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  • UPDATE: Club Asteria Now Said To Have 230,000 Members; ‘I Got Paid’ Posts Appear On Ponzi Boards; Press Releases Picked Up By Google News; Web Promos Stress ‘Passive’ Earnings

    “[I]f this company doesn’t have sales, it’s not a viable company. Every company has to have sales that’s what makes this company work because the great business model, not because it has a lot of outside resources, but with that said we have a lot of things planned in the next weeks and months ahead. This will create lots more wealth for you.” — Federal prosecutors, quoting Golden Panda Ad Builder President Clarence Busby in August 2008 forfeiture complaint that seized $80 million in the ASD/Golden Panda Ponzi case.

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    “Our electronic wallet offered by our financial partners can make a great difference to you and your family. If you don’t utilize these programs and services and take advantage of everything that Club Asteria offers, you are not helping yourself. Our services are priceless — but only if you take advantage of them.

    “We are privileged to work for you and we hope that you feel privileged to be part of our Club that is striving to make a real difference for you and the rest of the world. When the revenue sharing is announced each week, remember that we are doing our part to bring about the best services and products — you need to do your part as well to maintain the highest revenue sharing.” — Club Asteria announcement to members, April 2, 2011.

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    Members of Club Asteria, an online “opportunity” that trades on the name of the World Bank, purportedly issues member payments from Hong Kong and is promoted on Ponzi scheme and criminals’ forums as a “revenue sharing” business, now say that the club’s worldwide membership roster has swelled to more than 230,000.

    A new wave of “I got paid” posts appeared on TalkGold and MoneyMakerGroup over the weekend, and promoter “manolo” announced that a “matching bonus” program had been extended through April. Separately, other Club Asteria members are seeking to drive business to the firm, which touts its relationship with offshore payment processors, by issuing press releases in multiple languages.

    Google News has picked up a number of the releases in recent days, including one dated March 28 that touts a Miami-based promoter and claims “Club Asteria is exploding in every corner of the world.”

    When clicked, a URL in the press release takes visitors to a text and audio pitch for Club Asteria. “Some members are making in excess of $20,000 US Dollars per month,” the promo claims in bold. Prospects who pay Club Asteria a fee of $20 to join as a “GOLD Member” are offered a coaching program that promises the “best tips and tricks that you WILL need to succeed with Club-Asteria!” according to the promo.

    Google rejected an application by the PP Blog in June 2010 to become part of its Google News service. The PP Blog covers online fraud schemes and is written by a journalist with more than 20 years’ experience.

    “[W]e’re unable to include it in Google News at this time,” Google advised the Blog. “We don’t include sites that are written and maintained by one individual.”

    Some Club Asteria members say the company is based in the United States. Why payments purportedly are issued from Hong Kong is unclear.

    Forum posts that declare “I got paid” have been associated with Ponzi schemes that spread virally on the Internet. Such schemes have used press releases to sanitize the business “opportunities,” and also have made use of “matching bonus” programs and offshore processors.

    A March 30 sales pitch from a Club Asteria promoter claims the program “ia (sic) a basically (sic) Human Development Program.”

    The pitch continues with an all-caps paragraph that purportedly defines what the program is not and includes 15 exclamation points.

    “A CHANCE TO CREATE INCOME FOR LIFE…!!! YES…!!! INCOME FOR LIFE FINANCIAL FREEDOM…!!! CLUB ASTERIA EARN AND SHARE, NO SCAM, NO HYIP, NO PONZI, NO GET RICH QUICK SCHEME. EARN $ 400 EVERY WEEK FOR LIFE LONG. JUST A TRUE INVESTMENT AND A GREAT WAY TO EARN AND SHARE THE WEALTH WITH ALL THE PEOPLE OF THE WORLD. RUN BY FORMER DIRECTOR OF THE WORLD BANK ANDREA LUCAS. NOW CLUB-ASTERIA IS PRELAUNCH PHASE. GET ON NOW TO GRAB PRELAUNCH OFFERS…!!! JOIN NOW…!!!”

    Preemptive claims that emphasize what a program is not also have been associated with Ponzi schemes.

    The World Bank said last month that it once employed a person named Andrea Lucas, but that she left her job as a department head in Washington, D.C., in December 1986, nearly 25 years ago. Lucas was not a member of the World Bank’s board of directors, as hundreds — and perhaps thousands — of promotions for Club Asteria have implied.

    Some Club Asteria members have identified Lucas as a former World Bank “Vice president” and “Chairman.”

    Although Club Asteria has been promoted as a “passive” investment opportunity in which customers would simply register, pay a fee and earn money from the efforts of others, Club Asteria now appears to be trying to distance itself from those claims — while keeping the “matching bonus” program intact.

    Claims that members can make money passively by simply paying a fee and relying on Club Asteria to generate profits leads to questions about whether the company and its army of affiliates are selling unregistered securities as investment contracts. On March 17, the company said that members who registered for its program and paid a fee were in position to “help the people of Japan” after last month’s devastating earthquake.

    About two weeks later, Club Asteria suggested that members were overselling the earnings program and making false claims.

    “The revenue will go up or down depending on how many members actively take advantage of utilizing and/or selling any one of our programs or services,” Club Asteria said in an April 2  note on its website. “If anybody has told you something different, they are mistaken and incorrect. We share our revenue that is earned by our membership. There is no guarantee. It would be impossible to guarantee this.”

    Club Asteria members earned a payout of 4.01 percent last week, according to “akledba,” who was posting on the MoneyMakerGroup Ponzi forum in 36-point type.

    “Wow, that is great,” replied MoneyMakerGroup member “strosdegoz.”

    “I didn’t realize it was higher than last week,” strosdegoz noted. Below the post was a link for a program called “Exotic FX,” which bills itself a “PRIVATE ASSET HAVEN.”

    MoneyMakerGroup is referenced in U.S. federal court filings as a place from which the alleged Pathway to Prosperity and Legisi Ponzi schemes were promoted. The schemes gathered more than $140 million, according to court filings.

    Club Asteria did not say how much money it had collected as a result of purported misrepresentations by members or how members could be assured that the firm’s money stream was free of Ponzi and scam proceeds. The company does not publish verifiable financial data. Because the “opportunity” is being promoted on well-known Ponzi forums, it is possible that serial fraudsters have polluted Club Asteria’s revenue stream with proceeds from autosurf fraud schemes, HYIP fraud schemes, MLM fraud schemes, Forex fraud schemes, “arbitrage” fraud schemes and other forms of online fraud.

    “Matching bonus” programs have been one of the hallmarks of online Ponzi schemes, some of which swelled to victimize tens of thousands of participants. AdSurfDaily, an “autosurf” firm that also was promoted on the Ponzi boards, routinely used matching bonuses to attract prospects. ASD’s membership ranks swelled to 120,000, according to promos for the firm, which now is accused of operating an international Ponzi scheme that gathered at least $110 million.

    In 2009, a firm known as AdViewGlobal (AVG), which is said to have recruited 20,000 members in only weeks after the seizure of ASD-related assets, also used matching bonuses. One promoter claimed that $5,000 sent to AVG turned into $15,000 “instantly.” AVG also was promoted on the Ponzi boards.

    AVG collapsed in June 2009. Private attorneys suing ASD President Andy Bowdoin in a racketeering case have referenced AVG in court filings. Federal prosecutors who brought both civil and criminal charges against ASD have made veiled references to AVG in court filings.

    Recent promos for Club Asteria have made claims such as these (below): (NOTE: These are verbatim and are from multipe websites, all of which could be driving money to Club Asteria.)

    • “Earn a realistic $400 a week… PASSIVELY!”
    • “Discover How You Can Earn $400 Per Week Passively With No Sponsoring Requirement And How To Make Money Starting Now!”
    • “We help you become financially secure, YOU help others become financially free. We are restoring balance of financial equality.”
    • “Join Our TEAM and Earn $400 weekly for $20”
    • “Club Asteria” A site of “World Bank’s former Vice president Andrea Lucas”
    • “We all can be millionaires in 2 years if we can afford to invest N15,300 ($100). Thanks to ANDREA LUCAS, a former World Bank Director who established the investment outfit, CLUB ASTERIA.” (Continued below graphic.)
    This Club Asteria promo, which trades on the names of Google, Yahoo, MSN and America Online, claims Club Asteria members earn $400 a week "passively." Such claims lead to questions about whether Club Asteria members are selling unregistered securities as investment contracts.
    • “Be 100% passive and still earn $400 weekly from Real/Legal/Safe Co.”
    • “Hi, club Asteria is founded by former world bank Chairman. running in 141 countries worldwide,21 years experience,its main aim is to eradicate poverty by giving micro-loans.If u pays $20 monthly for life-long by taking gold membership,you earn weakly $400 for lifelong from 19 th Month.No-referrals.But,If u refer one member, U get $9 monthly for lifelong.”

  • STATEMENT: PP Blog Comes Under Attack Again

    Today at approximately 5:18 a.m., the PP Blog came under attack from a swarm of international IPs. The attack appears to have disrupted operations for approximately two hours and 19 minutes.

    Functionality was restored at approximately 7:38 a.m., although signatures of the attack continued to appear. The attack appears actually to have begun prior to 5:18, with prelude signatures appearing overnight — prior to the arrival of an insurmountable swarm.

    The vast majority of IPs that appeared during the swarm were non-U.S. IPs. The PP Blog is published in the United States and focuses on U.S.-based crime and fraud schemes. Most of its traffic originates in the United States.

    After the disabling attack was abated, a second, smaller attack, appears to have occurred. Certain elements of the twin attacks are consistent with efforts to probe the Blog for vulnerabilities and to execute command strings that include thousands of characters. A “normal” command string contains perhaps dozens of characters.

    A professional analyst who reviewed a huge command string targeted at the Blog last week said it was consistent with a hacking attempt, meaning the attackers might have sought to break into the Blog’s server. Elements of today’s attacks were consistent with the same pattern. Nothing suggests the break-in bids — if that’s what they were — were successful. In any event, the traffic was so overwhelming that it knocked the Blog offline for more than two hours.

    The PP Blog experienced sustained DDoS attacks in October 2010 and November 2010, including one in which more than 6 million “hits” were directed to the Blog in three hours. The Blog also has been subjected to spoofing bids, relentless spam and other efforts designed to disrupt its publishing operations and create havoc.

    The image above captures a sudden wave of mostly international IPs that descended on the Blog beginning at 5:18 a.m. The sudden visitors mostly sought to pull “old” stories simultaneously — on a range of topics.

    Meanwhile, the image below shows that the PP Blog was knocked offline for more than two hours earlier today. An IP associated with China recorded the last “hit” on the Blog at 5:19 a.m. The next “hit” did not occur until 7:38 a.m. Because of certain signatures left by the visitors, the Blog believes that U.S.-based IPs also were a small part of the attack and that the event was engineered robotically.

  • SPECIAL REPORT: Investor In Alleged Florida Forex Caper Arrested For Bankruptcy Fraud; Botfly LLC Ponzi Case Reminiscent Of ASD Case; Female Investigator Called Vile Names; Accused Schemer David Lewalski Shifted Blame To Government, Feds Say

    UPDATED 1:14 P.M. EDT (U.S.A.) A Florida man who allegedly received $1.5 million from an international Forex fraudster now jailed in the United States has been arrested on charges of bankruptcy fraud, federal prosecutors said.

    The three-count indictment against Jon Jerald Hammill, 39, of St. Petersburg, was unsealed yesterday. It marked the fourth major Ponzi-related event in Florida in recent days. The state is the site of some of the most complex fraud investigations in the nation, and the case against David R. Lewalski — from whom Hammill and his company allegedly received money — is no exception.

    Hammill, whose arrest was announced in Washington yesterday by Assistant Attorney General Lanny A. Breuer, was accused of failing “to disclose that he had received more than $100,000″ from Lewalski’s company prior to the filing of his bankruptcy petition” in February 2009. He is further accused of not disclosing his ownership of a shell company into which payments from Lewalski’s Ponzi scheme were routed and not disclosing his business relationship with Lewalski.

    Although Hammill’s Chapter 7 bankruptcy initially was granted in July 2009, U.S. Bankruptcy Trustee Donald F. Walton later reopened the case and sought to revoke Hammill’s discharge for fraud. In court filings, Walton said Hammill invoked his 5th Amendment right against self-incrimination when questioned about his dealings with Lewalkski’s company, which was known as Botfly LLC.

    Breuer is the head of the Criminal Division of the U.S. Department of Justice. The federal probe into the alleged $29 million Botfly Forex caper is being led by U.S. Attorney Robert O’Neill of the Middle District of Florida, with the U.S. Postal Inspection Service in Washington as the lead agency. O’Neill and his predecessor — former U.S. Attorney A. Brian Albritton — have squared off against against a series of spectacular fraud schemes operating in the region.

    Among the cases are the Beau Diamond Ponzi scheme, the David Merrick Ponzi scheme known as TIRN, the $220 million Forex Ponzi scheme of Jamaican David A. Smith and the alleged EMG/Finanzas Forex fraud. Investigators say they have traced proceeds from the EMG/Finanzas fraud to the international narcotics trade. A task force working in the region also did investigative legwork in the alleged AdSurfDaily Ponzi scheme.

    Some of the cases have elements that only can be described as bizarre and deeply disturbing. In the Lewalski case, for instance, it is alleged that Lewalski discussed a plan by which he’d divert blame to the government for his legal predicament in a bid to get his victims to pay for his defense.

    By making the government the bogeyman, Lewalski hoped victims would come to believe that he — as opposed to investigators — offered the best shot of getting back their money, according to court filings.

    At least one person gave Lewalski $50,000 to pay for a lawyer — and this occurred after Lewalski had chartered a private Gulfstream IV jet at a cost of $172,744 to fly from the United States to Belgium one day after he was charged civilly in Florida, according to court filings.

    One women — an attorney for the court-appointed receiver in Florida’s civil case — was made the subject of misogynistic rants by Lewalski, according to court filings. The rants were cited by federal prosecutors who argued successfully that Lewalski should not be released on bond.

    Prosecutors also argued that Lewalski had spent astronomical sums of investors’ money on luxuries in the United States and Europe and advised investors to take the 5th Amendment when questioned. In court filings, prosecutors argued that Lewalski also sought to tamper with witnesses.

    Lewalkski, prosecutors said, told “family members and other potential witnesses to stay quiet and not cooperate with law enforcement.”

    The receiver’s attorney was called a “c[$%!]” and a “Nazi,” according to court filings. In one rant, Lewalski allegedly said, “So f[$%!] her what a bitch.” Court documents also allude to a woman who allegedly was called an “FDLE chick” and described by Lewalski as “nuts” and a “bitch.”

    It was not immediately clear if Lewalski was talking about the receiver’s attorney or a different woman employed by the Florida Department of Law Enforcement  when making the alleged “FDLE chick” remark. In the context of the remark, however, Lewalski is alleged to have discussed a “nuclear option.”

    Separately, the U.S. Postal Inspection Service alleged that Lewalski complained to investors he defrauded about “recent ‘Orwellian’ totalitarian tactics” employed by U.S. investigators in Ponzi scheme cases, instead of accepting accountability for his fraud.

    But even as Lewalski was grumbling that his U.S. assets had been frozen, he allegedly did not tell his investors what had happened to their money and why they had not been paid as promised prior to the seizure. Instead, according to the investigating postal inspector, he talked about money he was able to access in Europe after he left the United States hastily, saying he had as many as six offshore accounts.

    Among Lewalski’s other claims was that he had been “investigated and cleared by the Securities and Exchange Commission,” according to court filings. Members of ASD also have claimed that ASD, which was accused of orchestrating a $110 million international fraud from Florida, was given the green light by the SEC.

    No evidence has surfaced in either the ASD case or the Botfly case that the SEC approved of the companies’ operations. Meanwhile, ASD members also have directed rants at prosecutors and investigators, describing them as “goons,” “Nazis,” merchants of “Satan” and criminals. One ASD member proposed that a federal prosecutor be placed in a medieval torture rack, with ASD members at large drawing straws to determine who got the honor of turning the torture wheel.

    Another ASD member proposed that a “milita” storm Washington in defense of ASD. Still another said that the company’s critics consisted of “Rats, Bed Bugs, Maggots, Cockroaches And Everything Else.”

    Lewalski, 47, operated Botfly from his mother’s home in Bayonet Point, Fla., according to court records.

    After being charged civilly by the state of Florida in April 2010, Lewalski immediately left the United States, spending the next seven months in Europe, according to court filings.

    He is believed to have returned to the United States in October 2010, but investigators said he pretended still to be in Europe. Lewalski was arrested in New York on November 4, 2010. Prosecutors said he was staying in a luxury suite atop the Mandarin Oriental Hotel for which he had paid $143,000 in advance with investors’ money.

    The Mandarin bills itself “the most breathtaking luxury hotel in New York,” and Lewalski’s suite overlooked Central Park, according to court records.

    Visit the site of the court-appointed receiver in the Lewalski Forex Ponzi case.

  • A FLORIDA TRIFECTA: FTC Goes To Federal Court To Halt ‘Timeshare’ Telemarketing Scheme; ‘When Consumers Realized They Had Been Duped, The Defendants Routinely Dodged . . . Phone Calls,’ Agency Says

    BULLETIN: Even as the SEC and CFTC were charging alleged Ponzi schemers and “precious-metal” fraudsters in Florida yesterday, the FTC was preparing to announce charges against an alleged “timeshare” telemarketing scheme operating in the Sunshine State.

    Charged by the FTC in the alleged timeshare scam were Albert M. Wilson, David S. Taylor, Frank M. Perry Jr., Vacation Property Services Inc. (VPS), Vacation Property Sellers Inc. (dba Timeshare Experts), and Higher Level Marketing Inc. (HLM, dba Vacation Property Services).

    Two of the companies — VPS and HLM — had previous run-ins with law enforcement over timeshare schemes, the FTC said.

    Although the telemarketing schemers were eager to sell their scam over the phone, they were less eager to pick up the phone to answer calls when confused or disgruntled customers called, the FTC said.

    A federal judge has issued a Temporary Restraining Order that halts the scam in its tracks, the FTC said. The scheme was operating in the St. Petersburg area, the agency added.

    Even customers on the FTC’s “Do Not Call” list were called by the scammers, the FTC said.

    “Defendants target consumers who own timeshare properties,” the FTC said. “Many of Defendants’ victims are elderly consumers and/or immigrants who speak English as a second language. Defendants also deceive many other segments of the population.”

    The scheme featured a pitch that the companies had buyers for timeshares, the FTC said. Prospects were told that, by paying an upfront fee ranging from $200 to more than $8,000, the firms could sell the properties and the customers could cash out.

    “[C]onsumers ultimately learned the defendants had no buyers lined up to purchase their timeshare properties and no such buyers were in the offing,” the FTC said. “And, when consumers realized they had been duped, the defendants routinely dodged consumers’ phone calls and denied their refund requests.”

  • INCREDIBLE: Florida — AGAIN: CFTC Charges Ft. Lauderdale Firm, Principals In Alleged Precious-Metals Scam; ‘Defendants Never Held Or Acquired Any Metals,’ Agency Says

    On the same day the SEC announced charges against two residents of South Florida in an alleged $30 million Ponzi scheme, the CFTC went to federal court and accused two other residents of the region of conducting a precious-metals scheme.

    Charged by the CFTC were James A. Ward of Ft. Lauderdale, and Nathaniel R. Walker of Lauderhill. Also charged was their firm, Kastle & Hawke Inc. of Fort Lauderdale.

    Florida has been plagued by spectacular fraud schemes. Just two days ago, David A. Smith, a citizen of Jamaica, pleaded guilty to charges in a $220 million Ponzi scheme. Last week, the U.S. Court of Appeals for the District of Columbia Circuit ruled that Ponzi-related orders of forfeiture totaling more than $65.8 million in a 2008 civil case would stand against Florida resident Andy Bowdoin, who now is charged criminally in the alleged AdSurfDaily Ponzi scheme. Prosecutors said Bowdoin’s ASD had gathered at least $110 million.

    In the case against Ward and Walker, the CFTC said “the defendants never held or acquired any metals for customers and charged customers interest on non-existent loans.”

    U.S. District Judge James I. Cohn has frozen their assets, amid allegations the company misappropriated at least $319,000 from customers hoodwinked in the scheme. Cohn also ordered books and records to be preserved.

    “To conceal their fraud, the defendants allegedly manufactured and sent false account statements and transaction confirmations to customers,” the CFTC charged.

    “K&H does not hold, nor has it ever acquired, any physical precious metals on behalf of customers,” the CFTC charged.

    When customers wanted to sell the metals they believed they had acquired, Ward manufactured one excuse after another, the CFTC alleged. Customers were told that “rogue” traders were responsible for his inability to sell the metals, according to the complaint.

    And they also were told that the metals could not be sold because of “problems in London,” because markets were closed for the holidays and because “force majeure” — things beyond the company’s control — had occurred, the CFTC charged.

    One of the things that occurred was that the unregistered company had advertised it was selling palladium on a leveraged basis to customers, an unlawful act in itself, the CFTC said.

    On the K&H website, the company told prospects they could take advantage of a “Leveraged Purchase Program” that allowed them to finance up to 77 percent of the costs of the precious metals over five years — “without having to make monthly payments or undergo credit checks,” the CFTC charged.

    Customers were told the company’s approach would lead to hefty profits, but it was all a scam, the CFTC charged.

    In April and May of 2010 — as the firm was explaining to customers why they could not claim their profits even as it was charging them interest on nonexistent loans — Ward withdrew $21,350 in cash from the company’s bank account “and spent nearly $9,000 at a grocery store chain, draining the bank account to a balance of less than $500,” the CFTC charged.

    Read the stunning CFTC complaint.

  • FLORIDA — AGAIN: James Clements and Zeina Smidi Of Plantation Ran $30 Million Ponzi Scheme, SEC Says; Firm Claimed ‘Protected Jurisdiction’ Offshore; Defendants Already Face $50 Million Judgment From Class-Action Lawsuit

    Two Florida residents have been accused by the SEC of operating a $30 million Ponzi and promissory-notes scheme that purported to trade foreign currency amid claims their domestic company was morphing into an “offshore” firm that would operate in a “protected jurisdiction.” The defendants in the case already face a judgment of $50 million from a class-action lawsuit filed against them by investors they ripped off, according to court filings.

    Charged by the SEC were James Clements, 45, and Zeina Smidi, 27, of Plantation. Also charged were their companies: MRT LLC, MRT Holdings LTD and Maximum Return Transaction LLC. (Collectively MRT.) The SEC said MRT Holdings was formed in the Republic of Seychelles, an island nation in the Indian Ocean.

    The SEC case also references an alleged claim by MRT in 2007 that it was “shifting” from MRT LLC into MRT Holdings to become an “offshore entity.” In April 2007, according to a company note to an investor the SEC quoted to a federal judge, Smidi said MRT would operate from Belize, a country in Central America.

    “[W]e have chosen Belize because this allows us to offer our very lucrative products and manager program to you,” Smidi allegedly wrote. “After two years of legal research, we have found that transitioning offshore is the best way to keep our program compliant.”

    By June 2007 — after it had slashed its payout rate — Clements told MRT’s pitchmen that the company was switching away from foreign currency, the SEC charged.

    Clements and Smidi “claimed in a letter to investors they wanted MRT’s money working with the best Swiss banks and advisors, and were searching for a high-yielding product that also offered a high level of security,” the SEC said.

    MRT traded very little Forex, and the trading that did occur resulted in losses, the SEC said. Instead, the company concentrated on keeping its Florida-based Ponzi scheme afloat, while investing “approximately $550,000 in a now-defunct currency trading firm that never returned MRT’s funds,” the SEC charged.

    As part of the scheme, MRT used “certain investors who agreed to be ‘account managers’ to solicit hundreds of investors through informal gatherings and word of mouth,” the SEC said.

    “During the early fall of 2007, MRT stopped answering investor phone calls, fulfilling redemption requests or responding to emails,” the SEC said.

    Read the SEC complaint.

  • BULLETIN: OLINT’S David A. Smith Pleads Guilty In $220 Million Ponzi Scheme; International Forex Caper Laundered $128 Million, Feds Say

    David A. Smith. Source: Orange County Jail

    BULLETIN: David A. Smith, who presided over a $220 million Forex fraud known as OLINT, has pleaded guilty in U.S. District Court for the Middle District of Florida.

    Smith, 41, is a citizen of Jamaica. He “executed a Ponzi scheme to defraud over 6,000 investors located in the Middle District of Florida and elsewhere out of more than $220 million,” prosecutors said. “Smith led investors to believe that he was investing their money in foreign currency trading, earning 10 percent per month on average. In fact, he was not trading their funds.”

    The case included a conspiracy with unnamed others to launder $128 million, prosecutors said.

    “Considerable investigative support”  was provided by the Financial Crimes Unit with the Royal Turks and Caicos Police Force, the Financial Services Commission in Jamaica, the Special Investigation and Prosecution Team in Turks and Caicos, and the governments of the United Kingdom, Turks and Caicos, and Jamaica, the FBI said today.

    Lead agencies in the United States included U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the FBI and the IRS. Also assisting in the probe were the CFTC and the NFA.

    Smith pleaded guilty to four counts of wire fraud, one count of conspiracy to commit money laundering and 18 counts of money laundering. He was the majority owner in a Lake Mary, Fla., firm known as I-Trade FX LLC, prosecutors said last year.

  • FDA Chemist Cheng Yi Liang’s Very Bad Day: Busted By The Feds, Sued By The SEC For Trading On Information Lifted From Confidential Government Database

    A chemist who works for the U.S. Food and Drug Administration has been charged criminally by federal prosecutors, arrested by federal agents in Maryland, sued by the SEC — and will go to bed tonight knowing his son has been arrested in the same case.

    Cheng Yi Liang, 56, of Gaithersburg, was accused of abusing his position of trust at the FDA by mining the agency’s database for information on drug approvals or denials — and then trading on the information he gleaned to “generate more than $3.6 million in illicit profits and avoided losses,” the SEC said.

    Liang’s son, Andrew Liang, 25, also of Gaithersburg, was arrested, too.

    And high-ranking public officials minced no words when announcing the charges against the men, which included a stunning allegation that the senior Liang sought to conceal the scheme in part by trading in the account of his elderly mother in China.

    “Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens,” said Assistant U.S. Attorney General Lanny Breuer. “According to the [criminal] complaint, he and his son repeatedly violated that trust to line their own pockets.”

    Breuer is the head of the Justice Department’s Criminal Division.

    “Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami.

    Khuzami is director of the SEC’s Division of Enforcement.

    Another high-ranking official summarized today’s events by saying Liang’s actions made government workers look bad.

    “Profiting based on sensitive, insider information — as Liang is charged with today — is not only illegal, but taints the image of thousands of hard-working government employees,” sighed Elton Malone, special agent in charge of the office of special investigations for the U.S. Department of Health and Human Services, Office of the Inspector General.

    Liang, an FDA employee since 1996, began snatching information as early as July 2006, the SEC charged.

    He “illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies,” the agency charged.

    In a bid to cover his tracks, Liang “traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China,” the SEC charged.

    “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives,” said Daniel M. Hawke, chief of the SEC’s Market Abuse Unit.

    Father and son were charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud. Federal prosecutors said investigators caught Liang after special software was installed on the work computer he was using.

    See this SEC exhibit that outlines the trades.

     

  • STATEMENT: Another Unusual Event At PP Blog

    Yesterday, beginning at approximately 11:09 p.m., the PP Blog’s operations were affected by a swarm of sudden visitors. The swarm caused an outage that lasted for approximately 30 minutes.

    The vast majority of the visitors displayed non-U.S. IPs, and sought to pull a range of “old” stories or archived files. It is believed the event was engineered robotically. Logs suggest that almost all of the visitors never previously had appeared at the Blog.

    Last night’s event was the most recent in a series of unusual events in which international IPs swarmed the Blog. The PP Blog is published in the United States. Most of its traffic originates in the United States.

    On March 27 — a Sunday — the Blog recorded a brief unusual event. In Sunday’s event, a small number of IPs sent unusually long command strings to the Blog’s server. One such string included 3,283 characters. Normal command strings are far, far smaller. Other visitors also sought to send exceptionally lengthy commands. The 3,283-character string appears to have been a bid to summon the same “old” story multiple times simultaneously. The story referenced the AdSurfDaily case and the now-defunct pro-ASD Surf’s Up forum.

    The events of Sunday and yesterday followed on the heels of unusual events that occurred on March 9 and March 22. The unusual event that occurred on March 9 also featured a bid to send exceptionally lengthy command strings to the server. In the March 9 incident, multiple visitors with international IPs sought to pull simultaneously a story about the MPB Today “grocery” MLM and an unrelated story about a Ponzi scheme in New Jersey.

    Like last night’s event, the unusual event of March 22 featured the sudden appearance of dozens and dozens of international IPs simultaneously. An early analysis of last night’s event suggests the sudden swarm delivered traffic at a rate of more than 63 times the Blog’s ordinary volume.

    A sudden swarm of visitors with international IPs appeared at the PP Blog, beginning at approximately 11:09 p.m. (EDT) on March 28, 2011.

  • URGENT >> BULLETIN >> MOVING: Andy Bowdoin, AdSurfDaily Lose Appeal Of $65.8 Million Forfeiture Order; Panel Unanimously Upholds District Judge

    Andy Bowdoin

    BULLETIN: Andy Bowdoin and AdSurfDaily Inc. have lost their appeal of a January 2010 order by U.S. District Judge Rosemary Collyer that $65.8 million be forfeited to the government in the August 2008 civil Ponzi scheme case against Bowdoin’s assets.

    The U.S. Appeals Court for the District of Columbia unanimously upheld Collyer, rejecting Bowdoin’s claims he had been denied due process and been hoodwinked by his former attorneys into releasing his claims to the seized cash in January 2009.

    “To begin with, there can be no doubt that appellants meant to withdraw their claims,” the panel ruled. “Their withdrawal motion expressly stated that they wished to ‘withdraw and release with prejudice’ their verified claims and that they ‘consent[ed] to the forfeiture of the properties.”

    “Nor is there any basis to conclude that appellants were somehow tricked into releasing their claims,” the panel continued. “Despite Bowdoin’s protests to the contrary, his own affidavit shows that he understood well that he was receiving no promise in return for relinquishing his claims.”

    Bowdoin’s withdrawal of his claims was “free and deliberate,” the panel ruled.

    Although Bowdoin blamed one of his former lawyers for giving him bad advice, the appeals panel said nonsense.

    “[F]ar from being negligent, appellants’ attorney had sound reasons for recommending that they cooperate with prosecutors by relinquishing their claims,” the panel ruled.

    The ruling means that the government now has title to about $80 million seized in the ASD case. Bowdoin lost a previous appeal for a smaller sum in a separate forfeiture action brought in December 2008, and Collyer ordered the forfeiture of more than $14 million from Golden Panda Ad Builder in July 2009.

    Golden Panda was the purported “Chinese” arm of ASD. It was operated by Clarence Busby, whom the SEC had implicated in three prime-bank schemes in the 1990s, according to court filings.

    About $65.8 million of the total sum seized in the August 2008 forfeiture case was in Bowdoin’s personal bank accounts, including one account that contained more than $31 million.

    Bowdoin initially released his claims to the money in January 2009. By late February of the same year, he sought to reassert his claims as a pro se litigant.  He ultimately retained new counsel, and unsuccessfully sought to have Collyer removed from the case.

    Collyer refused to step down, and issued the forfeiture order for $65.8 million in January 2010. At least one other ASD member also sought unsuccessfully to force Collyer to disqualify herself from hearing the case.

    That member — Curtis Richmond — accused the judge of treason. In a separate case in Utah in 2008, Richmond claimed a federal judge owed him $30 million. That judge, too, refused to step down, finding that a purported Indian tribe with which Richmond was associated was a “sham.”

    Richmond has claimed to be a “sovereign” being, as have other people with ties to ASD.

    Bowdoin was charged criminally with wire fraud, securities fraud and selling unregistered securities in December 2010. The U.S. Secret Service said he was operating a Ponzi scheme that had gathered at least $110 million by disguising itself as a “advertising” business.

    ASD perhaps created as many as 40,000 victims, according to court filings.  The civil portion of the case featured dozens of templated, pro se filings from ASD members who asserted the government had no “EVIDENCE” of wrongdoing.

    Almost three years into the case, some ASD members still are claiming the government has no evidence — despite the fact that the evidence has been discussed in open court and in public filings dating back to August 2008.

    Read the ruling.

  • BULLETIN: SEC Alleges ‘Payday Loan’ Ponzi Scheme In Utah; Second Major Ponzi Case Brought In State In Two Days; Schemes Attracted Almost $75 Million

    BULLETIN: The SEC has gone to federal court in Utah to halt what it described as a $47 million “payday loan” Ponzi scheme and offering fraud in which investors were lured by the prospect of “extraordinary returns” while the alleged operator diverted large sums of cash to himself and other business interests.

    The payday-loan Ponzi case against John Scott Clark, Impact Cash LLC and Impact Payment Systems LLC was the second major Ponzi case brought by the SEC in Utah in a matter of days. On March 23, the SEC charged Mike Watson Capital LLC of Provo, Michael P. Watson of Mapleton and Joshua F. Escobedo of Spanish Fork in an alleged real-estate and promissory-notes Ponzi scheme that gathered more than $27.5 million from more than 120 investors.

    Clark and his companies were charged on March 25. Utah has been plagued by Ponzi schemes and other forms of fraud, many of them directed at people of faith. The FBI said last year that thousands of residents of the state had been victimized in investment-fraud schemes.

    Now, Clark’s alleged payday-loan fraud has been added to Utah’s Ponzi mix by the SEC. If the alleged Clark total is added to the total gathered in the alleged Watson/Escobedo fraud, a figure of at least $74.5 million emerges from the two schemes.

    “Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”

    Clark also bought “multiple expensive cars and snowmobiles” and “stole investor funds to purchase a home theater, bronze statues and other art for himself,” the SEC charged.

    In October, the SEC’s Salt Lake office also filed charges against Imperia Invest IBC, a mysterious offshore firm alleged to have stolen millions of dollars from thousands of deaf investors. The Imperia scheme was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.

    In the Clark case, the SEC said “at least” 120 investors were affected. The scheme operated between March 2006 and September 2010.

    Investors were recruited to fund payday loans, the SEC said. One recruiter was paid more than $500,000 to help drive business to the unregistered offering, according to the complaint.

    Clark 58, of Hyde Park, “has never been registered with the Commission or any other regulatory agency in any capacity,” the SEC charged.

    Investors were offered their own companies with an LLC designation and lured by suggestions that Clark and his Impact companies could generate returns “averaging at least 80% per year,” the SEC said.

    “Clark explained to investors that Impact would create a unique LLC for each investor or investor group for the purpose of investing with Impact,” the SEC said. “The investor LLC would then enter into a Joint Operating Agreement with Impact to provide money to Impact to fund payday loans.”

    And Clark’s “early investors” — impressed by their returns — helped the Ponzi gain a head of steam, the SEC said.

    “Many of Clark’s early investors mentioned their astronomical returns to their families or
    business associates, who then invested with Clark,” the SEC said. “Clark paid one salesperson between $500,000 and $600,000 over a four or five year period to locate potential investors and attend payday loan conferences and trade shows. Clark also paid certain individuals commissions ranging from 2% to 4% for bringing in investors to Impact.”

    Neither firm that used the word “Impact” in its name was registered, the SEC said.

    Although investors believed they were funding payday loans, Clark diverted cash to “to make unauthorized investments, including a real estate investment company, a diabetes research company and an online products store,” the SEC said.

    The assets of Clark and his companies have been frozen. Read the SEC complaint against Clark.

    Read the SEC’s statement on the alleged Ponzi scheme involving Watson and Escobedo, who have settled without acknowledging wrongdoing.