Dwight Owen Schweitzer and Todd Disner — the two AdSurfDaily members from Miami who filed suit against the Justice Department and Rust Consulting Inc. in November 2011 — never filed remissions-claims forms, Rust said in a motion to dismiss the complaint.
And Schweitzer and Disner are “impermissibly” seeking to relitigate the forfeiture action against tens of millions of dollars in the personal bank accounts of ASD President Andy Bowdoin before a federal judge in Florida, Rust asserted.
The original civil case was brought by federal prosecutors in the District of Columbia and decided against Bowdoin/ASD by a federal judge in the District of Columbia.
But Disner and Schweitzer now are seeking a Florida venue to “avoid or evade the earlier judgment in the Seizure Action, or to deny its force or effect,” Rust argued in its dismissal motion.
The Florida court “lacks subject matter jurisdiction,” Rust argued. But even if the court concluded that it could preside over the the lawsuit, Schweitzer and Disner have not stated “a claim upon which relief can be granted against RUST, on the grounds that it constitutes an impermissible attack on the orders, rulings, and judgment rendered in the Seizure Action.”
“Plaintiffs are effectively seeking to re-litigate the Seizure Action in this case,” Rust argued. “Their material allegations and demands for relief center on their desire for this Court to determine whether the USA presented sufficient evidence in the Seizure Action to justify the seizure and confiscation of property held by ASD, including and in particular Plaintiff’s alleged property . . . In other words, in this action Plaintiffs seek to challenge the court’s decisions rendered in the Seizure Action. This is impermissible.”
Moreover, Rust argued, “it cannot be ignored that Plaintiffs admit they were afforded means in the Seizure Action to submit claims for their alleged property, but elected not to do so.”
In bringing their case in November, Schweitzer and Disner claimed an affidavit filed in the forfeiture case by the U.S. Secret Service in the District of Columbia was flawed and that the government hired Rust to implement a remissions program “designed to collect evidence and coerced admissions from the plaintiffs to be used by the government” at the criminal trial of ASD President Andy Bowdoin.
Disner and Schweitzer also took issue with government agents joining ASD prior to the August 2008 seizure and allegedly violating the ASD membership agreement, including an undercover agent who placed his undercover “MySpace” page in ASD’s advertising rotator. In 2008, the government alleged that “ASD did not require, or even verify that the agent “had any product or service to sell.”
Had the agents “lived up to the obligations they took on by becoming members of ASD they should have reported their own violations of the ASD terms of service with the result that the sites they foisted upon ASD would have been removed and the benefits to them as advertisers’ would be forfeited as the ASD rules mandated,” Disner and Schweitzer argued.
As of yesterday, the government had not responded to the lawsuit, which was brought by Schweitzer and Disner in the form of a complaint for declaratory relief that alleged Constitutional violations.
Whether Schweitzer and Disner properly served the government in the case is an issue.
U.S. District Judge Cecilia M. Altonaga has given them an extension of five days — from March 7 to March 12 — to demonstrate the government has been properly served.
If Schweitzer and Disner have properly served the government, it is possible that the Justice Department may move for dismissal on grounds similar to the grounds cited by Rust.
Not only were final orders of forfeiture entered by U.S. District Judge Rosemary Collyer in the District of Columbia, her orders were upheld by the U.S. Court of Appeals months before Schweitzer and Disner turned to the Florida federal court.
In September 2011 — weeks before Schweitzer and Disner brought their complaint — the government returned about $55 million to ASD members who demonstrated a loss through the remissions process administered by Rust.
When the government announced the return of the money, the U.S. Secret Service described ASD as a “criminal enterprise.”
In their complaint, however, Schweitzer and Disner argued that ASD was a profitable venture, in stark contrast to assertions by the government that ASD was insolvent because it created a liability of $1.25 for each dollar it took in through the sale of purported “advertising.”
“There is a line between First Amendment Rights vs. Libel here. So, when does your right to form an opinion begins (sic) and when does it constitute a defamation of character? The answer is, law enforcement agencies don’t pay attention to what’s being said on forums and blogs, so get your head straight and feet firm on the ground.” — “MoneyMakingBrain,” in March 4, 2012, post on RealScam.com
As previously reported on the PP Blog, a JSS Tripler/JustBeenPaid “defender” known as “MoneyMakingBrain” (MMB) has emailed threats to the PP Blog, hatched bizarre conspiracy theories here and at RealScam.com and planted the seed that he was someone to fear.
The email threats were received after MMB claimed Feb. 18 on RealScam he had performed “due diligence” on JSS Tripler/JustBeenPaid. On a website known as “ReviewOPedia,” a poster with the same handle offered this on Feb. 14, in the context of JSS Tripler/JustBeenPaid:
“They are for real! ”
Within the same Feb. 14 ReviewOPedia post, MoneyMakingBrain ventured this (italics added):
“BTW, everybody should check out the JBP live support chatroom which has over 160 people at any given time and is live 24/7. You can ask all the questions you can come up with and there is always moderator. Who does that? I’m sold already. So, if someone here claims that they ‘didn’t get paid’, either they still don’t understand how the matrix works or they’re just internet trolls.”
Whether the “MoneyMakingBrain” on the PP Blog and the “MoneyMakingBrain” on ReviewOPedia are one and the same is unknown to the PP Blog.
Precisely why the MMB known to the PP Blog and RealScam.com has been trying to chill specific individuals and antiscam forums is unclear. What is known is that what he’s doing is hardly unique.
Lessons Of HYIP History Ignored
While asserting that he knows the PP Blog’s IP address and posting location, MMB now is making a claim on RealScam, a forum that concerns itself with international mass-marketing fraud, that “law enforcement agencies don’t pay attention to what’s being said on forums and blogs.”
That claim is contrary to the public record, which shows that any number of agencies, self-regulatory bodies and private attorneys have been noting for years that HYIP schemes are proliferating on the Internet and being spread by posters on forums and social-networking sites. It also ignores the reality — also a matter of public record — that law-enforcement has a history of filing court documents that reproduce HYIP forum posts and of infiltrating HYIP schemes.
Prominent FINRA Warning On HYIPs
In July 2010, the Financial Industry Regulatory Authority issued this highly public alert. FINRA noted that “HYIPs use an array of websites and social media — including YouTube, Twitter and Facebook — to lure investors.”
HYIPs fabricate a “buzz” and create “the illusion of social consensus,” FINRA said, describing the sinister approach as a “common persuasion tactic fraudsters use to suggest that “everyone is investing in HYIPs, so they must be legitimate.”
Forum Posts Become Evidence In HYIP Cases
In the SEC’s May 2008 prosecution of the Legisi HYIP scheme, the agency included page after page of forum posts as part of a 267-page evidence exhibit in support of an asset freeze. A federal judge approved the freeze. (The screenshot below is from one of the forum pages.)
Legisi operator Gregory McKnight pleaded guilty to criminal charges of wire fraud last month. He also faces millions of dollars in civil judgments. The SEC Legisi filings also include a reference to the MoneyMakerGroup forum, which is listed in other federal court filings as a place from which HYIP Ponzi schemes are promoted.
This section of the Legisi Terms of Service purports that members must avow they are not an "informant, nor associated with any informant" of the IRS, FBI, CIA and the SEC, among others. The others included "Her Majesty's Police," the Intelligence Services of Great Britain, the Serious Fraud Office, Interpol and others.
Included within the SEC filings is a reproduction of Legisi’s bizarre Terms. (See graphic at right. It is taken from court filings.) Among other things, the Terms made members avow they were not an “informant” for various government entities.
JSS Tripler/JustBeenPaid has similar Terms. The Terms read like an invitation to join an international financial conspiracy. (The next two paragraphs are verbatim from the JSS Tripler/Just BeenPaid member agreement. Italics added.)
6. I affirm that I am not an employee or official of any government agency, nor am I acting on behalf of or collecting information for or on behalf of any government agency.
7. I affirm that I am not an employee, by contract or otherwise, of any media or research company, and I am not reading any of the JBP pages in order to collect information for someone else.”
When the U.S. Postal Inspection Service filed criminal charges against Nicholas Smirnow in May 2010 for his alleged operation of the Pathway To Prosperity HYIP Ponzi scheme, MoneyMakerGroup, TalkGold and ASAMonitor were specifically referenced in the service’s case filings. Smirnow now has his face on an INTERPOL “Wanted” poster.
MMB took great exception to the PP Blog’s Smirnow post, apparently believing it had no relevance in the context of JSS Tripler/JustBeenPaid. MMB also apparently believes the PP Blog and RealScam are treating Frederick Mann, the purported operator of JSS Tripler/JustBeenPaid, unfairly.
Among other things, MMB asserted on the PP Blog that “no one is invisible to the MoneyMakingBrain and you need to stop doing what you’re doing against this man immediately. Because if you don’t, I am going to make a formal complain (sic) to the very authorities you purport are coming after scam sites and send all the evidence I’ve gathered so far from posting on your site and the realscam site. I don’t like witch hunts and I am sure Fred Mann can whip your ass in court for your highly suggestive, provocative, highly contentious and flat-out defamatory commentaries against his character on your sites.”
MMB further suggested that JSS Tripler/JustBeenPaid critics may be “needing to look for another ISP because you won’t have internet access at home or your office, wherever.”
About three months after the SEC brought the $72 million Legisi/McKnight HYIP Ponzi case, the U.S. Secret Service — in August 2008 — filed evidence exhibits in support of an order to freeze tens of millions of dollars in AdSurfDaily-related bank accounts. The complaint in support of the seizure specifically references an ASD-related “Breaking News” Blog, and an evidence exhibit labeled “Government Exhibit 5” consists entirely of an ASD-related post on a different Blog that took up 15 printed pages.
The 15-page post featured alleged comments from ASD President Andy Bowdoin in which he threatened to sue critics.
“These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit,” the post quoted Bowdoin as saying. (The screen shot below is from Government Exhibit 5. It has been a matter of public record approaching four years.)
Both the ASD and Legisi investigations used government agents in undercover capacities, according to court filings.
Meanwhile, in June 2009, attorneys suing Bowdoin on behalf of ASD members in a civil RICO (racketeering) case referred to the PP Blog’s reporting on the ASD Ponzi case, specifically its reporting on a spinoff surf known as AdViewGlobal (AVG). (See court document. See June 30, 2009, related story. See PP Blog story the attorneys referenced in their filings.)
During its short run, AVG bizarrely asserted that it operated as a “private association” that enjoyed U.S. Constitutional protections in Uruguay. AVG used U.S.-based Gmail addresses to conduct business, something JSS Tripler/JustBeenPaid is doing. The defunct surf further claimed that it had appointed a person who held the title of “Protector.”
Such claims have been linked to the so-called “sovereign citizen” movement. On Feb. 27, 2012, the PP Blog reported that a site linked to Mann published videos of Francis Schaeffer Cox, a purported “sovereign citizen” indicted in Alaska in an alleged murder plot against public officials. The site features a drop-in ad for JSS Tripler/JustBeenPaid that encourages prospects to register with a Gmail address.
Whether MMB is aware of all of these these historical incidents while issuing threats and planting the seed he has the power to divorce JSS Tripler/JustBeenPaid critics from their Internet connections is not known. MMB’s posting privileges were revoked by the PP Blog last week after he emailed threats and menacing communications. RealScam has continued to permit MMB to post on its forum.
The PP Blog believes it is unwise to click on any link MMB has posted on RealScam. He appears to be attempting to bait members of the antiscam community into clicking on links as part of a bid to gather IP addresses and other data from posters — all while asserting he has the power to use the information to harm individuals and entities such as Eagle Research Associates, a California based nonprofit that seeks to educate the public about scams.
Piling On The HYIP Absurdity
In what would become one of the most visited threads in the history of the PP Blog, a poster known as “CORRECTION” repeatedly demanded that the Blog retract this June 3, 2009, headline about the AdViewGlobal (AVG) autosurf and a strategy advanced by a promoter by which AVG upline sponsors could gather money from individual prospects and funnel it through the sponsors’ local banks before passing it to offshore payment processors — instead of letting AVG gather the money.
“Get it right before you lead with this inaccurate, bias (sic) and unfair reporting!!!!!!!!!!!” CORRECTION demanded.
The PP Blog did not submit to the demand to retract the headline.
It was revealed later in court filings that the grand jury that indicted Bowdoin on charges of wire fraud, securities fraud and selling unregistered securities began to meet in May 2009, about a month prior to ASD- and AVG-related threats and demands made against the PP Blog.
“The focus of this sweep was fraud committed against individual investors, including Ponzi schemes, high-yield investment fraud, and market manipulation cases,” said Shawn Henry, the FBI’s executive assistant director. “Operation Broken Trust highlights the pervasiveness of the threat we face, and its impact on individuals from all walks of life.
“The perpetrators of these crimes are those who YOU might trust . . . friends and colleagues — people from your workplace, your child’s soccer team, even your church,” Henry said.
Read this March 1, 2012, story that reports a top U.S. Justice Department official speaking in Mexico referenced bogus libel lawsuits filed to protect criminal enterprises. Read this Justice Department news release last week on a meeting in Ottawa between top U.S. officials and top Canadian officials to discuss cross-border fraud.
More HYIP Nonsense: No ‘Unfriendly Political Jurisdictions’
JSS Tripler/JustBeenPaid purports to pay a daily return of twice that offered by Bowdoin and ASD — and eight times that of Legisi. The JSS Tripler/JustBeenPaid returns are somewhat on par with the returns offered by Pathway To Prosperity.
At the same time, JSS Tripler/JustBeenPaid says this on its website (italics added):
“Our business operations are geographically decentralized. We don’t have any central office. We’re not located in any ‘unfriendly political jurisdictions.’”
It is difficult to conceive how JSS Tripler/JustBeenPaid could send any brighter signals of a scam in progress, given its absurd advertised rate of return and a public proclamation that it is not located in any “unfriendly political jurisdictions.”
In 2008, Frederick Mann, the purported operator of JSS Tripler/JustBeenPaid, identified himself as an ASD pitchman. On Jan. 23, 2012 — six weeks ago today — the Italian securities regulator CONSOB announced it had opened a JSS Tripler-related probe and issued a 90-day suspension order.
During a March 1 conference call for JSS Tripler/JustBeenPaid, a caller informed Mann that a member of his second-level downline had informed him that the member’s bid to advertise the “opportunity” had been blocked in Holland amid concerns of legality.
“Tell him not to advertise in any particular country,” Mann replied.
Redacted screen shot of "regional representatives" claim today on the website of JSS Tripler/JustBeenPaid.
BULLETIN: The PP Blog has learned that JSS Tripler/JustBeenPaid is publishing a page in which it advertises the availability of “regional representatives” in various parts of the world, including Italy.
On Jan. 23, CONSOB, the Italian securities regulator, took action against certain JSS Tripler/JustBeenPaid affiliaties. Despite the CONSOB action, JSS Tripler/JustBeenPaid is openly advertising that it has at least two affiliates who speak Italian and that the affiliates are available to “assist you with ALL aspects of the program IN YOUR LANGUAGE.”
The page also touts the native-language talents of JSS Tripler/JustBeenPaid affiliates to assist members in Hong Hong, Taiwan, Belgium, Canada, Ireland, the United Kingdom, the United States (to assist people who speak English or Japanese), Germany, Lithuania, Indonesia, Malaysia, Mongolia, Poland, Portugal, Latvia, France, Chile, the Dominican Republic, Ecuador and Spain.
JSS Tripler/JustBeenPaid described its outreach via regional reps as “AMAZING!”
“The people on this page have been thoroughly trained in all the workings of JustBeenPaid’s programs, and are happy to assist you TODAY!” the murky entity crowed.
In a Feb. 23 conference call, Frederick Mann, the purported operator of JSS Tripler/JustBeenPaid, declined to say precisely where the “opportunity” itself was located.
JSS Tripler/JustBeenPaid, Mann asserted to an audience of Americans and at least one person who claimed to be a resident of Canada, was “not located in any specific part of the world.
“We’re all over the planet,” he said, speaking with an English accent that appeared to be native to South Africa.
The assertion led to questions about whether Mann was running the “program” in a fashion reminiscent of a sort of small-scale Bank of Credit and Commerce International (BCCI). BCCI deliberately structured itself in murky fashion to ward off oversight by regulators. Its collapse created one of the great business scandals of the 1990s, prompting the Wall Street Journal (Europe) to observe that BCCI had been set up to be “offshore everywhere.”
BCCI’s collapse also triggered Congressional probes in the United States, along with both civil and criminal prosecutions.
The CONSOB probe in Italy, which the agency announced nearly six weeks ago, was not referenced on the “representatives” page on the JSS Tripler/JustBeenPaid website.
Incongruously, the “representatives” page included a link to an “agreement” page in which JSS Tripler/JustBeenPaid registrants and/or prospects were informed they must affirm “that I am not an employee or official of any government agency, nor am I acting on behalf of or collecting information for or on behalf of any government agency.”
Moreover, the registrants and/or prospects were informed they must affirm “that I am not an employee, by contract or otherwise, of any media or research company, and I am not reading any of the JBP pages in order to collect information for someone else.”
The collapsed Legis HYIP published similar terms. (More on the Legisi prosecution below.)
How long the JSS Tripler/JustBeenPaid regional reps have been in place was not immediately clear. Also unclear was whether each of the reps had a physical presence in the respective countries or were using the Internet to reach over borders and perform customer service and recruit downlines in the respective nations.
The U.S. government and other governments of the world have become increasingly concerned about cross-border fraud. Yesterday, U.S. Attorney General Eric Holder and Janet Napolitano, the secretary of the U.S. Department of Homeland Security, met with top officials in Canada to discuss the problem.
Perhaps aghast over JSS Tripler/JustBeenPaid developments, a poster on the MoneyMakerGroup Ponzi forum declared today that having regional reps for JSS Tripler/JustBeenPaid is an “insane idea.”
“Forget about the matrix spots and payouts,” the MoneyMakerGroup poster wrote today. “[W]hy is 200,000 + members not enough and why arent (sic) we off the radar and private and not opening ourselves up to potential problems ? Regional reps is an insane idea, Im (sic) sorry but the admin needs to protect us and wakeup (sic) to the reality that you cant (sic) get this huge and expect nothing bad to happen.”
The poster did not explain his apparent belief that JSS Tripler/JustBeenPaid had a duty to go “private” and to get “off the radar” of regulators. Nor did he say precisely what constituted something “bad.”
HYIPs have been the subject of both civil and criminal litigation in various jurisdictions.
It is common for HYIP purveyors to tout purported “offshore” operating venues and to claim such venues insulate an “opportunity” from prosecution. It also is common for HYIPs to announce they are “private” programs and therefore not subject to government oversight. At the same time, it is common for HYIPs to try to structure a Terms of Service or Member Agreement that purports either that the “opportunity” is not selling securities or is not subject to regulatory oversight.
Some HYIPs, including JSS Tripler/JustBeenPaid, have preemptively denied they are Ponzi schemes.
The purported returns of JSS Tripler/JustBeenPaid are somewhat on par with the returns of Nicholas Smirnow of the alleged Pathway To Prosperity HYIP Ponzi scheme. Smirnow is listed as “Wanted” by INTERPOL.
On Feb. 27, the PP Blog reported that a website linked to Mann displayed videos of Francis Schaeffer Cox, an American and purported “sovereign citizen” under indictment in Alaska in an alleged murder plot against public officials.
Separately, a YouTube promo for JSS Tripler/JustBeenPaid dated yesterday asserted that “[a]ll you have to do is wait for your money to increase!!!”
A Blog post dated today, meanwhile, makes this assertion (italics added):
“The JSS Tripler new site is one month old. It has been a month of phenomenal growth, but it’s nothing compared to what’s in the future. Some ‘Big Things’ are on the horizon that will enable many of the members to become millionaires, some could even become billionaires.”
Neither the March 3 Blog post nor the March 2 YouTube video referenced the CONSOB probe.
In 2008, AdSurfDaily President Andy Bowdoin asserted that ASD had a plan to create 100,000 millionaires in three years. On Dec. 1, 2010, the U.S. government announced that Bowdoin had been indicted on Ponzi-related charges of wire fraud, securities fraud and selling unregistered securities.
Seabaugh also was an affiliate of an enterprise known as Ad-Ventures4U (ADV4u), which crashed in 2009 amid allegations that its operator had been threatened by members.
In web promos, Mann has described himself as a promoter for both ASD and ADV4U. Some affiliates have described him as a “genius,” the same description accorded Bowdoin before the August 2008 raid on ASD headquarters by the U.S. Secret Service.
After the event — and facing both civil prosecution and a criminal investigation — Bowdoin told ASD members that the raid was the work of “Satan.”
It is a descriptor completely contrary to the typical view Americans have of the Secret Service, which has the twin duties of protecting the nation’s financial infrastructure and the life of the President of the United States.
Most Americans believe the Secret Service consists of heroes who place themselves in harm’s way every day to keep the United States safe, doing everything from making sure U.S. grandparents have safe places to deposit their Social Security checks to making sure that the President is well-protected and accessible to the American people.
Kenneth Wayne Leaming, an ASD member and purported “sovereign citizen,” allegedly filed a bogus lien against the Secret Service agent who led the ASD investigation in 2008, the FBI said in November 2011 court filings.
Leaming also allegedly filed bogus liens against a federal judge and three federal prosecutors involved in the ASD case, according to court filings by the FBI. He is jailed near Seattle awaiting trial on those charges, along with charges of filing false liens against other public officials, concealing two federal fugitives wanted in a home-business caper in Arkansas, being a felon in possession of firearms and uttering a bogus “Bonded Primissory Note” for $1 million.
Court filings suggest Leaming was conducting financial research on John Roberts, the chief justice of the United States and the head judge of the U.S. Supreme Court, while hatching a scheme to serve papers on Roberts through a school attended by the distinguished jurist’s children.
EDITOR’S NOTE: A top U.S. official — speaking today in Mexico City at the High-Level Hemispheric Meeting Against Transnational Organized Crime hosted by the Mexican government under the framework of the Organization of American States (OAS) — addressed the challenges the world law-enforcement community is confronting in the Internet Age.
In remarks apt to cause unease within the HYIP and organized-crime spheres, Deputy U.S. Attorney General James Cole noted that the government was wise to efforts by criminals to chill efforts to expose crimes by filing libel lawsuits. (A link to Cole’s full prepared remarks appears at the bottom of this story.)
Some recent Ponzi cases in the United States involving incredible sums of money — and the corresponding behavior of some of the participants — help prove the point . . .
AdSurfDaily President Andy Bowdoin, named a defendant in a 2009 civil case that alleged racketeering, issued “slander” lawsuit threats prior to the August 2008 intervention by the U.S. Secret Service in the ASD scheme. The threats were issued not long after Bowdoin had returned from a trip arranged by a lawyer in which the ASD patriarch had ventured to Panama and Costa Rica, according to court filings.
Bowdoin later was indicted, amid allegations he was presiding over an international Ponzi scheme that had gathered at least $110 million. Robert Hodgins, who was referenced in 2007 ads for ASD, is an international fugitive wanted by INTERPOL. The United States accused Hodgins of laundering proceeds for narcotics traffickers in Colombia.
In advance of today’s High-Level Hemispheric Meeting Against Transnational Organized Crime, OAS Secretary General José Miguel Insulza noted that such crime “is the principal continental source of activities such as drug trafficking, the illicit trafficking of firearms and immigrants, human trafficking, money laundering, corruption, kidnapping, and cybercrimes.”
Befitting its importance, the hemispheric meeting was hosted by Felipe Calderón, the president of Mexico.
Among others things, Deputy U.S. Attorney General James Cole said this at the meeting:
“The advance of globalization and the internet, while hugely beneficial to people everywhere, has also created unparalleled opportunities for criminals to expand their operations and use the facilities of global communication and commerce to carry out their criminal activities across national borders.”
Although Cole did not use the term “HYIP” in his remarks, it is clear that the U.S. government is well aware of the dangers online fraud schemes pose as they reach across borders to accumulate tens and even hundreds of millions of dollars — sometimes through a single fraud scheme.
As the PP Blog read the text of Cole’s remarks, another thing leaped off the page. Indeed, Cole said this (emphasis added):
“Because of the sophistication of the world economy, organized crime groups have developed an ability to exploit legitimate actors and their skills in order to further the criminal enterprises. For example, transnational organized criminal groups often rely on lawyers to facilitate illicit transactions. These lawyers create shell companies, open offshore bank accounts in the names of those shell companies, and launder criminal proceeds through trust accounts. Other lawyers working for organized crime figures bring frivolous libel cases against individuals who expose their criminal activities.“
Cole, of course, wasn’t talking specifically about the AdSurfDaily Ponzi case and ASD’s preposterous claims that Bowdoin had found a legitimate way to pay interest of 1 percent a day on the tens of millions of dollars sent in by participants and that ASD would create 100,000 millionaires in three years.
Even so, the words Cole uttered in Mexico City today have deep relevance to the HYIP sphere. Indeed, ASD reached across international borders and relied on an international sales force.
Here is how ASD worked: It relied on “legitimate actors” of the sort Cole described — in ASD’s case, a lawyer who allegedly scrubbed the “opportunity” to ensure compliance, and Moms and Pops and entrepreneurs (and people down on their luck) who signed up and became the friendly faces to their prospect bases. The salespeople were paid 10 percent for recruiting a friend with money and 5 percent more if the friend could recruit a friend with money — on top of “surfing” earnings of 1 percent a day and even more through the purported miracle of “compounding.”
The current HYIP scheme of JSS Tripler/JustBeenPaid has the same type of payout schemes that ASD foisted on the marketplace. One big difference is the JSS/JBP says it can provide twice the daily payout of ASD.
JSS/JBP’s purported operator is Frederick Mann, a former ASD pitchman.
In September 2011, the U.S. Secret Service described ASD as a “criminal enterprise.”
You’ll note above that Cole today used the same phrase to describe one of the inherent threats of transnational organized crime. And, as noted above, he also spoke about bids to chill critics through the filing of libel lawsuits.
Those same types of threats were made in the ASD case, beginning in the summer of 2008. In fact, federal prosecutors even included an evidence exhibit in case filings that alluded to one such alleged threat. Unmentioned in the initial ASD case filings were the bids to chill reporters in at least two states and a newspaper in Georgia.
If you’ve been following the HYIP sphere for any length of time, you know that threats to sue members of the antiscam community are part of the landscape — so much so, that it has become an HYIP cliche. The bids to chill are not limited to threats to sue for libel and “slander,” however.
It also is becoming an HYIP cliche that the operators and apologists for brazen HYIPs threaten to file complaints with the ISPs of members of the antiscam community — i.e., if you report about us we’ll take down your Internet connection and/or sue you for copyright/trademark infringement.
These things are transparent bids to chill speech. They also are designed to have a secondary “benefit”: to make the marks — who may consist in part of people who are otherwise “legitimate actors” — believe that harm will come to them if they ever complain, that there are severe consequences to those who complain.
These nefarious methods have surfaced in scheme after scheme after scheme, as have various assertions about “offshore” venues and the purported “safety” the “offshore” venues provide. Longtime observers know the claims are part and parcel to the HYIP sphere — and that claims that someone is a successful businessman who has presided over multiple companies almost certainly will be incorporated into the sales pitch for an “opportunity.”
The FBI, for just one example, has been warning for years about securities fraud, the “shadow banking system” and the use of shell companies to disguise fraud proceeds. The director has testified repeatedly on Capitol Hill about the subject, while simultaneously warning about debit cards that are being used in nefarious ways and the dangers posed by lone wolves and “home-grown, violent extremists.”
All of these things are or may be in play in the HYIP sphere. Here are some things you should know:
It is likely that the scheme’s operator is trading on the credibility you have with loved ones and friends within your immediate sphere of influence to drive dollars to the scam. It is equally likely that you are being denied the sort of information that would empower you to make an informed purchasing decision and highly likely you are being asked to participate in a venture that could result in prosecutions under both civil and criminal law, possibly even the RICO statute.
The rate of return will be preposterous in any real-world context and the math will be fuzzy and confusing, if not downright impossible.
Your sponsor will lie to you or pass on GIGO that is part of the company line because the company line is more convenient than the uncomfortable truth. It will be garbage coming in, and garbage going out.
You will be subjected to a direct or indirect threat or a bid to chill, especially if you ask uncomfortable questions or raise any doubts.
There is a chance you’ll be working for a racketeer or an international criminal, perhaps even a “sovereign citizen” who has hatched a construction by which nothing is a crime, that all conduct is lawful in the name of freedom and free markets. If your sentiment is against the government or “big business” because of your personal financial situation or your political or philosophical views, an extremist may try to exploit your sentiment for personal profit.
Just some things to think about in the age of the HYIP, the age of terrorism and the age of transnational organized crime as practiced on the Internet . . .
Read the full remarks of Deputy U.S. Attorney General James Cole here.
BULLETIN: Jacquline Hoegel, an American living in American Canyon, Calif., has been charged criminally in an alleged Ponzi scheme that gathered $129.5 million, the office of U.S. Attorney Melinda Haag of the Northern District of California said.
Also indicted was William Wise, a citizen of Canada. Wise, 62, formerly resided in Raleigh, N.C. A warrant has been issued for his arrest, prosecutors said.
Hoegel, 55, made an initial appearance before U.S. Magistrate Judge Carolyn Delaney in Sacramento, and was released on bond, prosecutors said.
The case flowed from an SEC civil prosecution brought in March 2009. Hoegel and Wise now have been charged criminally with conspiracy, mail fraud and wire fraud for their actions involving the sale of CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust.
Hoegel also has been charged with four counts of making and subscribing a false tax return, one count of obstruction and one count of false statements, and Wise also has been charged with money-laundering, prosecutors said.
“The CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust all promised CD purchasers guaranteed rates of returns — sometimes over 16 percent — that were allegedly based on overseas investments,” prosecutors said. “In fact, CD purchasers’ funds were not used for overseas investments that generated the promised returns; the funds were instead used to enrich Wise and Hoegel and to make interest payments to earlier CD purchasers.”
When the SEC brought the civil case three years ago, customer losses were estimated at $75 million. More than 1,200 investors were affected by the scheme, which was unraveled by the IRS, the FBI and federal prosecutors in the Northern District of California and the Eastern District of North Carolina, Haag’s office said.
The 23-count indictment was returned under seal Feb. 21. It was unsealed after Hoegel’s arrest yesterday, prosecutors said.
In 2009, the SEC said the CDs “purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs.”
“Either we talk about here, or I talk about somewhere else (that’s not a threat, it’s a promise :)” — ‘MoneyMakingBrain (MMB), in email threat to PP Blog, Feb. 29, 2012, 7:52 a.m. ET
UPDATED 4:22 P.M. ET (U.S.A.) It has happened again: The PP Blog has received yet another threat via email for its reporting on the HYIP sphere, which FINRA described in a 2010 Alert as a “bizarre substratum of the Internet.”
Today’s threat came from “MoneyMakingBrain” (MMB) in apparent “defense” of JSS Tripler/JustBeenPaid, an HYIP “program” purportedly operated by self-described former AdSurfDaily and Ad-Ventures4U pitchman Frederick Mann. JSS Tripler/JustBeenPaid claims it pays a return of 2 percent per day.
ASD operator Andy Bowdoin, 77, is an accused Ponzi schemer under indictment for wire fraud, securities fraud and selling unregistered securities. The ASD scheme, which was based in Florida, gathered at least $110 million and created thousands of victims, federal prosecutors have said. Bowdoin’s Ponzi trial has been scheduled for September 2012. JSS Tripler/JustBeenPaid purports to pay a daily return twice that of ASD.
Among other things, Bowdoin has compared the August 2008 U.S. Secret Service raid on ASD’s headquarters to the 9/11 terrorist attacks and described it as the work of “Satan.”
MMB’s initial email threat was received at 7:52 a.m. ET. It was followed by another email threat at 11:14 a.m. in which MMB suggested he’d seek to cause banking troubles for a specific PP Blog poster and defend Mann “so help me God.”
“You could be the nicest guy in the world, doing a real public service, but on the matter of Frederick Mann, you’ve made a gross error, and you crossed the line, Mr.,” the second threat read in part. “I am not a passive by-stander Patrick, I am one of those who will come and help an old man from being beaten up by a bully, so help me God.”
The second email also claimed that, “If anything, you’ve brought all this upon yourself.”
On Feb. 27, the PP Blog reported that a site registered to Mann in South Africa at the same street address of JustBeenPaid had at least 11 links to videos featuring Francis Schaeffer Cox. Cox, 27, is a purported “sovereign citizen.” He is accused in Alaska of a “militia” murder plot against public officials.
Federal prosecutors known to be investigating the ASD scheme in the District of Columbia declined to comment on the Blog’s story, which was published Monday. Meanwhile, federal prosecutors known to be investigating the “sovereign citizen” movement in the Pacific Northwest did not respond to a request for comment on the report.
Today’s disturbing developments began with the Blog’s receipt of the initial threatening email at 7:52 a.m. The initial threat implied that, if the PP Blog did publish a comment submitted by MMB during the overnight hours and respond to the email, MMB would seek to cause harm to the Blog. The PP Blog did not reply to the initial email. Nor did it reply to the follow-up threat.
MMB’s comment already had been published by the PP Blog by the time the initial email threat was received. The comment was submitted at 1:12 a.m. today and approved by the PP Blog at approximately 7:30 a.m., after being temporarily sequestered in a holding queue because of the menacing nature of previous comments submitted by MMB.
An anonymous proxy in Europe was used to send the comment, and a Gmail address was entered on the PP Blog’s Comments form. For the past two days, MMB has been submitting comments that imply he has the power to harm the Blog if the Blog does not submit to his threats. His comments were sent from IPs in the United States and Europe. Today’s email communications from MMB were the first received from MMB.
Because the Blog believes it is important to publish comments that showcase the bizarre and sometimes menacing nature of the HYIP sphere, it has published several comments from MMB since Monday. But because today’s email threats introduced a new form of electronic menacing and implied a PP Blog reader would be subjected to a hectoring campaign, the Blog no longer will publish any additional comments from MMB.
The PP Blog engages in the marketplace of ideas, not the marketplace of threats.
These are among MMB’s menacing assertions yesterday:
“I know you’re reading everything I write and you are scared.”
” But, continue to annoy the MoneyMakingBrain and deviate him from his monitoring duties, and you’ll be the ones to be in the hot water. “
“no one is invisible to the MoneyMakingBrain and you need to stop doing what you’re doing against this man immediately. Because if you don’t, I am going to make a formal complain (sic) to the very authorities you purport are coming after scam sites and send all the evidence I’ve gathered so far from posting on your site and the realscam site. I don’t like witch hunts and I am sure Fred Mann can whip your ass in court for your highly suggestive, provocative, highly contentious and flat-out defamatory commentaries against his character on your sites.”
“You can delete my comments as much as you like, but take what I said to the bank. In the end, you are going to look like a fool.”
“Maybe it’s a good idea that you stop your charade once and for all and finally cease and desist attacking Mr. Fred Mann, who is innocent until proven guilty. Not going to be repeating myself again.”
“Needless to say that you’ll be needing to look for another ISP because you won’t have internet access at home or your office, wherever. Needless to say that your server host will also shut down your sites down for violation of terms and conditions.”
MMB also advanced a number of conspiracy theories, including one in which he asserts that two different people who post on RealScam.com and the PP Blog are one and the same. RealScam is a forum that concerns itself with mass-marketing fraud.
In November 2011, RealScam was subjected to a bid to chill from Bogdan Fiedur, the operator of AdLandPro, a website whose members routinely promote HYIP schemes and other highly dubious pursuits. JSS Tripler/JustBeenPaid is one of the “programs” promoted on AdLandPro, which also has a presence on Ponzi forums such as TalkGold and MoneyMakerGroup.
Conspiracy theories are part and parcel to the HYIP landscape, as are threats — direct and veiled. Today”s second MMB email threat also raised the specter of fear.
” . . . it’s clear that you are too scared of me by now,” the second email read in part.
In November 2011, an FBI Terrorism Task Force arrested ASD figure and purported “sovereign citizen” Kenneth Wayne Leaming on charges he filed false liens against at least five public officials involved in the ASD Ponzi case. Two months later, a superseding indictment was returned against Leaming that accused him of participating in a scheme to file false liens against two U.S. prison officials, uttering a false “Bonded Promissory Note” for $1 million and being a convicted felon in possession of firearms.
So-called “sovereign citizens” have been linked to various forms of securities fraud and tax fraud. Because they believe prosecutors and judges have no authority over them, “sovereigns” have been known to target state, local and national officials in plots to file bogus liens and destroy the credit of members of the law-enforcement community and litigation opponents.
Their harassment methods, which feature the use of both postal mail and email and often include direct or veiled threats, have become known as “paper terrorism.”
When arrested, Leaming, the ASD figure and purported “sovereign,” was found with two federal fugitives from Arkansas who’d been indicted on charges of duping participants in a home-business scheme of more than $2 million. Those fugitives also have been linked to the “sovereign citizen” movement and filed a series of bizarre pleadings in Arkansas after their arrests with Leaming, who is jailed near Seattle. Both fugitives now are detained at federal facilities in Texas, according to prison records.
After MMB sent today’s initial email threat, he sent another comment to the Blog that included a threat:
“Stop abusing your forum as Lynn does, or I am going to conclude that there is a business relationship between the two of you, and that would be bad a thing (I am afraid to say anything else as you may call it another ‘threat’).
“And yes, this is not a threat: you’re better off having me talking here than somewhere else. I know too much already about both you and Lynn, and I still want to believe that the two of you are men of good (although the tactics of one indicate the otherwise).”
“Lynn” is a reference to Lynn Edgington, the chairman of Eagle Research Associates Inc., a 501(c)3 Public Benefit Charitable Corporation based in Mission Viejo, Calif.
The second email implied that MMB would seek to interfere with an Eagle Research banking relationship.
From grainy "BigBooster" YouTube video dated June 6, 2007. "Hi, Frederick Mann here," the video begins — with Mann speaking in what may be British or South African English. Mann, who identified himself in 2008 as an AdSurfDaily promoter three months before the U.S. Secret Service conducted a raid on ASD's Florida headquarters, was the featured guest in a conference call last week for JSS Tripler/JustBeenPaid. He is the purported operator of the "program."
Visitors to BuildFreedom.com are greeted by a drop-down ad for JSS Tripler/JustBeenPaid that encourages them to register with a free Gmail address from Google for the outlandish “program” and its purported return of 2 percent a day.
At least 11 videos featuring Francis Schaeffer Cox are accessible on the BuildFreedom page, which features remarks attributed to Frederick Mann and others.
Mann is the purported operator of JSS Tripler/JustBeenPaid. Here is part of what he relates in written form on BuildFreedom in the context of Cox and others:
“To what extent do the people and activities featured so far on this page provide real solutions? How far do they go toward neutralizing the real enemies? What activities need to be added to increase the prospects for freedom?”
The remarks appear to have been written prior to the arrest of Cox and others in an alleged “militia” plot on U.S. soil.
Based on its research, the PP Blog is reporting today that BuildFreedom.com is registered to Frederick Mann at an address in South Africa. At least two other sites registered to Mann at the same address — JustBeenPaid.com and BigBooster.com — have been used to drive traffic to the JSS Tripler/JustBeenPaid “program.”
The BigBooster website uses the same drop-down ad for JSS Tripler/JustBeenPaid that appears on the BuildFreedom domain.
As the PP Blog reported in October 2011, the BigBooster domain was used in 2008 to drive traffic to AdSurfDaily, which the U.S. Secret Service described as an online Ponzi scheme involving at least $110 million. In November 2011, ASD figure and purported “sovereign citizen” Kenneth Wayne Leaming of Spanaway, Wash., was arrested by an FBI Terrorism Task Force on charges of filing false liens against at least five public officials involved in the ASD case.
In December 2010, ASD President Andy Bowdoin was charged criminally with wire fraud, securities fraud and selling unregistered securities. Bowdoin’s program advertised a payout rate half of that advertised by JSS Tripler/JustBeenPaid.
The Conference Call
Separately, the PP Blog is reporting today that Frederick Mann was the featured guest on a conference call for JSS Tripler/JustBeenPaid last week. The Feb. 23 call appears to have been hosted by an American — and Americans and persons from at least one other country (Canada) appear to have quizzed Mann on the investment scheme after joining the “program.”
Whether the conference-call participants were aware of the BuildFreedom domain and Mann’s written comments on Cox and “neutralizing the real enemies” is not known.
The American (likely) who served as the call host was a woman who appeared to speak U.S. English. She described Mann as a “mathematical genius,” but did not say whether JSS Tripler/JustBeenPaid was authorized to sell securities to U.S. citizens. Nor did she say whether she was a registered broker-dealer or whether others promoting the “program” were required to be registered in the United States and other jurisdictions.
Mann also did not speak to any issues concerning securities, including whether the “program” was properly registered in all jurisdictions in which it conducts business and whether individual promoters needed to be registered.
The first person who asked Mann questions during the call identified himself as “Randy” from “South Dakota.” Another caller who identified himself as “Chester” from “North Carolina” also quizzed Mann, who appears to speak British or South African English — or perhaps English from a different part of the world.
The call was conducted one month to the day after CONSOB, the Italian securities regulator, announced that the actions of certain JSS Tripler promoters were under investigation. The CONSOB action was not addressed in the call, which also featured commentary or questions from “Michael” from “San Francisco” and others.
During the call, Mann asserted — among other things — that there was no “age discrimination” in JSS Tripler/JustBeenPaid.
“So, theoretically,” he intoned, “even a one-year person” can participate.
And, he noted, adults were permitted to open accounts in the names of other adults and that registrants could send money to JSS Tripler/JustBeenPaid via AlertPay, SolidTrustPay, LibertyReserve and Perfect Money.
All four of the processors are referenced in U.S. court filings as processors for alleged or proven fraud schemes.
In response to a question from “Edward” (nationality unclear) about whether JSS Tripler/JustBeenPaid had a “contingency plan” in case problems with payment processors developed or if government “harassed” them, Mann suggested that LibertyReserve and PerfectMoney were part of a fail-safe strategy.
“Even if AlertPay and Solid Trust Pay get shut down, that won’t stop” the program, Mann said.
In response to a question from “Potato” from “California,” Mann also suggested it was possible to open accounts without a Social Security number that that members could open accounts for others, including teen-aged grandchildren in another U.S. state — even if a grandparent didn’t know the Social Security numbers of their grandchildren and the grandchildrens’ parents did not give permission to open the accounts.
Who would be responsible for the tax consequences of opening accounts in the names of others was not discussed.
The call appears not to have been limited to participation by Americans. A person who identified himself as “Mark(?)” from “Alberta” also was on the call.
At least one of the persons on the call complained that the “program” was confusing. Even so, he ventured that this is “quite a deal.”
In response to a question about where the “program” was located, Mann claimed JSS Tripler/JustBeenPaid was “not located in any specific part of the world. We’re all over the planet.”
“Oh, OK, cool,” the caller who asked the question replied to Mann.
It was unclear from the call whether all participants who listened in or asked questions understood that the governments of various jurisdictions have acted forcefully against similar “programs” over the years, bringing both civil and criminal prosecutions.
Other Domains That Reference Frederick Mann
On a domain styled Mind-Trek.com, Fredrick Mann is quoted as writing, “In order to legally and safely beat the IRS it is necessary for you to adopt a certain frame of mind. You need to have a certain independence of mind. You need to be able to read the U.S. Constitution for yourself. You need to be able to recognize how the Supreme Court ‘judges’ and other politicians routinely violate the Constitution. You need to realize that practically all lawyers and accountants are handmaidens of the ‘terrocrats’ – terrorist bureaucrats or coercive government agents.”
Similar antitax screeds appear elsewhere on the domain. Although the domain data lists a company that uses the word “Freeman” as part of its name and a contact address in Arizona, the address appears to be nonexistent in the state. Based on the registration data, the actual address of the purported owner may be in the area of Fort Smith, Ark.
Arkansas business records show data on similarly named business entities in the state, but it is far from clear whether the “Freeman” entity listed in the domain-registration data was one of those firms.
Based on its research, the PP Blog also is reporting today that a second domain that uses the Arizona address of Mind-Trek.com exists. That domain, which also appears to confuse Arkansas and Arizona in registration data, is styled TerrorCrat.com. “TerrorCrat” is a phrase Mann has used in his writings. The domain currently resolves to a parked page that beams advertisements.
The PP Blog initially learned about the BuildFreedom domain through a URL that appears under Mann’s name on the BigBooster site. That URL resolved to the BuildFreedom domain. When accessed, it loads the landing page of the BuildFreedom domain, the drop-down ad for JSSTripler/JustBeenPaid and two videos and 11 links pertaining to Francis Schaeffer Cox, the purported Alaska “sovereign” indicted in the alleged murder plot.
Also during the course of its research, the PP Blog observed writings attributed to Mann on a domain that sought to attract customers for debt-elimination schemes. Such schemes also have been advanced by so-called “sovereign citizens.”
A domain that lists Mann as the author of an introductory piece makes a reference to a purported “Indian” tribe. Although it is possible that the tribe is legitimate, some “sovereign citizens” who have no Indian heritage and no standing either as “Indians” or courtroom litigants have married debt-elimination schemes to purported tribal membership in bizarre bids to hamstring prosecutions and target litigation opponents and public officials with vexatious lawsuits.
Some AdSurfDaily members have been linked to the same kind of vexatious legal filings, which sometimes included threats to arrest judges and attorneys that represent banks in collections-related litigation.
Nicholas A. Smirnow. Source: Interpol "Wanted" notice.
After the news broke yesterday that Gregory N. McKnight, the accused operator of the Legisi HYIP Ponzi scheme, had pleaded guilty to wire fraud in a $72 million caper, things only got worse for the serial Ponzi-forum cheerleaders — not that they’re likely to abandon their practice of willful blindness while reaching across oceans to pick the pockets of any person with cash and a pulse.
Nicholas Smirnow, a convicted robber, burglar and drug dealer before he became an HYIP operator and darling of the TalkGold, MoneyMakerGroup and ASAMonitor Ponzi forums, is listed as wanted by INTERPOL.
How long Smirnow has been on INTERPOL’s wanted list and the circumstances under which he was placed on the list were not immediately clear. An email yesterday by the PP Blog seeking comment from federal prosecutors in the Southern District of Illinois on the status of Smirnow and the case against him was not immediately returned.
Smirnow, 54, also is known as Nicolay Smirnow, Alexander Judizcev, Nicholas Kachura and Jeff Prozorowiczm. He was charged in the Southern District of Illinois with fraud and money laundering-related crimes in May 2010 for his alleged operation of the Pathway To Prosperity (P2P) Ponzi scheme.
When the charges against Smirnow were announced approaching two years ago, U.S. federal prosecutors said they intended to ask the government of the Philippines to extradite Smirnow to the United States. Whether Smirnow had been jailed in the Philippines and somehow later was set free after the U.S. arrest warrant was issued could not immediately be determined.
What is clear is that INTERPOL is publishing a “Wanted” listing with the following physical details about Smirnow:
Height: 1.76 meter
Weight: 76 Kg
Colour of hair: Brown
Colour of eyes: Green
The INTERPOL poster for Smirnow was up even as the SEC was announcing the McKnight conviction. (See “Wanted” poster, which is active at the time of this post.)
The P2P scheme was almost unimaginably widespread, a postal inspector said in the 2010 affidavit.
“Financial records of payment processors utilized by P-2-P to collect investment funds from investors show that approximately 40,000 investors in 120 countries established accounts with P-2-P,” the postal inspector said. “Despite the fact that the investment was supposedly ‘guaranteed, investors lost approximately $70 million as a result of [Smirnow’s] actions.”
Ponzi-forum cheerleaders yesterday appeared either to be unaware of (or to have to ignored) the news about the guilty plea of Legisi’s McKnight and corresponding civil judgments against him totaling about $6.5 million.
Some of them continued to focus on their efforts to promote JSS Tripler/JustBeenPaid, a “program” purportedly operated by Frederick Mann that also uses AlertPay and SolidTrustPay.
AlertPay and SolidTrustPay also are referenced in court filings in the AdSurfDaily Ponzi case. A 2008 promo for ASD attributed to Mann asserted that Mann was an ASD promoter. ASD operator Andy Bowdoin faces a criminal trial in September 2012 on Ponzi-related charges of wire fraud, securities fraud and selling unregistered securities.
JSS Tripler/JustBeenPaid asserts it pays a daily return of twice what ASD offered. ASD figure Kenneth Wayne Leaming has been linked to the so-called “sovereign citizens” movement and is jailed near Seattle on federal charges of filing false liens against public officials involved in the ASD case.
McKnight’s base program in Legisi offered a return of .25 percent (one quarter of 1 percent) per day, according to a 2008 SEC filing.
Mann’s purported base program offers eight times that return on a daily basis, according to JSS Tripler/JustBeenPaid promos. On an annualized basis, the “program” offers a return that is between 48 and 73 times higher than the returns of imprisoned Ponzi schemer Bernard Madoff.
Madoff is serving a U.S. prison term of 150 years. McKnight faces up to 20 years, the SEC said yesterday.
A promo for JSS Tripler/JustBeenPaid that appeared yesterday on a forum known as CariGold made this claim. (Italics added):
JSS-Tripler now has 213,884 members — continuing to grow by over 3,000 new members a day. (If it hadn’t been for yesterday’s downtime, the number would have been “over 4,000.”) Thank you to our many promoters for doing such a great job!
Purchases of new JSS-Tripler positions are on track for a new all-time record, today.
More than a month ago — on Jan. 23 — the Italian securities regulator CONSOB announced that JSS Tripler promoters were under investigation. Ponzi-forum promoters pooh-poohed the news.
“Foreclosure-rescue scams prey on distressed homeowners’ desire to save their homes and to find any means to help fix their dire financial situations. As is the case with most loan-modification and foreclosure-rescue operations, consumers who dealt with Bella Homes lost not only the thousands of dollars they paid for ‘help,’ but also their homes.” — John Suthers, Attorney General of Colorado, Feb. 23, 2012
From a YouTube pitch for the Bella Homes' MLM compensation scheme.
BULLETIN: Colorado’s U.S. Attorney and the state’s Attorney General have gone to federal court in Denver to halt what they described as a foreclosure-rescue scam operated through an entity known as Bella Homes LLC.
Bella, which operated as an MLM and allegedly recruited more than 200 salespeople who paid the firm a combined total of more than $138,000 to pitch the “opportunity” and earn a shot at commissions from desperate homeowners, has been sued.
Also named defendants were Mark Stephen Diamond, Michael Terrell, David Delpiano and Daniel David Delpiano.
In court filings in the civil case, Daniel Delpiano was described by state and federal prosecutors as the Georgia-based “mastermind” of the Bella Homes fraud, which allegedly gathered more than $3 million.
Daniel Delpiano is a convicted felon currently on supervised federal probation, prosecutors said. Terrell is a Georgia attorney, and Diamond is an Arizona businessman, according to the complaint.
In February 2005, Daniel Delpiano was convicted of conspiracy to commit wire fraud in the District of Massachusetts. After that — in November 2006 — he was convicted of conspiracy to commit mail fraud, wire fraud and money laundering in the Middle District of Florida, prosecutors said.
And in May 2007, prosecutors noted, he was convicted of mortgage fraud and racketeering in Georgia Superior Court. Daniel Delpiano is the father of David Delpiano, who also resides in Georgia, prosecutors said.
RealScam.com, a forum that concerns itself with mass-marketing fraud, was among the first outlets today to report the news of the Colorado lawsuit. RealScam has been tracking Bella Homes’ developments at least since Nov. 27, 2011.
“To become a representative, the representative must pay Bella Homes an initial enrollment fee of $99.00 and a $195.00 fee to complete mandatory online training,” prosecutors said. “Each representative also has an option to pay a $49.00 monthly fee to create his own replicate of the Bella Homes website in order to recruit homeowners for the program.”
But the program, which has ceased to operate in the wake of the state and federal action, was a scam, prosecutors said.
“Bella Homes gave false hope to desperate homeowners, taking advantage of their desire to do anything to save their homes,” said U.S. Attorney John Walsh. “Bella Homes’s actions not only hurt those vulnerable homeowners, but the housing market generally. The company will now face the consequences of its misconduct.”
At least 450 people sent Bella money to save their homes, but no evidence has surfaced that Bella saved any homes, prosecutors said.
The 52-page complaint includes a number of examples in which financially strapped homeowners allegedly paid Bella thousands of dollars in illegal, upfront fees.
“The homeowner is fraudulently induced to pay ‘rent’ to Bella Homes in lieu of making the mortgage payments,” prosecutors charged. “Some of the mortgage lenders and mortgage servicers detrimentally affected by Bella Homes’ fraudulent scheme are federally insured financial institutions.”
Most of the money paid by victims “has been diverted to the individual Defendants for their own personal use,” prosecutors said.
Diamond, for instance, allegedly received “at least” $321,000 in fraud proceeds, “including more than $277,000 for his American Express bills,” prosecutors said.
Meanwhile, Daniel Delpiano received “at least” $184,000 in fraud proceeds that were applied to personal expenses. Of that sum, as much as $86,180 appears to have come in the form of ATM cash withdrawals, prosecutors said.
“The ATM cash withdrawals were frequently in the amount of $700,” prosecutors said.
Although YouTube videos touting the Bella Homes’ MLM compensation scheme continue to appear, the company’s website is offline and a federal judge has issued orders to preserve assets.
Here is a snippet from the complaint. (Italics added):
Rather than helping homeowners remain in their homes long term, as promised, Bella Homes preys upon distressed homeowners, duping them into paying thousands of dollars based on false promises and false representations, yet provides no meaningful assistance to prevent foreclosure or to allow homeowners to remain in their home for the time period promised by Bella Homes.
Bella Homes has fraudulently obtained approximately $3,000,000 from over 450 homeowners across the nation, and is rapidly expanding its fraudulent operations. In the last two months of 2011 alone, it has fraudulently obtained approximately $1,000,000 from homeowners.
As part of the scheme, Defendants solicit distressed homeowners to convey title to their home to Bella Homes for no consideration and to enter into purported three-, five-, or seven-year lease agreements under which the homeowner pays Bella Homes monthly “rent.” Bella Homes also collects an advance fee from the homeowner of three-months? “rent” upon transferring title and signing the lease. Despite Bella Homes taking title to and collecting “rent” for the property, it does not pay the homeowner for the property and it does not pay off or assume the existing mortgage. Nor does Bella Homes make any of the mortgage payments or pay any of the taxes or insurance for the property.
Here is a snippet from the preliminary injunction. (Italics added):
Except as noted below, Defendants and those involved in active concert with them who are served with a copy of this Order are ENJOINED from:
1. Conducting or continuing to conduct business activities by or on behalf of Bella Homes, LLC, including but not limited to: (a) engaging in any action affecting real title to any property; (b) entering into any agreements relating to real property; (c) collecting, negotiating, or depositing any rental payments made by purported lessees of Bella Homes, LLC; (d) distributing or receiving disbursement of any funds from Bella Homes, LLC; and (e) advertising, promoting, or soliciting customers on behalf of Bella Homes, LLC.
2. Transferring, withdrawing, pledging, dissipating, or otherwise using or concealing funds of Bella Homes, LLC or funds received by any Defendant from Bella Homes, LLC in any accounts with any financial institution . . .
The defendants have agreed to the preliminary injunction, which calls for “ceasing further operations and transferring approximately $500,000 to the government for homeowner restitution, pending final resolution of the case,” prosecutors said.
This grainy likeness of Gregory N. McKnight is taken from federal court filings in 2008.
URGENT >> BULLETIN >> MOVING:Gregory N. McKnight, the operator of the Legisi HYIP Ponzi scheme, has pleaded guilty to wire fraud in federal court in the Eastern District of Michigan, the SEC said this afternoon.
McKnight was charged criminally on Feb. 14 — Valentine’s Day. His guilty plea followed two days later, the SEC said. He faces a maximum sentence of 20 years in federal prison. The SEC charged him civilly in May 2008.
Legisi, which gathered more than $72 million and fleeced more than 3,000 investors in the United States and several other countries, was popularized in part on Ponzi cesspits such as TalkGold and MoneyMakerGroup.
MoneyMakerGroup is specifically referenced in U.S. court files in the Legisi case.
Legisi’s Terms of Service resemble those of JSS Tripler/JustBeenPaid, a purported “opportunity” currently being flogged on the Ponzi boards even as CONSOB, the Italian securities regulator, has opened a probe into the actions of JSS Tripler/JustBeenPaid promoters.
Promos by Legisi triggered an undercover operation by the U.S. Secret Service and state regulators in Michigan.
In addition to the prospect of jail time, McKnight is on the receiving end of a civil judgment and penalties totaling about $6.5 million, the SEC said.
Legisi members, according to the Terms, had to affirm they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among others, according to documents filed in federal court.
The others included “Her Majesty’s Police,” the Intelligence Services of Great Britain, the Serious Fraud Office and Interpol.
JSS Tripler/JustBeenPaid makes members affirm they are “not an employee or official of any government agency.” In addition, it makes them affirm they are not “acting on behalf of or collecting information for or on behalf of any government agency” and not “an employee, by contract or otherwise, of any media or research company.”
One of Legisi’s payment “programs” advertised a return of .25 (one-quarter) percent per day, according to court filings.
JSS Tripler/JustBeenPaid promotes a return of 2 percent a day — eight times higher than Legisi.
A sentencing date for McKnight will be determined later, the SEC said.
U.S. District Judge Mark A. Goldsmith presided over McKnight’s guilty plea, the SEC said.
Frederick Mann is the purported operator of JSS Tripler/JustBeenPaid.
A federal grand jury in Charlotte has returned an indictment against Jonathan D. Davey, 47, of Newark, Ohio; Jeffrey M. Toft, 49, of Oviedo, Fla.; Chad A. Sloat, 33, of Kansas City, Mo.; and Michael J. Murphy, 51, of Deep Haven, Minn., the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina said.
It was a case that married a conspiracy to a series of lies and ultimately was unraveled by the FBI and the IRS, prosecutors said. Among the key new allegations is that a second Ponzi scheme emerged to replace one that had collapsed earlier.
Davey, a CPA, organized a Belize company known as Divine Circulation Services Ltd. that assisted now-convicted Black Diamond felon Keith F. Simmons in pulling off the $40 million scam, according to federal records.
Other corporate entities identified in a 2011 CFTC civil complaint as having links to the alleged scam also used names that conjured images of religion and safety. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said last year.
“The indictment also charges Davey with tax evasion for claiming to the IRS on his 2008 tax return that $810,000 that Davey stole from victims was a ‘loan,’” federal prosecutors said today. “In reality, the indictment charges, Davey stole that $810,000, plus approximately $500,000 in 2009, from victims to build Davey’s personal mansion.”
All four of the new criminal defendants are charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money-laundering, prosecutors said.
Elements of the case as outlined in the CFTC’s civil complaint last year read like a work of impossible fiction. Regulators and other law-enforcement agencies increasingly have been squaring off against bizarre fraud schemes that seek to mask themselves behind shell companies both domestic and offshore. The schemes often feature appeals to greed and faith, amid claims of fantastic earnings.
Read the announcement about the new indictments on the FBI website, which also lists the names of individuals already convicted in the scheme.
UPDATED 2:57 P.M. ET (U.S.A., MARCH 11)
