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DEVELOPING STORY: Zeek Receiver Seeks Temporary Restraining Order ‘Necessary To Prevent Further Dissipation And Waste Of The Assets At Issue’

DEVELOPING STORY: (Updated 9:44 a.m. EDT Sept 3, U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case has asked a federal judge for a Temporary Restraining Order he says is necessary to prevent “further dissipation and waste” of certain assets.

Receiver Kenneth D. Bell asked that the motion be filed under seal. The Zeek-related assets Bell believes could shrink were not specified in a public filing

“The underlying motion and memorandum contain sensitive information regarding Receivership Property,” Bell advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina.

Neither the SEC nor Zeek operator Paul R. Burks objected to the request for the motion to be filed under seal.

From the public portion of a filing by the receiver today (italics added):

The underlying motion and memorandum contain sensitive information regarding Receivership Property. As explained in detail in the memorandum, sealing the Receiver’s motion and memorandum is necessary to prevent further dissipation and waste of the assets at issue. The Receiver seeks to have the underlying motion sealed only temporarily until the Court can consider and rule on the motion.

When Mullen would rule on the motion was not immediately clear. The public portion of Bell’s pleading today is styled, “Receiver’s Motion to Seal Ex Parte Motion for Temporary Restraining Order Enforcing the Court’s Asset Freeze.”

The sealed information contains three exhibits, according to the docket of the case.

Burks and Zeek figures Dawn Wright-Olivares and Daniel Olivares agreed to a $600 million consent judgment “to be satisfied with substantially all of their assets,” according to a filing by Bell in July.

The receiver’s motion for the TRO and to file under seal appears on the docket of the SEC case originally filed against Zeek and Burks in August 2012. The agency sued Wright-Olivares and Olivares in a separate case in December 2013.

Both Wright-Olivares and Olivares have pleaded guilty to criminal charges.

NOTE: Our thanks to the ASD Updates Blog.

Sep 2, 2014
ZEEK RECEIVER: ‘No Comment’ On BitClub Network Story

Zeek receiver Kenneth D. Bell had “no comment” this morning on an Aug. 30, PP Blog story that reported Zeek figure T. LeMont Silver now was pushing a murky “program” called “BitClub Network.”

Bell has raised concerns that Silver is a serial promoter of Zeek-like schemes to defraud.

As the PP Blog noted yesterday, Silver also has been linked to a “program” known as “Gold Crowdfunding” that has links to the OneX scam that put AdSurfDaily Ponzi schemer Andy Bowdoin in jail in 2012. Like Bowdoin, Silver pitched OneX.

OneX used an image of a bomb in its logo.

OneX logo.

Bell is suing Silver for the return of his alleged gains in Zeek, saying they came from Zeek victims. The SEC and federal prosecutors in the Western District of North Carolina have described Zeek as a Ponzi- and pyramid scheme that collected hundreds of millions of dollars in less than two years of operation.

The SEC shut down Zeek in August 2012.

Zeek figure Dawn Wright-Olivares pleaded guilty to criminal charges of investment-fraud conspiracy and tax-fraud conspiracy in February 2014. Her stepson, former Zeek programmer Daniel Olivares, pleaded guilty to a charge of investment-fraud conspiracy.

The Consumer Financial Protection Bureau (CFPB) issued a warning on Bitcoin-themed scams on Aug. 11, 2014. Silver’s promotions for BitClub Network began to appear on the Internet about three weeks later.

CFPB did not immediately respond to a request for comment on BitClub Network, which Silver has described as a “mining” venture.

BitClub Network purportedly pays out a daily dividend for 1,000 days and has three “mining pools” with tiered buy-in rates: $500, $1,000 and $2,000. Early birds — described as “Leaders” — are being encouraged to send in $3,599 to qualify for a “Founder’s” position.

Much is murky about BitClub Network.

Also see Sept. 1 report on “Gold Crowdfunding” by BehindMLM.com.

Sep 2, 2014
UPDATE: BitClub Network Launch Said To Be Delayed; ‘Founders’ Positions Reportedly Sell For $3,599; Pitches Directed At ‘Leaders’; Prospects Asked To Wire Money; Purported ‘Opportunity’ May Have TelexFree-Like Cash-Transfer System

“These participants received uncontrolled cash deposits outside of the TelexFree system,” — Massachusetts Securities Division, Ponzi- and pyramid complaint against TelexFree, April 15, 2014.

EDITOR’S NOTE: For our earliest background on BitClub Network, see Aug. 30 report that references serial HYIP promoter T. LeMont Silver. Are you really sure you want to promote bitcoin-themed HYIPs alongside a man who parachuted into the Dominican Republic from Florida after the Zeek HYIP scam and now is using an address in Seychelles?

Read on for more early background on BitClub Network . . .

** ______________ **

As tomorrow is the 75th anniversary of the beginning of World War II, it’s easy enough to summon images of the late Winston Churchill asking the world to pay attention. The great man still is very much alive in the annals of history and in millions of hearts. We imagine him in 2014, contemplating BitClub Network as a gathering storm, perhaps a modern “riddle wrapped in a mystery inside an enigma.”

BitClub Network appears very much to be yet another nascent MLM/network marketing whack-a-mole “program,” a reload scheme rising to replace a “program” that has collapsed. The most recent major “program” to crumble into an alleged heap of Ponzi- and pyramid rubble was TelexFree — in April 2014.

Reload schemes keep cash flowing to factories of online crime and to the “leaders” who deliver human souls to them for the purposes of financial disembowelment. The more bodies disemboweled, the more the scammers-in-chief and their disingenuous and corrupt enablers make.

Our early analysis of BitClub Network, subject to amendment, is that it is casting its net to attract the greediest and greatest HYIP scammers on a cross-continent basis. The PP Blog observed information last night that suggested the brand of BitClub Network, which already is conducting business via wires that pass though the United States, also may be expanding in a region of Europe known for atrocities, including ethnic cleansing.

Among the core dangers of HYIP scams is that they deliver undeserved and potentially ruinous economic power to unknown persons or entities. The money could be used for any nefarious purpose under the sun.

For an unclear reason — headline scraping to drive people with an interest in politics to bitcoin-themed sites, perhaps? — one promo using the name of BitClub Network linked yesterday via Twitter to a site that featured a video commercial and the names of National Geographic and Michelin, the French tire-maker with a presence in the United States. The Twitter linkage occurred through a site curiously dubbed “Bitcoin Regime” with a “From” message of “Bitclub Russia.” A promo today linked via Twitter through Bitcoin Regime was playing a commercial for Schick, the Connecticut-based maker of razors. Some text surrounding the promos is in English. Other text appears to be in the language of Russian or Ukranian or Serbian.

“Bitclub Russia” appears also to have its own YouTube site. “Bitcoin Regime,” meanwhile, says “[t]his site was created out of passion and interest in the subject.” One of the headlines on the site reads, “Obama: No Strategy For ISIS.. (Oops, We Funded & Trained ISIS!).”

Another reads, “. . . because fuck fiat!” Yet another reads, “Let’s Talk Bitcoin: Buenos Aires & Bitcoin Embassy.” Still another, in Russian, reads, “Earn Bitcoins on a serious level 1 service! The most serious Bitcoin earnings!” — when Google’s translation tool from Russian to English is used.

Is it a scraping site of some sort that is drafting off the anticipated popularity of BitClub Network?

ISIS is the terrorist group that allegedly beheaded American journalist James Foley and also allegedly beheaded a Lebanese soldier.

Launch Timing

Head-scratchingly, the “Founders’” launch of the BitClub Network “program” had been set for Sept. 1, the 75th anniversary of the beginning of World War II. Whether that’s a coincidence is unclear. Sept. 1 also is Labor Day in the United States. Various HYIPs have targeted the world’s workers, offering false relief from the daily grind — not just a chicken in every pot, but a mansion, unlimited sums of cash and perhaps a fleet of high-end automobiles and maybe even a Ferrari (or two).

As is typical in HYIP scams, there was at least one report this morning circulating on Twitter that BitClub Network has experienced a launch delay. As also is typical in HYIP Ponzi Land, black comedy is in no short supply. Whether it’s accidental or intentional is unclear.

In any event, BitClub Network reportedly has a feature known as the “holding tank” — and this “holding tank” is being blamed for the launch delay.

“Hi Leaders,” a link from Twitter bizarrely begins, adding a second layer of black comedy. “Ok, I just heard that the programming of the holding tank feature is taking a bit longer than expected, so dont [sic] be dissapointed [sic] as it basically gives us more time to prepare our teams. :) So, it now looks like we [sic] gonna pre launch around wednesday [sic] or thursday [sic] 2pm EST [sic?] this coming week!”

Perhaps most distressing, though, is a murky claim that “Founders” still can wire $3,599 to get started, “holding tank” delay or not. This wire maneuver appears to be very similar to the way things were done at WCM777, alleged by the SEC earlier this year to be a massive international scam. It’s also highly reminiscent of Profitable Sunrise, which told the marks to wire money to the Czech Republic. Some of the money was seized in Hungary in a money-laundering probe.

Details of the BitClub Network wiring arrangement are not published and apparently are revealed only in private communications, another typical signature of an emerging HYIP scam. It’s also possible that people are disguising themselves as BitClub Network promoters to solicit and then steal wire transfers.

“If you want to do a wire you need to get back to me ASAP and I will sent [sic] you the details for that,” the link from Twitter coaches. “The advanatge [sic] of sending in a wire is that you lock your spot on top of the binairy [sic] before hundreds or probably thusands [sic] that will come in afer [sic] you at launch!”

Chronic typos and odd syntax often signal HYIP scammers are at work.

A separate link from Twitter, presumptively from a different early bird, says, “[Y]ou get paid right away on all referrals and can use those commissions to pay others in after they send you paypal [,] bank wire, or pazya etc.”

If this is true, it would reflect the money-moving mechanics of other HYIP scams that encourage “leaders” to gather money from prospects via bank wires and payment processors — and then to cherry-pick part of it or all of it to use as a recruitment lure. Such deals almost certainly would take place off the books of the “program” and can create layers and layers of black markets inside a larger black market — nesting dolls of crime, if you will.

The second link from Twitter continues (italics added):

I can’t stress enough the fact that you are at the top and at the very beginning of this incredible global program that will make everyone money every day, just for joining.

If you have done your homework you shoud [sic] know by now why this is and how it works, cause of the crypto currency mining :)

And if you refer others, well you”ll [sic] make a KILLING! read [sic] the income example on the payplan site, this will blow your mind!

This is BIG money you can make here, some of you will make already [sic] 7 figures by christmas [sic].

Naturally some American scammers appear already to be doing some of the bidding for BitClub Network. It’s as though Profitable Sunrise, a collapsed HYIP allegedly operated by a ghost and driven by willfully blind affiliates who conducted business by wire from the United States to Eastern Europe, never happened.

BitClub Network also may be a bit like TelexFree, another collapsed HYIP. After prospects are told they can only join by wire at this stage and later will have to join with bitcoin, the first link from Twitter goes on to suggest sponsors can perform back-office transactions and collect money directly from recruits.

Here’s how the first link from Twitter (described above) confusingly puts it (italics added):

OR……having your sponsor or upline paying for you with their commissions within their back office using the credit system after you have sent them the money!

Back-office transactions almost certainly contributed to the calamity at TelexFree, an alleged Ponzi- and pyramid scheme that may have gathered more than $1.2 billion in a little more than two years of Internet scamming. One of the issues at TelexFree was “cash deposits” alleged to be “uncontrolled.”

As noted above, one of the dangers of such systems is that they introduce the specter of a black-market economy and back-alley deals, making already-dangerous enterprises doubly dangerous. The results can be bizarre.

As things stand today, if BitClub Network were the movie “Casablanca,” Renault would be telling the troops to “round up the usual suspects.”

Any person who joins this program with a purported “holding tank” is a fool. Any person who pitches it to others amid these exceptionally murky circumstances is reckless beyond comparison.

Aug 31, 2014
In Face Of Clawback Action And Warnings On Bitcoin Scams, Zeek Figure And Florida ‘ExPat’ T. LeMont Silver Offers ‘BitClubNetwork’ Mark Bonus Of More Than 3 Times What He Pays His Dominican Maid — And Uses Address In Money-Laundering Haven
“The Florida Office of Financial Regulation (OFR) warns consumers of the potential risks associated with purchasing, investing in, and exchanging virtual currencies, such as bitcoin. Members of the U.S. Congress, federal and state regulatory authorities, are continuing to question a way forward with respect to these diverse and decentralized payment mechanisms. Mt. Gox, an international Bitcoin exchange, filed for bankruptcy that resulted in losses in excess of $400 million and put a spotlight on risks surrounding virtual currencies.” — Florida Office of Financial Regulation, March 18, 2014.

“The Court may wish to take judicial notice of the many online videos in which one Defendant, T. Le Mont Silver, has appeared regarding his moving his family to the Dominican Republic . . . and promoting several ‘revenue sharing’ schemes in addition to Zeek.” — Kenneth D. Bell, Zeek Rewards receiver, July 30, 2014.

“Today the Consumer Financial Protection Bureau (CFPB) issued a consumer advisory warning consumers about the risks of virtual currencies such as Bitcoin. The CFPB advises consumers to be aware of potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threat of hacking and scams, and that companies may not offer help or refunds for lost or stolen funds. The CFPB also announced that consumers who encounter a problem with a virtual currency product or service can now submit a complaint with the Bureau.” — Consumer Financial Protection Bureau, Aug. 11, 2014.

Using a rocket in a promo, “BitClub Network” is set to launch for “Founders” on Sept. 1, the 75th anniversary of the beginning of World War II. Will more financial terror rain down from the skies above HYIP Ponzi Land?

4th UPDATE 3:27 P.M. EDT U.S.A. Florida “ExPat” T. LeMont Silver, a target of a huge clawback lawsuit flowing from the 2012 Zeek Rewards Ponzi- and pyramid case and a veteran HYIP “revenue-sharing” huckster, may be a bit slow on the uptake.

Florida — his own state — issued a caution in March 2014, warning that there are risks associated with bitcoin and that virtual currencies have been known to have “[l]inks to criminal activity.”

In July, the court-appointed receiver suing Silver for the return of his alleged winnings in the Zeek scam alleged that Silver was in a group of “serial” pitchmen of “revenue sharing” schemes — in this context, Zeek-like schemes to defraud.

Receiver Kenneth D. Bell asked a federal judge to take “judicial notice” of certain Silver promotional videos.

Silver’s Zeek gains tipped the scale toward $2 million and came from Zeek victims, Bell has alleged.

On Aug. 11, the Consumer Financial Protection Bureau (CFPB) issued a warning on bitcoin-themed scams.

“You may also have heard that some people buy them as speculative investments or that you can ‘mine’ them with your computer,” CFPB said in its warning.

Sometime after 6 p.m. yesterday, Silver sent out an email promising recipients an “enormous opportunity in Bitcoin Mining” through a “program” known as “BitClub Network,” the PP Blog has learned.

“BitClub Network” prospects are asked to invest in “mining pools,” BehindMLM.com is reporting. (Link below.)

“There are already hundreds of companies that do a share of revenue with their traders in this space,” the Silver email read in part.

So, another “revenue-sharing” scheme from Silver — this in the face of highly public warnings about bitcoin-themed scams, HYIP scams and even a de facto warning from the Zeek receiver that something untoward was occurring.

“Even if you have no list or never have a recruit, you can leverage this system to earn EVERY DAY for a period of 1,000 days!” the Silver email bleats. “As you grow your units … each subsequent unit also earns for 1,000 days.”

No part of the email touches on any of the warnings issued by regulators about the volatility of bitcoin values and scams that crop up that seek to attach themselves to bitcoin.

Here is how the Florida OFR spelled out the risks just five months ago (italics added):
- No insurance guarantee. Virtual currency is not guaranteed with protection, while funds held by U.S. banks and credit unions are insured.
- Unpredictability. The value of virtual currencies can rise and fall in a short time, and these values are driven by the marketplace. Those who deal in virtual currencies should realize the risks, which can result in substantial losses.
- Security. Some virtual currency exchanges that offer to store the consumers’ funds in virtual wallets have failed to protect them, resulting in consumer losses due to hacking of these virtual wallets.
- Links to criminal activity. Criminals have taken advantage of the anonymity provided by virtual currencies, and have used them for money laundering and other crimes. If an exchange is shut down, consumers may not be able to access their funds.
- Regulation. Oversight of virtual currencies has not been thoroughly developed, and thus, consumers lack many of the protections they have come to expect within the financial services industry.
- Tax obligations. To view the Internal Revenue Service (IRS) guidance on the tax implications concerning virtual currencies, visit http://www.irs.gov/pub/irs-drop/n-14-21.pdf.
Silver has been featured in videos bragging about how good his life has been in the Dominican Republic, which recently has been rocked by the alleged TelexFree Ponzi- and pyramid scheme that has affected hundreds of thousands of people across the globe.

The veteran HYIP huckster appears to have relocated to the Dominican Republic from Florida after the collapse of the Zeek scheme and after at least two other “revenue-sharing programs” he promoted after the collapse of Zeek also cratered.

One way to view these outrageous “programs” is as a war against people of limited means or people already living in poverty, dressed up as in invitation to escape their own misery. Like the rockets of war rain down on their human targets, HYIP offers fairly rain down from the skies of the Internet, putting vast numbers of people at risk.

Whether Silver remains in the Dominican Republic is unclear. His email for the “BitClub Network” appears to have used an address in Seychelles, an Indian Ocean archipelago nation associated with money-laundering. Why a Florida man who apparently did at least a pass-through in the Dominican Republic would be using a Seychelles address was unclear.

Agnes Jouaneau, a purported “director” of Inter Reef Ltd., a purported U.K. business associated with the Profitable Sunrise HYIP swindle last year, purportedly operated out of Seychelles. (Also see this disturbing 2010 story at Stuff.co.nz that references the name of Jouaneau before Profitable Sunrise emerged and raises questions about the laundering of money, perhaps even for terrorism.)

Incredibly and disgustingly, Silver’s pitch for “BitClub Network” promises “[$]600 to one person that goes through this entire email” and puts into action “everything” he shares in a video pitch.

Silver did not say whether he intended to pay his mark with proceeds from Zeek or any of his other scams.

The $600 sum apparently earmarked for his “BitClub Network” mark is more than three times the monthly wage Silver said in a January video he paid his Dominican maid.

Also see “BitClub Network” review at BehindMLM.com.

A snippet from BehindMLM.com (italics added):

At the very least, it’s a certainty that BitClub Network are accepting investments from affiliates on the expectation of a >100% ROI. Whether or not the scheme has registered itself with the SEC is unclear. Given the offshore domain registration with a Panama-based provider, I’d say it’s unlikely.

BitClub Network is an offshore scheme seeking to fleece investors under the guise of “let us explain Bitcoin mining to you”, with the mining itself (if any actually exists) having little to nothing to do with the flow of funds within the scheme.

Whilst the owner(s) of BitClub Network are for now are sticking to the shadows, there’s evidence that factions of the Zeek Rewards Ponzi scheme might be behind it.

“Bitclub Network” and its companion rocket apparently are set to launch for “Founders” on Sept. 1.

If it does, it will launch on the 75th anniversary of the beginning of World War II and all the hellfire that followed. On Sept. 1, 1939, Hitler invaded Poland.

NOTE: Our thanks to the ASD Updates Blog for providing the July 30 filing by the Zeek receiver.
Aug 30, 2014
BULLETIN: Lyoness, ‘Plan B’ Program Of Zeek And ASD Figure Keith Laggos, Charged In Australia With Operating ‘Pyramid Scheme’

BULLETIN: (Updated 2:35 p.m. EDT U.S.A. Aug. 29) Lyoness, the purported “Plan B” scheme of Zeek Rewards and AdSurfDaily figure Keith Laggos, has been charged in Australia with operating a pyramid scheme.

News of the Australian prosecution was published tonight by BehindMLM.com.

The Australian Competition and Consumer Commission (ACCC) has issued a statement on the Lyoness prosecution. It appears below (italics added):

The Australian Competition and Consumer Commission has instituted proceedings against Lyoness International AG, Lyoness Asia Limited, Lyoness UK Limited and Lyoness Australia Pty Limited (together ‘Lyoness’) for operating a pyramid selling scheme and engaging in referral selling.

Although Lyoness has been investigated by regulators for conduct in other countries, this is the first court action taken against Lyoness alleging that the Lyoness Loyalty Program constitutes a pyramid scheme.

Pyramid schemes involve new participants providing a financial or other benefit to other existing participants in the scheme. New participants are induced to join substantially by the prospect that they will be entitled to benefits relating to the recruitment of further new participants. Pyramid schemes may also offer products or services, but making money out of recruitment is their main aim, and often the only way for a member to recover any money is to convince other people to join up. In contrast, people in legitimate multi-level marketing schemes earn money by selling genuine products to consumers, not from the recruiting process.

The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers.

Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.

“Pyramid schemes are often sophisticated and may be operated under the guise of a legitimate business. Although these schemes can appear to be legitimate, the most significant inducement for new members to get involved is to earn ‘residual’ or ‘passive’ income from new members signing up,” ACCC Chairman Rod Sims said.

“The concern with pyramid schemes is that the financial benefits held out to induce potential members to join up rely substantially on the recruitment of further new members into the scheme. For these schemes to work so that everyone can make a profit, there would need to be an endless supply of new members.”

“Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity,” Mr Sims said.

The ACCC also alleges that the conduct by Lyoness breached the ACL prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.

The ACCC is seeking declarations, pecuniary penalties, injunctions, an order requiring the Lyoness website to link to the case report and costs.

As Lyoness International AG, Lyoness Asia Limited and Lyoness UK Limited are located overseas, the ACCC will be making arrangements for service on those entities.

The first Directions Hearing in these proceedings will be at 9.30am on 16 September, 2014 before Justice Flick in Sydney.

Among other things, Lyoness traded on the name of Nelson Mandela.

Laggos pushed Lyoness as a “Plan B” to members of Zeek Rewards, suggesting in 2012 that it could be used as a “passive” hedge in case things went south at Zeek. Indeed, things did go south at Zeek: The U.S. Securities and Exchange Commission (SEC) described it as an international Ponzi- and pyramid scheme that had gathered hundreds of millions of dollars while engaging in securities fraud and selling unregistered securities as investment contracts.

Among the tips Laggos provided Zeekers on a Lyoness conference call was this: “Don’t put no more than 70 percent back in [Zeek]. Take out 20 or 30 percent [on] a daily basis. [Unintelligible.] This would be a good place. But, by the same token, if you put $10,000 in Zeekler, if nothing happens over the next year, you’ll probably make $30,000 or $40,000, if that’s all you do without building the front end, the matrix . . . The same amount of money in Lyoness, you’re looking . . . and not doing anything else, without single sponsoring . . . you can probably make a quarter-million dollars.”

Also see Aug. 3, 2014, PP Blog story: ANOTHER MLM PR TRAIN WRECK: Receiver Alleges Clawback Defendants May Be ‘Serial’ Participants In Zeek-Like ‘Revenue Sharing’ Schemes, Asks Court To Take ‘Judicial Notice’ Of T. LeMont Silver Videos

News of the Lyoness action in Australia was received on the same day that TelexFree was squaring off against both the SEC and federal prosecutors in Boston over matters pertaining to scheduling. TelexFree was charged by the SEC in April 2014 with operating a massive Ponzi- and pyramid scheme. The agency had charged Zeek less than two years earlier

TelexFree figures James Merrill and Carlos Wanzeler were indicted in July 2014 on criminal charges of wire fraud and wire-fraud conspiracy.

Lawyers from both sides are battling over contentious issues such as whether the SEC’s civil case should be stayed (delayed indefinitely) in favor of the criminal case and whether Merrill can receive a speedy, fair trial on the criminal side of things.

An enormous amount of evidence remains to be sifted through by both sides.

“The United States Attorney’s office has contacted the parties indicating that it intends to seek a stay of these proceedings while the criminal case is pending and sought assent from the parties,” the SEC and defense attorneys said in a joint filing in the agency’s civil case today. “The parties have not unanimously assented to a stay.”

On the criminal side of things, Merrill contended today that his right to a fair trial would be put at risk if prosecutors were permitted to use “additional press releases and newspaper notices” to contact potential TelexFree victims.

“Every press release and/or newspaper notice issued by the government will likely repeat the government’s characterization of TelexFree and Mr. Merrill” as a pyramid scheme and a pyramid schemer, Merrill attorney Robert Goldstein contended.

And, Goldstein argued, “Mr. Merrill hereby respectfully opposes the government’s motion for complex case designation and exclusion of time . . . wherein the government seeks the exclusion of 90 days commencing on September 10, 2014, and instead respectfully asks the Court to defer a ruling regarding the exclusion of any time until the September 10, 2014 status conference (i.e., after the defense has had at least a minimal amount of time to review the government’s automatic discovery production, which was received today.”

The office of U.S. Attorney Carmen Ortiz asked for the complex-case designation and to carve out an exception to the Speedy Trial Act earlier this month.

Among other things, prosecutors contended that “evidence underlying this case is closely tied to certain foreign countries, especially Brazil” and that “it is likely that the parties will need to review evidence in foreign countries and arrange for foreign witnesses and/or law enforcement officers to travel to the United States to testify at trial.”

Schemes that operate over the Internet may grow to affect hundreds of thousands of people. Cases can become extremely complex if a pyramid or Ponzi scheme (or both) are alleged.

Regulators have warned for years that the schemes may use intricate disguises and exceptionally complex mechanics to ward off prosecutions. Cross-border schemes can pose monumental challenges to law enforcement.

NOTE: Our thanks to the ASD Updates Blog.

UPDATE 7:18 A.M. EDT U.S.A. Lyoness has denied the ACCC allegations. See denial in story at News.com.au.

Aug 28, 2014
Citing Missing Affidavit And Inconsistencies, Indiana Rejected TelexFree Telecom Application

UPDATED 6:20 P.M. EDT U.S.A. The Indiana Utility Regulatory Commission rejected TelexFree’s telecom application on June 11, 2014, according to records in the state.

TelexFree filed the application on March 24, requesting “CONFIDENTIAL TREATMENT OF THE FINANCIALS OF TELEXFREE, LLC,” according to records.

On April 13, TelexFree filed for bankruptcy protection in Nevada. On April 29, Indiana informed TelexFree via a docket entry that information it had submitted in March was “Missing [an] affidavit to support the March 24, 2014, request for confidential treatment of certain financial, technical, and/or managerial information.”

The state also noted that TelexFree had provided “Inconsistent descriptions of the services Applicant proposes to offer in Indiana.”

Indiana gave TelexFree until May 15 to correct the deficiencies. No corrections were received, according to the state.

The state formally rejected TelexFree’s application on June 11.

One of the issues with TelexFree is whether it supplied false, misleading or inconsistent information to various state regulators during the process of applying for telecom registrations.

In ~~March~~ [April], the Massachusetts Securities Division alleged that TelexFree’s financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided investigators in Massachusetts.

Certain regulatory filings by TelexFree in early 2014 suggest it was financially capable of delivering telecom services and even strong enough to provide intracompany loans to other TelexFree-related businesses. But by April 13, TelexFree was in bankruptcy court seeking to reject its contracts with promoters — this after adopting a new compensation plan on March 9.

On April 17, the U.S. Securities and Exchange Commission publicly accused former TelexFree President James Merrill of making false statements about how long TelexFree had been in the VOIP business.

The SEC also accused Merrill and other TelexFree defendants of not disclosing that “several banks and at least one payment processor stopped doing business with TelexFree, apparently due to concerns about the legality of its multilevel marketing program.”

Certain financial documents prepared by former TelexFree accountant Joe Craft referenced asserted loans TelexFree made to other TelexFree enterprises, according to the SEC.

After assuring state telecom regulators that it was healthy, records show, TelexFree went to bankruptcy court only weeks later.

“. . . defendants TelexFree, Inc. and TelexFree, LLC and relief defendant TelexFree Financial Inc. filed for bankruptcy in Nevada under Chapter 11,” the SEC alleged in April. “The three companies claimed to have liabilities of as much as $600 million but assets of no more than $120 million.”

In seeking to have the SEC’s fraud charges against him dismissed, Craft has said in court filings that he concluded in March 2014 that TelexFree was a Ponzi scheme selling unregistered securities. He further contends he had been “misinformed about the company’s activities and material information was withheld by company officers.”

In a filing on the docket of the TelexFree bankruptcy case, Craft contends that TelexFree plaintiffs who assert they are owed money have “fully recovered their ‘investments’ through benefits received from the TelexFree entities and are not owed anything.”

TelexFree managers or executives James Merrill and Carlos Wanzeler were indicted last month on criminal charges of wire-fraud and wire-fraud conspiracy.

In telecom filings docketed in Alabama on March 20, TelexFree asserted it was “financially qualified” to operate in the state and that its “current financials Show considerable net worth.” A hearing was scheduled for April 10. Prior to that date, however, TelexFree asked for a postponement for a month, listing unspecified “scheduling conflicts” as the reason.

With the April 10 Alabama hearing postponed, TelexFree was in bankruptcy court just three days later.

Aug 27, 2014
Illinois Issued Order Against Profitable Sunrise Figure Nanci Jo Frazer In March 2014

From a Profitable Sunrise promo.

Saying it had “credible evidence” of fraud, the state of Illinois issued a temporary prohibition order in March 2014 against Profitable Sunrise figure Nanci Jo Frazer. The order by the Securities Department of Secretary of State Jesse White also applied to purported Profitable Sunrise operator “Roman Novak,” as well as Profitable Sunrise itself and Inter Reef Ltd.

Inter Reef was a U.K. entity through which Profitable Sunrise apparently was operating. It was not immediately clear whether the temporary order has become permanent or whether Frazer or “Novak” contested it.

In an emergency action last year against Profitable Sunrise, the SEC described Profitable Sunrise as a ghost enterprise that “operates for the benefit of unknown individuals and/or organizations doing businesses through companies formed in the Czech Republic and using bank accounts in the Czech Republic, Hungary, Latvia, and China, among other places.”

Unlike state-level Profitable Sunrise actions in 2013, the March 2014 Illinois action alleged that Profitable Sunrise engaged in wrongdoing through Dec. 31, 2013. Various state regulators filed enforcement actions against Profitable Sunrise in early 2013. A 2013 action in Illinois did not name “Roman Novak” and Frazer respondents.

The March 2014 Illinois action accused Frazer and “Roman Novak” of fraud and selling unregistered securities while operating as unauthorized salespeople, dealers or brokers. In January 2013, according to the order, an Illinois resident in pursuit of a payout from Profitable Sunrise wired $15,000 to a “Bank in Czechoslovakia” in two separate transactions.

Frazer was accused of fraud by the state of Ohio in July 2013.

Her husband, David Frazer, is listed on the website of the court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case as a Zeek “winner” of a sum in excess of $1,000. Zeek, the SEC said, was a fraud that gathered hundreds of millions of dollars.

Zeek receiver Kenneth D. Bell has raised the prospect that the MLM HYIP sphere may have serial participants in fraud schemes.

TelexFree promoter Faith Sloan — currently accused of securities fraud by the SEC — is a former Profitable Sunrise and Zeek promoter. Sloan was banned by Illinois from selling securities in June 2014.

Zeek said it paid an average of 1.5 percent a day, according to the SEC. Profitable Sunrise purported to pay up to 2.7 percent a day.

Aug 26, 2014
BIZARRE: Purported ‘Sovereign Citizen’ Causes Interstate Traffic Tie-Up After Allegedly Crashing SUV Loaded With ‘Live Chickens, Marijuana, Firearms, And Improvised Explosive Devices’

A Pennsylvania man reportedly already facing charges he failed to yield to an emergency vehicle in that state allegedly crashed his SUV on I-79 in West Virginia on Friday, tying up traffic for hours, causing truck drivers to be late with their loads and handing police yet another bizarre case involving a purported “sovereign citizen.”

Seth Grim, 21, of Emmaus, Pa., was arrested after his SUV crashed, the Allentown Morning Call reported.

The crash occurred after a dog tried to jump out of the vehicle, the paper reported, quoting police.

When police arrived to investigate, they found “weapons, drugs and animals,” CBS13 (WOWTV.com) reported.

The animals reportedly were chickens — about 30 of them.

WOWK 13 Charleston, Huntington WV News, Weather, Sports

The station reported that Grim was charged with possession of marijuana with intent to deliver and that a bomb squad destroyed explosive materials. Police confiscated weapons and ammunition.

“It was a bizarre scene on the interstate: chickens, explosives, ammunition, an AK-47, a jar full of weed,” the station reported.

“Sovereign citizens” sometimes purport to represent “freedom.” The interstate incident in West Virginia appears to be a circumstance in which an individual apparently exercising his freedom to travel with livestock in his Ford Explorer, a military-style weapon, ammo and IEDs caused travel freedom to come to a four-hour halt for other motorists, including truck drivers who had cargo to deliver in keeping with the best traditions of American freedom and free markets.

Also see RawStory.com.

Aug 25, 2014
URGENT >> BULLETIN >> MOVING: Brazilian Attorney Living In United States Calls TelexFree A Massive Pyramid- And Ponzi Scheme And Becomes Co-Plaintiff In Racketeering And Fraud Complaint Against Company, American Lawyers, Accountant And Vendors

URGENT >> BULLETIN >> MOVING: (1st Update 8:13 p.m. EDT U.S.A.) A Brazilian attorney living in Massachusetts and studying law in the United States is among the co-plaintiffs listed in a racketeering and fraud lawsuit filed yesterday against TelexFree, its officers and executives and accountant, MLM attorney Gerald Nehra and various financial vendors.

The case is filed as an adversary action in the TelexFree bankruptcy case in Massachusetts.

Rafaela G.P. Serrano, the attorney and co-plaintiff, also is the trustee of the “TelexFree Settlement Trust,” according to the lawsuit. She alleges TelexFree was a massive international Ponzi- and pyramid scheme. The complaint lists her as “the former president of the Brazilian Immigrant Center, in Boston, Massachusetts, which is the largest Brazilian workers and immigrants’ rights nonprofit organization serving immigrants in the U.S.”

She is currently enrolled at Northeastern University School of Law in Boston.

Serrano’s entry into the TelexFree bankruptcy fray appears to be the first by a Brazilian legal scholar on U.S. domestic soil.

From the complaint (italics added):

Ms. Serrano has been playing a leadership role within the immigrant community in Massachusetts and other states in the U.S. participating in training workers about their rights, safety, and leadership skills; lobbying and participate in law making/changing in Massachusetts; outreaching community members through radio shows and visits to churches.

Her co-plaintiff is Paulo Eduardo Ferrari, a TelexFree member who says he was swindled.

TelexFree and various vendors have been named in multiple prospective class-action lawsuits that allege racketeering and fraud.

Read the Aug. 20 complaint.

Aug 21, 2014
BULLETIN: Receiver For WCM777 MLM ‘Program’ Says California Lobbying Firm Received $750,000

Ming Xu is called “DPMX” in this purported contract with a lobbying firm. Source: Federal court files. Red highlight by PP Blog.

BULLETIN: (7th update 6:59 p.m. EDT U.S.A.) The court-appointed receiver in the SEC’s WCM777 pyramid- and Ponzi-scheme case says she is seeking court approval to pursue claims against a California lobbying firm that allegedly received $750,000 from accused scammer Ming Xu and performed no work.

Some WCM777 MLM affiliates claimed $14,000 sent to the “program” returned $500,000 in 52 weeks.

Ming Xu also is known as Phil Ming Xu and Dr. Phil Ming Xu. The receiver, Krista Freitag, has shown a federal judge a document that purports to be a contract between Governmental Impact Inc. (GII) and Xu, who is described in apparent shorthand as “DPMX” in the contract.

James Dantona is listed on the contract as the president of GII. Under the contract terms, either party could terminate the agreement with 30 days’ notice and no refunds would be given Xu by GII.

“DPMX shall not be entitled to any refund for any reason,” the document allegedly specified. Given the nature of the allegations against Xu and WCM777, such an agreement could have deepened the Ponzi.

It is unclear whether Xu holds a doctorate, and there are claims Xu and enablers tried to plant the seed he was affiliated with Harvard, the famous Ivy League school. The receiver’s claim that Xu negotiated an advocacy contract dated Jan. 30 with GII just weeks after the WCM777 “program” got kicked out of Massachusetts and just days after it was issued a Desist and Refrain order in California adds another bizarre layer to an already-bizarre case.

Xu was photographed in 2013 with celebrities such as former Vice President Al Gore and Apple co-founder Steve Wozniak. He also purportedly was listed as a member of the Inauguration Committee of Los Angeles Mayor Eric Garcetti, son of the famed prosecutor Gil Garcetti.

Filings by Freitag suggest Xu, through the 2014 GII contract, was seeking to buy access to American politicians. It is not unusual for Ponzi schemers to seek to surround themselves with politicians and to use politicians and famous companies to create a veneer of legitimacy. WCM777 and its purported parent — World Capital Market Inc. — also claimed ties to scores of famous companies.

One of them — Siemens — specifically refuted WCM777’s claims in October 2013, during a period in which WCM was being pitched in California churches.

Some of the money Xu directed toward GII ended up at a company called ZHB International Corp. and was used to pay for the personal mortgage of ZHB’s Zayda Aberin, Freitag contends.

Through GII, Freitag contends, Xu sought help in “locating and securing legislators, obtaining access to such legislative leaders in California and Washington, D.C., and communicating and recommending advocacy strategies and effective public relations programs with the government.”

Xu’s plan appears to have backfired. After actions by Massachusetts and California, the SEC sued Xu, alleging he was at the helm of a massive international fraud.

Visit the receiver’s website. Read the receiver’s declaration.

Aug 21, 2014
PONZITRACKER.COM: New Ponzi Scheme Uncovered Every 118 Hours; Alleged TelexFree Fraud Heads 2014 List

If you’re a student or educator or employee or boss with a traditional M-F schedule, chances are you’ll be hearing about a new Ponzi scheme before the final bell rings or the final whistle blows on Friday.

During the first six months of 2014, a Ponzi scheme was discovered every 4.9 days (or every 118 hours), according to an eye-popping report today by Jordan Maglich at PonziTracker.com.

From PonziTracker (italics added):

. . . Ponzi schemes remain rampant in the United States and worldwide despite mounting government and regulatory efforts. Indeed, the 37 schemes discovered during the first half of 2014 suggest that at least 74 schemes will be discovered in 2014 — approximately 10% more than the 67 schemes unearthed in 2013.

The largest alleged scheme discovered in 2014 so far is TelexFree, PonziTracker reports.

Read the report on PonziTracker, which also notes Ponzi prison sentences handed down this year are on pace to top last year’s cumulative sentencing total.

The PP Blog’s research shows that MLM HYIP Ponzi schemes that spread through commission-based salespeople are the most insidious because they create victims in numbers America’s largest sports stadiums cannot accommodate.

Both Zeek Rewards (2012) and TelexFree (2014) may have created hundreds of thousands of victims each. The combined schemes could fill the Rose Bowl to capacity with victims 15+ times over and have led to requests by prosecutors or receivers to ask courts to approve special victim-notification procedures because of the overwhelming numbers.

Zeek receiver and special master Kenneth D. Bell has compared Zeek to Enron and the Bernard Madoff and Allen Stanford Ponzi schemes.

Just this week, prosecutors in the TelexFree case have asked for special victim-notification procedures — while contending that travel to Brazil and potentially other countries might be required.

WickedLocalHudson, which publishes news from the Hudson Sun and Metrowest Daily News, reported today that the Massachusetts Securities Division had received (to date) 8,847 complaint forms about TelexFree.

MSD posted the complaint form in late April.

The FBI and Homeland Security Investigations (HSI), an arm of the U.S. Department of Homeland Security, also are soliciting information from potential TelexFree victims.

Aug 21, 2014