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Category: The Economy

  • UPDATE: Another Bizarre Turn In WCM777 Ponzi Probe

    With a storyrecommendedreading1line that has included claims that $14,000 would turn into $500,000 in a year, a declaration of love to the Peruvians it had fleeced and additional claims that all would become clear when “4 blood moons” appeared in the sky in April, the WCM777 “cloud computing” MLM scam has served up a symphony of the bizarre. For now, at least, the storyline only is getting stranger.

    Here’s the latest  . . .

    Very early on in her investigation of the WCM777 MLM “program” and the financial activities of accused Ponzi schemer Ming Xu, court-appointed receiver Krista. L. Freitag discovered that a Xu/WCM777-linked entity known as ToPacific had transferred $1 million to an entity known as MaNa Fashion.

    This transfer, according to court filings, occurred “on or around” Feb. 28. On March 28, the SEC announced pyramid- and Ponzi charges against Xu. Freitag was appointed receiver.

    Shortly thereafter, according to court filings, Freitag tried unsuccessfully to contact and to serve a subpoena on MaNa operator Sue Wang, according to court files.

    Freitag, however, was able to identify Wang’s accountant, who provided an email address for Wang.

    The receiver’s counsel then “e-mailed Ms. Wang a copy of the subpoena and a demand for information,” according to court filings. On May 23, nearly two months after the SEC action and Freitag’s appointment as receiver, “Ms. Wang finally acknowledged the Receiver’s attempts to contact her.”

    Wang “thereafter engaged counsel to respond to the subpoenas,” according to the receiver. “After further delays and demands for additional time, Ms. Wang produced limited documents on July 18, 2014.”

    In court filings, Freitag now says MaNa’s Wang is Ming Xu’s sister and that Ming Xu did not disclose this during an interview with the receivership. In fact, according to Freitag, the receivership did not learn this until September 2014.

    That’s not the only surprise.

    Freitag now finds herself seeking court approval to liquidate apparel in bulk as a means of recovering funds for WCM777 participants affected by the scheme. That’s because Freitag, on Oct. 13, met with Wang and her counsel and visited “two 10′ x 20′ storage sheds” that included an estimated 100,000 garments.

    Wang has acknowledged the apparel belongs to the receivership, Freitag says.

    These garments mostly were “stored in disorganized fashion, with much of the articles of apparel stuffed in large plastic bags and boxes with limited recognizable form of organization either by style, size or other methods generally acceptable in the [fashion] industry.”

    The items, Freitag says, are “non-branded” and will not fetch the $1 million Xu supplied his sister to acquire them. The best that can be hoped for is between $100,000 and $250,000, but their value will decrease over time because the merchandise is aging. “Most” of it was acquired for “previous seasons.”

    It might be helpful to sell them in bulk ASAP with the holiday season quickly approaching, Freitag says.

    So, she has asked the judge for permission to do exactly that. And, Freitag notes that she “has direct experience running a design and wholesale footwear and accessories company, and will utilize that expertise and experience to market the Garments and negotiate with potential buyers for the highest per unit price.”

    It also turns out that Wang was associated with two other entities that received another $1 million combined from Xu. These were identified as JJ Sparkles Inc. and Yuanhao Inc.

    “These entities are interrelated as their public registrations with the California Secretary of State show that Ms. Wang (who is also named as a salesperson for MaNa Fashion) is the named agent for service of process for both MaNa Fashion and JJ Sparkles, and Yuanhao’s registered business address is that of JJ Sparkles.”

    “The Receiver is continuing her investigation into the remaining funds disbursed to the other entities and will pursue these matters as appropriate,” Freitag says in an Ex Parte Application for Order to Sell Additional Personal Property.

    Because Ming Xu also bought golf courses, the receivership also has found itself in the golf business. And because Xu, the purported cloud-computing chieftain, used WCM777-linked funds to acquire real estate, the receivership also has found itself in the property-management business.

    The receivership even became a part of the fish-management business when Freitag discovered “live Koi” at a WCM777-linked property in California.

    Visit the receivership website.

  • URGENT >> BULLETIN >> MOVING: First U.S. Criminal Prosecution Of Bitcoin-Themed Scheme; Trendon Shavers Arrested

    breakingnews72In the first U.S. criminal prosecution involving a Bitcoin-themed scheme, Trendon Shavers has been arrested and charged with securities fraud and wire fraud.

    Shavers, 32, of McKinney, Texas, was charged civilly by the SEC in July 2013. He is known as “pirateat40,”  and allegedly pushed his Bitcoin Savings and Trust Ponzi scheme from a forum.

    FBI agents arrested him today at his Texas residence.

    “As alleged, Trendon Shavers managed to combine financial and cyber fraud into a Bitcoin Ponzi scheme that offered absurdly high interest payments, and ultimately cheated his investors out of their Bitcoin investments,” said U.S. Attorney Preet Bharara of the Southern District of New York.  “This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency.”

    A top FBI official threw down the gauntlet.

    “Shavers used a new currency, but the same old reprehensible tricks,” said FBI Assistant Director-in-Charge George Venizelos. “He claimed to offer a Bitcoin market-arbitrage strategy. In reality, it was nothing more than an insidious scheme motivated by greed. Today, Shavers’ jig is up. He finds himself under arrest and charged in Manhattan federal court.”

    Some HYIP schemes appear now to have moved away from payment processors such as the now-shuttered Liberty Reserve and are moving toward Bitcoin.

    From a statement by Bharara’s office, which previously prosecuted Liberty Reserve, calling it a $6 billion money-laundering operation that enabled HYIPs and others forms of fraud (italics added):

    From at least September 2011 up through and including September 2012, SHAVERS operated a Ponzi scheme. Specifically, SHAVERS solicited investments in BCS&T on the “Bitcoin Forum” – a public, Internet-based forum where, among other things, Bitcoin investment opportunities were posted. SHAVERS’s offer to investors was straightforward: investors who lent Bitcoin to BCS&T would be paid up to seven percent interest weekly – an annualized interest rate of 3,641% per year – and investors could withdraw their investments in BCS&T at any time. SHAVERS claimed that the Bitcoin invested by BCS&T investors would be used to support a Bitcoin market-arbitrage strategy, which included (i) lending Bitcoin to others for a fixed period of time; (ii) trading Bitcoin via online exchanges; and (iii) selling Bitcoin locally via private, off-markets transactions – i.e., “over-the-counter transactions.” SHAVERS also personally guaranteed to cover any losses in the event of a market change. In truth, SHAVERS largely failed to execute the claimed market arbitrage strategy, failed to honor all of his investors’ redemption requests as well as his personal guarantee, and failed to deliver the agreed upon rates of interest.

    In the end, BCS&T was a Ponzi scheme in which SHAVERS used Bitcoin from new investors to make purported interest payments to existing investors and to cover investors’ requests to withdraw Bitcoin from existing BCS&T accounts. In addition, SHAVERS diverted investors’ Bitcoin for day trading in his own account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay certain of his personal expenses. At the peak of the scheme, SHAVERS raised, and had in his possession, about seven percent of all the Bitcoin that were then in public circulation. In the end, at least 48 of approximately 100 investors lost all or part of their investment in BCS&T.

    Some Bitcoin enthusiasts have fretted that dark forces and criminal organizations are seeking to use Bitcoin in the same way they used Liberty Reserve. Criminal activities could undermine confidence in Bitcoin and affect its perception in the marketplace.

    In late August, some affiliates of the collapsed $850 million Zeek Rewards Ponzi scheme began pushing a Bitcoin-themed “program” known as BitClub Network, a purported “mining venture” with an investment arm attached that purportedly supplies a payout for 1,000 days.

    Prospects were encouraged to buy in with sums ranging from $500 to $3,500.

    Zeek used traditional forms of payment.

     

  • NORTH CAROLINA: Teen Allegedly Swindled Senior Citizens In ‘Stark Innovations’ Scam That Purportedly Sold Overseas ‘Electronic Consumer Goods In Bulk’

    David Alan Topping. Source: Brunswick County mugshot.
    David Alan Topping. Source: Brunswick County mugshot.

    A North Carolina teenager who allegedly swindled senior citizens in an investment scam known as Stark Innovations was arrested yesterday, North Carolina Secretary of State Elaine F. Marshall said.

    Bond for the suspect, David Alan Topping, 19, of Oak Island, was set at $250,000. The Brunswick County Sheriff’s Office assisted with the case.

    “I am glad the citizens of Brunswick County will no longer be victimized by this individual’s deceit,” said Brunswick County Sheriff John Ingram V.

    Topping was charged with felony securities fraud  and  felony solicitation to obtain property by false pretense. He also was charged with a misdemeanor count of the latter.

    The scam gathered more than $100,000 investigators said.

    Investigators said that Topping already was on probation for previous thefts. Those cases  “involved felony convictions related to larceny and motor vehicle theft,” and Topping did not tell his Stark Innovations investors about them.

    Stark Innovations purported to be a company that “bought and shipped electronic consumer goods in bulk from overseas and sold them at a markup in the U.S.,” Marshall’s office said.

    “Investors told investigators that Topping said they could earn 6.5-percent interest per month with no risk to their principal,” Marshall’s office said.

    The scheme allegedly traded on Facebook and LinkedIn, investigators said.

    Scams regularly use social media to build heads of steam, according to regulators.

    “Calling our Securities Division would have revealed that Mr. Topping was never licensed to sell securities, and that in itself should always raise a huge red flag for potential investors,” Marshall said.

    A Facebook site that appears to be associated with Stark Innovations implies that the company was headquartered in a skyscraper in a bustling city. Other photos, however, suggest that Stark Innovations was renovating a trailer and turning it into a headquarters.

    “Hard at work renovating out [sic] new building!” the Facebook site roars in a post dated Aug. 27. “Will be completed in three months! Come in and talk to us about investing with the highest interest rate anywhere!”

    The site also prompts visitors to “Check out our newly designed site for Stark Card! The only card you can earn a 2.12% monthly interest rate.”

    “We believe that among Mr. Topping’s victims were retirees, some of whom invested tens of thousands of dollars in his scheme that they may well never get back,” Marshall said.

  • Quebec Moves To Shut Down Site That Purportedly Monitors HYIP Programs, Saying Operator Is Aiding Scammers

    cautionflagIf the Autorité des marchés financiers (AMF) gets its way, a website styled maxhyip.com will be shut down and its operator blocked from promoting “products and services relating to various high-yield investment programs (HYIP[s]) to Quebeckers.”

    The alleged operator of the site is Steeve Beaudin, against whom AMF is seeking a cease-trade order and “administrative penalties.”

    Beaudin is “aiding HYIPs with illegal activities as securities advisers in Québec,” AMF alleges.

    Ads that promise preposterous payouts such as 135 percent in a day and 5,000 percent in 90 days appear on the site. There’s also a section that purports to monitor which sites are paying, which sites are not and which sites are experiencing “problems.”

    Many such purported monitoring sites follow largely the same blueprint MaxHYIP appears to be following, a situation that has contributed to HYIPs expanding across the globe and sucking in millions and millions of people. That a scheme is “paying” is not evidence that no fraud is occurring, although disingenuous HYIP promoters often position it as so to keep the Ponzi wheels greased.

    Such sites also may encourage so-called “test spends” as a means of enabling an HYIP scam to gain a head of steam. If a successful payout results from the “test spend,” the recipient can be duped into believing a “program” is real and join the scammers-in-chief in helping the scam gather even more money.

    Payment processors named on the MaxHYIP site have been associated with a sea of scams, including “programs” such as AdSurfDaily, Zeek Rewards and Imperia Invest IBC. ASD was a $119 million Ponzi scheme. Zeek is alleged to have gathered nearly $900 million in a combined Ponzi- and pyramid scheme. Imperia is alleged to have gathered millions of dollars and to have targeted people with hearing impairments.

    Processors referenced on the site include PerfectMoney, EgoPay, Payeer, SolidTrustPay, HD-Money and others. Bitcoin also is referenced, as is an apparent virtual-currency wallet known as ASMoney.

    “Steeve Beaudin is not registered with the AMF and is therefore not authorized to solicit or advise Québec consumers for investment purposes,” AMF alleges.

    From the AMF statement (italics added):

    Caution when dealing with HYIPs

    HYIPs are investment programs in which money is invested for a given period (hour, day, week or month) at a high interest rate. It is a fraudulent scheme where investors are generally asked to entrust the management of their investments to so-called experienced managers and they receive interest according to the period chosen, which they can withdraw as they wish. In addition to being fraudulent, HYIPs are administered by companies which are generally off-shore, making it difficult for consumers to take legal action against them.

    HYIPs, which also often commissions to recruiters, tend to be straight-line Ponzi schemes with no “product” other than the purported investment “opportunity.” In recent years, however, more and more HYIPs may be using purported “products” such as VOIP software, cloud-computing software, “advertising” modules or auction “bids” to disguise the underlying investment elements and the underlying scam.

    If an HYIP scheme advertises a “product,” it typically promotes a lower daily return, perhaps between 1 percent a 3 percent. Even those purported returns are outrageous, however. On an annualized basis, Zeek Rewards, for instance, was touting returns that would have made Bernard Madoff look like a piker.

    HYIPs, whether they feature product claims or not, also offer returns that are unusually consistent. In the ASD and Zeek cases, it was alleged the operators simply manufactured the numbers because they knew that players who did hear a certain number would not play.

    The ASD and Zeek cases alleged the presence of co-conspirators. In such instances, the co-conspirators may be individuals who helped advance cover stories and fraudulent narratives. HYIP schemes also have been known to have silent partners and to launch reload schemes when the original scheme craters — AdSurfDaily to AdViewGlobal, for instance.

  • BULLETIN: Zeek-Like Situation Surfaces In TelexFree Case — Dishonored Cashier’s Checks; Trustee Seeks Authority To Subpoena Banks, Including Bank In Puerto Rico

    newtelexfreelogoBULLETIN: The court-appointed trustee in the TelexFree bankruptcy case is seeking authority to issue subpoenas and obtain information from eight financial institutions, including Puerto Rico-based Oriental Bank.

    The other seven are Digital Federal Credit Union, based in TelexFree’s headquarters city of Marlborough, Mass., Bank of America, JPMorgan Chase, Citizens Bank, Santander, TD Bank and Wells Fargo.

    All of the banks ended up in the TelexFree stream of commerce, but precise details of the relationships are not known publicly. What is known is that some TelexFree bank accounts were seized in criminal or civil forfeiture actions and that a cascading avalanche of litigation continues to roar down the mountain.

    Why MLM firms continually tempt this ruinous fate is one of the great business mysteries of current times.

    In the instances of Bank of America and TD Bank, it is known that TelexFree affiliates were given instructions to make walk-in deposits at the banks, some in the name of TelexFree Inc., others in the name of TelexFree LLC. Those instructions were highly similar to instructions given to members of the $119 million AdSurfDaily MLM Ponzi scheme in 2008.

    Court filings by Trustee Stephen B. Darr say he is trying to get to the heart of TelexFree-related money flow and communications involving the banks. Notably, one of the concerns is that all eight of the banks allegedly issued TelexFree-related cashier’s checks prior to the firm’s April 2014 bankruptcy filing, and later dishonored some of the checks.

    Cashier’s checks also were an issue in the ASD case. At the time of the ASD related actions in 2008, the enterprise was the largest known MLM HYIP Ponzi scheme. It since has been surpassed by Zeek Rewards, TelexFree and others.

    Dishonored cashier’s checks became one of the earliest issues in the $850 million Zeek Rewards MLM scheme in 2012. Citing the Uniform Commercial Code, Zeek’s receiver and lawyers have been been pursuing remedies from the banks for more than two years — at a cost of money and time.

    Kenneth D. Bell, the Zeek receiver, has said that “[i]f a bank refuses to pay a cashier’s check or teller’s check presented by the Receiver, it may be required to pay for the Receiver’s expenses and loss of interest resulting from the nonpayment, as well as consequential damages.”

    In the Zeek case, the Virginia Bankers Association provided guidance to member institutions that “the court’s order relied on the Uniform Commercial Code to establish that the uncashed cashier’s checks in the receiver’s possession were receivership assets, and that the receiver was required to present those cashier’s checks for payment and had no discretion not to.”

    Now, the TelexFree trustee appears to be wading into the same or highly similar MLM waters. Among the information Darr is seeking is “information respecting the remitters of the cashiers’ checks and the reasons for the dishonor of such checks.”

    Because MLM Ponzi- and pyramid schemes spread virally, have common promoters and often rely on cashier’s checks, it is conceivable that some promoters might have bought their way into both “programs” with cashier’s checks, possibly even with cashier’s checks recruits paid to their upline sponsors, rather than to the “programs” themselves.

    In the case of Zeek, tens of millions of dollars in checks allegedly had backed up at Zeek’s office in North Carolina in the weeks prior to the SEC’s August 2012 Ponzi- and pyramid action.

    The TelexFree case may add a new wrinkle. Indeed, nearly $38 million in cashier’s checks from Wells Fargo allegedly were found in TelexFree’s Marborough office in the possession of Joseph Craft two days after TelexFree’s April 13 bankruptcy filing. Craft, who has denied wrongdoing, was a TelexFree executive. He has been charged civilly with securities fraud.

    In April, the SEC said that a check dated April 3 in Craft’s possession was “remitted to” TelexFree principal Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000.”

    One check for more than $2 million in Craft’s possession was made out to Katia B. Wanzeler, Wanzeler’s wife. She later was arrested at JFK Airport in New York and detained for more than a week as a material witness.

    The SEC alleged that Carlos Wanzeler was amassing a small-real estate empire in Massachusetts and Florida. He is alleged to have ducked out of the United States via Canada in April, ultimately flying to his native country of Brazil. The United States describes him as an international fugitive.

    Darr now is seeking not only information about the cashier’s checks, but also information on communications between the banks and TelexFree or its principals James Merrill and Carlos Wanzeler, and information on any TelexFree-related investigations conducted by the banks, including “information related to ‘Know Your Customer’” rules and regulations.

    In addtion, Darr is seeking bank statements, canceled checks, deposit slips, wire-transfer communications and remittances, documentation concerning fees and contracts, minutes from bank board meetings at which TelexFree matters were discussed, documentation on why the banks ended relationships with TelexFree, documentation on communications the banks had with the SEC and state regulatory bodies, documentation the banks may have on the Massachusetts Securities Division TelexFree investigation and documentation “concerning whether the remitters have been refunded any amounts advanced to purchase” the dishonored checks.

  • RIPPLING NIGHTMARE: Has TelexFree Been Dwarfed By Another MLM Ponzi Scheme? Better Living Global Marketing Reportedly Says It Has Taken In $3.3 BILLION — And Is Experiencing ‘Cash Flow Problem’

    ponzinews1EDITOR’S NOTE: In a story dated today, BehindMLM.com has broken down claims made in a recent video in which Better-Living Global Marketing (BLGM) figure Luke Teng appears. The potential criminality at BLGM, purportedly based in Hong Kong, not only is alarming, it is stunning. Even more disconcerting is the level of disconnect surrounding the scheme, which had a Zeek Rewards-like business model and purportedly was in the penny-auction business . . .

    Hang on to your hats! There could be an active MLM HYIP Ponzi scheme that is even larger than TelexFree, which allegedly reached across national borders to take in $1.2 billion before collapsing in April 2014.  The alleged TelexFree sum would rival the epic Scott Rothstein Ponzi and racketeering scheme in Florida and potentially would make TelexFree the fifth largest Ponzi scheme of all time, regardless of the Ponzi business model used. (Like the shrimp delicacies memorably recounted by “Bubba Blue” in the movie “Forrest Gump,” Ponzi schemes come in many forms.)

    In 2012, prior to the actions against TelexFree by various law-enforcement agencies, PonziTracker.com rated Rothstein’s caper as the 4th largest of all time in terms of investor losses, estimated at $1.4 billion. Only the Bernard Madoff (est. $17.3 billion), Allen Stanford (between $4.5 billion and $6 billion) and Tom Petters schemes (est. $3.7 billion) were larger.

    BehindMLM.com is reporting today that BLGM’s Luke Teng claims to have set a “world record” for intake in his particular sphere of MLM.

    If the claim attributed to Teng is correct — that BLGM has taken in $3.3 billion — it could blow both Rothstein and TelexFree out of the water and put BLGM in the same Ponzi seas as Tom Petters and his $3.7 billion scheme. Put another way, BLGM could be the fourth-largest Ponzi scheme of all time, regardless of form.)

    If an online Ponzi scheme operating across national borders (including the borders of the United States) can put $3.3 billion on the table in two or so years of operation and creep up on Petters, are we on the cusp of the once unthinkable? Could MLM HYIP schemes rival or even eclipse Stanford and Madoff?

    At $1.2 billion, TelexFree already has created a litigation quagmire that rivals the quagmires surrounding the Madoff, Stanford, Petters and Rothstein schemes. BLGM could go the same way. Both BLGM and TelexFree even could eclipse the Top 4 in terms of litigation and logistical nightmares, because millions of victims from dozens and dozens of nations are apt to exist. That condition was not present in the Madoff, Stanford, Petters and Rothstein schemes.

    Zeek Rewards — the sixth-largest Ponzi scheme in history, according to the 2012 PonziTracker list — created a litigation monster that could be surpassed by both BLGM and TelexFree.

    And yet willfully blind MLM hucksters and serial scammers still are pushing cross-border fraud schemes. The numbers alone show that the world never has seen such felonious self-indulgence at the street level of dealers:

    • Zeek. Collapsed in 2012 after less than two years of operation. Victims: 800,000 to 1 million (est.). Dollar volume: $897 million. Source for dollar volume: U.S. court filings.
    • TelexFree. Collapsed in April 2014 after operating for a little better than two years. Victims: 700,000 to 1.5 million (est.). Dollar volume: $1.2 billion. Source: TelexFree figures cited in Massachusetts Securities Division action in April 2014.
    • BLGM: Operational, but reportedly experiencing cash-flow problem and not paying out or making selective payouts. Victims: Unknown number, but may rival Zeek and TelexFree. Dollar volume: $3.3 billion. Source: Luke Teng video cited by BehindMLM.com.

    A Rippling Nightmare

    The numbers are hardly the sole concern. As Behind MLM.com reported today, citing remarks made by Luke Teng in the BLGM video (italics added):

    [8:13] Some leaders are still making good money. Because the leaders are taking cash from the new members and they use it to give them ecash.

    So, that’s still a way for you to make money.

    Our take: If true, this is beyond horrifying. It is alleged TelexFree created conditions that permitted members to transact business outside of the system, and some members even may have created an exceptionally dangerous black market for TelexFree’s earning units, which were known as “AdCentrals.”

    As the PP Blog reported on March 24, 2014, an ad offering TelexFree AdCentrals at a firesale price appeared on an auction site. Viewers were encouraged to buy a bundle of 550 AdCentrals for $16,760. The asking price purportedly reflected a discount of $8,190 (33 percent), and the purchaser purportedly would earn $110,000 from TelexFree in the next year.

    The situation in both TelexFree and BLGM is reminiscent of the truly disturbing Evolution Market Group/FinanzasForex scheme described in 2010 by federal prosecutors in the Middle District of Florida.

    As the PP Blog reported at the time (italics added):

    . . . there were schemes within schemes in a tangled web of domestic and international deception that featured dozens of bank accounts, shell companies and various fronts for money-laundering enterprises, including companies purportedly in businesses such as real estate and car washes.

    The scheme was so corrupt, according to court filings, that some investors were told that, in order to leave the program whole, they had to recruit new investors, have the new investors pay them directly — and use the proceeds from the new investors to “recover” their initial outlays.

    In short, if you wanted to recover your EMG/Finanzas money, you had to steal your way out of the “program” by gathering new cash from incoming recruits and keeping it.

    Some of the money in the EMG/FinanzasForex case allegedly was tracked to the narcotics trade.

    Based on the BehindMLM.com report, it also appears that BLGM may be trying work a second form of Ponzi fraud into its existing scheme. This would appear to involve an adverting rotator of some sort, something consistent with the AdSurfDaily MLM Ponzi scheme in 2008. In 2012, while sharing promoters in common with Zeek, a “program” known as JSSTripler/JustBeenPaid appeared to be trying to transition from a straight-line HYIP fraud into a fraud named “ProfitClicking” that would introduce an “advertising” function. Part or all of the earlier JSS/JBP fraud appears later to have morphed into something called “ClickPaid.”

    So, in some ways, BLGM could be modeling ASD, JSS/JBP and other reload schemes to sustain its Ponzi deception.

    Teng also may be channeling a notable delusion of now-jailed ASD Ponzi schemer Andy Bowdoin.

    Indeed, according to the BehindMLM.com report, Teng is suggesting he may start his own bank.

    Before Bowdoin was arrested in 2010, he claimed ASD was looking at acquiring an interest in a bank in South America and creating its own payment processor.

    BLGM appears to have gained a head of steam in part from cash-gifting schemers in a “program” called “BlessingGoldClub” and also from former enthusiasts of the Zeek and Profitable Sunrise fraud schemes.

  • SEC: Penny-Stock Scammers Used ‘Intricate Web Of Offshore Corporations, Foreign Accounts, And Financial Institutions . . . In Canada, Nevis, Panama, Switzerland, And The Turks And Caicos Islands’

    breakingnews72Two Canadians have been charged by the SEC in an alleged pump-and-dump scheme that included a reverse merger between a “shell public company” and a startup, “blast emails” and a concerted hype campaign, the U.S. agency said.

    Named defendants are Bruce D. Strebinger, 38, of Vancouver, and Brent Howard Chapman, 38, who “is or has been residing in Antigua,” the SEC said. The complaint is filed in U.S. District Court for the Northern District of Georgia.

    “Strebinger and Chapman rigged a penny stock in their favor while staging a massive promotional campaign,” said William P. Hicks, associate director for enforcement in the SEC’s Atlanta Regional Office. “They disguised their scheme by dumping their shares in relatively small amounts over extended periods of time, and they attempted to hide their proceeds from U.S. regulators by routing them through offshore accounts.”

    The shell was known as Americas Energy Company-AECo. Its stock was suspended, with the company being liquidated in bankruptcy, the SEC said. The other company was a startup coal mining and oil and gas exploration business based in Nashville, Tennessee” that became known as Americas Energy Company Inc.

    From the complaint (italics added):

    The promotion began in September 2009 and continued through April 2010. While the promotion continued and the Stock price soared, Strebinger and Chapman sold their Stock for $17 million through offshore accounts, including accounts with Swiss financial institutions in the names of three entities: (1) Muskateer Investments, Inc. (“Muskateer”), beneficially owned by Strebinger; (2) Furla Blue SpA (“Furla”), beneficially owned by Strebinger’s wife, Anne Strebinger (“Strebinger’s Wife” ); and (3) Lance Investments S.A. (“Lance), beneficially owned by Chapman.”

    The promotion increased investor demand for the Stock and enabled Strebinger and Chapman to reap huge profits through sales of the Stock while simultaneously concealing from investors not only that Strebinger and Chapman owned a significant portion of Americas Stock, but also that it was Strebinger and Chapman who were together marketing and funding a multi-million dollar promotional campaign related to the Stock.”

    All in all, the SEC charged, the duo sold their shares “through an intricate web of offshore corporations, foreign accounts, and financial institutions located in Canada, Nevis, Panama, Switzerland, and the Turks and Caicos Islands.”

    Assisting in the probe were the British Columbia Securities Commission, the Swiss Financial Market Supervisory Authority and the Financial Industry Regulatory Authority, the SEC said.

  • Judicial Panel Of United States Moves TelexFree-Related Lawsuits To Massachusetts

    Carlos Wanzeler. From YouTube.
    Carlos Wanzeler. From YouTube.

    The United States Judicial Panel on Multidistrict Litigation has moved TelexFree-related litigation pending in federal courts in other states to Massachusetts. A directive ordering the transfers for the sake of judicial efficiency was issued on Oct. 21.

    Some plaintiffs from outside of Massachusetts sued TelexFree and other defendants in federal courts in Florida, Georgia and North Carolina. The order moves all of these cases to federal court in Massachusetts and puts them in the hands of U.S. District Judge Timothy S. Hillman, who is presiding over the criminal cases against TelexFree figures James Merrill and Carlos Wanzeler.

    Wanzeler has been deemed an international fugitive by U.S. federal prosecutors. He was born in Brazil, a country that has its own TelexFree-related investigations at both the state and federal levels.

    The U.S. Judicial Panel order provides yet another example of how cross-border MLM HYIP schemes that involve hundreds of thousands of people can lead to severe economic fallout and tidal waves of litigation that strain the resources of all parties involved. There are at two government actions against TelexFree and at least six private actions, all occurring while a court-appointed bankruptcy trustee for TelexFree is conducting an investigation.

    The great irony of the cases is that TelexFree, while operating, was presented as a means of making lives easier, a rising tide that would lift all boats. Serial promoters of fraud schemes continue to push similar “programs,” often using appeals to religious faith and lost economic opportunity as a lure

    From the order (italics added):

    On the basis of the papers filed and the hearing session held, we find that the actions listed on Schedule A involve common questions of fact, and that centralization in the District of Massachusetts will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.

    These actions share factual questions relating to the allegation that the TelexFree companies operated a Ponzi pyramid scheme involving the recruitment of investors in marketing TelexFree’s telephone service plan and that defendants directly participated in or aided and abetted the alleged scheme. Centralization will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.

    Weighing all factors, we are persuaded that the District of Massachusetts is the most appropriate location for this litigation. The events giving rise to the alleged claims primarily occurred in Massachusetts, which is the principal place of business of the TelexFree companies. The federal and state enforcement actions against TelexFree and affiliated individuals are pending there. Thus, the primary witnesses and other evidence likely will be located in Massachusetts. Additionally, transfer of actions to this district will facilitate coordination with the TelexFree bankruptcy cases, which also are pending in this district. The Honorable Timothy S. Hillman, to whom we assign this litigation, presides over the related criminal action and thus is familiar with the factual and legal issues presented by these actions. We are confident he will steer this litigation on a prudent course.

    Current cases listed in Schedule A that began outside of Massachusetts and now have been moved there include:

    GUEVARA v. MERRILL, ET AL., C.A. No. 1:14-22405 (Southern District of Florida).

    COOK v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 2:14-00134 (Northern District of Georgia).

    Cases already residing in Massachusetts include:

    GITHERE, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 1:14-12825.

    MARTIN, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04044.

    CELLUCCI, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04057.

    FERGUSON, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 4:14-40138 (transferred from the Eastern District of North Carolina).

  • Foreign Office Asks U.K. Travelers To Be ‘Vigilant’ In Wake Of Ongoing Military Campaign Against ISIS; North Carolina Man Pleads Guilty To ‘Attempting To Aid’ Terrorist Organization Linked To Beheadings

    Citing a generalized global terrorism threat, the United Kingdom’s Foreign Office says it is updating its travel advice and has asked U.K. travelers to be “vigilant.”

    From the Foreign Office (italics added):

    “There is considered to be a heightened threat of terrorist attack globally against UK interests and British nationals from groups or individuals motivated by the conflict in Iraq and Syria. You should be vigilant at this time.”

    Put another way, if you are a Brit, ISIS or ISIS sympathizers may attack you on that basis alone.

    The United Kingdom, like the United States, Canada and Australia, is a member of the military coalition arrayed against ISIS. Australian authorities have said ISIS or its sympathizers planned random attacks against members of the Australian public to demonstrate the reach of the terrorist group.

    ISIS, also known as ISIL or the Islamic State, has beheaded Brits and Americans and appears to be inciting people from multiple nations to join ISIS campaigns in Iraq and Syria. ISIS also appears to be inciting nationals from multiple countries to make war against their own governments or own fellow citizens to broaden the terror.

    On Oct. 30, federal prosecutors in North Carolina announced that Donald Ray Morgan, a 44-year-old local man from Rowan County, pleaded guilty to attempting to provide material support to a designated foreign terrorist organization and possession of a firearm by a felon.

    “Today’s plea is a sad reminder that those who wish to aid foreign terrorist organizations can come from any community and from any background,” said Ripley Rand, U.S. Attorney for the Middle District of North Carolina.

    From a statement on the Morgan case by federal prosecutors (italics added):

    According to court documents, Morgan knowingly attempted to provide support and resources beginning in January 2014 until on or about Aug. 2, 2014, including his own services, to al-Qa’ida in Iraq, also known as Islamic State of Iraq and the Levant (ISIL) and the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization. On at least one occasion Morgan unsuccessfully attempted to travel from Lebanon to Syria to join ISIL/ISIS. Morgan also frequently used social media and an interview with an American journalist to express his support for ISIL/ISIS and violent terrorist activities.

    A look at the agencies that participated in the Morgan probe shows that terrorism-related activities have become not only a concern for national agencies such as the U.S. Department of Justice and the FBI, but also local agencies. Indeed, the names of the Greensboro Police Department, the Guilford County Sheriff’s Office, the High Point Police Department and the Winston-Salem Police Department all appear in the Justice Department’s statement on the Morgan case. The local agencies are are members of Joint Terrorism Task Forces.

    “We will continue to do everything we can to work effectively with our law enforcement partners and protect innocent people from terrorist activity, whether here in the United States or abroad,” Rand said.

    “Preventing individuals from joining ISIL and holding accountable those who attempt to provide material support to the terrorist organization remains one of our highest priorities,” said John Carlin, assistant Attorney General for National Security.

    In the United Kingdom, MailOnline, citing extracts from a U.N. study, is reporting concerns that “a new breed of terrorist was being attracted by the [ISIS] ‘cosmopolitan’ use of social media.”

    The report suggests that terrorists could making war or inciting it in one moment — and posting “kitten photographs” on Twitter in the next.

    In recent days, individuals have carried out alarming attacks against Canadian soldiers, the Canadian Parliament, New York City police officers and a police officer in Washington, D.C. The precise motives for the attacks and the degree to which mental-heath issues may have played a role are less than clear, which makes the overall circumstance murkier.

    Weaponry has ranged from guns (Canada) to a hatchet (New York) to an ax (Washington).

  • In Extraordinary Development, Federal Judge Approves Temporary Restraining Order ‘Without Notice’ That Directs Zeek Vendor ‘To Immediately Deposit With The Receivership’ Nearly $5 Million

    Paul Burks.
    Paul Burks.

    DEVELOPING STORY: (Updated 10:02 p.m. EDT U.S.A.) In an extraordinary development on this Halloween Friday, the federal judge presiding over the SEC’s Ponzi- and pyramid-scheme case against Zeek Rewards has issued a Temporary Restraining Order and directed a Zeek vendor to immediately turn over to the receivership more than $4.85 million.

    The order was entered “without notice,” owing to concerns the money could go missing. It applies to Zeek financial vendor Preferred Merchants Solutions LLC and Jaymes Meyer, Preferred’s California-based sole member and manager.

    Events that led to the order involve a bizarre circumstance that allegedly occurred in June 2012, when tens of millions of dollars in undeposited checks — enough to fill six to eight mail bins — had backed up at Zeek, starving the Rex Venture Group LLC enterprise for cash during a period in which Zeek was having banking problems in North Carolina and its alleged Ponzi was crumbling.

    Zeek operator Paul Burks allegedly hired Preferred to solve the problem and also to provide trust services. According to a document filed by Preferred in August 2014, the first time the company visited Zeek headquarters, “ex- or off-duty police officers [were] providing security.”

    Preferred contends it solved Zeek’s problem with the backed-up checks and legitimately is owed the $4.85 million at issue.

    But receiver Kenneth D. Bell, who is seeking a contempt sanction against Preferred and alleges that Preferred effectively transferred Zeek Ponzi cash to itself after it learned from the SEC on Aug. 16, 2012, that an order freezing Zeek assets was imminent, asked Mullen for the TRO on Oct. 28.

    Bell alleges that “the evidence establishes that Preferred Merchants and Meyer directed the $4.8 million transfer from the RVG trust account to Preferred Merchants’ account just 19 minutes after the SEC told them about the asset freeze and imminent shutdown of RVG” on Aug. 16, 2012.

    He further alleges that “[n]ot only did Meyer fail to tell the SEC about his custody and control over RVG assets, Meyer also failed to disclose that he anticipated making any transfers, or, after the transfers were executed, that he had done so.”

    From the order entered at 11 a.m. today by Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina (italics added):

    The Receiver has satisfied the requirements of Federal Rule of Civil Procedure 65(b) and established that an order is appropriate in this case to avoid irreparable injury, loss, or damage to the Receivership Estate of Rex Venture Group, LLC, including the further waste and dissipation of Receivership Property. Notably, the Court finds that the large amount of money at stake, the liquidity of the funds which could be transferred overseas or hidden, and Preferred Merchants’ and Meyer’s apparent pattern of misconduct present a likelihood of irreparable harm and necessitate this order being entered without notice. Accordingly, and for the reasons stated in the motion and memorandum, the Court will GRANT the motion.

    IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that:
    1. This Order is entered at 11 a.m. on October 31, 2014.
    2. The Receiver’s Motion for Temporary Restraining Order is GRANTED;
    3. Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) are directed to immediately deposit with the Receivership $4,854,010.40, which is the amount they transferred from RVG’s trust account after the SEC notified them of the asset freeze and requested that they freeze all RVG accounts and assets;
    4. The Receiver is directed to deposit and maintain these funds in a segregated account;
    5. This injunction shall expire no later than fourteen (14) days from the entry of this Order or sooner upon further order of the Court.
    6. The Court will conduct a hearing on this matter on Wednesday, November 12, 2014 at 2 p.m. in Courtroom 3 at the Charles R. Jonas Federal Building, 401 W. Trade Street, Charlotte, NC 28202. The Receiver is directed to use all reasonable efforts to notify Meyer and Preferred Merchants of the date, time, and location of the hearing.

    Burks, 67, of Lexington, N.C., was indicted a week ago today on criminal charges, including mail fraud, wire fraud and conspiracy. A separate lawsuit filed by Bell last month against alleged Zeek winners in Canada contends that Zeek “insiders often worried about being caught.”

    Mountains of undeposited checks also were an issue in the AdSurfDaily Ponzi-scheme case in 2008. ASD purported to pay a dividend of 1 percent a day. Zeek’s average daily payout was about 1.5 percent, according to the SEC.

    ASD and Zeek had members in common.

    NOTE: Our thanks to the ASD Updates Blog.

  • Some Zeek Claimants From Outside The United States Unable To Deposit Distribution Checks; Receiver Provides Guidance

    Kenneth D. Bell, the Zeek Rewards receiver, published an announcement last night that certain Zeek claimants from outside the United States who received a distribution check were unable to deposit it. Here is the announcement, dated Oct. 30, 2014 (italics/bolding added).

    ANNOUNCEMENT FROM THE RECEIVER – October 30, 2014

    Various foreign claimants have reported that their banks have refused to deposit the distribution checks I have sent to you. It is likely that these banks are mistakenly seeking to deposit the checks in the local currency instead of in United States dollars. ALL checks issued by the Receivership are issued in United States dollars. Please inform your bank when you are depositing your check that it is in United States dollars. I am unable to issue checks in any currency other than United States dollars.

    Visit the receivership website.