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Category: Ad Surf Daily

  • BREAKING NEWS UPDATE: New Pro Se Motion To Intervene In ASD Case Lists Phone Number Associated With ASD Figure Nate Boyd

    UPDATED 5:16 P.M. EDT (U.S.A.) NOTE: After additional research, the 10-digit number cited below appears not to be a bank-account number. Rather, it appears to be a telephone number associated with Nate Boyd, a former compliance officer for AdSurfDaily. Boyd’s name also has been associated with the AdViewGlobal (AVG) autosurf.

    See the comments thread below.

    Here, our earlier story . . .

    A pro se motion to intervene just docketed in the AdSurfDaily civil-forfeiture case lists an “electronic transfer to” a bank account number (**Update 1:41 P.M. EDT: it’s actually a telephone number**) not listed in government references to accounts held by ASD President Andy Bowdoin.

    The filing lists the email address of nate@asdcashgenerator.com and a second account number that is associated with ASD in court filings. It was not immediately clear why the filing by Robert and Evelyn Gould included the account number not associated with Bowdoin in court filings. (**Update 1:41 P.M. EDT: it’s actually a telephone number**)

    An account number ending with the digits 1028 — an account number not associated with Bowdoin — is included in the Gould filing, along with the words “electronic transfer to” the account. (UPDATE 2:16 P.M. As noted in the 1:41 P.M. update, the 10-digit number is actually a phone number, as opposed to a bank-account number. The phone number is associated with Nate Boyd and a number of work-at-home opportunities.)

    Nate Boyd is a former compliance officer at ASD, members said. It was not immediately clear if the “nate” mentioned listed in the email address is Nate Boyd. (UPDATE 2:16 P.M. The phone number is associated with Nate Boyd.)

    Some ASD members have said some upline sponsors sold “ad-packs” directly to customers, as opposed to directing them to purchase them through ASD. “Ad-packs” then were transferred from the existing stockpiles of upline sponsors using ASD’s in-house system. The practice is problematic because some upline sponsors could have pocketed the cash, instead of transferring it to ASD, thus generating off-the-books cash sales.

    Such transactions could have transferred the burden of paying for ASD “rebates” to the rank-and-file membership, while destroying the reliability of ASD’s records and giving upline sponsors the opportunity to siphon tax-free profits.

    Actions by upline sponsors to sell “ad-packs” directly to customers could be construed as a form of wire fraud and money-laundering.

    Also unclear is why the Gould claim was filed using the same pro se template used by dozens of other ASD members. U.S. District Judge Rosemary Collyer already has rejected dozens of filings that used the same argument in the template.

    Collyer has not ruled on several templated submissions received after her initial ruling weeks ago that the filers had no standing in the case.

    The filing also referenced an account number ending in the digits 3016 that is associated with ASD.

    gouldinterventionsmall

    Federal prosecutors have listed 10 ASD account numbers in court filings, referencing them in the August 2008 forfeiture complaint and again in May 2009, in a proof of service of all defendants in rem. None of the account numbers ended with the digits 1028.

    Unlike previous pro se filings, the Gould motion included a printout of the government’s form for victims of AdSurfDaily, ASD Cash Generator, LaFuenteDinero and Golden Panda Ad Builder. Check marks on the Gould form are next to the names of AdSurfDaily and LaFuenteDinero. The form submitted to the court by the Goulds appears to have been printed out and filled out in longhand.

    The Gould filing suggests that Robert and Evelyn Gould filled out the government form last month, including the bank-account references.

    Despite the fact the government believes ASD engaged in a wire-fraud and money-laundering conspiracy with unnamed co-conspirators while operating as a Ponzi scheme, the Goulds said in the filing that the government owes them $2,000

  • Another Huge Ponzi Scheme Shaping Up In Florida

    (UPDATED 8:54 P.M. EDT U.S.A. See bottom of story.) Amid a rash of bank failures, an unprecedented number of mortgage foreclosures and a string of major fraud investigations, Florida is bracing for yet another spectacular Ponzi scheme probe.

    This one involves the alleged sale of fraudulent structured legal settlements by Fort Lauderdale attorney Scott Rothstein and may involve up to $500 million. Other lawyers in Rothstein’s firm have sued to remove the boss and put the firm in receivership.

    Rothstein, 47, was said to have returned from Morocco yesterday and was meeting with federal investigators. There were concerns that $500 million was deposited in a bank in Canada late last month and went missing, and accompanying concerns that Rothstein had contemplated suicide as the way out.

    Florida media is all over the Rothstein story, which is beginning to get national exposure in its early hours.

    Rothstein Rosefeldt and Adler, the law firm, has more than 70 lawyers at offices in Florida, New York and Venezuela, including “distinguished former judges,” according to a lawsuit the firm filed to remove Rothstein.

    The complaint alleged Rothstein had control over financial affairs and silently started what appeared to be a securities business.

    “Some investors allege that Defendant Rothstein may have been fabricating non-existent structured legal settlements for sale to investors,” the firm said in the lawsuit.

    Famed attorney Kendall Coffey is representing the firm in its bid to oust Rothstein, who has a reputation for flashiness and for doling out money to politicians from both parties.

    Coffey, a former U.S. Attorney, represented former U.S. Vice President Al Gore in the disputed 2000 election battle with then Texas-Gov. George W. Bush.

    The Rothstein Rosefeldt and Adler law firm was reported suddenly to have less than $500,000 to operate, and attorneys are working without getting paid.

    A dramatic story is shaping up.

    Attorney Jeff Sonn said his firm is investigation Rothstein.

    “Often these private investment schemes, in which many individuals invest in an unregistered hedge or mutual fund with the intent to share profits are nothing more than unregistered securities, that may not be exempt from state and federal securities laws,” Sonn said.

    “In many instances, promoters claim these are private investments that need not be registered as they are allegedly exempt under Regulation D of the federal securities laws, but often they fail to meet all the exemption requirements, including failure to file a Form D with the SEC. If the securities are not exempt from registration, investors would be able to seek rescision of their investment and to hold all promoters, and possibly others, for the loss,” Sonn continued.

    “I have heard that one of the funds run by Rothstein was named ‘Banyon Capital,’ but I have not yet seen the offering documents.” Sonn said, “My law firm had seen Scott Rothstein living a very large lifestyle, including armed body guards, police protection, very expensive cars, luxury homes, jewelry, donations, and appeared to be something out of a Great Gatsby movie.”

    Read this story in the Miami Herald.

    UPDATE 8:54 P.M. The Palm Beach Post is reporting that the FBI and the IRS are are at the law offices of Rothstein Rosefeldt and Adler tonight.

  • Madoff Accountant Expected To Plead Guilty; Charges Demonstrate One Of The Pickles In Which ASD Finds Itself

    UPDATED 2:03 P.M. EDT (U.S.A.) Prosecutors have advised a federal judge that the government expects David G. Friehling to plead guilty to charges next week.

    Friehling was the small-shop accountant for Bernard L. Madoff Investment Securities.

    The mere fact that Bernard Madoff’s multibillion firm used a small shop that employed a single accountant — Friehling himself — was enough to make some investors pass on Madoff’s offerings while performing due diligence.

    Other investors ignored the incongruity. Madoff’s empire collapsed in December 2008. In July 2009, prosecutors filed a criminal information against Friehling, accusing him of accounting fraud, securities fraud, investment-adviser fraud and making false filings.

    In a letter yesterday to U.S. District Judge Alvin K. Hellerstein, prosecutors said they expected to file a superseding criminal information Nov. 3 and that Friehling will plead guilty and cooperate in the government’s ongoing probe.

    Read the letter.

    Friehling’s experience demonstrates one of the pickles Florida-based AdSurfDaily — itself implicated in an alleged Ponzi scheme — is in.

    A hearing was held at ASD’s request Sept. 30 and Oct. 1 of last year to demonstrate it was not a Ponzi scheme. ASD, however, did not call either an in-house or external accountant to the witness stand to certify its books and financial statement, thus missing a chance to refute the government’s Ponzi claims by producing audited financials that could withstand scrutiny.

    One of the likely reasons is that no accountant would or could certify ASD’s books under oath in a fashion favorable to the company. To have done so would have been to introduce some of the same elements that led to intense scrutiny directed at Friehling and the criminal information against him.

    ASD published no verifiable financial information. There are major doubts that ASD even knew its own bottom line, amid assertions that members siphoned off money before it even arrived at ASD.

    One of the allegations against Friehling is that he verified information for Madoff that simply was not true.

    Among the assertions against Friehling was that he was not truly independent and was auditing a company in which he had a large personal stake — an investment account dating back to the 1980s that showed an equity balance of more than $500,000 each year.

    If ASD employed accountants or bookkeepers who held large numbers of “ad-packs” or were being paid in “ad-packs,” their independence could be challenged.

    Moreover, prosecutors said, Friehling’s purported audits did not comply with Generally Accepted Accounting Standards. Reports did not comply with Generally Accepted Accounting Principles.

    Any accountant who certified information favorable to ASD, which prosecutors allege was insolvent, almost certainly would have been subjected to the same degree of scrutiny that Friehling later encountered in the Madoff case.

  • ASDMBA Website Offline; Registration Lapsed Yesterday

    UPDATED 9:23 P.M. EDT (U.S.A.) The ASDMBA website appears to be back online. Our earlier story is below . . .

    The website of the ASD Members Business Association — asdmba.com — is offline. ASDMBA’s domain registration appears to have expired yesterday, and the site now resolves to a GoDaddy.com page that displays ads.

    Bob Guenther, ASDMBA’s de facto head, came under fire this year, after some members said Guenther did not provide transparent accounting on how the entity spent money it collected to litigate on behalf of members of AdSurfDaily Inc.

    Guenther, 61, recently said the group intended to ramp up efforts to get refunds for members of Florida-based ASD and Georgia-based Golden Panda Ad Builder Inc., two autosurf implicated in an alleged $100 million Ponzi scheme.

    “So now it is time to round up all the troops again and get ready to try and ‘GO GET THE MONEY,’” Guenther said.

    Guenther has been highly critical of the Justice Department, lecturing a federal prosecutor in an email and saying he planned to rely on unnamed “political connections” to embarrass the government.

    See an Sept. 30 story.

    Se an Oct. 1 story.

  • BREAKING NEWS: Water Toy Does Not Survive: Federal Judge Approves Liquidation Plan That Demolishes Parent Company Of Noobing Autosurf; Jet Ski, Car, Computers, Furniture — Even A Wastebasket Ordered Sold

    Noobing pitched itself to deaf people on YouTube.
    Noobing pitched itself to deaf people on YouTube.

    A federal judge has given the go-ahead to a court-appointed receiver to sell the assets of Affiliate Strategies Inc. (ASI), the parent company of the Noobing autosurf.

    U.S. District Judge Julie A. Robinson of the District of Kansas approved the plan submitted by receiver Larry Cook. The plan authorizes Cook to sell the assets in auction lots — right down to a stainless-steel wastebasket in the women’s restroom.

    Robinson’s order permits Cook to sell ASI’s jet-ski, a 2005 Yamaha, along with a 2003 Saturn automobile owned by the firm.

    “[Cook] previously determined the Receivership Defendants’ business operations could not be operated legally and profitably,” the receiver’s attorney, Brian M. Holland, said in a court filing.

    AdSurfDaily, a Florida company implicated in an alleged $100 million Ponzi scheme, used money to purchase two jet skis, federal prosecutors said.

    ASI’s furnishings, furniture, computer equipment, servers and related equipment all will go. Included in the equipment are the Compaq 6820 notebook computer used by ASI/Noobing President Brett Blackman, and the Lenovo SL500 notebook computer used by Noobing programmer Mike Reed, according to court filings.

    Neither Noobing nor Reed was named a defendant in the July action filed by the Federal Trade Commission and the attorneys general of Kansas, Minnesota and North Carolina. Noobing’s website, however, went offline in the wake of the action against ASI and several affiliated firms and individuals, including Blackman.

    One of the affiliated companies — the Grant Writer’s Institute — was alleged to have sold a fraudulent program that offered “guaranteed” government grants from economic stimulus funds. Separately, Cook said his preliminary investigation revealed that a 70-year-old Philadelphia man had been charged $995 for the names and addresses of three benevolent entities that could help him repair the aging home he shared with his wife.

    Noobing targeted deaf people in promotions. Although the Noobing surf was not named a defendant in the FTC action, Cook’s preliminary assessment revealed Noobing had gathered $590,000 in revenue last year and more than $541,000 this year.

    Cook estimated that the surf was in the hole nearly $550,000 since last year.

    Noobing participants became furious in February, when the surf slashed daily payouts to a fraction of 1 percent after paying up to 3 percent earlier.

    Some members said Noobing should provide refunds, but Reed said on the ASA forum that no refunds would be granted because the company never guaranteed a return. Regardless, some participants said they’d get their money back by filing chargebacks with credit-card companies.

    Critics said the practice was contemptible, pointing out the wink-nod nature of autosurfs and the stress it puts on banks. On one hand, participants are happy to accept Ponzi payouts from the surfs. On the other, in order to perform a chargeback, they claim surfs failed to deliver the “advertising” they paid for when a surf slashes payouts.

    Such an approach costs banks time and money. Some veteran autosurf pushers who position themselves as experts recommend the chargeback approach, in effect using banks to guarantee “advertising” purchases from the surfs even if surfs that slash payouts or suspend them still are displaying ads.

    The ASA forum is a popular site among autosurf enthusiasts. Critics call it a Ponzi board for both autosurfs and HYIPs.

    Noobing blamed its decision to slash payouts on uncertainty in the ASD case.

    “If there is a bad guy in this whole story, it’s the government!” Reed exclaimed on the ASA forum in February. “Let’s get mad at them! How can sharing our revenue to help control costs for legitimate advertisers be a bad thing? How can keeping $90+ million dollars to protect the people who worked with ASD be a fair result? It’s madness!!! Our government is the bad guy here, not Noobing.

    “Let’s get mad at the source of this challenge!” Reed railed. “Call your congressman, send letters, speak publicly!!”

    Some ASD promoters pushed Noobing after the U.S. Secret Service seized tens of millions of dollars from ASD last year in a wire-fraud, money-laundering and Ponzi scheme probe.

    Cook said the case against ASI and co-defendants was going to take some time to unwind because of thousands of intercompany transactions and the fact that some of the entities had registered as corporations offshore.

    “Of immediate concern is the large distributions and salary paid to defendant Brett Black[man] since 2008,” Cook advised Robinson in a preliminary report. “Per the QuickBooks accounting records, Blackman received $841,545 of distributions from Apex Holdings International, LLC in 2008 and made a net contribution of $491,559 into Affiliate Strategies, Inc. ($581,388 of contributions and $89,829 of distributions) for a total net distribution of $349,986, in addition to salary payments of $118,049.

    “In 2009,” Cook continued, “Blackman has received $253,506 of distributions from Apex Holdings International, LLC and has made a net contribution of $113,000 into Affiliate Strategies, Inc. ($349,000 of contributions and $226,000 of distributions). The total net distributions and salary to Blackman for 2008 and 2009 is approximately $490,000.”

    Cook said his assessment was ongoing. He reported that some of the accounts involved in the investigation had chargeback rates of as high as 77 percent, meaning that better than three of four customers who made credit-card charges requested refunds.

    Blackman, according to Cook, recently registered several corporations offshore, including Noobing; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.

    All in all, Cook said, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.”

    Robinson previously ordered all offshore assets to be repatriated.

  • BREAKING NEWS: California Man Expected To Enter Guilty Plea In Ponzi And Affinity-Fraud Scam; Kenneth Kenitzer May Face Up To 30 Years In Prison; Case Features Charge That A Vigilante Tried To Shake Down Business To Get Refunds For Investors

    UPDATED 6:51 P.M. EDT (U.S.A.) Kenneth Kenitzer of Pleasanton has become the most recent senior citizen to face significant jail time for his actions in a Ponzi and affinity fraud scheme. The California Ponzi fleeced investors and churchgoers out of at least $40 million, authorities said.

    Kenitzer, 66, is expected to plead guilty “in the near future”  to wire fraud and money-laundering for his role in the alleged Equity Investment Management and Trading Inc. (EIMT) scheme, federal prosecutors said.

    He faces up to 30 years in prison, but reportedly has agreed to cooperate with prosecutors, according to the Pleasanton Weekly News.

    Anthony Vassallo, a business partner of Kenitzer, was arrested in the case in March. Kenitzer was named in a civil complaint filed by the SEC, but was not immediately charged criminally.

    Vassallo is 29.

    Alleged Vigilante Seeking Refunds For Investors Charged

    The EIMT case is notable for a reason that went beyond allegations of Ponzi and affinity fraud: an alleged shakedown attempt by a vigilante group to retrieve money for victims.

    On March 18,  federal prosecutors filed charges against Michael David Sanders, also known as David Dennis Sanders, for posing as a federal agent and “attempting to extort monies in connection with recovering funds for EIMT,” the SEC said.

    Sanders, 41, of Fair Oaks, Calif., was charged with conspiracy, impersonating a federal agent and attempted extortion. The FBI described the alleged crime as an attempted shakedown after Sanders and others tried to force their will on two businessmen involved with EIMT.

    “Upon entering the office suite, Sanders and several others displayed guns and handcuffs on their belts and wore bulletproof vests, radio earpieces, and badges on chains around their necks,” the FBI said in March.

    “During the meeting, Sanders and the others with him falsely identified themselves as agents with the FBI, SEC, and the Attorney General and told the businessmen that ‘you can tell us to leave the office, but if we leave, you are leaving with us in handcuffs,’” the FBI said.

    “When asked for their names and law enforcement credentials, Sanders and the others told the attendees to shut up and not ask questions. During the meeting, one of the individuals working with Sanders spoke into his earpiece stating that ‘one of the units’ was ‘in place’ at the one of the businessmen’s personal residence where he lived with his wife and young child.

    “Sanders and the others told the attendees that they had until noon on Monday, March 9, 2009, to wire $378,300.16 to a bank account at Patelco Credit Union in the name of the ‘Spirit Foundation,’” the FBI continued. “Sanders threatened the individuals with ‘search and arrest warrants’ if they did not comply with the request.”

    Three others later were charged in the alleged extortion scheme: Craig Anderson, 39, of Chicago; Cassandra Moore, 26, of Beverly Hills, Calif.; and Sean Smartt, 41, of Sacramento,Calif.

    Read statement by U.S. Attorney Lawrence G. Brown of the Eastern District of California.

    Read the SEC complaint against Kenitzer, Vassallo and EIMT.

  • OCT. 28 PONZI NEWS AND NOTES: Tom Petters Trial To Open; Employee Of Sir Allen Stanford Purportedly Criticized, Ostracized, Fired For Being Too Honest

    NEWS: In the world of high finance, Tom Petters was Bernard Madoff before Bernard Madoff was Bernard Madoff — at least with respect to shocking headlines about Ponzi schemes.

    Jury selection is under way in Minnesota in the Petters case. The allegations that Petters presided over a $3.65 billion Ponzi were unfathomable in September 2008. The allegations dwarfed the August 2008 assertions by the U.S. Secret Service that Florida pitchman Andy Bowdoin of AdSurfDaily Inc. had operated a then-unfathomable $100 million Ponzi scheme.

    But with Madoff’s overnight ascent to the stratosphere of infamy in December 2008 amid allegations that he had operated a $50 billion Ponzi scheme, Petters faded from the headlines.

    Bowdoin would have faded, too, except he could not stop doing things such as comparing the Secret Service and federal prosecutors to the 9/11 terrorists; taking the 5th Amendment at a hearing his company requested to present evidence that it was not a Ponzi scheme, even as his supporters agreed he was “too honest” to testify; announcing a $200 million deal with a penny-stock company few people ever had heard of (while the penny-stock firm continued its practice of not publishing verifiable financial information and Bowdoin was awaiting a ruling on whether unaudited financial information he had supplied the court was reliable enough to make the Ponzi allegations go away); trying to sell members of AdSurfDaily VOIP telephone service after the Ponzi ruling went against him; negotiating with federal prosecutors; submitting to the forfeiture less than a month after prosecutors filed a second forfeiture complaint that asserted his wife and family had benefited from the illegal actions of his company and that Bowdoin had not reported a purported theft of $1 million by “Russian” hackers to authorities; and trying to get back in the case about six weeks later by saying he’d changed his mind, fired his attorneys and now was relying on a mysterious “group” of amateur attorneys to help him do his legal bidding.

    Not even Petters, who owned Polaroid and operated what prosecutors described as a multibillion-dollar Ponzi scheme involving a separate electronics company, could top Bowdoin in terms of relentless strangeness.

    Petters, however, easily topped Bowdoin in terms of the size of the alleged Ponzi he operated. And now the Petters trial is set to begin. One of the expected defenses in the case is a Bowdoin-like assertion that his hands were clean.

    Will it fly with jurors?

    Read pretrial Petters’ coverage by Reuters.

    Read this column by Jon Tevlin in the Star Tribune of Minneapolis/St. Paul. It includes comments from Barry Minkow, whose life once took a Ponzi turn.

    NOTE: Sir Allen Stanford now is accused of running a Ponzi that was larger than even the alleged Petters’ Ponzi. Stanford’s alleged crimes also are dwarfed by the Madoff Ponzi.

    Stanford was regarded as a sort of king of Caribbean banking, perhaps particularly on the island nation of Antigua.

    Federal prosecutors say ASD’s Bowdoin told the Secret Service that the company had $1 million in an account under a different name on Antigua. The claim was strange, considering that Bowdoin had told members in 2007 that he could not pay them because his purported advertising company had become insolvent after it overpaid members and was looted by the previously mentioned “Russian” hackers.

    The claim became Ãœber Strange in 2008, when Bowdoin asked a federal judge to free up $2 million from the tens of millions of dollars seized because ASD could not pay its hosting bill or rent or employees and had no money to implement a compliance plan — while apparently forgetting he had told the Secret Service about the $1 million on deposit in Antigua.

    Some of Bowdoin’s friends and employees remained staunch allies, always willing to support the company, call the prosecutors Nazis, diss doubters and even work for free to demonstrate their loyalty to the boss.

    An employee of Allen Stanford had a different idea about how to behave when a company’s words could not be reconciled with its actions.

    Charles Satterfield, an investment adviser, couldn’t make sense of things in the months after he joined Stanford Financial Group in 2005 as managing director of fixed income.

    Stanford stressed sales of its CD, regardless of the profiles of its customers. Old ladies were to be sold CDs. Young mothers were to be sold CDs. All people in between were to be sold CDs — at the virtual exclusion of all other financial products that perhaps were better suited for the unique situations of individual customers.

    On a business trip? Sell the CD. Sitting down with Grandpa or Junior? Sell the CD.

    When Satterfield asked his bosses to reduce their instructions to writing, he was fired the next day.

    He told the Financial Industry Regulatory Authority (FINRA) in 2007 that some strange things were going on inside Stanford Financial Group. The company said no — that Satterfield had gotten it all wrong, that he was incompetent and disgruntled.

    Satterfield was described as disloyal, incapable of recognizing that tremendous growth at companies causes problems and that the problems sort themselves out in the end.

    The experience of Charles Satterfield at Stanford will sound like a familiar refrain to many people who have followed the AdSurfDaily saga and observed a pattern of dissing critics as though they were simpletons, marginalizing their voices and authoring ad hominem attacks — before ostracizing them completely and banning them to the hinterlands.

    Read this column on Charles Satterfield by Al Lewis of Dow Jones Newswires, as it appears in the Denver Post. It is an eye-opener.

  • BREAKING NEWS: Bank Of America Named In New Lawsuit Amid Allegations It Aided And Abetted Alleged ‘Beau Diamond’ Ponzi Scheme In Florida; Lawyer Who Sued ASD President Andy Bowdoin For Racketeering Is Co-Counsel For Plaintiffs

    UPDATED 2:07 P.M. EDT (U.S.A.) Courthouse News Service is reporting that Bank of America has been named a defendant in a federal lawsuit filed in Florida that alleges it aided and abetted the Beau Diamond Ponzi scheme that fleeced investors out of millions of dollars.

    Bank of America also is named a defendant in a lawsuit against Florida-based AdSurfDaily Inc., which is implicated in an alleged $100 million Ponzi scheme. The lawsuit in the ASD case was filed as a racketeering complaint.

    The bank, which has denied wrongdoing, is not named a RICO defendant in the ASD case. Rather, it is accused of aiding and abetting a fraudulent scheme involving unnamed co-conspirators. The ASD case is on hold, pending the outcome of federal litigation against the autosurf firm.

    Attorneys for plaintiffs in the alleged Beau Diamond Ponzi scheme say the bank had “actual knowledge” of the scheme and “shares the responsibility for losses of $37 million,” according to the complaint.

    One of the attorneys in the Beau Diamond case is Steven Berk of Washington, DC. Berk also is a plaintiffs’ attorney in the ASD case. The other plaintiffs’ attorneys in the Beau Diamond case are Andre R. Perron and Randolph L. Smith of Brandenton, Fla.

    Beau Diamond operated Diamond Ventures LLC of Sarasota. He was arrested by the Pinellas County Sheriff’s Office in September after a probe by the FBI and Internal Revenue Service led to federal charges of wire fraud and money-laundering.

    The case is being prosecuted by the office of U.S. Attorney A. Brian Albritton of the Middle District of Florida. Albritton also is leading a major federal operation designed to prosecute cases of mortgage fraud. Nine banks have failed in Florida this year.

    Separately, Diamond was sued by the U.S. Commodity Futures Trading Commission (CFTC) in a complaint that alleged widespread fraud.

    Diamond’s actions cost investors at least $13.3 million, CFTC said.

    Diamond spent customers’ money on lavish personal expenses, including at least $850,000 for “luxury purchases and gambling,” CFTC said.

    Some of the allegations against Diamond read like discussions commonly seen on Internet forums when a scheme goes belly-up and the excuse-making by sponsors begins. Among the assertions by CFTC was that Diamond urged members not to call authorities because involving the government only would make matters worse.

    The Diamond Ventures HYIP enterprise quit paying in December 2008, telling some members they had not received checks because it took longer for the U.S. Postal Service to deliver mail near the holidays, CFTC said.

    Other members were told Diamond had a problem with Bank of America and was transferring his accounts to JP Morgan Chase, CFTC said.

    By Jan. 7, Diamond was explaining to customers that a “serious situation” had emerged. On Jan 9, he told customers that “the funds have been lost” due to a downturn in the world economy and unprecedented volatility, CFTC said.

    What Diamond did not tell customers was that he had lost huge sums in forex trades, had sent customers bogus account statements showing they were money to the good — and blew as much as $1.1 million on gambling, air travel, jewelry and hotel accommodations, CFTC said.

    By Jan 22, CFTC said, Diamond was urging customers not to “initiate a federal investigation” because such an event would lead to a situation in which “no one will see a penny, and I most likely will be behind bars,” CFTC said.

    Read the CFTC complaint against Beau Diamond.

    Read the FBI criminal complaint against Diamond.

    Read today’s coverage of Diamond at Courthouse News Service. (There is a link to the lawsuit against Bank of America at the bottom of the story.)

  • UPDATE: Another Parallel To ASD/Golden Panda/AVG Emerges In Canadian Probe Of Manna Trading Corp. Ltd.

    Yesterday we reported that the British Columbia Securities Commission (BCSC) ordered penalties and disgorgement totaling $42 million in the case against Legacy Capital Inc., Legacy Trust Inc., Manna Trading Corp Ltd. and Manna Humanitarian Foundation.

    We reported several parallels to the ongoing investigation in the United States into the business practices of AdSurfDaily/Golden Panda Ad Builder and the AdViewGlobal (AVG) autosurf.

    Another parallel has emerged, and it is a significant one: Two of the principals in the Canadian scheme previously had been disciplined for banking or securities violations.

    Hal (Mick) Allan McLeod was disciplined by the British Columbia Superintendent of Financial Institutions in 2003 for violations of the Financial Institutions Act and ordered to “cease carrying on a trust or deposit business,” BCSC said.

    Citing the superintendent’s order, BCSC said two companies with which McLeod had served as a director — First Capital Trading & Financing Corp. and First Capital Credit Corp. — “took and kept funds from the public, and engaged in conduct that was deceptive and misleading.”

    David John Vaughan, meanwhile, “was disciplined by this Commission [in 1999] for engaging in an illegal distribution that had many features in common with the Manna scheme,” BCSC said. “Orders against him from that misconduct remain in force today.”

    In the 1990s, both ASD President Andy Bowdoin and Golden Panda Ad Builder President Clarence Busby had run-ins with securities regulators.

    Bowdoin pleaded guilty to felonies in Alabama and was sentenced to a year in prison. The sentence was suspended when he agreed to pay restitution. In August 2008, he sent his victims a restitution check for $100. One month earlier, in July 2008, nearly $50,000 in ASD funds were used to purchase a luxury Lincoln sedan registered in the name of Bowdoin/Harris Enterprises, prosecutors said.

    Florida now has revoked ASD’s corporate registration and dissolved the registration of Bowdoin/Harris Enterprises. Although both companies are involved in serious litigation that potentially affects thousands of people, neither company submitted required annual reports to maintain their corporate standing. Florida provided the companies a five-month buffer to file the required paperwork. Neither firm complied.

    In May 1998, a federal judge permanently enjoined Clarence Busby from violations of the Securities Act of 1993 and the Securities Exchange Act of 1934. Busby was ordered to pay $15,000 in disgorgement for ill-gotten gains he had received “from sales of interests in three prime bank schemes,” the SEC said.

    The SEC waived the penalty because Busby certified he was unable to pay, the SEC said.

    Busby and Bowdoin went on a decade later to form Golden Panda Ad Builder after discussing the surf on a Georgia fishing lake in April 2008. In July 2008 — just prior to the seizure of tens of millions of dollars from the bank accounts of ASD and Golden Panda — Bowdoin distanced himself from Busby after Busby’s run-in with the SEC became known publicly.

    The “cause and effect” of Bowdoin’s actions with Golden Panda never has been clear. For example, was Bowdoin really too busy to run Golden Panda with Busby — as Bowdoin suggested — or did Bowdoin distance himself from Golden Panda because he learned about Busby’s alleged SEC violations and feared the allegations could lead to a probe of ASD?

    Golden Panda surrendered its claim to more than $14 million in the U.S. Secret Service probe. Busby now is listed as the “chief consultant” to BizAdSplash (BAS), another surf — one that purports to be operating offshore.

    BAS suspended payouts earlier this year, and then announced a relaunch. The firm, according to its website, now is selling tiered “charter memberships” for as much as $10,000.

    A “Presidential” charter membership is priced at $10,000; an “Executive” charter membership is priced at $5,000. Two other tiered charter memberships — “Visionary” and “Pioneer” — are sold at $2,500 and $1,000, respectively.

    BAS has not updated the news on its website since Oct. 7, nearly three weeks.

    Canadian officials say the whereabouts of three of the respondents in the Manna probe who were ordered to pay huge financial penalties is unknown. McLeod, Vaughan and Kenneth Robert McMordie (also known as Byrun Fox) “have fled the jurisdiction,” BCSC told The Globe and Mail, in a story published this morning.

    The Royal Canadian Mounted Police have opened a criminal investigation, BCSC said.

    Like ASD/Golden Panda, AVG and BizAdSplash, the Canadian Ponzi schemers pushed debit cards to offload profits, BCSC said.

    “Manna fraudulently used the investments of later investors to fund the promised returns to earlier investors, to pay commissions to the affiliates and consultants, to invest in an online gaming business, and to buy real estate in Costa Rica,” BCSC said.

    Other traits the Canadian scheme and the alleged U.S. scheme involving Bowdoin, Busby and offshoot companies had in common include:

    • Secrecy. AVG, for instance, did not identify its executives, morphed into a “private association” and advised members not to share information outside association walls.
    • False information. Some ASD members repeatedly have asserted that the U.S. government has admitted ASD was not a Ponzi scheme. Other members have sent emails that suggest participants should not cooperate with the U.S. Secret Service.
    • Offshore venues. Both AVG and BAS, for example, claim connections to South America and Central America, leading to fears that money could be hidden.
    • Use of ‘common law’ in various writings. Some ASD pro se litigants have cited common law in court filings in defense of the surf. One apparent argument of the litigants is that all commerce is legal as long as there is is contract between two parties. In the Canadian case, some purveyors of the scheme pushed what authorities described as a “private common law spiritual trust.”
    • Efforts that can be viewed as intimidation tactics. AVG, for example, threatened to sue members who shared information and to file abuse complaints with the Internet Service Providers of participants who complained on online forums.
    • Purported ties to charitable entities. AVG, for instance, advertised that it supported the World Rain Forest Movement. In Canada, Manna advertised the Manna Humanitarian Foundation.
    • An MLM-style sales structure. All of the Canadian and U.S. entities sold the programs as multilevel marketing opportunities.
    • Earnings “compounding.” Both the Canadian schemes and the alleged American schemes encouraged members to keep money in the systems and employ compounding strategies to maximize earnings.

  • HYIP/AUTOSURF SHOCKWAVES: Regulators Order Canadian Ponzi Schemers To Pay Penalties Totaling $26 Million And To Disgorge Illegal Profits Of $16 Million; Case Has Parallels To AdSurfDaily And AdViewGlobal

    The British Columbia Securities Commission (BCSC) has ordered four respondents in a civil action to pay penalties of $26 million for operating a Ponzi scheme and to surrender $16 million in illegal profits.

    In forceful findings that may echo throughout the HYIP and autosurfing universe, BCSC said the schemers tried to skirt securities laws by selling a fraudulent HYIP currency-trading program in Canada through an MLM-syle operation while hiding behind “non-disclosure” agreements and operating in an environment of secrecy.

    AdViewGlobal (AVG), an autosurf firm with close ties to the alleged AdSurfDaily (ASD) Ponzi scheme in the United States, created a similar structure in which participants were advised to keep news within “association” walls and not to disclose information to outsiders.

    BCSC also found that the companies named in the Canadian complaint disseminated false information and used intimidation tactics in a bid to prevent participants from cooperating with authorities.

    “Because of those [non-disclosure] agreements, and because of false but intimidating statements made to them by the respondents, many investors refused or were reluctant to cooperate with the Commission’s investigation,” BCSC said.

    In recent weeks, some ASD members have circulated emails that suggested participants should not cooperate with the U.S. Secret Service in the ASD probe. During the summer, AVG, which had suspended member cashouts, threatened to sue members for sharing information with outsiders and also threatened to contact the Internet Service Providers of participants who complained on a company forum.

    In yet another similarity to the ASD case, some of the purveyors of the Canadian scheme also pushed what Canadian authorities described as a “private common law spiritual trust.”

    Some of ASD’s and AVG’s most ardent supporters have used similar phrasing and referenced common law in defending the surfs.

    BCSC minced no words as it laid out the penalties against Hal (Mick) Allan McLeod, David John Vaughan, Kenneth Robert McMordie (also known as Byrun Fox) and Dianne Sharon Rosiek.

    BCSC pegged losses at $13 million, saying the respondents “fraudulently distributed securities and made misrepresentations” through Legacy Capital Inc., Legacy Trust Inc. and Manna Trading Corp Ltd.

    The Canadian respondents also cited a tie to an entity known as the Manna Humanitarian Foundation.

    AVG, in promotional material, cited a tie to the World Rain Forest Movement in what some observers saw as a bid to sanitize the AVG business by linking it to a worthwhile cause.

    “At AVGlobal Association we believe we should go beyond the basics of ethical business practices and embrace our responsibility to people and to the planet,” AVG said on its website. “We believe this brings sustained, collective value to our members, our employees, our customers and society.”

    AVG announced a suspension of payouts June 25. It is unclear if any worthwhile cause ever received money from the company.

    A BCSC panel fined McLeod $8 million. Vaughan, Rosiek and McMordie were dispensed penalties of $6 million each. The panel also ordered each respondent, including the companies, to disgorge the $16 million the scheme obtained from investors.

    The suggested payout percentages of the Canadian entities actually were significantly lower than the suggested payout percentages of both ASD and AVG.

    “Manna promised investors 7 [percent]  monthly returns (later reduced to 5 [percent]), sometimes compounded,” BCSC said.

    ASD and AVG both promoted compounding. Some ASD members promoted returns of 365 percent a year, claiming $100,000 in ASD returned $1,000 a day.

    Similar to ASD and AVG, investors who became “affiliates” or “consultants” of the Canadian companies could bring in new investors.

    “When they did so, they earned a commission on the amount invested and a continuing share of the return on the new investment,” BCSC said.

    The private, common-law spiritual trust “was a mechanism Fox concocted ostensibly to avoid the application of tax and securities laws to investments in the Manna scheme,” BCSC said.

    BCSC pegged losses in the Canadian scheme at $13 million, saying as many as 800 people lost money.

    “They created a multi-level marketing structure to maximize distribution of the Manna securities,” BCSC said.

    “The respondents knew exactly what they were doing when it came to dealing with securities laws,” a BCSC panel said. “They were well aware of the requirements of the Act, and of the role of the Commission in enforcing the Act. They took numerous actions calculated to escape detection. They attempted, unsuccessfully, to construct the Manna scheme in a form that would fit within a specific exemption in the Act.”

    Authorities said the scheme was inexcusable.

    “Nothing strikes more viciously at the integrity of our capital markets than fraud, and this case represents a particularly aggressive and flagrant assault on the public’s confidence in our markets,” BCSC said.

    BCSC’s announcement followed on the heels of announcements Oct. 15 by the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission that they were targeting a Florida company that allegedly tried to hide behind a corporate registration in Panama.

    The actions by the SEC and CFTC expose the vulnerability of autosurfs that register as corporations offshore and arrange web-hosting overseas, but do not comply with securities laws of the United States and foreign countries in which they have a paper footprint or are not regulated in the foreign countries.

    The moves also demonstrate that U.S. securities regulators — no matter where a company arranges webhosting — intend to treat American owners who flout laws as issuers of unregistered securities, unregistered investment advisers and operators of unregistered foreign investment companies from inside the United States

    Named defendants in emergency actions filed Oct. 15 in U.S. District Court for the Middle District of Florida were David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc.

  • NO AUTOSURF ENVY: Newspaper Circulation Plunges; Top Publications Hemorrhage Print Readers As Industry Looks To Harness Power Of Internet Advertising

    EDITOR’S NOTE: If you’ve been approached by individuals or a downline “team” and invited to join an online “surfing” program that purports to be an “advertising” company, this column may be of some value to you. Extremely well-known publishing companies — companies that produce titles you know and love, and companies that know advertising and business inside and out and through and through — are having trouble keeping readers’ eyes glued to print publications. Many of the famous companies have experienced serious revenue declines. Almost all of them have experienced spectacular print circulation declines even as actual readership was increasing. These famous companies are struggling to find ways to compete online and monetize their hugely popular websites, almost all of which get tremendous traffic.

    And yet none of them has turned to the so called “autosurf” model — even though the companies could crush “advertising” firms such as Florida-based AdSurfDaily, which is confronting allegations that it engaged in wire-fraud and money-laundering while operating a $100 million Ponzi scheme.

    Despite the fact these famous publishing companies have professional talent, audited readership, audited financials and the economies of scale to destroy so-called “advertising” firms such as ASD or BizAdSplash or AdViewGlobal — and scores of others — these companies do not position themselves against the surfs.

    Some of the surfs are collecting millions of dollars — if not tens or hundreds of millions of dollars — during a time the traditional publishing/advertising business is awash in a sea of red ink. All of the traditional companies could use the money autosurf participants are throwing at the surfs.

    Autosurf promoters would have you believe traditional publishing/advertising companies are struggling because the famous brands don’t understand the autosurf business model. Surf promoters position people such as ASD President Andy Bowdoin as vastly misunderstood geniuses and visionaries being picked on by the government. The surfs are positioned as cash cows for both the operators and members, and the “new” way to advertise.

    Promoters would have you believe that these celebrated publishing/advertising companies just don’t “get it” — and that the people promoting autosurfs in the hyped-up style of MLMs are the modern-day Henry Fords and Thomas Edisons — people who do get it.

    Surf promoters are unable to explain rationally why famous companies that could crush the surfs and take away all of their business — while delivering content that gives people a nonfinancial reason to visit highly professional sites and later share in hundreds of millions of dollars in revenue — have not leveraged their marketplace advantages and enormous volume of website traffic to make the companies and their readers rich by opening an autosurf.

    The reason is simple: The model as practiced in the so-called autosurf advertising “industry” is plainly illegal. It flouts securities laws, wire-fraud laws, mail-fraud laws, racketeering laws, banking laws, money-services laws and other laws — and the surfs try to sanitize it all by saying “rebates aren’t guaranteed,” which is just a contractual disclaimer designed to legalize theft.

    When reading the story below, keep in mind that each of the companies mentioned has advantages none of the surfs can offer, including some of the most highly talented writers, editors, designers and advertising-sales executives in the world — people who can deliver millions of eyeballs to websites and produce good results for advertisers both in product sales and branding.

    And yet these companies have not turned to Andy Bowdoin of ASD or Clarence Busby of BizAdSplash for guidance.

    Now, after this lengthy introduction, the story . . .

    Circulation at USA Today plunged 17.15 percent in the six-month period ending in September, compared to the same period in 2008, according to figures released today by the Audit Bureau of Circulations (ABC).

    Circulation losses experienced by the San Francisco Chronicle (-25.82 percent), the Star Ledger of Newark (-22.22 percent), the Dallas Morning News (-22.16 percent), the Boston Globe (-18.48 percent) and the New York Post (-18.77 percent) were even steeper, ABC reported.

    Elsewhere, the Houston Chronicle lost 14.24 percent of its print circulation during the period, and The Daily News (New York) lost 13.98 percent.

    Meanwhile, the Arizona Republic (-12.30 percent), the Cleveland Plain Dealer (-11.24 percent), the Los Angeles Times (-11.05 percent), the St. Petersburg (Florida) Times (-10.70 percent), the San Diego Union Tribune (-10.05 percent), the Chicago Tribune (-9.72 percent), the Detroit Free-Press (-9.56 percent) and the Pittsburgh Post-Gazette (-9.50 percent) also lost significant print circulation, ABC reported.

    The Post-Gazette explained today that much of its loss is attributable to an April decision to quit delivering the newspaper to certain outlying areas. The Post-Gazette says its website “remains the region’s most visited site.”

    Between the site and the print publication, the Post-Gazette reaches more than 1 million people every week, the newspaper reported.

    ABC’s numbers do not mean that actual readership of the publications is plunging. Many print-publishing companies have the dominant websites in their regions. And because the Internet has introduced the sort of immediacy once available only to TV and radio stations — and because print publications generally have larger news-gathering operations than their local competitors — the websites of newspapers and magazines have become enormously popular.

    What has not followed — at least not across the board — is an increase in revenues. Some famous print publications have declared bankruptcy, switched to an online-only model or a combination of online and print — or even folded.

    Print, in general, is struggling in every corner of the United States — and yet readership and reach never have been higher.

    Despite the advantages of readership, reach and talent pools autosurf companies only could dream about, there continues to be great stress in the worlds of publishing and advertising.

    No famous publishing house has adopted the autosurf model, even though promoters of the model would have would-be members/advertisers believe it is the magic cure.