PatrickPretty.com

Category: Writing And Branding

  • Quatloos Mod, RealScam.com, PP Blog Targeted In Bizarre Hectoring Campaign

    harassmentrs(3RD UPDATE 2:43 P.M. EDT U.S.A.) wserra, an attorney, Quatloos moderator and occasional poster on the PPBlog and RealScam.com, appears recently to have been targeted by a crackpot who desires to hector wserra with complaints to the bar association.

    Among other things, Quatloos publishes information on the bizarre undertakings of “sovereign citizens” in the United States and Canada.

    It is not uncommon for “sovereign citizens” and/or “supporters” of HYIP “programs” and/or bizarre MLM “programs” to hector sites such as Quatloos and RealScam and the PP Blog.

    Whoever advanced the hectoring campaign against wserra appears also to be interested in simultaneously hectoring RealScam and the PP Blog. The PP Blog occasionally posts on RealScam.com, typically providing context on scams-in-progress or comparisons with previous scams.

    Over the years, both RealScam.com and the PPBlog have been targeted with DDoS attacks and bizarre forms of menacing.

    The most recent campaign includes a conspiracy theory that the PP Blog and Lynn Edgington, an antiscam activist, own RealScam individually or jointly. The bogus theory further holds that the PPBlog fraudulently joined the JSSTripler/JustBeenPaid HYIP “program” (2 percent a day/precompounding) to “gain access to all the conference call recordings.”

    In addition, the theory seems to hold that JSS/JBP was a legitimate “program” and that the PP Blog was engaged in espionage in violation of U.S. law.

    JSS/JBP may have links to the so-called “sovereign citizens” movement.

    In November 2013, the PP Blog received a threat that federal authorities would move against it over its coverage of the Profitable Sunrise “program”  if the Blog did not meet certain conditions imposed on it by fiat by an apparent “supporter” of the “program.”

    The Blog also has been threatened with astronomical fines by individuals who appear to believe they can trademark their names as a means of assuring that reporters cannot use them when covering matters of public record or public discussion.

    Whoever is carrying out the hectoring campaign against wserra, RealScam.com, Edgington and the PPBlog appears to believe it prudent to encourage HYIPers to purchase firearms, apparently out of concern that the antiscam community may organize a flash mob and appear at the homes of HYIP purveyors.

    The individual, for instance, asserts that it is important “legally to stand your ground” and to “go purchase a firearm right away [l]egally if it gets that serious to protect your home or place of business.”

    And, the individual further suggests, the White House should be brought into the loop about perceived plots in the antiscam community to harm the HYIP trade.

    Apparently after determining there was a need for HYIP purveyors to conduct a swift  intelligence-gathering operation on critics who post on RealScam, one or more HYIP colleagues “have dissected this [RealScam.com] group in the matter of 2 days,” the individual asserted.

    This apparently led to a determination that the RealScam posters who advocate against HYIP schemes come “down to . . . maybe 2-6 lonely, depressed, lousy, white, obese, out of shape, old, uneducated group of Losers.”

    The individual offered no guidance on how to deal with RealScam posters who may, for example, have no issues with social rejection, depression or head lice while at once being African American or of another race, trim, in shape, young or youngish and educated.

    RealScam, according to the individual, also includes “dedicated snitches,” a line that plants the seed such snitches should be dealt with harshly by HYIP purveyors.

    And, the individual suggests, the HYIP field could benefit by carrying out extortion campaigns against RealScam and some of its posters — perhaps particularly those who may live in fear of being outed for being gay, aged, bigoted, afflicted with disease and living in poverty while serving their porn addictions. (Italics added to the individual’s claim below):

    RealScam admins have deep secrets amongst each other. Some are gay, some are OLD, some are Fat, Some have HIV, Some are addicted to Drugs, Some are Racist, Some are Broke/Poor, Some are addicted to the internet but mainly addicted to the realscam website and a few porn sites. It gets deep once you really sit down and ask yourself why are these strange group of losers out to harm so many innocent individuals?”

    Part of the individual’s “strategy” — if it can be called that — appears to be to overwhelm authorities with complaints about RealScam and some of its posters. Such an approach may be consistent with the approach of a “sovereign citizen” or a person who has fallen down a “sovereign citizen” rabbit hole. One of the “sovereign” strategies is to overwhelm courts and agencies with paperwork and to make false claims against individuals.

    The approach has been described as “paper terrorism.”

    Coinciding with the most recent attack on RealScam and some of its posters is an apparent bid to encourage complaints to RipoffReport. These events are taking place against the backdrop of continued efforts by a well-known cyberstalker to use lurid sexual innuendo in attacks against the antiscam community, including the depiction of one antiscam advocate as a diaper-wearing pole dancer.

  • UPDATE: Purported ‘Sovereign Citizen’ Convicted In Bizarre ‘Liens’ Caper Targeting Judges, Law Enforcement

    From 2012.
    From 2012.

    We first wrote about Cherron Marie Phillips in November 2012, after she was arrested on charges that she had filed bogus liens against a chief U.S. District Judge, a U.S. District Judge, two U.S. Magistrate Judges, a former U.S. Attorney, an assistant U.S. Attorney, a federal court clerk, four federal Task Force officers and a federal agent.

    All in all, Phillips allegedly sought the staggering sum of $1.2 trillion.

    Things only got crazier from there.

    By July 2013, a federal judge admonished Phillips by telling her that “I hesitate to rank your statements in order of just how bizarre they are.”

    Now, the Chicago Tribune is reporting that Phillips has been convicted of most of the charges against her. From the paper (italics added):

    Following the verdict, U.S. District Judge Michael Reagan ordered Phillips taken into custody, calling her “a paper terrorist” who “will continue on her misguided bent” if he allowed her to remain free until her sentencing in October.

    Also see the thread on Phillips at Quatloos.com.

    Among other things, Quatloos covers scams involving “sovereign citizens.”

     

  • ** CAUTION: Report Of Bogus TelexFree Site **

    cautionflagThere is a report on social media this morning of a bogus TelexFree site that mirrors an old TelexFree site that existed when the company was actively soliciting business. The site creates the impression TelexFree has reopened.

    TelexFree has not reopened.

    It is Sunday. Federal prosecutors handing the TelexFree criminal case involving alleged fraudsters James Merrill and Carlos Wanzeler did not immediately respond to a request for comment.

    The actual TelexFree site says the firm has suspended all business activity. The trustee in the TelexFree bankruptcy case has begun his investigation and announced in court filings that he is seeking court authority to issue subpoenas. (See documents 261-265 here. Link current as of today’s date.)

    Because the report about the bogus site was made on social media and the intent of the poster is not known, extreme caution is warranted. Clicking on the link to the asserted hacking site through the social-media site potentially could have bad consequences. So could entering any information on forms at the site.

    The social-media poster positioned the report as a warning hackers seeking to profit from the troubles at TelexFree could be at work.  The site used the word “telexfree” as part of its URL.

    Even if the social-media poster was being sincere in his warning and it proves true the site is bogus and designed for hacking, clicking on the link potentially could expose you to harm.

    And if the site is not a hacking or phishing site, it leads to questions about why such a site that mirrors TelexFree’s “old” site exists to begin with. Could it be an old TelexFree affiliate’s site created with swiped code and designed to dupe prospects into believing they were dealing directly with the TelexFree corporate entity? Could it be an orphaned site of TelexFree itself?

    The asserted hacking site uses the name of a male individual with an address in Chicago, according to a database search. The Registant Organization is listed as “telexfree.”

    Some TelexFree affiliates are alleged to have accepted TelexFree payments directly, a circumstance the Massachusetts Securities Division said in April resulted in a condition in which “participants received uncontrolled cash deposits outside of the TelexFree system.”

    The social-media poster who issued the warning appears to be pushing a “program” known as ViziNova that may be linked to the alleged $80 million WCM777 scam allegedly operated by Phil Ming Xu.

    It is common for HYIP hucksters to be in multiple “programs” simultaneously. After “working” a “program” for months and cleaning up with it, the most disingenuous promoters then may turn on the “opportunity,” perhaps particularly if a regulatory action occurs or there is a sense one is imminent.

    Such promoters then may try to port entire “teams” to a new scam.

    Read a report on ViziNova at BehindMLM.com.

  • BULLETIN: SEC Accuses Faith Sloan Of Violating Asset Freeze In TelexFree Case By Sending Thousands To ‘Changes Worldwide LLC,’ Company That Lists Zeek Figure Robert Craddock As Copyright Enforcer

    From an SEC filing today that alleges Faith Sloan violated the TelexFree asset freeze by sending money to a "program" known as Changes Worldwide LLC. Redactions by PP Blog.
    From an SEC filing today that alleges Faith Sloan violated the TelexFree asset freeze by sending money to a “program” known as Changes Worldwide LLC. Redactions by PP Blog.

    BULLETIN: (4th Update 10:01 a.m. EDT June 13 U.S.A.) The SEC has accused Faith Sloan of violating the asset freeze imposed against her in the TelexFree pyramid- and Ponzi case by sending nearly $15,000 to Changes Worldwide LLC for the purchase of “business promo packs.” On its website, Changes Worldwide identifies Robert Craddock as its copyright agent. He also is believed to be an affiliate for Changes Worldwide.

    Whether the SEC would seek return of the money from Changes Worldwide was not immediately clear. Recipients of ill-gotten gains can become relief defendants in SEC actions.

    Craddock emerged as a figure in the Zeek Rewards Ponzi scheme case, with the SEC asserting in 2012 that he encouraged affiliates not to cooperate with the court-appointed receiver in the Zeek case. The receiver said at the time that he had obtained information “indicating that large sums of Receivership Assets may have been transferred by net winners to other entities in order to hide or shelter those assets.”

    While a purported consultant for Zeek in July 2012, Craddock, citing alleged trademark and copyright violations, sought to shut down a Hubpages site by K. Chang that questioned the Zeek program, which the SEC and federal prosecutors later described as an $850 million fraud. K. Chang publishes the MLM Skeptic site.

    One of the assertions against Sloan today by the SEC is that she had the sole power of direction and was the sole beneficiary of a real-estate trust, but amended trust documents after the TelexFree freeze to transfer her interest to her mother — in violation of the asset freeze. Sending money to Changes Worldwide and a separate entity known as Changes Trading LLC also violated the freeze, the SEC alleged.

    The SEC said that it had linked Sloan to three transactions with Changes Worldwide on April 25, eight days after Sloan learned of the asset freeze. Two of the transactions were for $5,000 each, and a third was for $4,854, the SEC asserted.

    On April 28, 11 days after she learned about the freeze, Sloan sent $3,990 to Changes Trading, using two separate checks for $1,995 each, the SEC alleged.

    Neither of the “Changes” entities nor Craddock has been accused of wrongdoing, but the alleged Sloan transactions lead to questions about whether MLM promoters accused of fraud are hiding money in other “programs” and abusing trusts in bids to avoid detection and keep their interests in schemes intact.

    A crime known as structuring also could be occurring if the transactions are set up to evade bank-reporting requirements. In a civil action against TelexFree in April, the Massachusetts Securities Division raised the issue of structuring.

    The SEC said today that Sloan had asserted her Fifth Amendment right against self-incrimination over a TelexFree related matter involving the asset freeze cited in a preliminary injunction. The injunction requires her to identify her assets. She has not been charged criminally, but it is known that a criminal probe is under way.

    Read a November 2013 review of Changes Worldwide on BehindMLM.com.

    NOTE: Our thanks to the ASD Updates Blog.

  • Solavei, An MLM Telecom Company In Space TelexFree Wants To Occupy, Declares Bankruptcy Less Than 2 Years After Debut; Competing Affiliates Try To Poach Recruits

    Source: Twitter.
    Source: Twitter.

    UPDATED 6:07 P.M. EDT U.S.A. In yet another bizarre development in the world of MLM, a company that competes in a space TelexFree said it wants to occupy has declared bankruptcy less than two years after its formal launch.

    As though on Stepfordland cue, competing MLMers started trawling the Internet for the carcasses of potentially disaffected affiliates.

    Seattle-based Solavei, which offers a cell-phone service, announced its Chapter 11 filing yesterday. Now in bankruptcy court itself, TelexFree has said it, too, wanted to offer a cell-phone service on top of its VOIP product.

    Solavei formally launched in July 2012, saying it was a “new social commerce company with an affordable, contract-free mobile service that actually pays back consumers for adding new members.”

    The company, however, now says it needs to restructure its debt “in line with operating income and more accurately align costs and infrastructure needs.”

    Some MLMers immediately pounced on the news of the bankruptcy filing, using it as a means of poaching Solavei affiliates into competing MLM “programs.” Like some TelexFree loyalists, some Solavei fans tried to dismiss the Solavei filing as business as usual.

    Solavei itself declared on Twitter that it was “Happy Pay Day.”

    The firm says its members and employees “will notice no changes in service or operations as we work with our vendors and investors to refine the social commerce platform and model we pioneered. Solavei will emerge from this process equipped to continue our growth with strong operations, a better cost structure, and opportunity for our members.”

    Read a Solavei brief (and accompanying comments thread) at BusinessForHome.

    MLM often is known for epic PR blunders and embarrassing efforts to poach recruits. When two TelexFree affiliates were referenced in Brazilian media accounts about suicide deaths, some fellow affiliates spammed the stories with offers to join the “program.”

    After TelexFree confronted pyramid-scheme allegations in Brazil, some affiliates responded by asserting they were “100% TelexFree.”

    Perhaps channeling the PR approach of TelexFree Stepfordians, one Solavei affiliate on Twitter declared himself “100% Solavei now!” Another on Facebook roared, “I am Solavei!”

    MLM’s telecom sector is known for strange occurrences. In 2010, an upstart  “program” known as Data Network Affiliates purported to be the world’s low-price leader in cell phones, offering “unlimited” talk and text for $10 a month. The company appears to have made the claim despite the fact it had no carrier agreements and no licensing.

    It then backed away from the claim, bizarrely asserting that a vendor had made it believe it had crushed all competition on earth.

  • TelexFree A No-Show At Alabama Hearing; Litigation Involving Firm Piles Up

    newtelexfreelogoUPDATED 12:25 P.M. EDT U.S.A. Immersed in litigation on at least 10 fronts in the United States while also confronting licensing challenges and asset freezes, TelexFree did not appear last month at a hearing it requested to consider its telecom application before the Alabama Public Service Commission.

    As things stand, the company is not authorized to operate in the state. The May 13 hearing began, according to a transcript published June 4, with an administrative law judge polling the room for appearances on behalf of the state and TelexFree. Two officials from the Commission entered appearances.

    “Let the record reflect that no one has appeared on behalf of the applicant,” noted Administrative Law Judge Scott Morris.

    The Commission then noted a TelexFree matter before the Minnesota Public Utilities Commission. In April, the staff of the Minnesota PUC asked the state to deny the firm the authority to operate, amid allegations it had provided “false and misleading information” during the application process.

    Morris, according to the Alabama transcript, then noted that “unless [TelexFree] requests rescheduling and pays the court reporter fees for not appearing, this application will not go forward. It will be dismissed.”

    TelexFree initially was scheduled to appear at an Alabama hearing on April 10, but asked for the session to be postponed “for a month” owing to unspecified “scheduling conflicts.”  One of those scheduling conflicts now appears to have been the logistics associated with filing for bankruptcy in Nevada less than a month after TelexFree assured Alabama regulators it had the financial wherewithal to operate in the state.

    The Commission accommodated TelexFree by rescheduling the April 10 hearing for May 13, but TelexFree did not show.

    TelexFree’s Alabama application asserted that TelexFree LLC had a “parent company” known as “TelexFree Group Inc.” Where it is based is unclear. A provision of the TelexFree LLC “Operating Agreement” included in the Alabama application purported to permit TelexFree LLC “[t]o lend money upon terms acceptable to the Managers to any person or entity, and to enter into contracts and agreements which are not arms-length if they are consistent with the best interests of the Company.”

    On April 13, TelexFree declared bankruptcy. The Massachusetts Securities Division (MSD) and the U.S. Securities and Exchange Commission (SEC) filed fraud allegations shortly thereafter. MSD described TelexFree as a combined pyramid- and Ponzi fraud that had gathered more than $1.2 billion.

    Less than a month earlier, on March 20, TelexFree filed for its license in Alabama, saying it had 2013 net income of more than $36.4 million and that its “current financials Show considerable net worth.” The document described “Joe Craft” as holding the “Official Title” of “CFO” of TelexFree LLC.

    As the PP Blog reported on April 21 (italics added):

    Page 15 [of the Alabama application] includes an oath recorded March 5, 2014, before a Massachusetts notary public. The oath bears the name and signature of Jim Merrill, who is listed as “President” of TelexFree LLC. The oath attests that the information in the Alabama document — an “Application for a Certificate of Public Convenience and Necessity to provide interexchange telecommunications services in Alabama” — is true to the best of Merrill’s knowledge and belief.

    The document appears accidentally to have identified Merrill as a woman, given that the certification line actually reads “the statements made herein are true to the best of her [emphasis added by PP Blog] knowledge and belief. Merrill appears not to have noticed when signing the document.

    Despite the sworn oath of Merrill that Craft was the “Official” TelexFree “CFO” on March 5, 2014, however, TelexFree’s board appears not to have named Craft CFO until sometime after 8:11 p.m. on April 13, 2014, the same day TelexFree and related entities filed for bankruptcy in Nevada.

    According to TelexFree’s bankruptcy filing, “Joe H. Craft” of “Joe H. Craft, CPA” was present at the meeting, which was called to order by Carlos Wanzeler.

    During the meeting, the board and other attendees, including CPA Craft, “considered the Company’s liabilities, the strategic alternatives available to it, and the impact of each of the foregoing on the Company’s businesses,” according to the bankruptcy filing.

    During the meeting, the board decided to file for bankruptcy. It then was resolved that “Joe H. Craft” would become one of TelexFree’s “authorized persons.” After this resolution, it then was resolved that “the Authorized Persons be, and they hereby are, authorized and directed to employ the accounting firm of Joe H. Craft, CPA to provide Joe H. Craft to serve as Chief Financial Officer of the Company while the Chapter 11 case is pending and to assist the Company in carrying out its duties under the Bankruptcy Code.”

    Another resolution resolved that “Joe H. Craft be, and he hereby is, elected to serve as Chief Financial Officer of the Company.”

    On April 15, the SEC accused TelexFree, Merrill, Wanzeler and Craft civilly of fraud. Merrill and Wanzeler later were charged criminally with wire-fraud conspiracy. Interim TelexFree CEO Stuart MacMillan said he fired Wanzeler on April 17 and asked Merrill and Craft to resign.

    Page 19 of the 99-page Alabama filing showed an image of a March 8, 2014, document from the office of Alabama Secretary of State Jim Bennett. The document noted that the name TelexFree LLC was “reserved as available” in the state.

    “This name reservation is for the exclusive use of BWFC Processing Center, LLC, 825 East Main St, Boonville, IN 47601 for a period of one year beginning March 08, 2014 and expiring March 08, 2015,” the document reads in part.

    The East Main Street address is the address of both Craft’s accounting firm and the address of BWFC Processing Center LLC, a company listed in New Hampshire as a payment processor. A company with the same name operates in Nevada and provides registered-agent services.

    The SEC said in a complaint that Craft was hired as TelexFree’s accountant in April 2012 and “was sometimes held out as the company’s CFO.”

    Craft is accused of preparing “materially false and misleading” TelexFree financial statements.

    His work for TelexFree “was fraudulent and deceptive, because TelexFree was a Ponzi and pyramid scheme that was destined to collapse, thereby preventing it from making the payments promised to investors,” the SEC alleged.

    The PUCs of Nevada and Hawaii have booted TelexFree, with licensing issues unsettled in Minnesota, Alabama and other states.

    TelexFree is facing civil actions by the SEC and MSD, litigation in bankruptcy court, criminal prosecutions against Merrill and Wanzeler, a criminal grand-jury investigation in Massachusetts, forfeiture actions and at least four prospective class-action lawsuits.

    The firm says on its website that it “has suspended all business activity.”

  • EDITORIAL: Who’d Have Thunk It?

    “But like Heaven above me/The spy who loved me/Is keeping all my secrets safe tonight” — Lyrics from “Nobody Does It Better,” composed by Marvin Hamlisch, written by Carole Bayer Sager, performed by Carly Simon as the theme song of the James Bond film, “The Spy Who Loved Me.” Elektra Records, 1977.

    British spy James Bond, the world’s most public keeper of secrets, de-stressed through drollness. “Mmm, maybe I misjudged Stromberg,” he said in The Spy Who Loved Me. “Any man who drinks Dom Perignon ’52 can’t be all bad.”

    Bond, remarkably, has saved humanity approximately two dozen times over the years. Even more remarkable is that we know this. At least one of the saves, according to a film that never should have been made public, occurred in space.

    People in general didn’t know what had gone down in the cosmos and never should have been told. Given that the plot failed and they were still alive, they simply didn’t need to know. This is why it is so surprising MI6 made Moonraker public and actually sold tickets.

    Tacky.

    We’ll perhaps never know how many times the CIA and its various spies have saved humanity. Mum’s the word at Langley. Regardless, we appear to have found out today that agency that never talks and never sleeps also has a Bond-like odd and amusing quality.

    Film at 11? Not a chance. Mum’s the word at Langley.

    Memo to MI6: Stop putting your secrets on film. We really don’t want to know.

  • FAITH SLOAN: Blame TelexFree, Merrill, Wanzeler, Labriola And Nehra, Not Me

    Faith Sloan in a TelexFree promo. Source: YouTube
    Faith Sloan in a TelexFree promo. Source: YouTube.

    UPDATED 8:55 P.M. EDT U.S.A. Veteran HYIP huckster Faith Sloan told a federal judge presiding over the SEC’s TelexFree case that she is a victim of the company and was duped by TelexFree executives James Merrill, Carlos Wanzeler and Steve Labriola.

    And, the former Noobing, Zeek Rewards and Profitable Sunrise pitchwoman asserted, she also was duped by MLM attorney Gerald Nehra, a lawyer for TelexFree.

    Sloan was among four TelexFree promoters charged with fraud by the SEC. Four executives also were charged.

    “Sloan believed what Defendants Carlos Wanzeler, James Merrill, Steve Labriola and their attorney, Gerald Nehra, had told her, until TelexFree continued to miss the deadlines for the launch of its new products, which were to be the foundation of TelexFree’s growing business going forward into 2014,” Sloan said in court filings through her attorney.

    Those new products, Sloan said, included “MyFinancialAdvantagePlan,” “Mobile App,” “TelexCommerce” and “TelexMobile.”

    Taking a swipe at Nehra, Sloan contended that she and fellow promoters were “excited” about TelexFree after Nehra “had stood on the stage and publicly announced that TelexFree was ‘on a solid legal ground’, because they were selling a real product.”

    Nehra made the remark at a TelexFree rah-rah fest in Newport Beach, Calif., in July 2013, according to YouTube videos. The remarks followed a June 2013 action in Brazil in which certain TelexFree assets were frozen and new registrations were suspended, amid pyramid-scheme allegations.

    Sloan did not say why she continued to promote TelexFree with serious pyramid allegations on the table, except to suggest that Nehra’s remarks paved the way for her to continue with TelexFree. Nor did Sloan say whether her experience promoting Noobing, Zeek and Profitable Sunrise provided her any clues that something could be amiss at TelexFree.

    MLM attorney Gerald Nehra offering remarks about TelexFree; Source: YouTube.
    MLM attorney Gerald Nehra offering remarks about TelexFree; Source: YouTube.

    Sloan was not charged in the Noobing, Zeek and Profitable Sunrise cases. Regulators say Noobing, an HYIP that targeted people with hearing impairments, was attached to a government-grants swindle. It effectively was shut down by the FTC.

    Zeek, meanwhile, was an $850 million pyramid- and Ponzi scheme, and Profitable Sunrise was a cross-border securities swindle effectively run by a ghost that potentially raked in tens of millions of dollars. Both “programs” collapsed after SEC actions.

    In April 2014, the SEC described TelexFree as an epic, billion-dollar cross-border pyramid and Ponzi-swindle that engaged in securities fraud and the sale of unregistered securities. All four of the “programs” offered returns that bested Bernard Madoff on orders of between 20 and 70 to one on an annualized basis.

    Regulators have been warning about HYIP schemes for years, saying they offer returns that are too good to be true and make cosmetic tweaks to dupe the masses.

    Many such schemes proliferate because serial promoters turn blind eyes to obvious markers of fraud such as preposterous interest rates, a presence of a “program” on Ponzi-scheme forums, the presence of other serial fraud promoters and fractured relationships with payment vendors during the course of the fraud. The schemes pay commissions to unlicensed promoters to sell securities to recruits and typically have an illegal investment arm attached.

    When a scheme collapses, serial promoters disingenuously point fingers of blame back at management. Though the blame is deserved, it ignores the promoters’ roles in driving dollars to scams.

    Sloan also today accused Merrill and Labriola of threatening to boot her from the “program” after she made unflattering remarks about it — after she’d been in the “program” for a year or so and suddenly realized something was wrong at TelexFree.

    “In response to her public complaints, Labriola, with the approval of the Defendant, Merrill, threatened to terminate Sloan’s relationship with TelexFree shortly before they filed for bankruptcy protection on April 13, 2014,” Sloan contended in a “verified” memorandum of law filed by her attorney. The document seeks to have the charges against Sloan dismissed.

    From Sloan’s motion (italics added):

    Sloan became a “promoter” of TelexFree early in 2013. Sloan attended public webinars (web-based seminars) along with thousands of other TelexFree “promoters”. During those webinars, Sloan was told by TelexFree leaders that they were growing a company based on remarkable new products such as the “MyFinancialAdvantagePlan” (MFA), “Mobile App” “TelexCommerce” and “TelexMobile”, which was built on the backbone of Sprint, Verizon, and T-Mobile. All these products were due to be launched during the last quarter of 2013. The Mobile App was touted as being on a par with “WhatsApp”, which had been purchased by Facebook for 19 billion dollars. Based on what she was told by her fellow Defendants, Sloan and her fellow “promoters” were excited about the future of TelexFree, especially after the companies’ lawyer, Gerald Nehra, had stood on the stage and publicly announced that TelexFree was “on a solid legal ground”, because they were selling a real product.

    Sloan’s troubles aren’t limited to the SEC case. She’s also a defendant in at least three prospective class-action lawsuits that allege fraud and racketeering.

    Nehra is accused in the class-action complaints of turning a blind eye to TelexFree’s fraud to line his own pockets and dupe the masses.

    In the Legisi HYIP Ponzi case, HYIP figure Matthew John Gagnon tried a defense similar to Sloan’s defense in the SEC civil case. It didn’t work.

    Gagnon was held civilly liable and eventually was charged criminally for making a secret deal with Legisi to promote its scam, which had payouts similar to TelexFree, Noobing, Zeek and Profitable Sunrise. He was sentenced to five years in federal prison.

    Like the criminal side of the TelexFree case, the Legisi case was brought after an undercover investigation.

    NOTE: Our thanks to the ASD Updates Blog.

  • Appeals Court Agrees with FTC: BurnLounge Was A Pyramid Scheme

    breakingnews72UPDATED 10:12 A.M. EDT (JUNE 3) U.S.A. The U.S. Court of Appeals for the 9th Circuit today agreed with both a lower court and the Federal Trade Commission: BurnLounge was a pyramid scheme.

    Much to the dismay of some MLMers, the case demonstrates that a company that makes some retail sales still can be a pyramid scheme if rewards derived by participants largely came from recruitment, not from product sales.

    “We agree with the district court that BurnLounge was an illegal pyramid scheme in violation of the [Federal Trade Commission Act] because BurnLounge’s focus was recruitment, and because the rewards it paid in the form of cash bonuses were tied to recruitment rather than the sale of merchandise,” a three-judge panel ruled.

    The panel further ruled that the lower court did not err when it admitted testimony by Peter Vander Nat, an FTC expert who holds a doctorate in economics and an advanced degree in mathematics. BurnLounge had sought to strike the testimony.

    Circuit Judge Morgan Christen wrote the opinion for the panel, which unanimously found BurnLounge was a pyramid scheme.

    U.S. District Judge George H. Wu of the Central District of California made the pyramid ruling in 2012, ordering the company, CEO Juan Alexander Arnold and other pitchmen to pay about $17 million.

    Read the 2014 Appeals Court ruling which, among other things, discusses the applications of the Omnitrition International Inc. and Koscot Interplanetary Inc. pyramid cases on the BurnLounge case.

    Precisely what percentage of retail sales defeats charges of pyramid-selling remains an open question, with courts choosing to look at how the MLM business operates in practice, rather than how an MLM firm may spin things.

    In BurnLounge, Wu found that the the program’s bonus system was “a labyrinth of obfuscation” that resulted in a “93.84% failure rate for all Moguls,” all of whom were required to pay a fee to become Moguls and earn cash rewards, according to the appeals panel.

  • Say It Ain’t So, Lefty! Phil Mickelson’s Name Surfaces In Insider-Trading Probe

    The Wall Street Journal and the New York Times are reporting tonight that golfer Phil Mickelson’s name has surfaced in an insider-trading probe that also involves billionaire investor Carl Icahn and Las Vegas sports bettor William “Billy” Walters.

    Reports say Mickelson was approached today by the FBI at the Memorial golf tournament hosted by Jack Nicklaus in Dublin, Ohio. The SEC also is investigating.

    The news has thundered across the sports, entertainment and financial worlds,  with early reports appearing on ESPN.com,  Golf.com, Variety.com, HollywoodReporter.com,  CNBC.com and CNN/Fortune/Money.

    Early Twitter reactions ranged from sarcastic bemusement and indignation to resignation and disbelief.

  • Effort To Fete Two-Time SEC Pyramid Defendant And Alleged Racketeer Sann Rodrigues In Brazilian Senate Hall Reportedly Thwarted

    Sann Rodrigues. From a promo for a March TelexFree event in Spain at which Sann Rodrigues was feted.
    Sann Rodrigues. From a promo for a March TelexFree event in Spain at which Sann Rodrigues was feted.

    Politicians appear to have spared themselves some embarrassment, but MLM had another La-La Land PR train wreck today.

    iG (Brazil) is reporting that an effort to honor accused TelexFree pitchman and two-time SEC defendant Sann Rodrigues in a Brazilian Senate hall today was thwarted. The effort to fete Rodrigues appears to have been staged by a Brazilian MLM cheerleader, who reportedly also wanted Rodrigues named to the Multilevel Marketing Regulatory Agency of Brazil, which is not a government arm despite its name.

    The effort collapsed when iG contacted a Senate member, iG reported.

    From a translation from Portuguese to English by Google translate (italics added):

    The event was canceled after the iG contacting the office of Senator Cicero Lucena (PSDB-PB), which had made the reservation request the auditorium Petronio Portella Senate at the request of Regino Barros.

    An assessor’s office reported that such requests are common and that senators do not participate in drawing up the list.

    Earlier this month Rodrigues was accused of racketeering by TelexFree members suing the enterprise and several individuals, including accused TelexFree Ponzi schemers James Merrill and Carlos Wanzeler and MLM attorney Gerald Nehra.

    TelexFree staged a March 1 and March 2 awards ceremony in Madrid, Spain, at which Rodrigues was feted. Nehra also was feted, but appears not to have shown up to accept the award.

    Merrill, Wanzeler and Steve Labriola, another TelexFree SEC defendant, also were feted at the Madrid event. Merrill was jailed in the United States two months later, and Wanzeler allegedly fled to Brazil and became a fugitive.

    The massive TelexFree pyramid- and Ponzi scheme began to collapse on March 9, just a week after the Madrid event, according to court filings and other documents.

    “Rodrigues used investor funds to buy expensive automobiles, including a Lamborghini, a Ferrari, and two Mercedes Benz,” the SEC charged in an amended TelexFree complaint earlier this week. (See May 27, 2014, PP Blog story.)

    In 2006, Rodrigues was named an SEC defendant in a complaint that charged he operated a pyramid scheme involving phone cards. The phone-card scheme was targeted at the Brazilian community, the SEC said at the time.

    In April 2014, he was named one of eight individual defendants in the SEC’s TelexFree action.

    TelexFree also offered a communications product and, like the 2006 Rodrigues scheme, was targeted at the Brazilian community. TelexFree also targeted Latinos, according to records.