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  • UPDATE: Ponzi Suspect Found Dead Tuesday Conducted Benefits/Planning Seminars For FBI, IRS, Secret Service, Others; July Pitch Was Scheduled For Federal Law Enforcement Training Center In Georgia

    UPDATED 5:31 P.M. EDT (U.S.A.) A company operated by a man found dead Tuesday in Florida from an apparent self-inflicted gunshot wound was scheduled to conduct a seminar for government workers July 2 at the Federal Law Enforcement Training Center (FLETC) in Glynco, Ga., according to the firm’s website.

    FLETC is operated by the Department of Homeland Security and serves as an interagency law-enforcement training organization for 88 federal agencies.

    Kenneth Wayne McLeod was 48 when he died Tuesday. The SEC said his Jacksonville company, Federal Employee Benefits Group Inc. (FEBG), was paid “up to” $15,000 by government agencies for seminars conducted by McLeod.

    The SEC now says McLeod was operating a Ponzi scheme dating back to at least 1988. The scheme was alleged to have fetched “at least” $34 million, and the SEC’s top official in Miami said McLeod might have destroyed the savings of federal employees who entrusted him.

    “The victims gave years of public service and McLeod stole their futures,” said Eric I. Bustillo, Director of the SEC Miami Regional Office.

    In the early hours after the scheme was exposed, the extent of losses was unclear. What is clear is that FEBG used its website to boast about its federal contacts, while using what appeared to be clipart files to drive home the company’s message of “Professionalism, Experience, Integrity.”

    What appears to be clipart of two businessmen holding briefcases and shaking hands in front of a globe appears on the website. An image of an attractive woman from an apparent clipart file also appears on the site, as do other elements of apparent clipart. The site appears to use other static elements associated with earlier web technology. The site also appears to use older technology in its contact form, which publishes live links to email addresses of employees.

    Also on the site is a link to the U.S. Office of Personnel Management from which visitors can download forms. Another link on the site purports to link to the domain SEBG.US, but the site was throwing a server error at the time of this posting. Records suggest the SEBG site was live Wednesday, and that SEBG stands for State Employees Benefits Group. Archives show the SEBG site featured keywords such as “retirement system, florida retirement system, state retirement systems, public employees, state employees, municipal employees, law enforcement, police officers, sheriff s office, benefits analysis, financial planning” and more.

    For its part, the FEBG site touted trust.

    “Through dedication and commitment to our core values of Professionalism, Experience and Integrity, FEBG holds all associates and subsidiaries responsible to vigilance, service and honor for each of our clients’ individual needs and planning strategies,” the company proclaimed on the website.

    “It is our mission to educate and maximize the financial well being of all Federal employees,” the company said. “Contact us to discuss scheduling a training workshop or speak with one of our leading financial planners.”

    The website also published a schedule of its seminars. If the schedule is accurate, FEBG completed a seminar for U.S. Immigration and Custom Enforcement (ICE) at the FLETC facility in Georgia June 8 — 14 days prior to McLeod’s death. Another ICE seminar is listed for July 2 at the same FLETC facility.

    Seminars for the Federal Air Marshals Service (FAMS) were scheduled July 7-9 in Miami. Dual seminars were scheduled for July 21 — one at the Georgia FLETC facility for ICE, and another in San Antonio for “SSA – OIG,” which stands for Social Security Administration, Office of the Inspector General.

    Seminar schedules dating back to 2006 appear on the site, featuring names such as the FBI, WIFLE (Women in Federal Law Enforcement), the DEA, the IRS, the U.S. Census Bureau, USSS (United States Secret Service), the U.S. Forest Service, USPS (United States Postal Service), ATF (the Bureau of Alcohol, Tobacco, Firearms and Explosives), NAADHS (National Association of African-Americans in the Department of Homeland Security, US Bankruptcy Court and US District Court, the Federal Public Defenders Office, the National Park Service, the US Fish & Wildlife Service, NABNA (National Association of Black Narcotics Agents), DCIS (Defense Criminal Investigative Service), NCIS (Naval Criminal Investigative Service) and others.

    It was not immediately clear if members of each of the agencies or employee associations invested in the alleged scheme. Also unclear was the total exposure of investors to losses.

    See earlier story.

  • BULLETIN: Another Florida Ponzi Scheme: SEC Sues Estate Of Dead Man, Saying Kenneth Wayne McLeod And His Companies Ripped Off Members Of ‘Law Enforcement’ And Operated Ponzi Scheme For Decades

    BULLETIN: The SEC has gone to court in Florida to obtain emergency relief against two companies and their late owner, alleging that Kenneth Wayne McLeod targeted government employees and members of law enforcement to invest in a government bond fund that did not exist.

    McLeod, 48, was found dead Tuesday in Jacksonville’s Mandarin Park. Local media outlets are reporting that the death is believed to be a suicide, but the SEC described the death only as “sudden.”

    In a dramatic emergency action, the SEC has sued McLeod’s estate and both of his businesses: Federal Employee Benefits Group Inc. (FEBG), a consulting firm, and F&S Asset Management Group Inc., a registered investment-advisory firm.

    U.S. District Judge Federico A. Moreno has frozen the assets of McLeod and the companies. The SEC said it was unclear who even was running the firms in the wake of McLeod’s death.

    Among the astonishing allegations was that McLeod had been operating a Ponzi scheme since at least 1988 and that the colossal fraud gathered “at least” $34 million from 260 investors across the country.

    “McLeod victimized law enforcement agents and other government employees who dedicated their lives to the service of this country,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “The victims gave years of public service and McLeod stole their futures.”

    McLeod conducted investment seminars “at government agencies nationwide” to lure clients, the SEC said. The agencies paid “up to” $15,000 each for these seminars,” and FEBG held itself out as “dedicated to the complex issues surrounding special group employees, including Law Enforcement Officers, Firefighters and Air Traffic Controllers,”the SEC charged in the complaint.

    At least one investor was told the purported bond program was a special fund for family and friends, and families of “fallen agents,” the SEC charged.

    If the allegations are true, it means that McLeod was selling a Ponzi scheme dressed up as a secure retirement plan backed by government bonds right inside government offices — while earning a fee to make the pitch and plucking heartstrings by referring to people who had lost their lives in the line of duty.

  • SHADES OF AVG: Upstart AdPayDaily ‘Surf Scolds Members For Not Understanding The ‘Program’ After Pumping Bonuses For Weeks

    Ponzi, wire fraud and money-laundering allegations against AdSurfDaily and President Andy Bowdoin — and the bizarre conduct of a spinoff surf known as AdViewGlobal — have made it harder for upstart surfs to gain traction. ASD's brand is radioactive, even in the strange universe of the so-called autosurf "industry." Surfs also are having a harder time gaining a following because the U.S. Secret Service has revealed in court filings that it is using undercover agents in its autosurf investigations.

    AdPayDaily (APD), an upstart surfing company whose membership includes participants in the alleged AdSurfDaily Ponzi scheme and the failed AdViewGlobal (AVG) autosurf, is lecturing members on proper behavior.

    AVG, which had close ties to ASD, became infamous for scolding members

    In an unsigned post on its free WordPress Blog, APD, which does not disclose its ownership and registered its domain behind a proxy while plying participants with bonuses and asking them to recruit prospects willing to fork over $300, told members they needed to get a grip on the “program.”

    The Blog post is dated June 21. During the very same week a year ago, the AVG autosurf was in its death throes. News about AVG’s suspension of payouts amid a bonus flap was announced one year ago today. AVG had close ties to ASD. ASD’s offices in Quincy, Fla., were raided by the U.S. Secret Service on Aug. 5, 2008, amid allegations of wire fraud, money-laundering, selling unregistered securities and operating a Ponzi scheme.

    Like its predecessors ASD and AVG, APD has been flogging bonus programs for weeks, including a “Special Memorial Day Weekend Promotion” in which members were offered a “200% Ad Point bonus on all purchases, with outside funds, of $500 to $2,500.” By June 8, APD was hawking “an exciting New APD promotion.”

    Reps who recruited “at least” three new advertisers willing to plunk down $300 were offered “a 200% Ad Point Bonus on the new advertisers [sic] sales,” plus a “200% Ad Point bonus on their own purchases.”

    It its June 21 Blog post, authored after the bonuses were advertised, APD explained the bonus offerings in hard-to-decipher language.

    “Reps who are also Advertisers, [sic] are required to qualify for Bonus Ad Points they receive when they make a purchase as an Advertiser,” APD said in the Blog post. “For example, if you are a Rep and you make a $1,000 purchase as an Advertiser, as a Rep you are required to make a new sale or sales that equal or exceed the number of Bonus Ad Points you received when you made the purchase.

    “In this example,” the post continued, “you must make a new sale or sales that equal or exceed $1,000 and up to 50% or $500 of those new sales can come from your Cash Account. If you choose to use your Cash Account to purchase additional advertising, to qualify for the Bonus Ad Points, you must make that purchase within 30 days of your advertising purchase. Reps will have a total of 50 days to make the required sale, as long as they have used their Cash Account to purchase additional advertising within 30 days. Otherwise, the Bonus Ad Points will expire and be deducted from their Ad Point account.”

    APD, in AVG-like fashion, then scolded members in bold type.

    “The purpose of the qualification is to prevent Reps, who are also Advertisers, from only purchasing advertising to earn two times the cost of their advertising,” the company said in the Blog post. “This type of behavior is a money game and that is not acceptable behavior or the intent of the APD program.”

    Perhaps adding even more confusion, APD noted, “Referring Reps who made the sale will still receive the commission but the Bonus Ad Points they received for unqualified sales will be deducted from the Referring Reps [sic] account when it is determined that the Rep they referred did not qualify for the bonus Ad Points.”

    Revisiting AdViewGlobal

    Plied with a virtually endless series of bonus programs and claims that $5,000 spent on advertising with AVG turned into $15,000 “instantly,” members sent untold sums believed to have totaled in the millions of dollars to the surf.

    AVG launched in early February 2009. In late January, the surf denied it had any affiliation with ASD after AVG’s graphics appeared in a webroom controlled by ASD. The AVG graphic listed the company’s address as 13 S Calhoun Street, Quincy, FL 32351 — ASD’s address.

    The appearance of the graphic was explained away as an “operational coincidence.” Incredibly, the AVG spokesman who explained that the company had no affiliation with ASD was a former ASD employee who testified on the company’s behalf at at evidentiary hearing in 2008.

    Equally incredibly, the spokesman explained that Gary Talbert, an executive at ASD who filed a sworn affidavit on ASD’s behalf in the court case, was AVG’s chief executive officer — all while insisting the two companies were not affiliated.

    In March, AVG incongruously announced that Talbert had resigned as CEO but would remain in the “accounting” department — a strange place for a former CEO to land. The company also announced that its bank account had been “suspended,” but continued to pitch bonus programs relentlessly.

    AVG, which purported to be headquartered in Uruguay while also citing U.S. Constitutional protections, then became the center of a firestorm. An affiliate used a forum set up by some moderators of the now-defunct, pro-ASD Surf’s Up forum to explain a complex method by which AVG prospects could pay sponsors for “page impressions” (ad-packs) to qualify for bonuses.

    Under the method, prospects would make a private agreement with sponsors to pay the sponsors and make AVG the final recipient of the money. Sponsors would deposit the money in their individual bank accounts. The sponsors then would send the sum via wire or overnight mail to an offshore payment processor, and then wait for the sum to be credited to the sponsor’s account at the processor.

    Once the sponsor’s account was credited by the processor, the sponsor would instruct the processor to send the sum to AVG. Because the sum somehow had to get back in the hands of the prospect after its hemispheric trip, the sponsor would apply the funds to his AVG account and then use AVG’s internal system to get the money or the value thereof to the real customer, the prospect, for the purchase of page impressions and to qualify for a whopping 250 percent bonus.

    Some AVG members described the convoluted, multistep process as a helpful sponsor going the extra mile for a prospect. Others called it an invitation to be indicted for wire fraud, money-laundering, tax evasion and securities fraud.

    AVG crashed and burned a year ago today, suspending payouts and threatening members and the media with lawsuits for sharing the news.

    See earlier story on APD.

  • Postal Inspectors, IRS Say Canadian Promoted ‘Series’ Of HYIP Frauds; Randi A. Bochinski Arrested In British Columbia, Faces U.S. Indictment

    Still promoting HYIP frauds on the Ponzi boards and elsewhere?

    A Canadian citizen was arrested in British Columbia June 3 and now has been indicted in the United States on charges of wire fraud, mail fraud and money-laundering, authorities said.

    Randi A. Bochinski, 46, of Kelowna, B.C., potentially faces decades in prison and huge fines if convicted.

    A company known as Carlant Holdings Ltd. was “among other schemes” Bochinski promoted, federal prosecutors said.

    The case was investigated by the U.S. Postal Inspection Service and the IRS Criminal Investigations Division, and will be prosecuted by the Economic Crimes Unit of U.S. Attorney Carmen M. Ortiz in Boston.

    Bochinski “promoted a series of high-yield investment programs, whereby he promised investors significant returns on their investments within a short amount of time,” prosecutors said.

    “[A]mong other schemes, Bochinski solicited investors to invest in” Carlant by stating “they would receive returns of 8-10 times their investment within 90 days,” prosecutors said, adding that neither the purported returns nor the purported payout timeline ever materialized.

    Investors were told their money would remain in an escrow account, but Bochinski “transferred the investments out of the escrow account without notifying the investors,” prosecutors said.

    “To date, only small portions of the initial investment have been returned to the investors, none of it was returned within 90 days, and the promised returns have been non-existent,” prosecutors said.

    Bochinski “also promoted several other fraudulent investments to investors throughout the country and used funds invested by newer investors to make payments to previous investors,” prosecutors said.

  • FOX 5 ATLANTA: Narc That Car President, Director Involved In Previous Pyramid Schemes; Separately, Math Expert Says License-Plate Location System ‘Like Finding A Needle In A Haystack’

    A Georgia State University mathematics professor consulted by Fox News 5 in Atlanta said Narc's purported data-driven location system was like finding a needle in a haystack.

    The Fox 5 News “I-Team” in Atlanta has returned to the subjects of pyramid schemes and Narc That Car, also known as Crowd Sourcing International. (See video and link below.)

    During tonight’s principal newscast, veteran investigative reporter Dana Fowle reported that Narc President Jacques Johnson was a manager in YourTravelBiz (YTB), which was sued in 2008 by California Attorney General Jerry Brown for operating a pyramid scheme.

    Meanwhile, Fox 5  reported that Narc Director Norman Pearah, who owns the building in which the firm’s offices are located, was charged in Louisiana in the 1980s with running an “endless chain” pyramid scheme.

    Records reviewed by the PP Blog show that the California case against YTB was settled with a stipulated judgment that ordered the company to pay $1 million. Records also show that YTB sought an injunction in federal court against Johnson amid allegations he violated a “director’s agreement,” solicited members to move from YTB while still a director and violated a “non-compete” agreement after leaving YTB.

    Johnson “hung up” on Fowle when she contacted him for comment, the station reported.

    Separately, the station reported that it consulted with Yichuan Zhao, a mathematics professor at Georgia State University, about Narc’s license-plate data claims.

    The professor, who appeared on camera with a chart and graphs, observed that the math of Narc was “like finding a needle in a haystack.”

    Narc has said its system could help recover abducted children. Although promoters claimed the firm was affiliated with the AMBER Alert program, the U.S. Department of Justice denied in February that the program had any affiliation with Narc. So did the National Center for Missing & Exploited Children, which administers the secondary AMBER Alert program for the Justice Department.

    Fox 5 also aired a Narc report during last night’s newscast. Last night’s report revisited the station’s previous reports on Narc, which featured the use of a hidden camera.

    See tonight’s Fox 5 report below:

    Visit the Fox 5 website.

  • ASD-LIKE LITIGATION PLAYBOOK BACKFIRES: Washington State Man Indicted For Placing Fraudulent Liens Against Prosecutors, IRS Agent; Ronald James Davenport Faces Decades In Prison If Convicted

    EDITOR’S NOTE: This is a post in which the introduction is longer than the actual story (below). The story demonstrates the dangers of jumping on bandwagons before giving them careful thought.

    Longtime readers of the PP Blog will recall our coverage of Curtis Richmond, “Professor” Patrick Moriarty and ASD Members International (ASDMI). Each was a mainstay in the AdSurfDaily autosurf Ponzi scheme case.

    Richmond, a member of a sham Utah “Indian” tribe, was sued successfully in 2008 under federal racketeering statutes for being part of a group that placed enormous financial judgments against Utah public officials in performance of their duties. The judgments were bogus. Richmond and other members of the sham tribe were ordered to pay damages and penalties totaling more than $108,000.

    Richmond has described himself in court filings as a “sovereign” being answerable only to Jesus Christ.

    Moriarty, now in federal prison in Missouri after pleading guilty in January to filing a false tax return, advocated Richmond’s legal theories in the ASD case. Among other things, Moriarty, who claimed to be skilled in the art of “karma restoration” and once sold fake academic degrees on eBay by explaining they were gag gifts, was part of a group — ASDMI — whose membership roster consisted of members of the now-defunct Surf’s Up forum.

    ASDMI came out of the gate by announcing a scorched-earth legal campaign against the government for its seizure of tens of millions of dollars in the ASD case. At least two federal prosecutors and at least one Secret Service agent became targets of a hectoring campaign that involved the use of certified mail. Surf’s Up championed the campaign, which was designed to demand a litigation result from the government by trapping the recipients of the certified mail into a contract to which they never agreed. The approach, which also was used by the sham Utah tribe in litigation separate from the ASD case, sometimes is known as “paper terrorism” or “mailbox arbitration.”

    Surf’s Up also championed a secondary campaign to write letters to Sen. Patrick Leahy, chairman of the Senate Judiciary Committee. Surf’s Up described the ASD case as a legal “travesty that was committed against the 100,000-plus members of ASD by US attorneys Jeffrey Taylor and William Cowden.”

    Richmond, fresh from his RICO rebuke in “Indian”-related litigation in Utah, then became a mainstay in the ASD case. He filed a series of pro-se pleadings accusing U.S. District Judge Rosemary Collyer and the prosecutors of crimes and threatening prosecution and lawsuits under federal racketeering statutes.

    Some ASD members cheered the filings. Richmond was dubbed a “hero” on Surf’s Up, and also on a forum some of the Surf’s Up Mods established to promote the AdViewGlobal (AVG) autosurf, which had close ASD ties. One of Richmond’s motions claimed that actions by Collyer, a court clerk and two prosecutors prevented an ASD member named Alana Holsted from “Collecting on an Entry of Default Affidavit for $30 million for each Defendant.” In the Utah “Indian” case, Richmond tried to force the federal judge presiding over the litigation to step down by claiming the judge owed him $30 million.

    It is believed that bogus payment claims against Collyer, the prosecutors and the court clerk by some pro-se litigants in the ASD case totaled at least $120 million. It is unclear if overt steps were taken to formalize the purported judgments by filing liens against the judge, the clerk and the prosecutors.

    Previously Richmond had been linked to a scheme to imprison federal judges and litigation opponents and had been declared in contempt of court in California for threatening and trying to intimidate judges.

    Although the story about Ronald James Davenport is not related to the ASD case, it demonstrates the risk of some of the approaches advocated by Richmond, Moriarty and ASDMI — and it shows the utter madness of the advocacy of the Surf’s Up forum. It was the type of advocacy that can land followers in prison for decades.

    Here, now, a brief on Ronald James Davenport . . .

    A Washington state man faces up to 40 years in prison if convicted on charges of filing fraudulent liens against a U.S. Attorney and other government officials, the U.S. Department of Justice said.

    Bogus liens filed by Ronald James Davenport of Deer Park sought the spectacular sum of nearly $5.2 billion from each of the officials, including U.S. Attorney James McDevitt of the Eastern District of Washington, an assistant U.S. attorney, a court clerk and an IRS agent, according to court records.

    Prosecutors described Davenport as a “tax defier.” Davenport has described himself in court filings as a “sovereign.”

    In a civil case that preceded the criminal indictment against Davenport, Senior U.S. District Judge Justin L. Quackenbush ruled last month that the liens “were filed to retaliate against the officers for their good-faith efforts to enforce the tax laws against Mr. Davenport.”

    Quackenbush struck the liens, which were filed in the form of UCC Financing Statements with the Washington State Department of Licensing, according to records. The liens not only were fraudulent, but also contained “sensitive personal information” that violated privacy laws, the judge ruled.

    Davenport also filed instruments dubbed “Notice[s] of Claim of Maritime Lien” with the Spokane County Auditor’s Office, according to records. Those, too, were struck.

    The government sued Davenport civilly in 2008 “to collect delinquent income taxes,” prosecutors said.

    Records show that Davenport responded by filing liens against the officials.

    “The indictment alleges that in retaliation for attempting to collect the delinquent taxes, Davenport made a series of fraudulent claims in December 2009,” prosecutors said.

    “Davenport filed liens against the property of these government officials, falsely claiming that each of them owed Davenport $5,184,000,000,” the Justice Department said.

  • BULLETIN: Alberta Securities Commission Orders $2 Million Penalty Against ‘Lord’ David Greene And John Jenkins In Gold Quest International Ponzi Case

    After determining in January that Gold Quest International (GQI) was a “sham” operating as both a Ponzi and a pyramid scheme, the Alberta Securities Commission (ASC) now has doled out the penalties.

    David Michael Greene, also known as “Lord” David Greene, and John Jenkins were ordered to pay an “administrative penalty” of $2 million, ASC said today. Greene and Jenkins were GQI’s operators, according to the agency.

    Michael McGee, described by ASC as having played “a lesser but still considerable role” in the scheme, was ordered to pay an administrative penalty of $100,000. ASC further determined that McGee claimed that a case against him filed by the U.S. Securities and Exchange Commission had been “dismissed” when it had not.

    In fact, ASC said, the SEC case had resulted in a judgment of more than $8.5 million against McGee, but that the judgment is not being enforced because of McGee’s professed inability to pay.

    If the case involving GQI was not one of the strangest in Canadian history, it almost certainly is one of the strangest in U.S. history.

    Part of the money in the case is tied up in a California homicide investigation in which the operator of the E-Bullion payment processor was charged with murdering his wife.

    During the SEC litigation, the purported “attorney general” of a purported “sovereign” Indian tribe tried unsuccessfully to sue the SEC for the spectacular sum $1.7 trillion, claiming GQI was immune from U.S. securities laws.

    Read this story for more background on GQI.

    Penalties doled out by ASC were less severe on GQI President Delroy Atwood. He was not assessed a financial penalty other than a share of litigation costs of $49,700, but was “prohibited from acting as a director or officer of any issuer for five years,” ASC said.

    Greene and Jenkins were banned from the Alberta capital markets for life.  McGee was banned for 10 years.

    “In the Merits Decision, we found that Greene created Gold-Quest and the Gold-Quest Offering,” ASC said. “Greene and Jenkins ran Gold-Quest’s operations, with some assistance from McGee.

    “Gold-Quest and Greene lured investors by touting investments in the Gold-Quest Offering as safe and secure or guaranteed and by promising 87.5% annual returns,” ASC continued. “These statements about the investments were misrepresentations. The Gold-Quest Offering, purportedly involving investment in foreign currency trading, was in fact a sham.

    “On the evidence, we were satisfied that, during the relevant period, Gold-Quest itself did not open any foreign currency trading account, receive income from any currency trading, have an active currency trading program or any actual currency traders in its employ, or place investors’ money with external foreign currency traders,” ASC said.  “Rather, the evidence was that any foreign currency trading had been done through foreign currency trading accounts opened in the names of Greene and Jenkins, had been minimal and had resulted in heavy losses.”

    The scheme gathered $29 million, ASC said.

  • BULLETIN: Another Ponzi Scheme In South Florida; SEC Alleges $28 Million Fraud Against Trade-LLC

    A Florida company — Trade-LLC — and its operators have been accused of running a $28 million Ponzi scheme that fleeced members of three investment clubs.

    Named defendants by the SEC were Trade-LLC and its managing members, Philip W. Milton and William Center. The scam operated in the Palm Beach Gardens area, and affected more than 800 members of the investment clubs, the SEC said.

    Investors were persuaded to “entrust Trade-LLC with money so that it could trade securities on the clubs’ behalf using its purported proprietary software trading program,” the SEC said.

    “With claims of a sophisticated trading program and extraordinary returns, Milton and Center persuaded the clubs and their members to increasingly invest millions with Trade-LLC,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “They then blatantly lied to the clubs about the returns that were being achieved and hid the clubs’ losses by running a Ponzi scheme.”

    U.S. Attorney General Eric Holder gave a speech in the Palm Beach area in January, warning fraudsters that they were writing their own tickets to jail. Florida has been pounded by both Ponzi schemes and cases of real-estate and mortgage fraud.

    Milton already has agreed to settle the SEC charges against him, the SEC said.

    Trade-LLC will be placed in receivership and also “has also consented to pay a civil money penalty to be determined by the court,” the SEC said. Milton has been ordered to return $2.3 million and pay a civil penalty of $130,000.

    “Milton and Center used the clubs’ funds to pay themselves salaries of more than $2 million and $1 million, respectively, and to cover more than $1.3 million in business and other unrelated expenses,” the SEC said. “Milton and Center also transferred, without any legitimate basis, over $4.8 million of the clubs’ funds to three Florida companies they controlled.”

    The case against Center remains unresolved.

    Named relief defendants in the case were the three companies controlled by Milton and Center. They were identified by the agency as BD LLC, TWTT-LLC and CMJ Capital LLC. All of the companies have been placed in receivership and have agreed to a settlement and to disgorge ill-gotten gains, according to the SEC.

    Assisting in the probe were the CFTC and the Florida Office of Financial Regulation.

  • UPDATE: Renner Begins Sentence In Tax Case; INetGlobal Operator Housed In Minnesota

    Steve Renner, the operator of the Minneapolis-based INetGlobal autosurf, is an inmate at the Federal Prison Camp (FPC) in Duluth, Minn., according to the Federal Bureau of Prisons (FBP).

    Renner, 55, was sentenced in May to 18 months for income-tax evasion. He was indicted in September 2008 and convicted in December 2009.

    The Duluth FPC is a “minimum security” facility located at the former Duluth Air Force Base. FPCs have “dormitory housing, a relatively low staff-to-inmate ratio, and limited or no perimeter fencing,” according to the FBP. “These institutions are work- and program-oriented; and many are located adjacent to larger institutions or on military bases, where inmates help serve the labor needs of the larger institution or base.”

    Renner was listed last week as in the custody of the U.S. Marshals Service and “in transit” to an unnamed federal facility. For security reasons, there may be lag time between when a federal prisoner is being transported to a facility and when he or she is listed as an inmate at a specific facility.

    As of this morning, Renner was listed as Inmate No. 14166-041 at FPC Duluth. Renner’s conviction occurred prior to allegations by the U.S. Secret Service that he was operating a Ponzi scheme through INetGlobal and related businesses.

    A federal probe into Renner’s business practices continues. He has not been charged with a crime, and has denied wrongdoing.

  • Prosecution, INetGlobal Strike Interim Agreement That Frees Money To Pay Employees, Insurance Under Court Supervision

    UPDATED 6:14 P.M. ET (U.S.A., JAN. 20, 2011.)

    Employees of an Internet company under federal investigation amid allegations it was operating a Ponzi scheme have received some good news: a sum of $125,000 has been released to pay their past-due salaries and $25,000 has been released to pay their past-due healthcare benefits.

    Meanwhile, $200,000 per month will be released to pay the “ordinary and necessary operating expenses” of INetGlobal and affiliated companies as the probe into their business practices continues.

    News for commission-based affiliates of INetGlobal was not good. No money has been released to pay them.

    Dubbed an “interim agreement,” the release of funds was negotiated by attorneys for both INetGlobal and the government. It will be in effect “until such time as the government files an indictment or information containing forfeiture provisions, a civil forfeiture complaint against the funds seized on February 23, 2010 and in later days, or determines that there shall be no prosecution or forfeiture complaint,” according to the terms.

    The agreement does not mean that INetGlobal no longer is in legal jeopardy.

    A separate action against a San Diego property the government alleged was acquired with fraud proceeds has been suspended under the terms of the agreement. The case against the San Diego property has not vanished; under the terms of the agreement, it is being placed on hold “until the related criminal case or investigation is resolved or, in the event that the government determines that there shall be no prosecution, until the government either files a separate civil forfeiture complaint against the funds which were seized on February 23, 2010 and in later days, or determines that there shall be no prosecution or forfeiture complaint.”

    In February, the U.S. Secret Service said it believed INetGlobal operator Steve Renner was running an international Ponzi scheme. About $26 million was seized in the case.

    Companies covered under the agreement include INetGlobal, Inter-Mark Corp. of Nevada,
    Virtual Payments Systems LLC of Wisconsin, V-Media Marketing LLC of Minnesota, Cash Cards International LLC of Minnesota and SMR Investments #1 LLC of Minnesota.

    NOTE IN BOLD ADDED JAN. 20, 2011: An Indianapolis-based company known as Virtual Payment Systems Inc. has contacted the PP Blog to let it know it is not affiliated with the Renner company Virtual Payment Systems LLC of Wisconsin, which is referenced in the paragraph above.

    SteveRenner.com described the agreement with the prosecution as “an incredible turn of events,” reporting it was “worth millions.” The website also reported that the firm has become “the 1st company ever” targeted in a government investigation to receive money back.

    Prosecutors told the Star Tribune of Minneapolis-St. Paul that the government agreed to the release of funds so employees could get paid. (See link to Star Tribune story below.)

    Payments will be administered under court supervision by a court-appointed attorney, according to the agreement. The agreement calls for the IRS to receive “up to” $650,000 and the Minnesota Department of Revenue to receive “up to” $150,000 for tax payments delayed by the probe. Renner will receive $151,484.75 upon providing “proof that Inter-Mark Corporation and/or V-Media Marketing, LLC and/or Cash Cards International, LLC” owe him that sum.

    Renner, 55, was listed last week as in the custody of the U.S. Marshals Service and “in transit” to a federal detention facility to begin serving an 18-month sentence for income-tax evasion. He was convicted in December 2009 and sentenced in May for actions that occurred prior to the INetGlobal Ponzi scheme investigation.

    Renner-related companies have ties to at least four other Ponzi or investment-fraud cases, according to records.

    Read the Star Tribune story on the interim agreement.

  • U.S., German, British, Canadian Provincial Regulators Cooperate In Probe Of Alleged ‘Oil And Gas’ Fraud Scheme Operating In Florida, Texas And Aruba; SEC Sues Justin Solomon And Affiliated Firms

    A Florida man selling “joint ventures” in oil-and-gas businesses in Texas to overseas clients through corporate arms in the United States and Aruba has been accused of fraud by the SEC.

    Named defendants in the case were Justin Solomon of Deerfield Beach, Fla., and three affiliated companies: Seisma Oil Research LLC of Boca Raton, Fla., Seisma Energy Research AVV and Permian Asset Management AVV of Aruba.

    Seisma Oil Research LLC also is known as Seisma Energy Research LLC, and Seisma Energy Research AVV also is known as Seisma Oil Research AVV, the SEC said.

    The case is notable for reasons beyond fraud allegations and the number of companies with similar-sounding names. Indeed, the SEC said the agency was assisted in the probe by the Financial Services Authority of the United Kingdom, the Federal Financial Supervisory Authority of Germany, the Ontario Securities Commission and the Nova Scotia Securities Commission.

    Also assisting internationally was the London Police Department. On the U.S. domestic front, the Division of Securities of the Florida Office of Financial Regulation also assisted.

    The defendants have consented to a preliminary injunction and to repatriate “any remaining investor assets” to the United States.

    Solomon and the companies raised “at least” $25 million in the scheme by using “high-pressure sales tactics” on “more than 400 non-U.S. investors,” drawing them into the scheme, the SEC said.

    “The ventures were supposed to purchase undivided working interest in oil and gas projects owned and operated by two unrelated Texas companies,” the SEC said.

    Investigators, though, said “Seisma never acquired any working interest for two of the six ventures and has expended only $9.5 million of the funds raised toward acquiring interests on behalf of the ventures.”

    At the same time, the SEC said, “Seisma misrepresented or omitted material facts about the profitability and prospects of the oil and gas opportunities.”