PatrickPretty.com

Category: The Economy

  • URGENT >> BULLETIN >> MOVING: Zeek’s Paul Burks Indicted

    Paul Burks.
    Paul Burks.

    URGENT >> BULLETIN >> MOVING: (3rd update 9:15 p.m. EDT U.S.A.) Alleged Zeek Rewards operator Paul R. Burks has been indicted by a federal grand jury in Charlotte, N.C., on charges of wire and mail fraud, wire- and mail-fraud conspiracy and tax-fraud conspiracy.

    Burks, 67, of Lexington, N.C., is the third Zeek figure to be charged criminally.

    On the tax front, the grand jury charged that Zeek Rewards, the MLM arm, and Zeekler, the penny-auction arm, failed to file corporate tax returns. So did Rex Venture Group LLC, the parent company.

    Burks and “others” caused fraudulent 1099 forms to be issued for the 2011 tax year, which caused victim-investors to file false tax returns that reported “phantom” and “fictional ” income. Burks “engaged attorneys and tax professionals to legitimize the issuance of the 1099s,” the indictment alleged.

    Meanwhile, the grand jury alleged, “Burks and others paid themselves large salaries and other payments from victim-investors’ funds and did not keep accurate and complete records of the payments.”

    And, the indictment alleged, Burks and other used multiple bank accounts and offshore payment processors “to deposit funds from victim-investors and to make Ponzi payments” to them.

    Link to Department of Justice statement.

    More tomorrow on the PP Blog . . .

  • BULLETIN: More TelexFree-Related Raids In Brazil

    breakingnews72BULLETIN: In a follow-up to July’s “Operation Orion,” federal authorities in Brazil today conducted more TelexFree-related raids based on evidence uncovered during the first raids.

    A statement in Portuguese by Receita Federal — the Brazilian equivalent of the IRS — said it was aided by Brazilan federal police (Polícia Federal) and federal prosecutors (Ministério Público Federal). TelexFree is known as Ympactus in Brazil.

    Search warrants were executed and assets were seized, according to the statement.

    GazetaOnline (Brazil) has a report in Portuguese of the raids. So does Abril.com (Brazil).

    Here is the entire Receita Federal statement (italics added):

    Operação ORION: Receita Federal combate esquema de pirâmide financeira no Espírito Santo

    A Receita Federal do Brasil (RFB), a Polícia Federal (PF) e o Ministério Público Federal (MPF) deflagram nesta sexta-feira (24 de outubro de 2014) uma segunda fase da “Operação ORION”, com o objetivo de combater fraudes envolvendo a prática de pirâmide financeira promovida por empresas sediadas no Espírito Santo.

    O pedido de medidas cautelares adicionais decorre da obtenção de diversos documentos e do surgimento de novas informações durante a operação ORION, deflagrada em 24 de julho de 2014.

    As ações ocorrem nos municípios de Vitória e Vila Velha, onde estão sendo cumpridos quatro mandados de busca e apreensão na sede de uma empresa e em três residências de envolvidos. Além dos Mandados de Busca, foi autorizado o sequestro de valores e de bens imóveis.

    Participam da operação 12 servidores da Receita Federal e 20 policiais federais.

    A operação realiza-se como mais um esforço para combater um esquema de investimento conhecido como pirâmide financeira que se sustenta a partir da cobrança de taxas de adesão de divulgadores de um serviço de telefonia. A rede construída pelas empresas não condiciona os ganhos dos divulgadores à venda ou revenda dos serviços de telefonia, mas principalmente à angariação de novas adesões à rede, o que torna o esquema lucrativo somente para os membros que figuram no topo da pirâmide. O número de divulgadores prejudicados com a ação das empresas já ultrapassa um milhão de pessoas.

    A empresa está sendo investigada por diversos órgãos públicos no Brasil e no exterior. Em junho de 2013, a Justiça Estadual do Acre determinou a vedação de novos cadastros de divulgadores e indisponibilidade de todos os bens dos sócios de uma das empresas.

    Há indícios do cometimento de crimes tributários na atuação dos divulgadores, crime contra a economia popular, com suposta formação de pirâmide, estelionato e crime de induzimento à especulação.

    Google’s translation tool is here.

    A sustained misinformation campaign about TelexFree may be occurring among a segment of TelexFree promoters in Brazil.

    U.S. authorities have called TelexFree a billion-dollar Ponzi- and pyramid scheme. Some TelexFree members have alleged that TelexFree engaged in racketeering.

  • Now, A Hatchet Attack On New York City Police Officers

    From CNN video.
    From CNN video.

    Four uniformed New York City police officers were ambushed yesterday afternoon by a murderous man wielding an 18.5-in. hatchet. The sneak attack occurred a day after the sneak attack on Canada’s Parliament in which a duteous sentry standing watch over the Tomb of the Unknown Soldier at the War Memorial in Ottawa was shot and killed.

    In the New York incident, one officer presumptively was brutally cleaved in the head, another in the arm. Both are hospitalized. The two other officers reportedly shot the attacker dead. A bystander exercising the freedom to be out in public reportedly was hit by a stray bullet. All four officers are rookies. They were posing for a picture when attacked, according to reports.

    This, friends, is what anarchy looks like in freeze frame. It can happen in a matter of seconds. The danger is that it can be copy-catted in random locations. At least for now, whether a hardware-store hatchet served as a cheap substitute for the swords of ISIS is just another imponderable.

    As an official matter, terrorism has neither been ruled in nor ruled out in the New York attack. When a man swinging a hatchet like a baseball bat goes after patrol cops on the streets of Queens in broad daylight, however, it’s hard to see it as anything other than an attack on U.S. society itself.

    New York, of course, was a target of grandiose terrorists who caused airliners to crash into the Twin Towers of the World Trade Center on Sept. 11, 2001, destroying both human and brick-and-mortar symbols of freedom and Democracy. The hatchet attack suggests New York City and other cities now may need to be on the lookout for terrorists (officially designated or otherwise) who are less grandiose in choice of weaponry and their instant aims, but equally committed to destroying the symbols of order and the guardians of that order — in this case, four cops on the beat.

    Video of the incident appears to show the attacker could have carved up a civilian on the sidewalk, but darted around him and headed straight for the people wearing badges. But before you get the notion that the hatchet man was interested in giving the pedestrian an even break and didn’t hold him accountable for grievances, remember that the 9/11 attackers also sought to aim planes at the U.S. Capitol or the White House and ultimately struck the Pentagon.

    Despite the fact he thankfully was left physically unharmed, the New York pedestrian nevertheless counts as a casualty: By attacking the cops, the hatchet man was attacking the pedestrian by proxy, just as the American people were attacked by proxy on 9/11 through attacks on the symbols of commerce and freedom itself and the Canadian people were attacked by proxy in this week’s attack against the soldier and Parliament.

    We’re sitting here this morning remembering that Eric Frein, who allegedly ambushed cops at their home barracks in Pennsylvania under cover of darkness last month, is still on the lam.

    Regardless of the varied corrupt ideologies and the tortured psychologies or malignant philosophies of the attackers, all of these attacks are attacks against the keepers of freedom and the people who benefit from that freedom. That some of the attackers chose over-the-counter weapons rather than hijacked airliners matters only in terms of the instant body count and the size of the headline font. The mind-set is the same, even if the official casualty list includes fewer names.

    It’s terrorism at a variety-store discount, the same thing the world observed at the 2013 Boston Marathon. But in New York City yesterday, it was a garden hatchet, not a pressure cooker.

     

  • URGENT >> BULLETIN >> MOVING: Massachusetts Charges 4 Alleged Promoters Of EmGoldEx Scheme, Saying ‘Program’ Was Fraud And That Hucksters Stacked Children In Downlines

    emgoldexURGENT >> BULLETIN >> MOVING: (14th Update 4:33 p.m. EDT U.S.A.) Massachusetts has charged promoters of the EmGoldEx MLM “program” with securities fraud and selling unregistered securities, alleging they “created a complex web entangling investors throughout the Commonwealth” in a “pyramid scheme” that offered “guaranteed returns of up to 1,105% for recruiting more individuals.”

    The civil prosecution was brought by Commonwealth Secretary William Galvin and the Massachusetts Securities Division, which alleged that photos of children “getting paid” by the “program” were used as lures to drive dollars to the scam.

    Children also were used to stack downlines so promoters could “reach the Pay Spot faster,” the state alleged.

    And, the state alleged, “Investors in the EmGoldex Marketing Program are also able to purchase investment positions directly from other investors, rather than through EmGoldex, creating even greater risks for potential new investors.”

    Similar allegations that members could bypass the “program” itself to purchase positions were made in the TelexFree case earlier this year, a circumstance that suggests multilayered criminality in MLM HYIP “programs.”

    Named respondents are EmGoldEx Team USA Inc. of Andover, Mass.; Matthew Michael D’ Agati of Methuen, Mass.; Joseph Zingales of Methuen; James Vincent Piemonte of Methuen; and Jonathan Herman Seigler, formerly of Boston and now of New Hampshire.

    D’ Agati, Zingales, Piemonte and Seigler are accused of recruiting “hundreds of investors into the scheme,” according to the 41 page complaint. MSD is asking for disgorgement and financial sanctions.

    “Using multiple pooled bank accounts, Respondents have collected over $473,000 in Massachusetts for the EmGoldex Marketing Program,” the state alleged, further alleging that “over $282,659 has been wired to EmGoldex financial institutions overseas.”

    The Massachusetts entity was a recruiting arm for EMGX FS Ltd., “an entity purportedly registered in the Seychelles, with a principal place of business located at Suite I, Second Floor, Sound and Vision House Francis Rachel Str. Victoria, Mahe Seychelles[.] EmGoldex maintains an internet website at www.emgoldex.com,” the state alleged.

    Seychelles is a nation associated with money-laundering.

    News that Massachusetts was investigating EmGoldEx broke on Aug. 8.

    Like other HYIP schemes, EmGoldEx was positioned as a “Plan B.”

    “Respondents even use the Team USA Homepage to pitch the EmGoldex Marketing Program as a retirement vehicle, noting that EmGoldex can create a “[p]Ian B to care for you and your family in the later years,” the state alleged. “Respondents further add that membership in the EmGoldex Marketing Program is a fully transferrable asset upon death, providing perpetual residual income for an investor’s family.”

    Facebook and Twitter “at least” were used to drive recruiting, Massachusetts alleged.

    One of the key prongs of the Massachusetts-based pitch was that even “children” could earn through EmGoldEx, the state alleged.

    From the complaint (italics added):

    148. The Team USA Homepage advertises the EmGoldex Marketing Program as a simple and relatively quick way to earn significant residual income.

    149. Respondents also advertise on the Team USA Homepage that through the EmGoldex Marketing Program, even children are able to make significant profits, with little to no effort of their own.

    150. In a section on the Team USA Homepage titled “Local Success Stories,” Respondents feature at least three photos of children, with one caption reading, “Paid $4000 in only 13 weeks! Yes, even your children can get paid!!”

    151. The Team USA Homepage “Local Success Stories” section also includes photos of a number of other EmGoldex investors who are members of Team USA. Each photo is emblazoned on an American flag background, with the title “GOLDEN $4000 CLUB.”

    152. The “successful” investors received their payouts by recruiting new investors into the EmGoldex Marketing Program, not through the sale of any purported product.”

    Like earlier MLM scams such as TelexFree and WCM777, EmGoldEx picked up a local head of steam when the Massachusetts promoters hosted hotel pitchfests, Massachusetts alleged.

    Some local events for EmGoldEx charged admission fees of $10 and $25, and a purported “boot camp” for EmGoldEx held on Saturdays and Sundays charged an admission fee of $79 and $99, the state alleged.

    “According to marketing materials Team USA provided to the Division, Team USA represented EmGoldex as a ‘life changing opportunity’ for new investors. These advertising and marketing materials from Team USA are also adorned with pictures of gold bars, bags of cash and phrases such as ‘NOW YOU GET PAID,’” the state alleged.

    The scheme also took advantage of the popular culture, Massachusetts alleged.

    “For their part, according to documents that Team USA produced to the Division, D’ Agati and Zingales adopted speeches from popular movies, such as ‘Rocky’ and ‘Any Given Sunday.’”

    Moreover, the state alleged, attendees of a launch event were told “the speakers . . . were ‘not bottom feeders,’ and included lawyers, millionaires, and other very successful business people.’”

    Read the complaint.

  • OUTRAGEOUS! Emerging Scheme That Appears To Have TelexFree Ties Is Trading On The Name Of Abraham Lincoln

    8elosUPDATED 12:24 P.M. EDT U.S.A. BehindMLM.com has a story today about an emerging “program” known as “8Elos” that may have ties to TelexFree promoters, including Sann Rodrigues, already charged with fraud in the TelexFree Ponzi- and pyramid case.

    Rodrigues is an alleged recidivist securities- and affinity fraudster who now may be adding a shiny object scheme (emeralds) to his fraud bona fides. The evolving situation is so bizarre it almost defies description. BehindMLM, which reports 8Elos is using addresses in the British Virgin Islands and Switzerland, has published an early review here.

    One of the things that caught the eye of the PP Blog is that 8Elos appears to be trying to loosen American purse strings by trading on the venerated name of Abraham Lincoln through the use of a quote on leadership attributed to the 16th President of the United States.

    The PP Blog could not immediately confirm that Lincoln ever spoke the words attributed to him by 8Elos: “The greatest ability of a leader is to develop extraordinary abilities in ordinary people.”

    By even attributing a quote to Lincoln, however, 8ELos may be trying to sanitize a scam in largely the same way a 2011 MLM scam known as Club Asteria tried to sanitize its scam and bring in large numbers of Indians. Club Asteria leeched off the name of Mahatma Gandhi.

    8Elos may be targeting Brazilians, Brazilian-Americans and Latinos. Based on the flags published on its website, it also may be targeting Chinese, Portuguese, Spaniards and Russians.

    Lincoln was assassinated in 1865; Gandhi was assassinated in 1948.

    Club Asteria put a “JOIN OUR MISSION” button below a quote attributed to Gandhi.  It also placed a “JOIN NOW” button directly below an image of the actor Will Smith — this after months of trading on the names of the American Red Cross and the World Bank.

    8Elos, which implies it has ties to emerald and gemstone deposits in Brazil, curiously describes itself as “the perfect link between everything and everyone, the four elements with the four dimensions, people in search of infinity and its preciousness.”

    Also see PP Blog story from Oct. 2, 2012: “Was This Man Your Zeek Sponsor?”

    Also see this May 29, 2014, Media Alert from the Utah Securities Commission, an arm of the Utah Department of Commerce.

    From the lede (italics/bolding added):

    The Utah Securities Commission issued a Final Order against Jack Phillips, an Oregon resident, for conning Utah investors into several phony investment schemes involving travel cards, foreign currency trading, and importing Brazilian emeralds for sale all while promising guaranteed returns of 300 to 500% with no risk to investors.

  • In 1 Thai Province Alone, 120 Pyramid Schemes May Be Operating, Report Says

    cautionflagIn Lamphun Province in northern Thailand, the Thai government suspects that 120 pyramid schemes may be operating and swindling villagers in and around the district of Li, according to a report at NationMultimedia.com.

    The report suggests this is a specific type of securities swindle in which investors purchase shares in purported construction companies that actually are corporate shells with no real operations. The scammers are left with the money. Investors believing they’re helping themselves and the region drive growth are left with worthless pieces of paper.

    As is typical in pyramid schemes, corporate registrations appear to have been used to dupe investors. The presence of a corporate registration is not proof no scam is occurring.

    As NationMultimedia reports, quoting Director-General Pongpun Gearaviriyapun of the Department of Business Development (italics added):

    “Fraudsters deceive people by allowing them to hold shares in a company and partly own the business by asking for initial investment capital. These frauds tell them that they will benefit from the government’s construction mega-projects, and they do register the new firm with the department, but actually these businesses do nothing.”

    A recent example of an alleged swindle in which corporate registrations were used to dupe investors is the TelexFree case in the United States. Promos for the firm pointed prospects to the registrations, but TelexFree was conducting a billion-dollar, cross-border pyramid- and Ponzi scheme, according to court filings.

    Some of the promos for TelexFree even reproduced images of a government official. Other promos were worded to suggest that the government endorsed the purported opportunity and that recruits were helping drive economic growth to sustain their families and communities.

    TelexFree was promoted in Thailand, according to online promos. One promo was headlined, “Telexfree Thailand Team Number One.”

    In Thailand, the Department of Business Development “is closely inspecting newly registered firms to see if they are really operating,” NationMultimedia reports. “If not, the department will probe these companies in cooperation with local police, chief district officers, and the Department of Special Investigation.”

    Thailand is a nation in the Indochina Peninsula. Neighbors include Myanmar, Laos, Cambodia, Indonesia and Malaysia.

  • TELEXFREE BRIEFS: (1) False Claims That ‘Program’ Has Been Cleared Of U.S. Pyramid-Scheme Charges; (2) Name Of Model/Racecar Driver Used In Sanitization Campaign; (3) TelexFree Members Targeted In Ongoing ‘IFreeX’ Reload Scheme

    newtelexfreelogo1.) Reports began to surface late Thursday on Twitter and Facebook that TelexFree has been cleared by a judge of U.S. pyramid-scheme charges. These reports are false. Period.

    Perhaps to add credibility to the claim, a photo that appeared to depict a female TV reporter sitting in a studio was posted on Facebook. A computer to which a TelexFree logo was affixed sat to the reporter’s right. Below these images was a text message in Portuguese.

    The headline was “FORTE VITÓRIA TELEXFREE NOS ESTADOS UNIDOS.” Google’s translate tool (to English) translated it to this: “STRONG Telexfree VICTORY IN THE UNITED STATES.”

    Another Portuguese section read as such: “Corte americana declarou que a empresa não pratica “Pirâmide Financeira” e nomeou um interventor, Stephen B. Darr, que deve dar início ao processo de recuperação judicial, que tem autonomia de liquidar ou manter o funcionamento da empresa.”

    The Google translation tool translated this section to: “American Court stated that the company does not practice “financial pyramid” and appointed a receiver, Stephen B. Darr, who shall initiate the process of bankruptcy, it has autonomy to liquidate or keep running the business.”

    No American court has said that TelexFree was not a pyramid scheme or not a “financial pyramid.” Darr is the court-appointed trustee in the TelexFree bankruptcy case in Massachusetts. He has said he has no intention of reorganizing or reopening the company.

    It is unclear whether the person depicted as a reporter has any association with TelexFree or any of its media outlets. It is not unusual for MLMs and their affiliates to try to create the impression that specific media figures or media brands endorse an “opportunity.”  (See April 7 PP Blog story: “TelexFree, An Alleged Pyramid Scheme, Promotes Itself During Probes By Wrapping Logos Of Local Fox, CBS, ABC, NBC Affiliates Into Video.”) Also see Oct. 15, 2013, PP Blog story: “PROFITABLE SUNRISE CASE: Did Fake Reporter Use Photo Of Real Reporter In ‘Story’ Titled ‘Nanci Jo Frazer WINS in Court – A Case Of Innocent Ignorance?’)

    2.) Some of our readers may recall the flap over TelexFree’s sponsorship of a professional soccer club in Brazil. Could a new flap be in the offing, one that involves a Brazilian model and racecar driver?

    Twitter and Facebook were used today to drive TelexFree visitors to images of Helena Soares. She is wearing an old TelexFree logo on her racing outfit.

    Whether TelexFree had or has sponsored her was not immediately clear. What is clear is that there are a number of references to Soares in the context of TelexFree online. One of them is a YouTube video titled “Deaf Deaf TelexFree.” Promo text appears to be in Russian.

    This may spark questions about whether TelexFree was targeted at members of the international hearing-impaired community. HYIP scams such as Noobing and Imperia Invest have been targeted at investors who cannot hear.

    Today’s Twitter/Facebook references to Soares depict her as a “Campeã” (champion) of TelexFree.

    It is not unusual for Ponzi schemes to seek to associate themselves with celebrities, politicians, business stars and sports stars. This particular form of brand-leeching surfaces in scheme after scheme after scheme. A recent major example of this is the WCM777 scam, which tried to associate itself with the sport of golf, Jesus Christ, Harvard College, the Denny’s Restaurant chain, Apple co-founder Steve Wozniak and former U.S. Vice President Al Gore — and many others.

    The practice is so common that it has become a virtual signature of a scam. Like TelexFree and the Profitable Sunrise scams, WCM777 traded on the image of the Christ the Redeemer statue in in Rio de Janeiro.

    3.) As the PP Blog reported on Sept. 30, 2014, Massachusetts Commonwealth Secretary William Galvin issued a warning on a an emerging “program” known as IFreeX that is being targeted at TelexFree members. iFreeX may be a reload scheme designed to fleece TelexFree members for a second time. On Oct. 1, the Blog reported that IFreeX appears to have lifted branding material of T-Mobile, including images of Carly Foulkes, “the T-Mobile Girl” famous for wearing pink summer dresses in TV spots.

    T-Mobile said it was looking into the situation.

    A large image of Foulkes appeared today on Twitter in an iFreeX promo targeted at TelexFree members.

    The use of the letter “X” in HYIP scams has led to questions about whether purveyors are speaking in a sort of secret code. The OneX scheme used an “X” and an image of a bomb as part of its logo, and HYIP scams have been known to have ties to “sovereign citizens” and antigovernment extremists.

  • CKB/CKB168, WCM777 And TelexFree Prosecutions Make SEC’s 2014 Highlight Reel; Agency Says Its Job In MLM Sphere Isn’t Done

    recommendedreading1The prosecutions of the CKB/CKB168, WCM777 and TelexFree “programs” made the SEC’s highlight reel for fiscal year 2014, which began on Oct. 1, 2013 and ended on Sept. 30 of this year.

    In a statement today, the SEC said “new investigative approaches and the innovative use of data and analytical tools contributed to a very strong year for enforcement marked by cases that spanned the securities industry.”

    Noting the FY 2014 pyramid-scheme actions against the MLM or direct-sales firms included allegations that the “programs” used social media and targeted immigrant communities, the SEC said its work wasn’t done.

    “The Enforcement Division will continue to root out pyramid and Ponzi schemes that prey on vulnerable investors,” the agency said.

    Not specifically noted in the agency’s statement today were the actions against the eAdGear and Zhunrize “programs” announced just prior to the close of the 2014 fiscal year. The eAdGear case was announced on Sept. 26; the Zhunrize case was announced on Sept. 23.

    Since the Zeek Rewards action in 2012, it has become clear that MLM HYIP schemes have tapped participants for spectacular sums. The Zeek scheme alone gathered on the order of $850 million. Filings suggest TelexFree may have gathered on the order of $1.2 billion.

    CKB/CKB168 appears to have gathered at least $20 million. WCM777 gathered on the order of $80 million. Zhunrize gathered on the order of $105 million, and eAdGear gathered on the order of $129 million, according to court filings.

    Zeek receiver Kenneth D. Bell, who is managing Zeek-related cases that involve hundreds of thousands of victims across the world, described Zeek this week as an attempt to put lipstick on a pig.

    It’s a description that could apply across the MLM HYIP sphere. The cross-border, murky nature of the “programs” raise concerns about both economic security and national security.

    On Sept. 21, the PP Blog reported that a small sampling of data from 95-self-identified victims of TelexFree shows they lost an average of $27,578 each. TelexFree potentially created 1 million victims or more.

    The SEC has broad responsibilities across the securities industry and its sectors — from Wall Street to Main Street.

    From the SEC’s statement today (italics added):

    The Securities and Exchange Commission today announced that in fiscal year 2014, new investigative approaches and the innovative use of data and analytical tools contributed to a very strong year for enforcement marked by cases that spanned the securities industry.

    In the fiscal year that ended in September, the SEC filed a record 755 enforcement actions covering a wide range of misconduct, and obtained orders totaling $4.16 billion in disgorgement and penalties, according to preliminary figures. In FY 2013, the Commission filed 686 enforcement actions and obtained orders totaling $3.4 billion in disgorgement and penalties. In FY 2012, the Commission filed 734 enforcement actions and obtained orders totaling $3.1 billion in disgorgement and penalties.

    The agency’s enforcement actions also included a number of first-ever cases, including actions involving the market access rule, the “pay-to-play” rule for investment advisers, an emergency action to halt a municipal bond offering, and an action for whistleblower retaliation.

    “Aggressive enforcement against wrongdoers who harm investors and threaten our financial markets remains a top priority, and we brought and will continue to bring creative and important enforcement actions across a broad range of the securities markets,” said SEC Chair Mary Jo White. “The innovative use of technology – enhanced use of data and quantitative analysis – was instrumental in detecting misconduct and contributed to the Enforcement Division’s success in bringing quality actions that resulted in stiff monetary sanctions.”

    “Time and again this past year, the Division’s staff applied its tremendous energy and talent, uncovered misconduct, and held accountable those who were responsible for wrongdoing,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “I am proud of our excellent record of success and look forward to another year filled with high-impact enforcement actions.”

  • Lawyers Assemble To Discuss TelexFree Case; Session Sponsored By Boston Bar Association And Led By Jonathan M. Horne And Timothy J. Durken Of Jager Smith PC

    newtelexfreelogoEDITOR’S NOTE: It is hard to contemplate the rich history of the United States without at once contemplating the rich history of the Boston Bar Association. They shall forever be intertwined . . .

    One could imagine that, 241 years ago, a contemplative session of the Boston Bar Association (BBA) might have been advertised with paper handbills and titled, “The Law as It Pertains to Taxation without Representation and the Destruction of Certain Aromatic Tea in Boston Harbor on December 16, 1773.”

    Although yesterday’s noontime session at the BBA appears to have eschewed handbills in favor of Twitter and such, it nevertheless addressed the past and the future. Its simple title: “TelexFree[:] How We Got Here and Where We Are Going.”

    Jonathan M. Horne and Timothy J. Durken of Jager Smith PC were instrumental in putting it together. A PDF of what was covered at the session is available today.

    Other information on the session is available at the website of the BBA.

    The venerable Boston Bar traces its roots to the 18th century. In the 1760s, a local young fellow by the name of John Adams was speaking on important things (such as justice) in and around the coffeehouses and taverns on Beacon Hill. He later helped organize the greatest beacon of freedom the world had ever known: the United States of America. In ways large and small, Massachusetts continues to be a preeminent source of light from this beacon.

    Later yet, Adams would become the second President of the United States, succeeding George Washington.

    President Adams, the father of John Quincy Adams, America’s sixth President, knew towns TelexFree members later would know. (Among them are Quincy and Worcester.)

    Read the bio of President John Adams at WhiteHouse.gov.

  • DEVELOPING STORY: Zeek Figure Robert Craddock Accused Of Trademark Infringement And Engaging In ‘Shake-Down’ Bid Against MLM Affiliates

    EDITOR’S NOTE: The story below focuses mostly on a lawsuit filed against Zeek Rewards figure Robert Craddock by a Nevada company known as BTG180. A lawsuit filed against Craddock by a Wyoming company known as OfferHubb.net Inc. makes similar claims against Craddock.

    ** ___________________________________**

    breakingnews72DEVELOPING STORY: (4th Update 10:12 a.m. EDT Oct. 14 U.S.A.) Zeek Rewards figure Robert Craddock has been accused in a private lawsuit filed in Nevada federal court of trademark infringement and using a “shell corporation” to engage in a “shake-down” bid against affiliates of at least three MLM networks: Zeek, OfferHubb and BTG180.

    The alleged shell corporation is known as Fun Club USA Inc., according to a complaint filed Feb. 5, 2014.  It has “no employees,” was  “never capitalized” and created a condition under which Craddock was able to use funds directed to the corporation by MLMers as his personal funds, the plaintiffs contend.

    The plaintiffs in the case are listed as BTG180 LLC and Randall Jeffers. A second complaint against Craddock was filed on the same day, also in Nevada. Plaintiffs in that case are OfferHubb.net Inc. and David Flynn, who allege that Craddock “immediately” embarked on a web-based disparagement campaign against them after OfferHubb chose in July 2013 not to renew a contract with Craddock and FunClub USA.

    OfferHubb.net Inc. further accused Craddock of misrepresenting the company, breaching the OfferHubb Terms of Service by inducing affiliates to make side deals and accept kickbacks from affiliates and cross-selling other MLM opportunities in contravention of his agreement with OfferHubb.

    BTG180 is associated with a “program” known as BidsThatGive, which positioned itself as an opportunity to fight child poverty and the exploitation trades. An apparent prelaunch for BidsThatGive was conducted in July 2012, the month before the SEC moved against Zeek.

    Fun Club and Craddock are referenced in a blistering memo filed in the Zeek Ponzi- and pyramid-scheme case by the SEC on Dec. 17, 2012. In the memo, the SEC accused Craddock of encouraging Zeek affiliates “not to cooperate” with Kenneth D. Bell, the court appointed receiver. The SEC further alleged that Craddock was spreading misinformation about how the agency viewed its own case against Zeek and that Fun Club appeared to have been formed 11 days after the SEC emergency action against Zeek on Aug. 17, 2012.

    Craddock has not been charged by the SEC with wrongdoing.

    Despite the SEC’s December 2012 assertions against Craddock and Fun Club, however, BTG180 appears to have entered into a contract with Craddock and Fun Club on Aug. 12, 2013, just five days shy of the one-year anniversary of the SEC’s complaint against Zeek. In the August 2012 action, the agency accused Zeek of engaging in securities fraud, selling unregistered securities and operating a combined Ponzi and pyramid scheme that had gathered hundreds of millions of dollars in just shy of 20 months.

    BTG180, according to its own lawsuit against Craddock and Fun Club filed in February 2014, paid Craddock and the shell company $50,000 in advance of work Craddock had agreed to perform for BTG180.

    BTG180 says it wants back the $50,000 because Craddock failed to deliver. It also contends other actions by Craddock caused it to suffer damages.

    Part of Craddock’s duties, according to the complaint, was to “market the BTG180 network marketing opportunity to former affiliates of the Zeek Rewards network, which had provided products similar to those provided by BTG180.”

    Craddock did not perform the agreed-to work, according to the lawsuit. Instead, he attempted to “induce BTG180 to promote and incorporate into its product line a so-called checking account draft processing system known as BTM. Craddock is the founder of a corporation  known as BTM Check Draft Inc.”

    Without authorization from BTG180’s Jeffers, according to the complaint, Craddock pitched his BTM check system to the members of BTG180, amid false claims that it “had been approved by BTG180” and was in the company’s product stable.

    Other “confrontations” between Craddock and “BTG180 executives” ensued, and Craddock tried to “induce” BTG180 to “market other products for him,” according to the complaint.

    When Craddock “continued to defy Plaintiffs requests to stop these actions,” according to the complaint, “BTG stopped paying Craddock and Fun Club.”

    Under the terms of the contract, according to an exhibit in the case, Craddock and Fun Club were to receive $20,000 a month through BTG180, plus approved expenses, from Sept. 1, 2013 through Sept. 1, 2014.

    Craddock also was required not to reveal BTG180’s trade secrets and proprietary information, according to the exhibit.

    But at some point during contractually required Craddock visits to BTG180’s operations in Nevada, according to the complaint, BTG180 came to believe that “Craddock used a computer or several computers at BTG180’s offices to access and download and/or retain contact information of BTG180’s affiliates.”

    Craddock, according to the complaint, then sought to harm BTG180 by “disrupting and ruining its relationships with its affiliates.”

    As part of his plan to ruin BTG180, according to the complaint, Craddock established a website styled BTGlegal.com and engaged in trademark infringement while doing so. As a further part of this scheme, according to the complaint, Craddock used the website to paint Jeffers as dishonest and unethical, saying Jeffers and “other principals” of BTG180 had criminal records and a history of defrauding people.

    At the same time, according to the complaint, Craddock claimed that BTG180 had been “classified” a Ponzi scheme, that the company was to be “investigated,” that “reports” about BTG180 had been filed with the North Carolina Attorney General, that a Zeek-like action against BTG180 was planned by investigators and that “BTG180 affiliates could face criminal or other legal charges for signing up new affiliates.”

    Craddock, according to the complaint, issued an “edict” that “all BTG180 affiliates were under a cease and desist order to stop doing business with BTG180.”

    By December 2013, according to the complaint, Craddock was soliciting monthly donations of $25 each from BTG180 affiliates, saying the money would help them get back sums they had paid to BTG180. At the same time, according to the complaint, Craddock was encouraging members to contact a reporter at ABC News by email and to use a subject line that read, “They Took My Money and Used Kids to Lure me In.”

    In 2012, according to the BTG180 complaint, Craddock had solicted donations from Zeek members amid assertions he was protecting their legal interests. He eventually did the same thing to BTG180 and OfferHub participants, a “shake-down” bid targeted at MLMers, according to the complaint filed by BTG180.

    Craddock is accused in the complaint of cybersquatting, trademark infringement, wrongful use of a computer, misappropriation of trade secrets, wrongful interference with economic relations, breach of contract, unjust enrichment, defamation and hiding behind a shell company.

    The trademark-infringement claim may be particularly concerning to the MLM trade, given that Craddock has asserted he works as a copyright and trademark agent on behalf of MLM “programs.”

    On July 22, 2012, while purportedly working as a “consultant” for Zeek, Craddock filed a copyright- and trademark-infringement complaint against a HubPages website operated by Zeek critic K. Chang. K. Chang, who also posts on publications such as the PP Blog and BehindMLM.com, ultimately prevailed in the action brought by Craddock.

    Less than a month later, the SEC brought the Ponzi- and pyramid action against Zeek.

    Earlier this year, a website known as Changes Worldwide identified Craddock as its copyright agent. Filings by the SEC in June 2014 alleged that Faith Sloan, accused in April 2014 of securities fraud by the agency in its Ponzi- and pyramid complaint against the TelexFree “program,” sent more than $15,000 to an entity known as Changes Worldwide LLC after an asset freeze was opposed against Sloan in the TelexFree case.

    Sloan also was a Zeek affiliate. Whether proceeds that originated in Zeek and/or TelexFree made their way into Changes Worldwide is unclear.

    BehindMLM.com, recently the subject of a DMCA takedown notice by Sloan but now back online, reported yesterday that Changes Worldwide and a companion entity known as Changes Trading are having payment problems. As the PP Blog reported on Oct. 2, the email address Sloan used to file the complaint against BehindMLM.com was associated with a 2×2 matrix “program” known as “Diamond Holiday Feeder” that was making the HYIP rounds in 2010.

    Despite the fact Sloan accused BehindMLM.com of using on its website copyrighted material she owned, one of her 2010 promos for Diamond Holiday feeder used nearly three minutes of a soundtrack recorded in 2009 by The Black Eyed Peas to celebrate the 24th season of the Oprah Winfrey Show.

    MPB Today, a collapsed matrix cycler that led to racketeering charges in Florida against the “program” operator, is an example of a 2×2. Another example is Regenesis 2×2, which led to a U.S. Secret Service probe in Washington state in 2009. Some Zeekers are known to have promoted Regenesis 2×2.

    News broke last week that Craddock is listed on Amazon.com as the author of a book on Zeek Rewards. Marketing copy for the book asserts that the U.S. government should have modeled a “stimulus program” after Zeek, rather than shutting it down.

    In the current infringement actions against Craddock, the dockets of the case suggest Craddock no longer has paid counsel and is seeking to litigate pro se against the plaintiffs, contending that the cases should have been handled through binding arbitration, not actions in federal court.

    Craddock’s wife is a co-defendant, amid claims she and her husband used Fun Club USA to dupe MLMers who provided money to protect their legal interests.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

  • UPDATE: Ad For Book By Zeek Figure Robert Craddock Appears On Drudge Report

    This ad for Zeek figure Robert Craddock's new book appeared on the Drudge Report today. Source: Screen shot.
    This ad for Zeek figure Robert Craddock’s new book appeared on the Drudge Report today. Source: Screen shot.

    DISCLOSURE: The PP Blog carries ads from AdChoices that are delivered by Google.

    UPDATED 7:22 A.M. EDT OCT. 12 U.S.A. The PP Blog observed yesterday that a new book by Zeek Rewards figure Robert Craddock now is available on Amazon.com after earlier having been listed as “Out of Print” and with “Limited Availability.” The price of the 276-page paperback, as advertised on Amazon.com yesterday and today, is $22.45.

    This afternoon the PP Blog observed an ad for the Craddock book at the top of the Drudge Report, one of the most highly trafficked political websites in the world. A symbol in the ad suggested it originated through AdChoices. Ads on the Drudge Report are arranged through Intermarkets Inc.

    Marketing copy for the book, which the PP Blog accessed directly through Amazon.com, does not mention that Zeek Rewards was alleged to be a massive international Ponzi- and pyramid scheme that gathered hundreds of millions of dollars and affected hundreds of thousands of people.

    The copy argues that the U.S. government should have modeled a “stimulus program” after Zeek, instead of shutting it down.