Late Tuesday, a fundraising email attributed to accused Ponzi schemer Andy Bowdoin of AdSurfDaily acknowledged that an advertised email “Blast” to 77,000 ASD members that was supposed to have occurred on Monday — the third anniversary of the Aug. 1, 2008, ASD-related asset seizures — had not occurred.
What actually occurred, according to the email, was a purported “Soft Launch” to fewer than 500 ASD members. Despite an earlier claim that the “Blast” to 77,000 members would occur Monday, the email backed away from the claim, advising recipients that the “Blast” was “COMING REAL SOON.”
Bowdoin’s fundraising venture itself missed two advertised launch dates, but finally launched on July 26, fours days after Bowdoin’s most recent appearance before a federal judge in the District of Columbia.
Tuesday’s email made various claims about the success of the purported “Soft Launch” so far while at once planting the seed that Bowdoin remains hugely popular among the ASD membership base.
Because the email did not identify the characteristics of the ASD members initially contacted, the purported results — including a result that 110 people among the group of fewer than 500 initially contacted had made donations totaling “Over $4,400” — could be heavily skewed in Bowdoin’s favor. As things stand, the email effectively makes the claim that more than 22 percent of the people initially contacted chose to donate to Bowdoin while suggesting the number could hold across a cross-section of 77,000 ASD members.
The “average” donation was pegged at $40. Averages in such a small sample, however, can be misleading. The email did not reveal the amount of the smallest donation or the largest one.
At the same time, the email does not say whether the “Soft Launch” group consisted of Bowdoin friends, family members, close business associates or people who may be friendly with Bowdoin such as former cheerleaders on the pro-ASD Surf’s Up forum. Nor does it say whether the initial contributors perhaps were predisposed to make a donation out of fear or concern that they had legal exposure because of the size of their downlines, the dollar volume they generated through ASD, the amount of “profits” they have lost as a result of their participation in ASD or the amount of interference they ran for Bowdoin before and after the August 2008 seizures of about $65.8 million from Bowdoin’s personal bank accounts.
Some ASD members have more legal and financial exposure than others and may be predisposed to help Bowdoin raise funds to mount his criminal defense as a means of delaying their own day of reckoning. The government, however, has two civil judgments against ASD-related assets in its favor, and announced nearly three years ago that it was implementing a remissions program through which ASD victims would receive compensation for their losses through seized funds.
Certain purported results suggest that, in the early stages of Bowdoin’s fundraising venture, the initial goal was to let Bowdoin bask in a preordained light and to shape the data to intensify the light. Although much has been made of a purported open rate of 42 percent — meaning that more than four out of 10 members of the initial group contacted opened the fundraising email — such a purportedly glowing statistic could be meaningless. Friends and foes alike are interested in Bowdoin news, and the nature of the initial group’s relationship with Bowdoin has not been revealed.
If Bowdoin and his fundraising helpers already had a “hot” list of sympathizers, early purported success would not be surprising — in the same way that a self-evident result culled from baseball fans asked to name their favorite team while already inside the park of their favorite team would not be surprising.
UPDATED 7:42 A.M. EDT (July 31. U.S.A.) Accused Ponzi schemer Andy Bowdoin of Florida-based AdSurfDaily twice has tried to prevent U.S. District Judge Rosemary Collyer of the District of Columbia from presiding over Bowdoin and ASD-related matters. In December 2009, Bowdoin tried to have Collyer disqualified from hearing the civil-forfeiture case in which the U.S. Secret Service had seized $65.8 million from his personal bank accounts. In January 2011, Bowdoin sought a change of venue that would have taken the criminal case away from Collyer and put it in the hands of a federal judge in Florida.
Both of Bowdoin’s bids failed.
Bowdoin, though, now appears to have shifted strategies. Instead of continuing to insist that Collyer should be removed from the case or that the case should be removed from her courtroom in the District of Columbia and assigned to a federal judge in Florida, Bowdoin is now acting as spokesman-in-chief for his own slime machine. He is suggesting in a fundraising video that ASD lost the civil case “because of” Collyer, whom he described as a “single, lone” judge without mentioning her by name — and that ASD members should send him $500,000 to prevent him from losing the criminal case and being sentenced to prison by Collyer.
AndysFundraisingArmy.com — the web venue through which Bowdoin is seeking to raise half a million dollars to pay for his criminal defense — missed two advertised launch dates this month before finally launching late Tuesday (July 26).
The site first advertised a launch date of on or before July 15. Missing that date, it then advertised a July 20 launch, which it also missed. The need for additional “testing” delayed the launch, according to the promos.
The missed launch dates pose an intriguing question: Were the launch dates deliberately postponed because Bowdoin and “Andy’s Army” knew he had made a video in which he slimed Collyer without identifying her by name — and wanted neither Collyer nor the prosecution to know until he was safely out of Washington that he intended to use Collyer as a reason ASD members should fund his criminal defense?
The “Andy’s Army” fundraising video in which Bowdoin claimed he lost the forfeiture case “because of a single, lone judge” was not released until July 26, four days after Bowdoin’s most recent appearance before Collyer.
Because the video appears to have been produced weeks in advance of Bowdoin’s July 22 date in Collyer’s courtroom — and because Bowdoin himself was the “star” of the video and knew what he had said in the fundraising pitch — it is apparent that Bowdoin knew even as he was asking Collyer on July 22 for a six-month continuance that he’d already hatched a scheme by which he’d transfer blame for his legal predicament to Collyer as a means of raising defense funds. In the video, Bowdoin also suggested his former attorneys, federal prosecutors and the U.S. Secret Service were responsible for his legal woes.
Collyer denied the continuance on July 22, according to the case docket. The video debuted four days later.
Bowdoin’s fundraising video made no mention of the fact that the U.S. Court of Appeals had upheld rulings made by Collyer. Indeed, it was hardly the case that a “single, lone judge” had the only say in the forfeiture case. A three-judge panel on the appeals court unanimously ruled against Bowdoin and ASD.
The appeals panel issued its ruling on March 25, 2011 — about three months prior to the production of the fundraising video.
Among Bowdoin’s assertions in the forfeiture case was that he had tricked into releasing his claims to $65.8 million seized by the Secret Service in August 2008. The tricksters, according to Bowdoin, included at least one of his paid attorneys and also federal prosecutors.
“Despite Bowdoin’s protests to the contrary, his own affidavit shows that he understood well that he was receiving no promise in return for relinquishing his claims,” the appeals panel ruled.
“Moreover,” the panel ruled, “far from being negligent, appellants’ attorney had sound reasons for recommending that they cooperate with prosecutors by relinquishing their claims.”
The panel also concluded that “the witnesses AdSurfDaily offered at the evidentiary hearing to prove that it operated a legitimate business contradicted each other . . . and at least one actually undermined the company’s position.”
Bowdoin, however, makes no mention of the appeals-court decision in the fundraising video. Nor does he explain what happened to millions of dollars ASD allegedly had moved offshore — some of it to Canada, some of it to Antigua.
Andy Bowdoin's fundraising video in which he claims ASD lost the forfeiture case because of a "single, lone judge" appears to have been produced as early as June 24. But the video was not released publicly until July 26, four days after Bowdoin appeared before the very judge he had dissed in the video. Two advertised launch dates prior to Bowdoin's July 22 appearance In U.S. District Court for the District of Columbia were postponed.
An email attributed to ASD member Todd Disner was received by some ASD members on July 25, three days after Bowdoin’s Washington appearance but one day before the release of Bowdoin’s fundraising video. (Read story based on email.)
“I talked to Andy the other day,” the email read in part. “He was in Atlanta airport coming home from his hearing in Washington.”
It is unclear whether Disner watched Bowdoin’s fundraising video prior to its public release on July 26. What is clear is that Bowdoin was in Collyer’s courtroom in Washington on July 22 when Bowdoin had the knowledge that, weeks earlier (as early as June 24), he’d taped a fundraising commercial asking ASD members to send him money and painting Collyer as one of the reasons they should pony up $500,000.
The video does not reveal that Collyer, in 2008, granted ASD a two-day evidentiary hearing in the “interests of justice” in which ASD called a series of witnesses to make its case that it was operating lawfully.
Nor does the video reveal that Collyer gave ASD extension after extension to file pleadings and once moved a hearing to a larger courtroom so more ASD members could observe the events unfolding in public.
When ASD members stayed away in droves, Collyer moved the proceedings back to a smaller courtroom — only to be pummeled later by dozens of pro se pleadings from ASD members, including members who accused her of “treason” while championing Bowdoin through the U.S. mail.
While Collyer was deliberating the issues raised by attorneys for Bowdoin and attorneys for the government during the evidentiary hearing, ASD announced on its Breaking News website that it expected a revenue infusion of $200 million from a penny-stock company.
Bowdoin did not address the $200 million claim in his fundraising video, choosing instead to position himself as a victim of a “single, lone” judge — and a victim of his attorneys and federal prosecutors and Secret Service agents who had “crucified” him.
Bowdoin As Christian Flag-Waver
That Bowdoin, a self-styled Christian “money magnet,” is wrapping himself in the American flag and other patriotic symbols on the “Andy’s Army” website adds yet another layer of the absurd to the long-running ASD saga.
On Sept. 11, 2008, the seventh anniversary of the 9/11 attacks, an ASD member released a “prayer” that asked God to strike federal prosecutors dead.
“Pluck them out of their dwelling place!” the prayer commanded. “Root them out of the land of the living! Let evil slay them, and desolation be their lot!”
God, among other things, was asked to “Send divine angelic prophetic assaults against
all diabolical intelligence!” and to “Release divine viruses (emphasis added) to invade satanic databases (emphasis added) and command that they be consumed and destroyed!”
For good measure, God was asked to “Let all satanic manifestations cease and let divine abortive measures and miscarriages occur in satanic wombs and incubators!”
All in all, the “prayer” included 38 specific pleas for ASD/Bowdoin help from God. Included in the 38 was a plea that federal officials be “afflicted and tormented WITHOUT RELIEF.”
“Heavenly Father, you have given us a great work to accomplish! We war for the releasing of our finances and all resources that belong to us! Let those that hold on to our wealth longer than they should be afflicted and tormented WITHOUT RELIEF until they release what rightfully belongs to us!
“We command satan to cough it up! Spit it out! Release it! Loose (sic) it and let it go!!!!”
Nearly three years later, the prayer remains unanswered. It is almost certainly the case that, to Christian members of ASD who value intellectual honesty, the nonanswer was the answer. Indeed, asking God to let evil visit federal employees and cause their deaths is decidedly unChristian. No person with genuine faith in God ever would embrace an appeal for God to slay Bowdoin’s litigation opponents, whom the prayer defined as “satan.”
Since the prayer’s September 2008 debut, Bowdoin has lost two civil forfeiture cases, including one in which he did not even bother to file a claim. Bowdoin-connected assets have been targeted in a third forfeiture case. Meanwhile, he has been sued by some of his own members for racketeering — and, as was the case in the second forfeiture action, he did not bother to enter an immediate defense.
After nearly three years, it has come down to Andy Bowdoin blaming events on Collyer, Bowdoin’s attorneys and the agency that guards the life of the President of the United States while also guarding the U.S. financial infrastructure.
Even as Bowdoin is demonizing the U.S. justice system, he is clinging to his purported faith in God and using it as a reason to send him half a million dollars. Bowdoin, according to Bowdoin, has been attacked by the U.S. government under the direction of “Satan” himself.
Is Bowdoin Risking An Enormous Spam Fine?
In recent hours, some ASD members have received an “Andy’s Army” email (from a Google “gmail” address) that claims 75 people have ponied up “over” $3,000 for Bowdoin so far.
Why the email came from a Google address was unclear. What is clear is that some ASD members once tried to scam Google by encouraging ASD members to commit click fraud against Google. It also is clear that Google’s logo once was used in a promo for ASD that claimed Google and 23 other famous companies were ASD advertisers.
So, Bowdoin’s ASD — which at one time had members in its ranks who tried to defraud Google — apparently now has a subset of members (“andysdefensefund”) who are using Google’s gmail service and the “AndysFundraisingArmy” website to communicate with fundraising prospects. The email includes the name of “Andy Bowdoin” as the sender, and provides an “andysdefensefund” gmail address for return correspondence.
The email claims that an email “blast” will occur Monday “to the ASD Members List of Over 77,000.”
“This coming Monday, we will begin our email blast to the entire ASD Members list, and we will keep blasting this list every day or so, with different emails, until we get the Networking Momentum kicked in and turned on, causing rapid growth in our Fundraising Statistics, which will easily carry us to reaching our Goal” of $500,000, according to the email.
Sending “blasts” and repeating “blasts,” however, could trigger spam complaints if the intended recipients never agreed to receive email from “andysdefensefund” at a gmail address and had agreed only to receive email from ASD itself — not a defense fund or “Andy’s Army.”
The state of Florida dissolved AdSurfDaily Inc. in September 2009 and revoked its registration as a foreign corporation headquartered in Nevada. The state of Nevada also revoked ASD’s corporate registration.
A plan to “blast” 77,000 ASD members leads to questions about whether “andysdefensefund” at a gmail address and “Andy’s Army” are permitted to contact persons with whom they have no business relationship with a commercial proposition to send money to Bowdoin to pay for his defense.
And if ASD no longer is a registered corporation — and records in Florida and Nevada show that it is not — questions can be raised about how a dissolved entity is authorized to contact subscribers who no longer exist because the corporation itself has been dissolved.
Questions also can be raised about whether ASD, a dissolved corporation, is permitted to transfer an asset — its email list — to the “andysdefensefund” and the “Andy’s Army” fundraising entities without the express permission of former ASD members.
Still more horror surfaced in June 2009, when the AdViewGlobal (AVG) autosurf tanked. AVG, whose name is referenced in the 2009 racketeering lawsuit against Bowdoin, had close ties with ASD. The AVG collapse followed on the heels of a series of 200 percent “matching bonus” offers for both enrollees and their sponsors.
“Each separate email in violation of the “CAN-SPAM Act is subject to penalties of up to $16,000,” according to the FTC.
Even a small number of spam complaints triggered by the advertised email “blast” could be costly for Bowdoin if the “andysdefensefund” entity and “Andy’s Army” contact ASD members in unauthorized fashion.
A recent price increase by our host — along with the higher monthly costs brought on by the DDoS attacks last fall — has put the PP Blog against the wall and its author at the edge of an abyss. These higher costs have coincided with a loss of income.
I am passing the hat reluctantly, but pass it I must.
The price increase, combined with the DDoS attacks, increased the monthly hosting cost more than fourteenfold. I simply do not have the resources to keep the Blog going.
Beyond that, my resources are thin, owing to the general slump in publishing and the general state of the economy.
The donation button appears in this post; I also plan to put it in the sidebar to the right and in other posts that readers may find helpful, meaningful or significant.
Nevada state authorities have arrested Hans P. Seibt of Las Vegas on Ponzi charges. He specifically was charged under state law with 25 counts of securities fraud and six counts of theft, amid allegations he targeted senior citizens.
At 70, Seibt himself is a senior citizen. He was booked into the Clark County Jail, and is being held without bail.
Seibt is expected to make a court appearance Monday, according to Clark County records.
“Targeting senior citizens is particularly egregious,” said Nevada Attorney General Catherine Cortez Masto.
The office of Nevada Secretary of State Ross Miller described Seibt’s alleged crimes as a real-estate Ponzi swindle affecting investors in Nevada and “several other states.”
“So-called interest payments or distributions that are paid to some investors aren’t a guarantee that an investment is legitimate,” Miller said. “That’s the whole basis for a Ponzi scheme. Potential investors just can’t be careful enough, especially in the current economic environment.”
Investors were promised returns of between 10 percent and 12 percent, but Seibt duped them, investigators said.
“Seibt successfully solicited investments of $10,000 or more from his victims, offering them trust deeds, joint venture agreements, and subscription agreements, all of which were supposedly secured by parcels of land Seibt was holding in Nye County,” investigators said.
But the value of the land was “grossly exaggerated in order to support Seibt’s claims to his victims,” investigators said.
And Seibt also didn’t purchase the land as advertised. Instead, he “used the money to pay off other investors and for personal use,” investigators said.
Seibt did business as HSLV Development Corp., and Clark and Nye County Development Corp., investigators said.
EDITOR’S NOTE: Having experienced DDoS attacks that crippled our ability to publish and inform readers, researchers and victims of Ponzi schemes, pyramid schemes and other forms of fraud about investigations, arrests and court cases, the PP Blog is not sympathetic to the points of view of the attackers and their apologists.
Readers and researchers have come to rely on the PP Blog as an important information source. Victims and persons affected by various schemes visit the Blog daily, as do financial institutions performing research on potential trouble spots and law-enforcement agencies at the local, regional, national and international levels.
The PP Blog, whose monthly costs have increased more than tenfold owing to sustained DDoS attacks beginning last fall, frequently writes about the incongruities that often accompany Ponzi and other fraud schemes. Hackers, DDoSers and cyber bullies use the same type of illogical and incongruous “explanations” to rationalize their particular brand of crime.
DDoS attacks, cyber intrusions and cyber bullying chill speech and threaten domestic and international security, thus putting both commerce and the free marketplace of ideas at risk. Period.
It is simply untrue that hackers, cyber bullies and DDoSers are the modern-day equivalent of freedom fighters. Simply put, they are anarchists who do not respect private and public property, rules of decorum, the rights of sovereign nations and the rights of people living free or yearning to live free. Nor do they respect the rights of merchants, information purveyors and their customers, clients and readers to have access to the marketplace of commerce and ideas.
Many of the attackers and cyber bullies, though, would have you believe the opposite — that they’re serving a higher good by bringing down a server, by harassing people and companies on the Internet and even cackling about it, by subjecting their targets to economic and potentially even physical danger, by forcing their will on individuals and entities with whom they have political or philosophical disagreements.
Here, now, the story of yesterday’s arrests . . .
The FBI arrested 16 individuals and executed more than 35 search warrants “throughout the United States” yesterday in a coordinated response to cyber attacks, including last year’s DDos attack on PayPal and intrusion attacks on AT&T and on InfraGard in Tampa Bay.
InfraGard is an FBI-led, public-private partnership that shares information on terrorism, intelligence, criminal and security matters.
Separately, authorities in Europe rounded up five more individuals for alleged cyber crimes.
Although some of the alleged attackers apparently see themselves as advocates for a free exchange of ideas and modern avengers for societal injustices, the U.S. Department of Justice described them as free-wheeling marauders who attacked two famous companies and the FBI-led public-private partnership.
After WikiLeaks “released a large amount of classified U.S. State Department cables on its website” last year, members of the Anonymous hacking group retaliated by executing a “coordinated” DDoS attack on PayPal, which had blocked WikiLeaks’ ability to collect donations for a Terms of Service violation, U.S. officials said.
Anonymous, according to the Justice Department, even had a name for its PayPal assault: “Operation Avenge Assange.” Beyond that, WikiLeaks itself declared that PayPal was trying “to economically strangle WikiLeaks,” the Justice Department said.
Julian Assange, who is under investigation in Sweden for alleged sexual assaults, is the founder of WikiLeaks. He has denied wrongdoing.
In bringing the attacks, members of Anonymous compromised the ability of legitimate PayPal users to access the PayPay website, the Justice Department said. Fourteen people were charged in a federal indictment brought in San Jose, Calif., that alleges a conspiracy to damage protected computers at PayPal.
Named in the San Jose indictment were Christopher Wayne Cooper, 23, aka “Anthrophobic”; Joshua John Covelli, 26, aka “Absolem” and “Toxic”; Keith Wilson Downey, 26; Mercedes Renee Haefer, 20, aka “No” and “MMMM”; Donald Husband, 29, aka “Ananon”; Vincent Charles Kershaw, 27, aka “Trivette,” “Triv” and “Reaper”; Ethan Miles, 33; James C. Murphy, 36; Drew Alan Phillips, 26, aka “Drew010”; Jeffrey Puglisi, 28, aka “Jeffer,” “Jefferp” and “Ji”; Daniel Sullivan, 22; Tracy Ann Valenzuela, 42; and Christopher Quang Vo, 22.
One individual’s name was withheld by the court, the agency said. The reason was unclear.
Charged in the Middle District of Florida in the alleged InfraGard attack was Scott Matthew Arciszewski, 21. The Justice Department described him as a hacker who uploaded files without authorization and provided instructions “on how to exploit the Tampa InfraGard website.”
Meanwhile, in a complaint in federal court in New Jersey, Lance Moore, 21, of Las Cruces, N.M., was charged with stealing information from AT&T and posting it on a public file-sharing site.
The Metropolitan Police Service in the United Kingdom also made a cyber-crime arrest yesterday, and the Dutch National Police Agency made four arrests, the Justice Department said.
EDITOR’S NOTE: This is one of those stories of an investor wipeout that may leave you scratching your head and wondering if no person, institution or symbol of America is off-limits in the world of Ponzi criminals.
For starters, the scheme allegedly was targeted at least in part at Parent-Teacher Association (PTA) members in the Los Angeles area. If that’s not bad enough, the elementary school whose PTA members were targeted is named after Neil Armstrong, the first person to set foot on the moon and an American hero.
And authorities also say the suspects in the alleged scheme also traded on the name of Disneyland to separate victims from their money.
Three California women, including one who already is in prison, swindled investors in an affinity-fraud Ponzi scheme that gathered $14 million, traded on the name of Disneyland and took advantage of parents whose children attended a school named after an American hero, the Los Angeles County Sheriff’s Department said.
All three women were “actively” involved in the Parent-Teachers Association (PTA) at Armstrong Elementary School in Diamond Bar, Calif., the agency said. The school is named after astronaut Neil A. Armstrong, 80, the first man to set foot on the moon. Armstrong, a former Eagle Scout, also is a recipient of the Presidential Medal of Freedom.
One of the reasons the scam succeeded was that the women gained “the friendship and trust of investors during organized school events and social functions,” investigators said.
“In order to get money, many of the victims took out second mortgages on their homes, maxed out their credit cards and ‘invested’ their life savings,” investigators said.
Losses ranged from $5,000 to $208,000, investigators said.
“The victims were given serialized receipts commonly available in stationary stores,” investigators said.
Arrested in the alleged caper were Maricela Barajas, 41, and Juliana Menefee, 50. Both women resided in Diamond Bar and are being held in the Los Angeles County Jail. Barajas also is known as Maricela Torres.
The third suspect — Eva Perez, 51 — already was in custody. Perez previously was arrested for fraud by the Chino Police Department “and is currently incarcerated in the Central California Women’s Facility, California State Prison,” investigators said.
Perez pleaded guilty last year in San Bernardino County in the same fraud scheme that triggered the Los Angeles County probe and the filing of more charges against her. She was sentenced to 11 years in prison in the San Bernardino case.
Investors plowed about $14 million into the scheme after being told that the women had an exclusive deal to sell AltaDena Dairy products at Disneyland, Disney Hotels and to small retailers, investigators said.
About $4 million of the sum was “retained” by the thieving PTA mothers, and about $2.5 million “has not been directly accounted for” and may have been spent on vacations and gambling, investigators said.
Until its detection, the scheme succeeded in part because the PTA Moms recycled $10 million back to investors, thus creating the impression that the women were at the helm of a successful enterprise, investigators said.
Investors were told that cash was required to become an investor and that their money was safe and guaranteed. At least some of the more than 40 victims were told they’d receive a return of 100 percent, investigators said.
As the Ponzi was unraveling and payments stopped, the thieving PTA Moms “organized informational meetings, and attempted to pacify investors by explaining the delays in payment were a result of an internal audit of the business,” investigators said.
“The victims are mostly typical, hard-working people,” investigators said. “When they were interviewed by sheriff’s detectives, their main reaction was to emotionally describe their embarrassment that they fell for this scheme. They said they saw others making a lot of money and didn’t want to miss out on the opportunity to make a better life for themselves and their families. They are in hopes that people who hear about what happened to them, will look for the warning signs that they ignored, and not have this happen to them. They also made the mistake of investing in people they thought they could trust.”
URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.
The sting featured a phony “consulting” company created by the FBI, authorities said. News about the make-believe consultancy followed on the heels of news last month that U.S. investigators had created a “payment processor” as part of a different probe into illegal gambling.
Charged criminally in today’s undercover cases were Brian Gibson, 63, of Coconut Creek, Fla; Donald W. Klein, 40, of Frisco, Texas; Douglas Newton, 66, of Rancho Mirage, Calif; Charles Fuentes, 66, of Dana Point, Calif; and Thomas Schroepfer, 54, of Las Vegas. Schroepfer also is known as Thomas Schroepfer Baetsen.
The men and several companies also were charged civilly by the SEC in what the agency described as a coordinated law-enforcement assault against microcap hucksters.
“Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement.
The Miami region’s top federal prosecutor, meanwhile, said the cases evolved from the Southern District of Florida’s ongoing Securities and Investment Fraud Initiative, a task force aimed at criminals and fraudsters operating in the region.
“The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” said Wifredo A. Ferrer.
Undercover FBI agents posed as scammers and set up a phony “consulting” business as part of the probe, the SEC said.
“The defendants charged today were intent on making profits for themselves while defrauding others,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.
Newton, the SEC said, was chief executive officer of Real American Brands Inc., now known as Real American Capital Corp. He was accused of paying kickbacks to a “purported employee pension fund trustee” to buy more than 6.2 million shares of restricted Real American Brands stock.
He further was accused of trying to conceal the kickbacks through a “consulting” firm.
However, the trustee Newton believed to be corrupt actually was “a fictitious person,” the SEC said. Meanwhile, “the trustee’s business associate who helped arrange the deal was an undercover FBI agent,” and the consulting company was a “phony” one created by the FBI, the SEC added.
Klein was the president and chief executive officer of KCM Holdings Corp. He is accused of engaging in two restricted stock transactions and one market transaction involving KCM Holdings’ stock.
“Klein and the company paid kickbacks to an undercover FBI agent who portrayed himself as a business associate of a corrupt trustee of an employee pension fund, in exchange for the fund’s purchase of 2.5 million shares of restricted KCM Holdings stock,” the SEC said. “Klein attempted to conceal the kickbacks through a consulting agreement with a phony company that would receive the kickbacks. In another scheme, Klein bribed a purported corrupt stockbroker (actually an undercover FBI agent) to purchase KCM Holdings stock in the open market for brokerage clients with discretionary accounts.”
Thomas Schroepfer was president and president of of SmokeFree Innotec Inc. He, too, got caught in the sting, the SEC said.
For his part, Fuentes was a promoter of SmokeFree’s stock, and “paid kickbacks to an undercover FBI agent, posing as the business associate of a corrupt employee pension fund trustee, in exchange for the fund’s purchase of 400,000 shares of restricted SmokeFree stock,” the SEC said.
Schroepfer, the SEC said, “attempted to conceal the kickbacks through a consulting agreement with a phony company created to receive the kickbacks.
“In addition, SmokeFree issued shares of its stock to a cooperating witness for acting as a middleman in the scheme,” the SEC said.
Gibson “created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International Inc., as part of a planned pump-and-dump scheme,” the SEC charged.
He is accused of touting Xtreme Motorsports “by blasting a series of e-mails to potential investors” and posting “false testimonials on the site from purported investors raving about their success in following the website’s stock picks,” the SEC said.
In a separate case in Maryland last month, prosecutors announced that federal agents had created a “payment processor” to infiltrate illegal gambling operations.
The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:
“Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.”
In response to a white-collar fraud epidemic involving huge sums of money and fraudsters and criminals operating both domestically and internationally, U.S. agencies, including the Secret Service, ICE and others, have been employing techniques once largely reserved for organized-crime probes.
BULLETIN: UPDATED 6:44 A.M. EDT (U.S.A.) Club Asteria, a Virginia-based company that claims to elevate people out of poverty globally by involving them in an MLM-like income and recruitment scheme, has acknowledged a revenue plunge and described it as dramatic.
In an audio recording posted online, the firm blamed its current state on lies from members and bad publicity. The audio is dated June 24.
“It’s taken our revenue, and it has hurt it dramatically,” the company said.
Club Asteria, which described itself as a ’cause’ marketing company concerned about the impoverished people of India and other countries across the world, conceded it has been swamped by “thousands” of support tickets from members.
Eight weeks ago, approximately a year after its launch, Club Asteria discovered that it had liars in its ranks, the company claimed in the recording. The liars created problems, according to the firm.
Among other places, Club Asteria is being promoted on forums linked to numerous Ponzi schemes. A Club Asteria thread on TalkGold, for example, has been active since April 5, 2010. Meanwhile, a Club Asteria thread on MoneyMakerGroup has been active since May 29, 2010. Both forums are referenced in federal court filings as places from which Ponzi schemes are promoted.
Club Asteria did not say in the recording precisely where it believed its problems with untruthful promoters had begun. Nor did the company say how much money it believed it had collected as a result of lies told by its freelance sales staff or what it planned to do with tainted proceeds.
“The challenge that occurred is that, all of a sudden, we found that our membership — many of our members — were presenting Club Asteria in an inaccurate, untruthful manner,” the company said.
False claims and “all kinds of distortions” were being made “all over the Internet” that Club Asteria provided “passive” income of $400 per week, the company said.
Members — and not the company itself — were responsible for the false claims, the revenue plunge and putting the firm at risk, the company suggested in the recording.
“It’s like a bank where somebody says, ‘They have no money left.’ And everybody runs to the bank and takes their money out,” the company said. “Of course, the bank is going to be in serious trouble . . .”
Many Club Asteria members have claimed preemptively in promos for the firm that Club Asteria was not operating a Ponzi scheme. Why the firm chose a bank-run analogy to describe its problems was not immediately clear.
Some Ponzi schemes topple — the Bernard Madoff scheme, for instance — when a company encounters cash-flow problems and cannot meet redemption requests, the Ponzi equivalent of a run on the bank. In a classic Ponzi scheme, no real business exists — and a firm takes money from “new” members to meet the payout expectations of “old” members.
Club Asteria said it hoped to reverse its financial course by inspiring members to sell more products and services to increase revenue. Meanwhile, the firm said it hoped to sell a tablet computer to members on time payments beginning on a date uncertain. Club Asteria did not identify a manufacturer for the computer, but said the device would help members become better equipped to run successful businesses.
Whether impoverished members of Club Asteria could afford a tablet computer or whether such a computer would be operable in all the countries of the world was not made clear in the recording.
Pricing for the tablet was not revealed. The firm also said it planned to offer apparel, vitamins and other products.
There have been claims in recent weeks that Club Asteria has slashed cashouts, which some members claimed provided a return of 10 percent a week. Other members said Club Asteria normally paid between 3 percent and 4 percent a week. In recent days, there have been claims that the firm suspended cashouts altogether. These claims followed on the heels of claims that Club Asteria had offered bonuses convertible to cash to lure members to join.
Club Asteria did not say in the recording whether it believed its bonus program had contributed to its problems. Nor did the firm say why it had come to recognize only weeks ago that false claims about its business opportunity were appearing online.
In a strange turn-of-phrase, however, the company did say this: “We offer them products and services to purchase under the guise of ’cause’ marketing.”
The firm described “cause” marketing as an inspirational “concept” that targets people globally who may be enduring personal poverty and motivates them to climb the ladder of economic success by giving them something in which to believe.
Two of the problems the company is experiencing are that fewer people now believe in it because of the lies told by members and because members were complaining in public about the firm, Club Asteria said.
A blurb for Hank Needham has reappeared on the Club Asteria website after having been missing for days. The blurb appears to have gone missing sometime between June 19 and June 24, but is back on the site today.
Separately, promoter “Ken Russo,” who posts as “DRdave” on the TalkGold Ponzi scheme and criminals’ forum, announced in a TalkGold post dated yesterday that he’d received $400 by wire from “Asteria Holdings Limited (Hong Kong)” yesterday.
The payment was described as a “cashout.” Other members, however, claimed that Club Asteria suspended cashouts last week and had been paying only pennies or low-dollar sums prior to the purported suspension.
TalkGold is referenced in federal court filings by the U.S. Postal Inspection Service as a place from which Ponzi schemes are promoted.
In the month of June, “Ken Russo” has claimed on TalkGold that his Club Asteria cashouts have totaled at least $2,032. The cashouts appear to have occurred after Club Asteria’s PayPal account reportedly was frozen last month and after Italian authorities began to investigate claims made about the company.
Few details are known about the Italian probe. Whether Russo’s purported payments as outlined on TalkGold could be considered ill-gotten gains if a prosecution emerges was not immediately clear.
“The next couple of months will tell the [Club Asteria] story,” Ken Russo opined in his cashout claim on TalkGold yesterday. The post suggests the enterprise is in danger, but “Ken Russo” did not say whether he would return his cashout money voluntarily if authorities in Italy or elsewhere file a fraud action against the firm.
Nor did “Ken Russo” say whether he’d provide refunds for his downline members.
Some ClubAsteria members claim they are filing disputes with Alert Pay in a bid to reclaim money directed at Club Asteria.
A Twitter site in the name of “Hank Needham” claims Needham is the “owner” of Club Asteria. On the Club Asteria website, Needham is described as director of sales and marketing.
After the PayPal freeze, Club Asteria encouraged members to use offshore processors. Many Club Asteria promoters preemptively claimed that the Virginia-based firm was not operating a Ponzi scheme.
How they could be certain never has been made clear, and a cash crisis appears to have engulfed Club Asteria after the claims were made. The company, which trades on the name of the World Bank, may have hundreds of thousands of members globally, including members from Third World countries, developing nations and nations subjected to political dictatorships.
Many Club Asteria members claimed the firm offered a “passive” investment opportunity, which led to questions about whether Club Asteria was selling unregistered securities to some of the poorest people on earth.
He called it “The Greatest Vitamin in the World.” Federal prosecutors in Arizona, however, called it conspiracy, mail fraud, wire fraud, promotional money-laundering and transactional money-laundering, accusing Donald Lapre of selling “essentially worthless” Internet businesses to more than 226,000 victims.
And now Lapre, 47, is under arrest. Prosecutors said he skipped a June 22 court date, a decision that caused an arrest warrant to be issued, a “Wanted” poster to be created and a brief manhunt to ensue.
Lapre was arrested on June 23. Prosecutors, who earlier advised the public that Lapre may be suicidal, said he was found with “self-inflicted” wounds to his legs and taken to a hospital. He was arraigned inside a “medical facility” by a federal magistrate judge yesterday.
Tens and tens of thousands of Lapre’s customers were defrauded out of nearly $52 million after responding to his TV and web pitches, prosecutors said.
Customers lured by the prospect of receiving “$1,000 checks” were dubbed “independent advertisers,” but Lapre provided them “false vitamin sales records” and sold them “bulk,” untargeted web traffic while claiming the traffic was targeted, prosecutors said.
“The ‘business’ primarily consisted of selling the Greatest Vitamin in the World . . . over the Internet and the opportunity to sell the opportunity to do the same thing to others,” prosecutors said.
Sales reps “regularly” signed up “independent advertisers” even if they did not own a computer, prosecutors said.
“Mr. Lapre used incessant nationally televised infomercials to hawk his vitamins and worthless websites as a way to get rich quick without working hard,” said U.S. Attorney Dennis K. Burke of the District of Arizona. “His scams swindled a sea of victims, but thanks to the efforts of the [U.S.] Postal Inspection Service and the IRS, he will face justice.”
Lapre was charged in a 41-count indictment issued by a federal grand jury earlier this month. He potentially faces decades in prison, if convicted on all counts.
Fox 10 News in Phoenix reported that Lapre hid from authorities in a 24-hour gym.
UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.
“[W]e never confirm or deny the existence of investigations,” said Jeanne Cooney.
The firms announced yesterday that prosecutors had agreed to return more than $20 million seized by the U.S. Secret Service in a Ponzi scheme probe in February 2010. Some INetGlobal members instantly seized on the news, claiming the government’s release of the funds validated the company’s business practices as they existed at the time of the seizure.
Separately, INetGlobal members circulated a statement from Inter-Mark Board Chairman Bob Kinsella. The PP Blog was sent a copy of the statement by an INetGlobal member, under a subject line of “Gov. Releases funds Lets Rock!”
“Today’s outcome is validation of the Inter-Mark Corporation business model,” the statement quoted Kinsella as saying. “I wonder if any business has been more researched and analyzed as Inter-Mark in the last year. Sales Associates all over the world should have complete confidence in the future of Inter-Mark Corporation.”
Cooney had no immediate comment today on Kinsella’s statement that the firm’s business model had been validated.
But Cooney did say that she believed a claim on the INetGlobal Blog that the firm had been validated had been made in “error” by the company — and that the firm “removed” the claim from its Blog.
Agreement
The money is not being released to INetGlobal directly, under the terms of an agreement approved by U.S. District Judge Donovan Frank. Instead, it is being released to attorney R.J. Zayed, who was appointed Temporary Administrator of Seized Funds.
Zayed, who also is the court-appointed receiver in the Trevor Cook Ponzi scheme, will distribute the funds under judicial supervision to INetGlobal affiliates owed money at the time of the February 2010 seizure.
Frank gave the government up to 45 days to turn over the money to Zayed. Prosecutors can petition for an extension of time beyond 45 days for “good cause,” according to the order.
“The Administrator shall conserve, hold, and manage the Seized Funds transferred by the United States as part of the Court’s Order, and shall perform all acts reasonably necessary or advisable to preserve the value of the Seized Funds until they are validly distributed to the members of Inter-Mark,” according to the order.
“If the Administrator is satisfied, in his sole discretion, that the identity of the Inter-Mark member is correct, that the amount due and owing to the member is correct, and that the name, address, government identification documents, and IRS tax forms of that member are proper, the Administrator shall wire transfer from the Seized Funds to that member’s ‘e-wallet’ account with International Payout Systems the amount due and owing to that member,” according to the order.
Funds that remain after Zayed pays INetGlobal affiliates will be returned to the company, according to the agreement.
No one has been charged criminally in the INetGlobal probe. Former executive Steve Renner, who denied wrongdoing, was sentenced in 2010 to 18 months in federal prison in an unrelated tax case. He is scheduled to be released in October.
The firm says it will have an exciting future.
“InetGlobal will use the remaining funds to launch a new and exciting array of products, many of which have been delayed due to the seizure of the funds,” the company announced on its Blog. “What working capital was available was used to service the existing business and to pay for the expensive process required to convince the United States government that iNetGlobal’s business is legal.”
An INetGlobal supporter who emailed the PP Blog this afternoon included a link to the Star Tribune story, which included Kinsella’s comment that the firm had been validated.
“Wow, it looks like you have some explaining to do,” the sender opined, referring to the Blog’s coverage of the allegations against the firm.
The sender then imagined a fantasy conversation in which the Blog would say “oh uh uh well uh” — and which he would say in return, “THAT’S WHAT I THOUGHT!!”
BULLETIN: The Ponzi cavalcade involving senior citizens continues . . .
EDITOR’S NOTE: Having experienced DDoS attacks that crippled our ability to publish and inform readers, researchers and victims of Ponzi schemes, pyramid schemes and other forms of fraud about investigations, arrests and court cases, the PP Blog is not sympathetic to the points of view of the attackers and their apologists.
EDITOR’S NOTE: This is one of those stories of an investor wipeout that may leave you scratching your head and wondering if no person, institution or symbol of America is off-limits in the world of Ponzi criminals. 
URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.
BULLETIN: UPDATED 6:44 A.M. EDT (U.S.A.) Club Asteria, a Virginia-based company that claims to elevate people out of poverty globally by involving them in an MLM-like income and recruitment scheme, has acknowledged a revenue plunge and described it as dramatic.
In the month of June, “Ken Russo” has claimed on TalkGold that his Club Asteria cashouts have totaled at least $2,032. The cashouts appear to have occurred after Club Asteria’s PayPal account reportedly was frozen last month and after Italian authorities began to investigate claims made about the company.
UPDATED 9:24 P.M. EDT (U.S.A.) A spokeswoman for U.S. Attorney B. Todd Jones of the District of Minnesota refused to say today whether the government’s probe into the business practices of Inter-Mark Corp. and INetGlobal is over.