Marguerite Martial Jean. Source: Broward County Sheriff's Office
Marguerite Martial Jean has been arrested in Florida on felony charges of operating a $3.4 million Ponzi scheme that targeted Haitian-Americans and churchgoers in the Sunshine State.
Florida has been plagued by Ponzi schemes and other forms of financial fraud. The announcement of Jean’s arrest was made by Miami-Dade County State Attorney Katherine Fernandez Rundle. Joining Rundle in the announcement were Tom Cardwell of the Florida Office of Financial Regulation, and Jeff Atwater, the state’s chief financial officer.
Jean, 38, was charged securities fraud, grand theft and organized scheme to defraud. She is being held at the Paul Rein Detention Facility. Bail was set at $300,000.
Authorties said Jean fleeced at least 293 victims through her companies, which were known as MMJ’s Warehouse and VLM Enterprise. Among other things, Jean posed as a buyer and seller of rice from India who shared money she made on the spread with investors, authorities said.
“Jean promoted the investment offering to members of her church congregation guaranteeing her promissory notes and made promises to pay investors as much as 22% interest,” authorities said.
When investigators reverse-engineered the scheme, a “bank analysis revealed that investor funds went to Jean’s personal account, which she subsequently used to pay older investors and finance her lifestyle,” authorities said.
This "fake" news site is now known as "Exhibit A" in the FTC's case against alleged acai-berry scammers.
EDITOR’S NOTE: If this federal and state action doesn’t get the attention of the out-of-control, direct-sales crowd that divines itself the right to plant the seed that an “offer” is endorsed by famous companies and people, well, perhaps nothing will. Even as this story is being written, affiliates of Club Asteria, a purported “passive” investment company, are planting the seed that the firm is endorsed by Google, Yahoo, MSN and America Online. Club Asteria promoters also routinely trade on the name of the World Bank. Club Asteria is being pitched on forums populated by serial Ponzi scheme promoters.
UPDATED 2:23 P.M. EDT (U.S.A.) One of the most cherished brand names in the United States — “Consumer Reports” — was appropriated by acai-berry hucksters to confuse the marketplace and rip off customers, the FTC charged today.
As the PP Blog reported Friday in advance of the FTC’s formal news conference this morning, “fake” news websites also were used in the alleged scam. The FTC announced today that it was seeking an asset freeze against 10 acai-berry operations. The actions were brought in federal courts in Washington state, Illinois, Michigan, New Jersey, New York and Georgia.
Illinois brought its own action at the state level against an alleged acai huckster in Sauk Village, near Chicago.
“Almost everything about these sites is fake,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “The weight loss results, the so-called investigations, the reporters, the consumer testimonials, and the attempt to portray an objective, journalistic endeavor.”
Lisa Madigan, the attorney general of Illinois, said the scheme also masked a continuity-billing fraud while confusing the public about what is real and what is not.
“Consumers across the country visit these fake marketing sites that are carefully — and illegally — disguised to represent professional news organizations, only to wind up unknowingly debited for extra diet products,” Madigan said. “These Internet con artists are profiting from their purposely deceptive marketing ploys.”
Consumer Reports itself was affected in the brazen scheme, according to court filings. The publication, which is published by Consumers Union of Yonker’s, N.Y., is an American treasure that readers rely on for unbiased news and reviews.
The magazine filed an affidavit in the FTC case that advised a federal judge about the unauthorized trading on its name.
The website consumerproductsdaily.com, which has no tie to Consumer Reports or any of its websites, used language such as “As seen on . . .” followed by the logos for Consumer Reports and other news outlets, Consumer Reports said.
“Consumers Union has no affiliation with consumerproductsdaily.com or with any other website using the Consumer Reports logo in a similar fashion,” Consumer Reports said. “Consumers Union has never licensed or in any way authorized the use of the Consumer Reports trademark in connection with the website consumerproductsdaily.com or with any website employing a similar format.”
Injury to the Consumer Reports brand and confusion about perceived ties to acai-berry companies were not just limited to the consumerproductsdaily.com site, according to the affidavit.
“Additionally, Consumers Union has received numerous complaints and inquiries from consumers regarding web sites with a format similar to consumerproductsdaily.com, including consumerdigestweekly.com, weeklyhealthnow.com, healthnews10.com, and health9news.com,” Consumer Reports said. “Many of the complaints voiced concern that these web sites were infringing the Consumer Reports trademark, while other complaints questioned Consumer Reports’ affiliation with these web sites.”
For its part, the FTC said the “fake news sites” also used titles such as “News 6 News Alerts,” “Health News Health Alerts” and “Health 5 Beat Health News.”
“The sites often include the names and logos of major media outlets — such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports — and falsely represent that the reports on the sites have been seen on these networks,” the agency said.
How slow were some affiliate marketers to take the clue that this form of marketing had come on federal radar screens? Even as marketers were using the name of Consumer Reports to hawk the alleged acai scam, the magazine was warning readers about fake news sites pitching acai products.
Even after today’s actions, some affiliates are continuing to use the very template the government now describes as “Exhibit A” in a fraud case.
Charged by the FTC were Beony International LLC, Mario Milanovic and Cody Adams; Zachary S. Graham, Ambervine Marketing LLC and Encastle Inc.; Intermark Communications Inc. also doing business as Copeac and IMM Interactive; Ricardo Jose Labra; Thou Lee, also doing business as TL Advertising; Circa Direct LLC and Andrew Davidson; Coulomb Media Inc. and Cody Low, also known as Joe Brooks; DLXM LLC, and Michael Volozin, also known as Mikhail Volozin; Charles Dunlevy; Tanner Garrett Vaughn, also doing business as Lead Expose Inc., and Uptown Media Inc.
Named in Madigan’s complaint in Illinois was Ishmael Lopez Jr. Investigators there said at least two sites linked to Lopez used the letters CNN in their domain names, according to the complaint.
View government “Exhibit B,” which the FTC says outlines how the scheme was designed to work.
BULLETIN: A federal judge in Pennsylvania blocked the launch of an online venture known as EclipseChannel.TV after reviewing evidence that recidivist felon and securities huckster Robert Stinson Jr. was at the helm and had thumbed his nose at court orders and an asset freeze.
Meanwhile, the Philadelphia Inquirer, quoting federal prosecutors, reported that Stinson, who is African American, had been using the alias of Jon P. Sascha II online to solicit money for the video venture.
“The Facebook page for Sascha, who counts Stinson among his ‘friends,’ depicts a white man with short brown hair and sunglasses on a beach,” the newspaper reported.
Part of the evolving EclipseChannel fraud involved naming conventions, according to court filings. An earlier iteration of the enterprise initially was part of Stinson’s overall, $17 million fraud, which led to the SEC filing a civil lawsuit and prosecutors charging Stinson criminally.
After Stinson’s assets were frozen, new shell companies were formed to continue the fraud, and the Eclipse Channel was renamed “Eclipsechannel.tv Global Broadcasting Network Inc.,” according to court filings.
Kamian Schwartzman, the court-appointed receiver, said a “flurry of incorporations” had occurred to drive money to the scheme, but that most of the money was used to pay “past due rent” on the Philadelphia-area “mansion” of Stinson and his wife.
Prosecutors moved to revoke Stinson’s bail. That issue will be decided April 27. For now, Stinson has been placed under “house arrest” and U.S. District Judge Michael M. Baylson ordered that his computers be taken to keep him offline, according to the Inquirer.
Court filings in the SEC case quote Stinson as saying the charges against him were “bullsh*t” peddled by a “disgruntled employee.” He told people he had “proof” the case against him was false and confidently predicted he would “beat it.”
But he offered no “proof” and did not “beat it,” Schwartzman said.
Instead, he was charged criminally and failed to defend against the SEC action.
Rather than adhere to the conditions placed on him by a federal judge, “Stinson has busied himself with efforts to evade this Court’s Freeze Orders and Receivership Order,” Schwartzman said.
U.S. District Judge Berle M. Schiller authorized Schwartzman to take control of the EclipseChannel website, its Facebook and Twitter accounts and “any and all other Eclipse Channel II content or promotional material.”
EclipseChannel was positioned as an “advertising” venture and was actively soliciting money despite the swirl of litigation around Stinson.
Remarkably, a number of people continued to do business with Stinson despite the Ponzi allegations and his felonious history, according to court filings.
In 1986, he was convicted of wire fraud and larceny in U.S. Court in Delaware, according to records. In 1987, he was convicted of forgery and larceny in New Jersey state court. During the same year, he was convicted of mail fraud in U.S. District Court for the Eastern District of Pennsylvania.
Meanwhile, in 1996, he was convicted of criminal conspiracy in state court in Pennsylvania. In 2001, he was convicted of bank fraud in U.S. District Court for the Eastern District of Pennsylvania.
Stinson filed two bankruptcy petitions in 1999, one in October and another in December, according to records.
Nine years earlier, in 1990, he was charged with fraud by the SEC. He was ordered to pay a judgment of $7,680, but the judgment remains unpaid, according to court filings.
BULLETIN: The Federal Trade Commission has gone to federal court in Fort Myers to seek contempt sanctions against Florida companies accused of encouraging prospects to misrepresent information on applications to receive Food Stamp benefits.
Prospects who followed the advice could be charged with a crime, the FTC said.
The companies and their principal also are accused of violating a March 2010 court order that prohibited them from marketing credit-repair and debt-elimination programs deceptively. Named in the contempt petition are Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC (CRB), and Debt Negotiations Associates LLC.
“In violation of the Stipulated Settlement Order, Contempt Defendants Sam Sky and
his companies have launched a scheme to defraud economically distressed consumers who
may be interested in receiving food stamps,” the FTC charged. “Specifically, taking cynical advantage of the recent economic downturn, Sky and his companies deceptively market a ‘Food Stamp Eligibility Tool Kit’ . . . to consumers seeking financial help. Sky and his companies market the product as an ‘automatic,’ ‘hassle free’ method by which ‘virtually
everyone’ can receive food stamps ‘without any risk.’
“In fact,” the FTC continued, “eligibility for food stamps remains strictly limited and the vast majority of Americans do not qualify. To side-step these longstanding limitations, Sky’s ‘guide’ encourages consumers to provide so-called ‘ideal’ information on their food stamp applications thereby misrepresenting their income and expenses. Following such advice is hardly ‘without any risk.’ Rather, it puts consumers at considerable risk of criminal prosecution for public benefits fraud. Finally, Contempt Defendants also violate the Stipulated Settlement Order by unlawfully requiring payment before performance for credit repair services and refusing to make required disclosures about the timing and risk of debt negotiation.”
Today’s filing is rich with coincidences. For one, one of the accused firms — Debt Negotiations Associates — uses the acronym DNA. The DNA acronym also has been used by a separate, unrelated company known as Data Network Affiliates, which also operates in Florida. Data Network Affiliates offered a purported debt-reduction program tied to purported mortgage re-writes, while at once advising prospects it was in the business of gathering data to help the AMBER Alert program rescue abducted children.
Data Network Affiliates, which is associated with Internet Marketer Phil Piccolo, later appears to have morphed into a company known as OWOW, which offered purported cancer cures and a “magnetic” product purported to have prevented a leg amputation. The purported “magnetic” product also was positioned as a device that could help tomatoes grow to twice their ordinary size and dairy cows produce more milk.
In another rich coincidence, promoters of a Florida company known as MPB Today targeted Food Stamp recipients last year in promos that implied Food Stamp money could be used to join the MPB Today MLM program and that a $200, one-time purchase could result in free groceries for life.
One promo for MPB Today even advised prospects to sell $200 worth of Food Stamps to a family member to raise the cash to join the MPB Today program. The promo, which appeared in the form of a news release, purported to be the byproduct of a thought that had popped into the promoter’s head on a drive home from “church” on a “beautiful Sunday afternoon.”
The U.S. Department of Agriculture said last year that it was investigating certain claims about the MPB Today program.
Among the allegations was that Sky had started a “new ficitious business” known as “Florida Consumer Assistance” to hawk the purported Food Stamp guide. The new scheme also featured the creation of a website known as MyFoodStampCard.com, according to the FTC.
The website, which is still active, appears to make a series of political statements. Under a subhead of “THE SICKENING STIGMA,” for instance, the site says this:
“The sickening stigma – most all of us grew up in a time where our parents and grandparents – worked hard – never took a hand out and wouldn’t ever let their credit go bad, or even miss a house payment! This is not the same America – ‘Political Greed is destroying our children’s future’ and our retirement opportunities.
“If you 100% disagree with the previous sentence – then leave this website now.” the site barks.
“Good people need to wake up!” the site continues. “Good people have lost their homes and lost their savings trying to do the ‘right thing’ – but what they didn’t understand is the ‘right thing’ is really now the wrong thing. Back in the day, doing the ‘right thing’ would’ve NEVER put good people in the positions that they’re in today.”
The site eventually asks for “1 Easy Payment Of $99.95,” instructing prospects that “You do not have to pay a private social worker $599 to give you assistance.”
Want to mess with Alabamans in the securities fraud era? Don’t do it in Coffee County. A jury there took just 28 minutes to convict Scott Frye on five counts of selling unregistered securities or causing them to be sold.
That’s an average of 5.6 minutes of deliberations per count. The case was prosecuted by Coffee County District Attorney Tom Anderson and the Alabama Securities Commission.
Frye, who faces court action elsewhere in Alabama, initially avoided prosecution by fleeing to the Philippines. But he was arrested there after the United States revoked his passport and he became an undocumented alien on foreign soil, and Coffee County — which has a population of less than 47,000 — sent an investigator to bring him back from the Western Pacific to face trial.
Enterprise, the small Alabama city in which Frye’s two-day trial was conducted, is nearly 9,000 miles away from Manila, where Frye was arrested in 2009.
The Dothan Eagle reported on the 28-minute verdict. Other local media outlets such as WDHN have kept communities informed about the Frye case and have shown Frye being led from the courthouse in handcuffs.
Frye has been dubbed “the father of Internet fraud” — and it may be a richly deserved title. Though only in his early 40s upon his Alabama conviction this week, Frye’s name surfaces in SEC records dating back to 1995, when he was just 27.
One of the early pioneers of online fraud, Frye initially hatched a scheme that promised “riskless profits” from “investments in two Costa Rican enterprises,” the SEC said 16 years ago. The scam proved to involve what has been described as “coconut chips.”
Frye also was linked by Pennsylvania authorities to a securities scheme involving a device that purportedly would permit jewelers “to determine the exact quality and value of any gemstone.”
The Internet was so new back then that law enforcement felt the need to explain to judges what it was, and there was no general agreement about how the word best was presented in court documents. The SEC initially used an uppercase “N” in the third syllable.
“Frye has posted numerous messages on the InterNet, a decentralized web of computers, accessible to millions of potential investors across the country and world-wide, in which Frye has solicited funds from investors,” the SEC wrote in the 1995 Frye case.
Bartow County Bank, which once held deposits tied to Golden Panda Ad Builder and the alleged AdSurfDaily Ponzi scheme, has failed in Georgia.
The Georgia Department of Banking and Finance closed the small bank today and appointed the FDIC receiver. Bartow once held $644,266 linked to Golden Panda, federal prosecutors said in a December 2008 forfeiture complaint.
Bartow’s failure is expected to cost the Deposit Insurance Fund nearly $70 million, the FDIC said. Georgia leads the United States in bank failures.
Golden Panda President Clarence Busby and his daughter, Dawn Stowers, voluntarily ceded the money in the Bartow account to the government more than two years ago, according to court filings. U.S. District Judge Rosemary Collyer formerly ordered the money forfeited on March 31, 2010.
Golden Panda was the purported “Chinese” arm of the Florida-based ASD “autosurfing” enterprise, which prosecutors said was a $110 million Ponzi scheme. Most of the money from the scheme was routed through Bank of America, according to court filings.
Busby, who was implicated by the SEC in three prime-bank schemes during the 1990s, advised Collyer in 2008 that Golden Panda was formed after a “relaxing” day of fishing with Bowdoin and a minister on a Georgia Lake.
Along with the more than $644,000 in Golden Panda cash seized in the December 2008 forfeiture case, prosecutors also seized an $800,000 building in Florida for which Bowdoin had paid cash, according to court filings.
Prosecutors also seized a boat, cars and other equipment in the December 2008 complaint. In a forfeiture complaint filed in August 2008, prosecutors seized nearly $80 million held in Bank of America accounts, including $65.8 million in 10 accounts in Bowdoin’s name, and $14 million in Golden Panda-related accounts.
Collyer ordered Bowdoin’s money forfeited in January 2010. Golden Panda’s money was ordered forfeited in July 2009.
As was the case with many things associated with ASD, the December 2008 forfeiture case turned into Theatre of the Absurd. Although Bowdoin family members were named beneficiaries of much of the fraud outlined in the December complaint, neither Bowdoin nor a family member entered claims for the seized property.
Regardless, Bowdoin filed an appeal after Collyer ordered the money and property forfeited.
The FDIC said today that Bartow County Bank will repoen tomorrow as a branch of Hamilton State Bank. Bartow’s failure will cost the Deposit Insurance Fund an estimated $69.5 million.
“The FDIC and Hamilton State Bank entered into a loss-share transaction on $247.5 million of Bartow County Bank’s assets,” the FDIC said. “Hamilton State Bank will share in the losses on the asset pools covered under the loss-share agreement.”
Four other U.S. banks failed today, bringing the year-to-date total to 34. In 2007, only three banks failed in the United States.
Eight banks have failed in Georgia so far this year. Two have failed in Florida.
After the assets of ASD and Golden Panda were seized, some members immediately turned their attention to promoting other autosurfs. They also pushed HYIPs and cash-gifting schemes, saying the miserable businesses were a good way to make up for ASD/Golden Panda losses.
When an MLM program known as MPB Today launched in Florida last year, promoters urged foreclosure subjects and Food Stamp recipients to part with their money to join the business. Records show that one of the banks MPB Today used was operating under a consent agreement with the FDIC.
MPB Today said last year that it had recruited more than 30,000 members.
Florida has one of the highest foreclosure rates and bank-failure rates in the United States.
Is this an image of a "fake" reporter sometimes listed as "Julia," "Stacie" or "Karen," depending on the acai-berry site?
BULLETIN: (Also see editor’s note below.) The Federal Trade Commission says a major law-enforcement initiative is under way to stop an acai-berry weight-loss scam that features “fake” news stories on websites that appear to be real media outlets but are really just sites that flog acai products. The agency appears to have filed at least six lawsuits against multiple defendants. Although the complaints are filed in Washington state and Illinois, the corporate and individual defendants do not all reside in those states, according to documents viewed by the PP Blog.
Some of the defendants reside in Minnesota, Texas, Michigan, California and New York.
Although the FTC said today that it did not plan to announce until Tuesday the names of the defendants in the cases alleging that fake news sites were hawking acai products, some sites that aggregate court filings are showing that the agency filed complaints Wednesday against Tanner Garrett Vaughn in Washington state; Ambervine Marketing LLC, Encastle Inc. and Zachary S. Graham in Illinois; Beony International LLC, Cody Adams and Mario Milanovic in Illinois; IMM Interactive Inc. in Illinois; Ricardo Jose Labra in Illinois; and Thou Lee in Illinois.
Details of the filing that names Thou are unclear. Like the others, the Thou case is listed on Justia.com, with the FTC as the plaintiff and Thou as a defendant. The case number is sequential to the others, which suggests it was filed at the same time.
Separately, Courthouse News Service has obtained a copy of the complaint against IMM Interactive, which once was known as Intermark Communications Inc. and does business as COPEAC and Intermark Media, according to the FTC. Courthouse News published the IMM Interactive complaint yesterday.
It is unclear if the FTC is filing actions in states beyond Washington and Illinois. The PP Blog checked several domain names alleged by the FTC to have delivered fraudulent news content about the acai berry. Each of the domains threw error messages.
It was not immediately clear if the domain owners shut down the sites independently or if one or more federal judges ordered the sites taken down. Each of the URLs tested by the PP Blog had domain names that implied visitors were at a journalism site.
“Millions of consumers are being lured to websites that imitate those of reputable news organizations,” the FTC said today. “The ‘reporters’ on these sites supposedly have done independent evaluations of acai berry supplements, and claim that the products cause major weight loss in a short period of time with no diet or exercise.
“In reality,” the agency continued, “the websites are deceptive advertisements placed by third-party or ‘affiliate’ marketers. The websites are aimed at enticing consumers to buy the featured acai berry weight-loss products.”
In past acai-berry cases, the FTC has said Internet Marketers had ripped off customers in promos featuring bogus testimonials and hidden continuity-billing schemes. Talk-show host and business icon Oprah Winfrey has filed lawsuits against acai promoters who’ve traded on her name.
EDITOR’S NOTE: The acai-berry scandal is growing, and it may not be easy for promoters in the direct-selling sphere to contain or explain away. Some sites that appear to use “fake” reporters continue to be operational and appear to be hosted on any number of domain names owned by individual promoters. One “fake” reporter featured in “news” accounts appears to have been referred to by three different names, but also appears to be the same “person” — that is, the sites used the images of an attractive female “reporter” and changed the “reporter’s” name. Details about how much weight the “reporter” purportedly lost also varied from site to site. One site we viewed had a disclaimer in small type at the very bottom of the page. The disclaimer appeared against a gray screen, which created a washing effect. The type was smaller than the type of the fake news report, which used black type against a white background. We could not read the disclaimer without glasses.
Perhaps the most intriguing element of the developing story is why the promoters simply did not permit the acai-berry products to be sold on their own merits. An entire fantasy world featuring interchangeable, fake reporters or news anchors appears to have been created to drive sales.
To be sure, today is not a banner day for Internet Marketers. When MLM and direct-sales aficionados in general wonder why there are so many critics, they need look no further than the acai-berry sector. Despite case after case in which the government and private litigants such as Oprah Winfrey alleged elements of false advertising and bogus business practices, purveyors of the schemes dialed up the acai madness to greater and greater extremes.
A big section of the public no longer may know what is real and what is fake in the acai world. One of the reasons is that promoters also have used the names of real media companies to plant the seed that they endorsed the acai offers. Today alone we have seen the logos of CNN, Forbes magazine, ABC, CBS News and USA Today in acai promos. The promoters clearly were trying to plant the seed that the famous media companies had endorsed the product.
Two weeks after an employee of the U.S. Food and Drug Administration was accused of stealing confidential information from a government database to profit from illicit stock trades, another government employee accused in a separate case of taking advantage of his position to commit a crime has pleaded guilty.
Harold Hughes, 58, of Arlington, Va., was a supply clerk for the Federal Trade Commission. In April 2009, just two months after he began his stint as an FTC clerk, Hughes “began using FTC money to make unauthorized purchases,” federal prosecutors said.
By the time the scheme was discovered, Hughes had used FTC money to acquire computers, TVs and DVD players illicitly, eventually draining $218,636 from the agency’s coffers, prosecutors said.
Part of his gambit, prosecutors said, was to order the items and then sell them for cash at a discount.
Some of the items were delivered to FTC headquarters, and Hughes “used his proximity to the mailroom and his familiarity with its employees to avoid detection,” prosecutors said.
In some cases, he removed the illicitly purchased items from the FTC building and shipped “other items via Federal Express using FTC funds,” prosecutors said.
“As the scheme continued, Hughes arranged for items to be shipped directly to his residence in Virginia and to the residences of people to whom he had arranged to sell the items,” prosecutors said.
Prosecutors did not say who his customers were.
The FTC discovered the thefts in December 2010, about 22 months after Hughes became an agency shipping clerk, prosecutors said. Hughes was “removed” from his job, and an investigation was launched.
“Before the FTC discovered the theft and removed Hughes from his position as supply
clerk in December 2010, Hughes made unauthorized purchases from vendors totaling $217,372.11, and he accrued $1,264.10 in unauthorized shipping charges, causing a total loss to the FTC of $218,636.21,” prosecutors said.
Hughes faces a maximum prison term of 10 years. He has agreed to make restitution and to an order of forfeiture, prosecutors said. He is scheduled to be sentenced July 13.
On March 29, federal agents arrested Cheng Yi Liang, 56, of Gaithersburg, Md. Liang worked at the FDA as a chemist, and prosecutors said he mined information from the agency to make illicit stock trades and rack up $3.6 million in illegal profits and avoided losses.
Liang, 56, also was sued by the SEC.
Officials have cautioned the public against painting with too wide a brush when a government employee gets in trouble.
Multiple agencies became part of the probes into both the conduct of Liang and Hughes, according to records.
BULLETIN: In a case that could have been taken from the MLM and security swindler’s playbook, James A. Sweeney and Patrick M. Ryan have been found guilty by a state jury in California of operating a pyramid scheme and stock fraud and stealing $8.2 million after soliciting business at “seminars.”
The men face more than 20 years each in prison. Prosecutors said they told members that their “opportunities,” known as Big Co-op Inc. and Ez2Win.biz, represented the “future of online commerce.”
The firms were compared in promos to Google and eBay, and members were told an IPO was “imminent” and that “when the company went public, the stock would double or triple and [stockholders’] investment[s] could climb to well over $100 per share,” prosecutors said.
At an October 2006 pitchfest attended by a state undercover agent, prospects were falsely told that the company that had taken Google public had been hired to manage Big Co-op’s purported IPO and that the company would go public in December 2006, according to the state.
But no arrangements with Google’s IPO manager to take the firm public had been made and no “application to any governmental or regulatory agency to allow Big Co-op to make an initial public offering of stock in 2006, or at any other time thereafter” had been filed, the state charged.
Filings by the California Department of Corporations paint a picture of affiliates making wild claims to drive business to the company. The company itself lured prospects by planting the seed they’d be driving a Mercedes Benz and wearing a Rolex wristwatch, according to state filings.
Vague — and even wild claims of future success — often are part of MLM scams. It also is common for hucksters to plant the seed that a company “soon” will go “public” and become the “next” Google, Microsoft or eBay. At least one Big Co-op promoter declared the firm the next Walmart, according to records.
Even if no claims that a firm will go “public” are made, it is common for MLM hucksters to leech off the brands of famous companies to create a sort of legitimacy by osmosis. In the universe of MLM fraudsters, it is common for hucksters to plant the seed that figures such as Donald Trump, Warren Buffett and Oprah Winfrey have endorsed the “opportunities,” when no such endorsement had occurred.
Some MLM hucksters even have traded on the names of various presidents of the United States and other world figures.
Sweeney, 64, of Afton, Tenn., and Ryan, 35, of Canyon Lake, Calif., were arrested in June 2009.
By the time it was all over, more than 1,000 California residents had been lured into the scheme, prosecutors said.
The scam “purported to be an online shopping hub where consumers could go to purchase thousands of goods and services at discounted prices from big-name retailers including, Sears, Target and Macy’s,” prosecutors said.
Members were told they’d earn “rebates” and “rewards,” which never came. In reality, the state said, any “monetary gains” were based on a member’s ability to recruit people into a pyramid, have those people recruit others “and so on.”
Taking another page out of the scammer’s playbook, the “opportunity” sold stock ranging in price from 50 cents a share to $5, “with two-for-one deals offered to investors willing to pay cash,” the state charged.
“Sweeney and Ryan bought luxury homes, country club memberships, five Mercedes, and ran up $30,000 to $50,000 in monthly credit card bills,” prosecutors said. “Investor funds were also used to pay for an elaborate bachelor party in Las Vegas, a $23,000 wedding ring and a $100,000 wedding.”
UPDATED 10:51 A.M. EDT (U.S.A.) The name of JPMorgan Chase — one of the most prominent financial institutions in the world — is being used by “manolo” in a pitch for the ThatFreeThing (TFT) MLM program on the TalkGold Ponzi scheme and criminals’ forum.
“manolo” also is promoting Club Asteria (CA), a highly questionable “program” that trades on the name of the World Bank. The World Bank’s name also appears in promos on TalkGold and other Ponzi forums such as MoneyMakerGroup.
JPMorgan Chase did not respond immediately to a request for comment about the use of its name in TFT promos and whether TFT and its affiliates were authorized to use the bank’s name in sales pitches.
TFT affiliates in multiple forums and social-networking sites have been using the Chase name to drive “sign-ups” to the MLM by planting the seed that Chase will pay them $150.
“Members are signing in (sic) their droves, and corporate businesses see this…now the back office is loaded with Tons of freebee’s (sic) …like Free $150 fro (sic) Chase bank !!!” a three-exclamation-point promo from a poster on Scam.com screamed yesterday.
On TalkGold, meanwhile, “manolo” was circulating the Chase name in a post that asked, “Did you see the $150 you get for FREE when you open up a Chase Bank account?”
“These types of freebies are HUGE when we post them because you can literally get someone to join for $25 and instantly show them how to put $150 in their pocket in the very first day,” the post declared.
“manolo” appeared to be quoting an email sent to him earlier this month by “TFT Support.”
Chase’s name also is referenced in a 12-page TFT thread on the MoneyMakerGroup Ponzi forum. There, within the TFT thread, promoter “strosdegoz” also is pitching something called Exotic FX, which purports to be a “PRIVATE ASSET HAVEN.” At the same time, “strosdegoz” is promoting a “program” known as “Cycle2Riches,” which appears to be a matrix cycler that uses a notorious business model that has been attacked by the U.S. Secret Service.
“strosdegoz” and “manolo” are believed to be one-in-the-same. How either TFT or Club Asteria could assure members its income stream was not polluted by proceeds from fraudulent enterprises promoted on MoneyMakerGroup, TalkGold and other Ponzi forums is unclear.
Both MoneyMakerGroup and TalkGold are referenced in federal court filings as places from which Ponzi schemes are promoted. Any new Chase customer who opened an account with the bank in response to the TFT promos on the Ponzi forums conceivably could cause fraud proceeds to flow into the bank. The Ponzi forums are populated by serial hucksters.
TFT promos that reference Chase also are appearing on Facebook. Chase appears recently to have offered a promo by which certain customers who established a banking relationship with it and met other conditions could qualify for a $150 reward. Details about the Chase offer, which appears to have expired, were not immediately clear.
Records suggest, however, that Chase never promised to put $150 in the pockets of new customers “on the very first day,” as the TFT promo implied. Moreover, Chase is Chase, and TFT is TFT. If the Chase offer was available to the public, there was no reason to pay TFT any money to gain access to the Chase offer.
Chase currently is offering a $125 bonus to certain new customers through May 16, according to its website. But the offer varies by state and comes with conditions such as making a minimum opening deposit of $100 and establishing direct deposit from “payroll, pension or government benefits, such as Social Security.”
New accounts come with banking fees if customers don’t meet the minimum qualifications, and no one gets the reward money instantly, according to the Chase website.
BULLETIN: A federal judge in Connecticut has authorized the seizure of 29 domain names tied to the alleged “Coreflood” botnet and malware network and ordered registrars and DNS providers to neutralize what prosecutors have described as a threat to U.S. national and economic security.
The judge ordered the network architecture to be nulled after reviewing allegations that large sums of money had gone missing from corporate bank accounts in at least four states. One of the targets of the cybercriminals was a U.S. defense contractor, according to the complaint.
In an extraordinary move, the judge ordered the U.S. Marshals Service to set up two “substitute server[s]” to intercept traffic and cripple the botnet’s ability to communicate with infected computers. The FBI was ordered to assist the marshals, if needed.
Coreflood is believed to have infected more than 2.3 million computers by installing keylogging software that opened doorways for criminals to steal passwords and remove money from bank accounts. Among the victims cited in court filings were the Tennessee-based defense contractor, a real-estate firm in Michigan, a law firm in South Carolina and an investment company in North Carolina.
In the case of the defense contractor, prosecutors said, the botnet was responsible for “fraudulent wire transfers” that attempted to siphon $934,528 and successfully stole $241,866. The real-estate firm was hit for $115,771 in fraudulent wire transfers. Meanwhile, the law firm was hit for $78,421, and the investment firm was hit for $151,201.
“The full extent of the financial loss caused by the Coreflood Botnet is not known, due in part to the large number of infected computers and the quantity of stolen data,” prosecutors said.
Thirteen “John Doe” defendants have been charged civilly, and criminal seizure warrants and search warrants have been executed, prosecutors said. The defendants are believed to be located “outside the United States,” according to court filings.
“Botnets and the cyber criminals who deploy them jeopardize the economic security of the United States and the dependability of the nation’s information infrastructure,” said Shawn Henry, executive assistant director of the FBI’s Criminal, Cyber, Response and Services Branch.
