

    Montes is being held in the Los Angeles County jail, on a warrant for “another financial crime” unrelated to the Ponzi scheme, police said. Jail records show the crime was a felony, but the specific crime was not defined.

    Bail was set at $572,465.

  • DEVELOPING STORY: Family Of Alleged Ponzi Schemer In Canada Targeted With Death Threats; Bullets Fired At Home

    Just how far will people go to avoid getting caught or convicted of operating a Ponzi scheme or to reclaim funds lost in a Ponzi scheme — or to send a message that designed to rattle nerves?

    There have been several recent Ponzi or financial-fraud cases with more than just a hint of violent intent.

    Implicated in a massive Ponzi scheme, disbarred Florida attorney surrounded himself with body guards prior to getting charged with racketeering, authorities said. Guns were pulled on multiple occasions, according to media accounts.

    Accused Ponzi schemer Jeffrey Lane Mowen is jailed in Utah amid allegations he sought to hire a fellow inmate to kill four witnesses in the case against him. Meanwhile, the FBI said last year that four individuals staged what effectively was the business equivalent of a coup d’état in California, wielding firearms and posing as federal agents to retrieve money purportedly lost in the alleged Kenneth Kenitzer/Anthony Vassallo Ponzi scheme at Equity Investment Management and Trading Inc.

    Last month, fleeced Texas investor Christine Cayton was arrested in Texas on charges that she brought a gun to the headquarters of Triton Financial LLC — implicated in an investment-fraud scheme by the SEC — and demanded a refund from Triton principal Kurt B. Barton

    Now comes word that bullets were fired in Canada at the home of family members of Tzvi Erez, accused of operating a “printing” Ponzi scheme that gathered $27 million. A school that youngsters in the Erez family attend added security after it received a threatening letter.

    Read the Erez story in the National Post.

  • North Carolina Man Adds To List Of Alleged Schemers Who Bought Jet Skis With Fraud Proceeds; J.V. Huffman Jr. Also Faces Trial On Weapons Charge

    J.V. Huffman Jr. Source: Catawba Country Sheriff's Office

    It’s not as though alleged fraudster J.V. Huffman Jr. did not have the expensive cars and real estate often associated with Ponzi schemes or financial frauds.

    Huffman, jailed awaiting trial in North Carolina on Ponzi and weapons charges, had plenty of those, according to William Walt Pettit, the court-appointed receiver. He had an Aston Martin ($100,000+), three Mercedes (nearly $180,000 combined), and a Prevost motor home (insured against loss for $825,000) , for example. And Huffman had at least 14 parcels or properties, including a $765,000 property in North Carolina and multiple interests in time-shares at Walt Disney World in Orlando.

    But Huffman also had jet skis, which oddly seem to have become a signature purchase among operators of alleged Ponzi schemes or financial frauds. Disbarred Florida attorney Scott Rothstein, implicated in an alleged $1.2 billion Ponzi scheme, had jet skis.

    Affiliate Strategies Inc., a Kansas company under whose umbrella the shuttered Noobing autosurf fell, had a jet ski. ASI is among a number of companies sued by the Federal Trade Commission and the attorneys general of four states for operating a grant-writing scheme.

    Florida-based AdSurfDaily, whose president is implicated by the U.S. Secret Service in a $100 million Ponzi scheme, also had jet skis — two of them. Andy Bowdoin told his members that the jet skis (and a lakefront home) were for their benefit, but the statement was met with anger, the jet skis and Bowdoin’s other marine equipment dismissed derisively as “water toys.”

    Huffman’s next court appearance in North Carolina has been delayed until Jan. 25. He also faces a civil prosecution by the SEC, which said his Ponzi scheme began in 1991 and operated for 17 years before collapsing.

    The weapons charge was added when guards found a razor blade hidden in Huffman’s Bible in his jail cell. Prosecutors said the alleged financial scheme largely was targeted at Lutherans.

    SEC investigators said Huffman and his company — Biltmore Financial Group — gathered as much as $25 million from 500 investors. At first, Huffman told investors he operated a mutual fund.

    After the 9/11 terrorist attacks and the ensuing volatility in financial markets, Huffman changed his story, telling investors that he pooled funds to purchase and sell safe mortgages that had strong equity positions and were insured, the SEC said.

    “Contrary to his representations, Huffman and Biltmore did not invest the funds as represented,” the SEC said. “Instead, Huffman spent investor funds to subsidize his lavish lifestyle. Returns to investors were paid from money invested by new investors. The purported insurance protecting the investments did not exist and much of the principal has been dissipated or used to purchase real estate for Huffman and/or his wife, expensive automobiles or other luxuries.”

    In another claim reminiscent of the AdSurfDaily case, the SEC said Huffman dropped famous acronyms such as “FDIC” to get people to invest with him.

    North Carolina Secretary of State Elaine F. Marshall is spearheading the criminal prosecution.

    “People who are knowledgeable in the investment industry came to us saying that the
    promises being made sounded ‘too good to be true,’” she said, after agents arrested Huffman in November 2008. “In most cases, when an investment sounds too good to be true, it usually is.”