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  • BULLETIN: Donald Allen Says He Will Cooperate With Secret Service In INetGlobal Probe; VP Of Renner Entity Claims Former CEO Was Maligned By Company After Raid

    BULLETIN: The vice president of marketing and public relations for V-Newswire — an entity in the Steve Renner family of companies — said he will cooperate “100 percent” with federal prosecutors in the INetGlobal Ponzi scheme investigation.

    Donald W.R. Allen II said this morning that he has met with the U.S. Secret Service twice in recent days. Allen added that he believed INetGlobal had maligned former company CEO Steven Keough in the days following a Feb. 23 raid at the company’s offices in Minneapolis.

    “I respect [Keough] highly,” Allen said. “Keough had the corporate skill . . . to make sure everything was in compliance,” but the company saw him as a “threat,” Allen said.

    Allen said this morning that he had an “excellent” meeting Friday with the Secret Service after agents showed up unannounced at his home.

    “I have nothing to hide,” Allen said. “I will cooperate 100 percent.”

    A full story will appear in a separate post later this morning . . .

  • Is Trevor Cook Lying To Ponzi Investigators In $190 Million Case After Accepting Plea Deal? Investors Say Story Too Incredible To Believe

    EDITOR’S NOTE: Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme in Minnesota say they believe Cook is lying to investigators about the whereabouts of assets and perhaps other elements of the probe.

    “We do not believe this much money could be totally lost in such a short period of time,” an investor told the PP Blog this evening.

    The comment followed on the heels of a grim statement issued today by R.J. Zayed, the court-appointed receiver in lawsuits brought against Cook by the SEC and CFTC in November. Cook, 37, pleaded guilty to criminal charges earlier this month and is required to cooperate in unraveling the money mystery as part of his plea agreement.

    Zayed said he met with Cook April 23 — and Cook shed little new light on the probe.

    Here is the verbatim statement of the receiver (coloring added to distinguish Zayed’s statement from the PP Blog’s Editor’s Note):

    The Receiver met with Trevor Cook on April 23, 2010 at the United States Attorney’s office in Minneapolis, Minnesota for about 4½ hours for the purposes of identifying, locating, and retrieving assets belonging to the Receivership Estates. Also present at the meeting were representatives of the SEC, the CFTC, the FBI, the IRS, and the United States Attorney’s Office.

    Other than the $362,700 in cash and the collection of “Fabergé” eggs or purses resembling “Fabergé” eggs that Cook caused to be turned over to FBI on April 12, 2010, and which were identified at Cook’s change-of-plea hearing on April 13, 2010, Cook provided the Receiver with little new information with respect to the nature and location of any Receivership assets. Almost all of the information that Cook provided to the Receiver was already known to the Receiver as a result of the Receiver’s own investigation in this matter.

    Cook informed the Receiver that he had no submarines, houseboats, or hidden cash. He also identified no real estate, personal property, cash, bank accounts, safe-deposit boxes, jewelry collections, art collections, bonds, stocks, precious metals, buried treasures, or assets of any kind that were not already known to the Receiver. Cook further informed the Receiver that he has not given any assets to others to hold or hide for him. In sum, Cook identified little more than what the Receiver had previously identified, through the Receiver’s investigation, as assets belonging to the Receivership Estates.

    Cook identified three gambling accounts that were not included in the public Receiver reports; however, the Receiver already was aware of them. Those accounts contain over $100,000, but the Receiver has not been able to retrieve the money because the accounts are located in places outside of the Receiver and the Court’s authority (Costa Rica, Cyprus, and Jamaica). With Cook’s cooperation, these funds may be recoverable.

    According to Cook’s plea agreement, “his currency trading during the period from July 1, 2006 through August 31, 2009 at PFG in Chicago generated trading losses in excess of $35 million.” Cook also filed a claim against Crown Forex, S.A. for $67 million in investor funds that he claims were being held by Crown Forex, S.A. Crown Forex, S.A., however, is insolvent. Therefore, the timing and the amount of any potential recovery is speculative, uncertain, and unknown.

    R. J. Zayed
    Court-Appointed Receiver for Trevor Gilson Cook et al.

  • UPDATE: Data Network Affiliates Gets More Bizarre By The Day; MLM Firm Now Says It Was Snookered In $10 ‘Unlimited’ Cell-Phone Deal

    The PP Blog attempts to write serious stories about serious subjects. In recent weeks, we have reported very little on events at Data Network Affiliates (DNA). Perhaps the biggest reason we have published fewer updates on events at DNA was because things had gotten so strange that sharing news with readers almost seemed like a disservice.

    In our view, nothing that DNA says should be taken seriously. The company plays into every negative stereotype about multilevel marketing (MLM), seems neither to notice nor to care, and has reinvented itself more times than Elizabeth Taylor has been married — and this in a compressed time frame of only weeks.

    DNA, which started its MLM journey earlier this year by telling members it was the business of paying them to record the license-plate numbers of cars for entry in a database because 100 million plate numbers could equate to $1 billion in revenue, sold itself as a sort of “free” Narc That Car.

    DNA, though, oversold the “free” part. It then tried to inspire members to buy a $127 upgrade by telling them its free module to enter plate data was a clunker. Its affiliates have done other strange things, such as attempting to persuade prospects that Oprah Winfrey and Donald Trump endorsed the company.

    DNA has a history of making bizarre announcements.

    Narc That Car (referenced above) is another MLM company that collects plate data. Like Narc That Car, DNA said it saw itself as an excellent tool for law enforcement and the AMBER Alert program for missing children. At first, DNA suggested AMBER Alert, which is administered by the Department of Justice and the National Center for Missing & Exploited Children, was doing a poor job.

    DNA then backed away from that claim, went through a phase it which it positioned itself as an anti-Narc That Car, and finally got around to saying that its database would have limited utility when it came either to helping law enforcement or abducted children and their families.

    All of this was done in the name of MLM profits. It also went through a phase in which it threatened reporters with lawsuits. After Dean Blechman, its original CEO, resigned and later said the company was sending out “bizarre” communications authored by a “back door guy,” DNA sought to regroup. Before long, it announced it was in the cell-phone business.

    All of this came on the heels of claims by the company that church parking lots and the parking lots of doctors’ offices were wonderful places to record license-plate numbers if for some reason you couldn’t get to Walmart to get your supply. Coupled with the cheerleading on conference calls, it was enough to make a person wonder whether MLM had reached a new low.

    DNA Cell-Phone Plan Now DOA

    DNA now says it was snookered into believing it could offer an unlimited cell-phone talk and text plan for $10 a month and, for $19.95 a month, could offer unlimited talk, unlimited text and 20 MB of data.

    Yes, unlimited for $10 a month.

    By comparison, Walmart offers an unlimited talk and text program with unlimited mobile web access called Straight Talk for $45 a month. Straight Talk is part of the Tracfone Wireless Inc. companies. The system runs on the Verizon network, and the pricing has electrified U.S. customers accustomed to paying much higher rates. Walmart has reported that more than 1 million people have joined the Straight Talk program.

    If you are a DNA member, did you really believe that DNA, which changes its message like children consume jellybeans at Easter, was going to sell an unlimited plan for $35 a month less than Walmart does through its Straight Talk affiliation and Tracfone’s buying clout with Verizon? Tracfone itself does not undercut the pricing. It has Walmart’s huge economies of scale, its own Straight Talk marketing arm and ample access to the Verizon network behind it now. The program, which started regionally, now has gone national.

    An email sent by DNA today — weeks after members were lured by all the talk about cell-phone plans priced four and a half times under Straight Talk and other low-price leaders — confirms that the DNA pricing is impossible. DNA blamed an exuberant reseller for making it believe the pricing was possible.

    The pricing was obviously impossible — weeks ago. We try not to be rude on this Blog, but there is just no way to be gentle with this one: If you believed DNA, you are a fool. The crap it sends to your inbox is exactly that: crap. DNA’s crap from the very beginning has been uniquely ripe.

    The DNA email was a thing of wretched beauty. The company furiously tried to spin its announcement as good news, but the announcement was just another in a long line of strikingly pungent missives from the firm.

    Oh, by the way, the company also announced that Phil Piccolo was involved in DNA. The note announcing both the death of the cell-phone plan and the presence of Piccolo was signed by DNA’s CEO George Madiou. DNA said it was happy to have Piccolo on board.

    Here are some highlights (italics added):

    We had a call came in from one of our PRO Leaders and asked if we would consider the cellular industry for one of our divisions. She had information that a BIG “MVNO” VENDOR (a reseller of cell service) was not happy where he was and that he not only could bring in the best and lowest prices but that he could bring in thousands of affiliates into our program. We agreed to meet with him.

    After meeting [the reseller,] everything seemed to be too good to be true. The names he was tossing around and the prices he said he could deliver were just unbelievable. Let’s face it a $10 a month unlimited talk and text plan, a $19.95 a month unlimited talk & text with 20 MB of DATA plan, were two unbelievable products that got us very excited, and we knew it would get our affiliates thrilled also. The excitement was contagious and we immediately put our full I.T. Division along with our entire Web team on the DNA Cellular Project.

    Well the dream turned into a nightmare. After selling hundreds, or should we say thousands of cellular agreements, [the reseller] said he could not deliver either product. He stated that Sprint had terminated his reseller agreement. In fact further investigation on our part, of [the reseller] and his so called $10 and $19.95 monthly service agreements, we found that there are no such service plans to be found by any carrier, anywhere on the planet, by any company in the industry. He also said his good friend of 20 years [name deleted] of Sprint found out that “DNA Affiliates” were raiding the Liberty International, WOW Mobile downline groups. He also stated that [name deleted] found out that “Phil Piccolo” is the lead consultant to the corporate team.

    [The reseller] even provided what seemed to be personal e-mails directly from [name deleted], [title deleted] of Sprint to DNA. D.N.A. even received an e-mail supposedly from [name deleted] of Sprint. This entire series of correspondence immediately seemed fraudulent. We plan on contacting [name deleted] because we at D.N.A. feel that there may be foul play with all of these so called [name deleted] communications that are going around.

    How would the D.N.A. management be fooled like this? When you believe you are talking to the [title deleted] of Sprint, when you believe you are receiving legitimate email communication with the [rank deleted] of Sprint, it’s easy to be fooled at first. Thankfully there was enough red flags that this foolishness was quickly exposed for what it was.

    Addressing the allegation of D.N.A. Affiliates raiding the Liberty International WOW downline, this is another untrue comment. It would be impossible to have 120,000 Affiliates (from D.N.A.) who would not know any WOW Affiliates, so there was a lot of discussion in the field from both companies. There is a very open relationship and mutual respect for Randy Jeffers the owner of WOW Mobile and myself.

    In regard to Phil Piccolo, it is no secret that Phil Piccolo is a lead consultant to the D.N.A. corporate team and we are happy to have him on our team. As far as my D.N.A. Corporate team is concern, we do not judge people by what others say about a person, especially on the wild wild west of the Internet, but by the content of their character and their accomplishments. We hired Mr. Piccolo for his genius ability to develop the best compensation plan for our affiliates and his incredible leadership and customer relationship ability. I have also known Mr. Piccolo personally for years and know him as a man of integrity and have watched him help 3 different companies reach the billion dollar level. He is an industry expert that goes back 34 years and we are proud to have him on our team to spear head us to a million affiliates by years end.

    We were blinded by excitement and did not believe the rumors that flooded into D.N.A. about [the reseller]. Not only from hundreds of affiliates but from other owners of companies. We thought at first they were just jealous of our newest, greatest and latest deal with [the reseller]. However now with personal experience along with written, documented facts backed up with recorded conference calls, e-mail and voice mail messages. We can truly say that [the reseller] is a fraud and we have cut all ties with him. We are also looking at all legal options to protect D.N.A. from this man including to see if there are any criminal and civil charges that can be explored.

    We plan to turn over all of our evidence to the proper authorities. Our intent is to make sure all of our D.N.A. affiliates are fully protected from unethical characters like this man.

    We also apologize for [the resellers’] crude language on our conference calls. You have our word that this will never happen again. That anyone we expose to our D.N.A. Family will be 100% checked out and vetted by a very high standard.

    Again, we are very excited about being in the cellular industry and we are pleased with the development of D.N.A. Cellular becoming it’s own MVNO in full control of our wireless future! Stay tune for some more great news in the days to come.

  • SPECIAL REPORT: SEC Says Detroit Pension Funds Looted By Outside Manager, Used-Car Dealer; Agency Alleges Elaborate Fraud Into Which Millions Dumped Into Firms That Financed High-Risk Loans In Metro Atlanta

    EDITOR’S NOTE: The story below is about a compelling case in which nearly $16 million in public-pension funds from the Detroit area allegedly ended up in the control of an Atlanta-area, used-car dealership that operates in a business segment commonly known in the auto trade as “buy here, pay here.” Research shows that the dealership is situated more than 700 miles from Detroit and seeks business from high-risk borrowers who cannot qualify for bank loans. Three pension funds entrusted the money to a start-up, outside investment-advisory business that operated as a sort of venture-capital firm, according to records. The SEC now says the vast majority of the pension funds’ investment was plowed into the dealership and its in-house lending arms — and that the dealership and its financial arms are controlled by a “friend” of the outside adviser. More than $3 million invested by the funds was stolen in a highly complex fraud scheme, according to the SEC.

    If you’re already scratching your head and thinking that plowing millions of dollars in public funds earmarked for Midwest retirees in their Golden Years into a high-risk “buy here, pay here” car lot hundreds of miles away in the Southeast would be imprudent if not impossible, you’re not alone.

    Intrigued? Your mind may fairly well bubble over with questions when you discover that, not only did the “second-chance” car lot allegedly end up with the money, the outside money manager who persuaded the pension funds to trust him was viewed by at least one of the funds as too inexperienced to handle the job. The doubting fund, however, later decided to go ahead with the investment after the outside manager provided it a document the SEC now says was forged to dupe the pension fund into getting on board.

    Here is a question for readers to ponder: Given the astonishing level of corruption investigators are exposing in U.S. financial markets — and given the fact that one of the assertions in the case outlined below is that public pension funds for Detroit and Pontiac, Mich., municipal workers ended up being directed to an Atlanta-area used car dealer — is it possible that pension funds from other U.S. cities are being used to finance high-risk car loans and perhaps subsequent repossessions if the owners default?

    Beyond that, is it possible that used-car lots that provide in-house financing in other areas of the country have been capitalized with public money or are serving as illicit conduits for private investment capital? Could a silent party be under way with venture-capital funds at corrupt “buy here, pay here” dealers that are not linked to a retirement system, setting the stage for shady operators to siphon and squander money investors believed was earmarked for legitimate purposes?

    There are no early answers, and few people would argue against legitimate venture capitalism that provides a return on investment and the opportunity for entrepreneurs to create wealth and jobs. Regardless, the prospect of pensioners’ money or pooled investment capital not linked to a pension fund being used to capitalize “buy-here, pay-here” car lots and other inherently risky businesses raises intriguing questions.

    As always, one of the questions is this: What constitutes “legitimate” and who’s minding the store? Remember: This is the era of Scott Rothstein, the disbarred Fort Lauderdale attorney and Ponzi operator who managed to recruit investors by packaging nonexistent legal settlements in sexual-harassment cases as securities. Americans have seemed willing to buy into all sorts of extremely speculative, highly dubious or just downright illicit schemes in recent years.

    Here are a few things you should know about the “buy here, pay here” business and the repossession business that often accompanies it.

    Disreputable “buy here, pay here” firms have been known to sell grossly overpriced cars to financially strapped consumers amid promises of “easy” weekly or monthly payments — and then take extreme measures to repossess the cars if the owner defaults, thus potentially creating a second tier of business for in-house or contract repo men. (See subhead titled “National Consumer Law Center Describes Underbelly Of Repo Business” in this post.) The NCLC says the “self-help” repo business is dangerous for low-income consumers and has been linked to six deaths in recent years.

    Some of the companies in the “buy here, pay here” business position dealerships in areas of high poverty and unemployment,  buy cars at auction prices, sell them at inflated retail prices, require large down payments, tack on usurious interest rates of 20 percent or higher, equip the cars with technology that disables the motor if a payment is late (thus, for example, potentially stranding a mother with young children in a supermarket parking lot during freezing weather or making it impossible for the mother to get to her job), and then dispatch the repo man and sell the car all over again to another consumer with money troubles.

    The “buy here, pay here” business also may be spawning offshoots and cottage industries, including one in which members are told they can earn money by helping repo companies seize collateral for clients.

    At least one U.S. company — Narc That Car, also known as Crowd Sourcing International — says it is paying members to record license-plate numbers for entry in a database that will be used by companies in the repo business. Narc That Car is believed to have ties to companies and individuals in the “buy here, pay here” business. There have been no allegations of wrongdoing against the company, although critics have questioned its business model and promoters of the firm have made one vague claim after another.

    Narc That Car, which operates as a multilevel marketing firm and is promoted by members as a way to make money by recruiting other members, says “lien holder” companies are interested in purchasing the license-plate data.  Questions have been raised about whether Dallas-based Narc That Car is operating a pyramid business model to pay members or has an investment angel or angels with ties to the title-loan and repo businesses.

    Critics also have raised privacy concerns and questioned the propriety, safety and legality of neighbors recording the plate numbers of neighbors and entering the information in a database. Narc That Car, which scored an “F” rating from the Better Business Bureau, operates in a shroud of mystery. The company recently said it had signed a “multi year, six figure contract is to lease our growing Data Base to a Texas Based Lien Holder Company,” but did not name the company.

    The business of providing in-house financing and following up with repossessions when car buyers default can be downright unseemly. That public funds from the Detroit area allegedly were passed to an Atlanta-area used-car dealer that had at least 38 bank accounts and multiple affiliated entities is a matter for great introspection. There also are allegations of forgery and siphoning in the case. A look at the websites of two of the entities allegedly involved reveals the need for a good editor — and yet millions of dollars of public money changed hands in what the SEC described as an elaborate fraud.

    The allegations in the SEC’s case against Onyx Capital Advisors LLC, investment adviser Roy Dixon Jr., and Michael A. Farr., who operates used-car lots that provide in-house financing, are mind-numbing. The 24-page complaint in the civil case includes charts that reverse-engineer the alleged fraud and hundreds and hundreds of words that paint a picture of an astonishing, highly complex theft involving multiple companies in multiple venues. The story below does not address in detail the issue about how Detroit municipal pension funds ended up in the control of a used-car dealer in Greater Atlanta, although the media in Detroit are asking some very tough questions. Hats off to the Detroit Free Press.

    Here, now, the story of the allegations against Oynx Capital Advisors, Dixon, Farr and related entities in the pension case . . .

    A former wide receiver for the Detroit Lions has been named a defendant in a complex fraud and theft scheme in which the SEC alleges that pension funds belonging to Detroit-area municipal workers were given to a used-car company in Metropolitan Atlanta that provides a type of financing commonly known as “buy here, pay here.”

    Michael A. “Mike” Farr, who played three seasons for the Lions (1990-1992) and hails from a family whose name is synonymous with football and the car business in Greater Detroit, is the owner of Second Chance Motors Inc., which sells used cars in Marietta and Conyers, Ga., according to its website.

    Farr’s father, uncle and older brother all played in the NFL. Mel Farr Sr., the father, was named NFL Rookie of the Year by the Associated Press in 1967 and went on to become one of the most prominent Ford dealers in the United States after he retired from football.

    The senior Farr’s story was one of African American success. He last played professional football in 1973, entered the car business in 1975 and became famous for his homemade, low-budget commercials in which he wore a Superman-like cape. On the downside, some customers later sued him for outfitting cars with devices that disabled them if payments were missed. The shut-off devices are legal, but some consumer advocates oppose them.

    Like his father, Michael Farr entered the car business after his NFL career ended. The younger Farr set up shop in Michigan, Georgia, North Carolina and Texas, according to records.  His NFL career is not mentioned on the website of Second Chance Motors, although Farr’s name and his company’s name is listed in business records in Texas and on the website that promotes athletics at UCLA. Farr played for UCLA in college.

    Also named defendants were Onyx Capital Advisors LLC and its founder Roy Dixon Jr., whom the SEC described as as a money manager and investment adviser to the pension funds and a friend of Farr’s. Onyx Capital directed nearly $16 million from the Onyx Fund to Farr-controlled entities, according to the SEC. Onyx describes itself as a sort of venture-capital firm that “invests private equity capital into small and medium sized companies primarily located in the Midwest through the Southeast United States and Canada.”

    The recipients of capital from Onyx are “stable” companies that “possess superior products or management know-how,” according to the company’s website. Parts of the website feature vague claims, along with grammar and usage errors.

    Farr, 42, lives in Atlanta, according to the SEC. He also controls SCM Credit LLC and SCM Finance LLC, Georgia companies that provide financing support to Second Chance, the SEC said. Farr and his wife also own another Georgia company known as 1097 Sea Jay LLC.

    Second Chance’s website says the company is “not only in the business of selling cars; we are in the business of helping people. With our strong banking relationship with SCM Credit, we can guarantee your approval the spot!”

    In essence, the Michael Farr-controlled car dealer appears to have boasted about a strong “banking relationship” with another Farr-controlled entity — SCM Credit — one of its lending arms. Georgia corporation records suggest that Farr was affiliated with as many as 10 entities that use or used the “Second Chance” name, and Farr is listed as the registered agent for SCM Credit and SCM Finance.

    “We are not in the repossession business; therefore our experienced financial staff at SCM Credit will take a look at your credit history and recommend a car and payment that fits your budget and your style,” the Second Chance website says.

    How the company handles repossessions if customers default was not immediately clear.

    At issue in the SEC case is the alleged chain of events that occurred prior to the dealership coming into possession of the money and what happened to the money after it was advanced to Farr’s companies.

    Roy Dixon Jr. And Oynx Capital

    Dixon, 46, resides “primarily” in Atlanta, and is “the owner and founding member of Onyx Capital, a private equity firm based in Detroit,” the SEC said. The agency said Dixon owns “numerous” rental properties in Detroit and Pontiac, and an insurance business known as Oynx Financial Group LLC.

    Dixon used money from the scheme to make mortgage payments on more than 40 rental properties in Detroit and Pontiac, and Dixon, Farr and related entities “stole more than $3 million” invested by the Detroit-area pension funds, the SEC charged.

    “These public pension funds provided seed capital to the Onyx [F]und, and Dixon betrayed their trust by stealing their money,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office. “Farr assisted Dixon by making large bank withdrawals of money ostensibly invested in Farr’s companies, and together they treated the pension funds’ investments as their own pot of cash.”

    The SEC’s use of the phrase “ostensibly invested” may be a key to the case because it suggests the investment was a sham from the start, even though the Oynx Fund ended up owning majority stakes in SCM Credit and SCM Finance. At the end of 2009, the Oynx Fund owned 80 percent of SCM Credit, and 52 percent of SCM Finance, the SEC said.

    Dixon and his company raised $23.8 million from the pension funds, the SEC said, accusing Dixon of misappropriating money soon after it came under his control in 2007.

    “Between 2007 and 2009, Dixon and Onyx Capital misappropriated approximately $3.11 million from the Onyx Fund,” the SEC charged. “They took more than $2.06 million in excess management fees. In addition, Farr assisted Dixon and Onyx Capital in misappropriating almost $1.05 million through the Onyx Fund’s purported investments in companies Farr controlled.

    “Dixon used the proceeds from his and Onyx Capital’s misappropriations to pay personal and business expenses,” the SEC said in its complaint. “These expenses included payments for the construction of Dixon’s multimillion-dollar house in Atlanta, Georgia, and mortgage payments on more than forty rental properties Dixon owns in Detroit and Pontiac, Michigan.”

    On at least 15 occasions, the SEC said, “Dixon withdrew investor money from the Onyx Fund’s bank accounts to cover overdrafts in his own personal accounts, or Onyx Capital’s bank accounts.”

    Dixon also took “advances” against unearned management fees, overbilled the fund by $1.74 million for fees to which he was not entitled and, in at least one instance, double-billed for fees that already had been withdrawn from the fund and placed in Dixon’s personal bank account, the SEC charged.

    Pension Funds Allegedly Denied Access To Records

    “Dixon and Onyx Capital have taken a number of steps to prevent the pension funds from discovering their misappropriations from the Onyx Fund,” the SEC charged. “Among other things, Dixon and Onyx Capital have disregarded the requirements of the partnership agreement and have failed to provide the pension funds with copies of the Onyx Fund’s tax returns for 2007 and 2008.

    “Those tax returns identified some of the excess management fees taken by Onyx Capital as a related party receivable,” the agency charged. “Dixon and Onyx Capital also sent each of the pension funds an annual Investor’s Report in August 2008, and several quarterly account statements, which falsely stated that Onyx Capital had been paid only the management fees that it was entitled to receive under the partnership agreement.”

    Michael Farr’s Alleged Role In $15.7 Million Scheme

    Dixon and Michael Farr were friends “since before Dixon started Onyx Capital” in 2006, the SEC said. “In fact, Dixon selected Farr’s father to serve on the Onyx Fund’s initial advisory board.”

    The senior Farr is not named a defendant in the SEC complaint.

    Michael Farr’s Second Chance dealership and related financing arms initially received $4.25 million from the Oynx Fund, the SEC said.

    “However,” the agency charged, “after entering into these agreements, Dixon and Onyx Capital transferred funds in excess of agreed amounts to SCM Credit and SCM Finance. The Onyx Fund did not execute new investment agreements, showing an additional debt or equity investment with these two entities, until the end of 2008 and the end of 2009.

    “The Second Chance entities treated the money obtained from the Onyx Fund as if it was a line of credit,” the SEC alleged. “By the end of 2009, Dixon and Onyx Capital had transferred approximately $15.7 million to the Second Chance entities.”

    Farr knew that the money had come from public pension funds and even attended a meeting conducted by one of the funds, the SEC said. Regardless, he used the money to aid and abet Dixon in a fraud, the agency charged.

    The pension funds’ exposure to loss was not immediately clear. What is clear is that money was diverted and siphoned in a whirlwind of transactions, some involving cash, according to the complaint.

    “Beginning in 2008, Dixon coordinated additional misappropriations from the Onyx Fund with Farr,” the SEC alleged. “In total, Dixon and Farr misappropriated approximately $1.05 million of the money the Onyx Fund purportedly invested in Farr’s companies.”

    The fraud mushroomed, the agency charged.

    “Between June 2008 and November 2009, Farr transferred approximately $2.34 million from the Second Chance entities to Sea Jay, a company owned by Farr,” the SEC said. “Sea Jay’s only asset was a piece of real property leased to one of Second Chance’s used car dealerships for $10,000 per month. Sea Jay had the right to receive a total of $230,000 from the Second Chance entities for this purpose. The Second Chance entities had no legitimate business purpose to transfer an additional $2.11 million to Sea Jay.

    “Farr assisted Dixon in misappropriating approximately $948,000 of the investor funds which had been transferred to Sea Jay,” the SEC continued. “Farr later returned $1.16 million of the money transferred into Sea Jay to the Second Chance entities. Of the approximately $948,000 which Dixon and Farr misappropriated, $719,000 was used to benefit Dixon and $229,000 was used to benefit Farr.

    “Between October and December 2008, Farr made approximately $522,000 in payments from Sea Jay’s bank account to three construction companies that performed work on Dixon’s new house in Atlanta,” the SEC charged. “On December 30, 2008, Farr and Dixon executed a promissory note pursuant to which Dixon was not required to repay any amount to Sea Jay for six years.

    “During December 2008, Farr also made a series of cash withdrawals from Sea Jay’s bank account at approximately the same date and time, and in the same locations, as Dixon made cash deposits,” the SEC alleged. “Over the course of approximately two weeks, Farr and Dixon made at least 25 corresponding cash transactions in banks near Atlanta, Georgia and Naples, Florida where they both own homes. On many of these days, Farr and Dixon made similar withdrawals and deposits of cash on the same day.

    “In addition, Farr misappropriated at least $100,000 of the money invested in his businesses by the Onyx Fund through one of Second Chance’s used car dealerships, Second Chance Motors of Houston, LLC (‘SCM Houston’),” the agency said. “On December 29, 2008, Dixon transferred $125,000 from the Onyx Fund to SCM Credit for investment purposes. Farr immediately transferred $100,000 of that money to SCM Houston. The next day, Farr withdrew $100,000 in cash from SCM Houston’s account at a bank in Estero, Florida and Dixon deposited $130,000 in cash into Onyx Capital’s account at a bank located approximately 20 miles away.”

    The fraud was in part designed to cover tracks, the SEC charged.

    “Dixon used most of the December 2008 cash deposits so that it would appear to the Onyx Fund’s auditor that Onyx Capital had repaid the excess management fees it had withdrawn from the Onyx Fund during 2008,” the agency charged. “In this manner, Dixon and Onyx Capital were able to avoid reporting any excess management fees as a related party receivable on the Onyx Fund’s tax return and audited financial statements for 2008.

    “Finally,” the agency said, “Farr commingled the funds invested by the Onyx Fund among the three Second Chance entities and Sea Jay — which between them maintained at least 38 bank accounts at seven separate banks. On several occasions, Farr made at least ten transfers between and among these bank accounts in a single day.”

    Oynx compounded the fraud by sending a “forged letter to one of the pension funds misrepresenting the principals of Onyx Capital,” the SEC said. The letter was used to allay the fund’s concerns that Dixon was too inexperienced to manage the investments, the SEC said.

    U.S. District Judge Denise Page Hood of the Eastern District of Michigan has frozen the assets of the defendants and issued a temporary restraining order.

    Read the SEC complaint.

  • Alleged Cyber-Extortionist Indicted: Feds Say Anthony Digati Tried To Chill, Defame Business On Internet To Extract $200,000 In Bizarre Social-Networking Plot

    Unhappy with an entity with which you have a dispute? Want to chill them to get your way by threatening to use keyword targeting and social networking? Want to start a wild spin campaign to misinform the public and slime people and entities you perceive to be your enemies?

    Want to suggest a person or entity submits to your demands or else? Want to suggest you’ll be aided in your efforts to get what you want by thousands — if not tens of thousands — of like-minded, online acquaintances and colleagues?

    A California man has been indicted in New York on federal charges of extortion through interstate communications. Federal prosecutors also are seeking the forfeiture of Anthony Digati’s computer and other equipment alleged to have been used in an ever-escalating bid to extort money from New York Life Insurance Co. because he was unhappy with a product purchased from the firm.

    U.S. District Judge Denny Chin — the judge who presided over the Bernard Madoff case — has been assigned to hear the Digati case. Digati, 52, of Chino, Calif., faces a maximum of two years in federal prison and a fine of up to $250,000 — or twice the gross pecuniary loss or gain derived from the offense — if convicted.

    Digati registered a domain in February that used New York Life’s name in its URL, according to records. He then embarked a relentless hectoring campaign aimed at fashioning “false public statements” and threatening to transmit millions of spam emails “in an effort to damage the reputation of New York Life and cost the company millions of dollars in revenue,” according prosecutors.

    The intent, according to prosecutors, was not to inform or educate. Rather, it was to “extort” money from New York Life by keeping it in a constant state of threat and suggesting the demand for a payment of $198,303.88 would escalate into a demand for $3 million if the lower demand was not met.

    New York Life called the FBI.

    Part of Digati’s strategy, according to prosecutors, was to “drag [New York Life’s] company name and reputation . . .  through the muddiest waters imaginable.”

    Digati’s website included this text, according to records:

    • These things, unless you honor the below claim, WILL HAPPEN on March 8, 2010.
    • As you have denied my claim I can only respond in this way. You no longer have a choice in the matter, unless of course you want me to continue with this outlined plan. I have nothing to lose, you have everything to lose.
    • My demand is now for $198,303.88. This amount is NOT negotiable, you had your chance to make me an offer, now I call the shots.
    • I have 6 MILLION emails going out to couples with children age 25-40, this email campaign is ordered and paid for. 2 million go out on the 8th and every two days 2 million more for three weeks rotating the list. Of course it is spam, I hired a spam service, I could care less, The damge [sic] will be done.
    • I am a huge social networker, and I am highly experienced. 200,000 people will be directly contacted by me through social networks, slamming your integrity and directing them to this website within days.
    • I think you get the idea, I am going to drag your company name and reputation, through the muddiest waters imaginable. This will cost you millions in lost revenues, trust and credibility not to mention the advertising you will be buying to counter mine. Sad thing is it’s almost free for me!
    • The process is in motion and will be released on March 8th, 2010. If you delay and the site goes live, The price will then be $3,000,000.00.

    Meanwhile, prosecutors said Digati flooded the company with email directed at executives, employees and a board member.

    “[H]e directed the recipients to his website and stated, ‘I HIGHLY suggest you visit this website and contact me afterwards,’” prosecutors said.

    Later, according to prosecutors, Digati sent an email that said the “[c]lock is ticking” and prompted New York life employees, executives and a board member again to visit his website.

    A grand jury returned the indictment after Digati was arrested by the FBI in March. The original case was filed via criminal complaint.

    “In this computer age, cyber-extortion has become an emerging tool for criminals to hold businesses at virtual gunpoint, threatening them with widespread spamming and other Internet-based attacks,” U.S. Attorney Preet Bharara said in March, after Digati’s arrest.

    “With the assistance of the FBI, our Office will work to safeguard the Internet and prosecute computer-savvy criminals who seek to harm the well-being of businesses and our economy,” Bharara said.

  • NEWS/UPDATES: Feds Say $900 Million Nevin Shapiro Ponzi ‘Perfect Example Of Greed Run Amok’; Colorado Charges Bela Geczy, Michael Kass With Racketeering In Fraud Case

    The acts of Nevin Shapiro — a Florida man arrested in New Jersey yesterday on charges of orchestrating a $900 million Ponzi scheme — represent a “perfect example of greed run amok,” an FBI agent said.

    Separately, a grand jury in Colorado has charged two men under the state’s organized-crime statute with operating an $18 million securities-fraud scheme that affected at least 270 investors.

    Arrested in Colorado were Bela Geczy, 57, of Longmont, and Michael Brian Kass, 48, of Boulder. Authorities said they orchestrated a massive Ponzi scheme involving domestic and offshore business opportunities.

    The court docket in the cases against Geczy and Kass shows two dozen felony counts, including violations of the Colorado Organized Crime Control Act, conspiracy to commit securities fraud, securities fraud by fraud or deceit and securities fraud by untrue statement or omission.

    Like Florida, Minnesota, Washington, New York, South Carolina, California, Michigan and other states, Colorado has been plagued by Ponzi and fraud schemes. No fewer than five major Ponzi or financial fraud probes are under way in Colorado. Records suggest the highly complex frauds involved more than $100 million.

    In New York alone this week, two major financial-fraud cases were filed. The schemes involved in the neighborhood of $101.5 million, according to court filings. Meanwhile, U.S. Attorney Jenny A. Durkan of the Western District of Washington outlined five major Ponzi probes in various states of completion in the Greater Seattle area. These cases involve tens of millions of dollars, according to records.

    At the same time, the main page of the website of U.S. Attorney B. Todd Jones of the District of Minnesota features links to three major Ponzi cases in various stages of investigation. One of the cases is the Tom Petters’ Ponzi case. Petters was sentenced this month to 50 years in federal prison for presiding over a $3.65 billion fraud.

    Jones’ website also includes information on a Ponzi case involving at least $190 million. Trevor Cook pleaded guilty to mail fraud and tax evasion in the fraud earlier this month, and is awaiting sentencing. The website also includes information on the investigation into the business practices of Steve Renner in an alleged autosurf Ponzi scheme case involving tens of millions of dollars.

    Florida/New Jersey Cases Against Nevin Shapiro

    Shapiro, 41, was a prominent Miami Beach businessman. Authorities now say he was operating a Ponzi scheme since 2005 that rivaled the $1.2 billion Scott Rothstein scheme in dollar volume. Rothstein pleaded guilty in his massive fraud case earlier this year.

    Like Rothstein, Shapiro liked to chum around with sports figures and live large, according to records.

    Shapiro used “stolen funds to purchase a pair of diamond-studded handcuffs, which he gave as a gift to a prominent professional athlete,” prosecutors said. He also spent more than $400,000 for floor seats to watch the Miami Heat, a team in the NBA.

    At the same time, prosecutors said, he spent about $26,000 per month on mortgage payments on his $5.3 million residence in Miami Beach, while directing about $7,250 per month for payments on a $1.5 million dollar Riviera yacht and roughly $4,700 per month for the lease of a Mercedes-Benz.

    Viewed on a yearly basis, the payments on the residence, yacht and car alone consumed more than $450,000 — and yet Shapiro’s purported business produced no sales.

    A veteran FBI agent said the case was about naked greed.

    “This case is a perfect example of greed run amok,” said FBI Special Agent in Charge Michael B. Ward. “In pursuit of wealth and a lifestyle he was otherwise unable to attain, Mr. Shapiro allegedly preyed upon unsuspecting investors looking to secure a safe place to maximize their investments.  Instead, their futures have been irrevocably damaged.”

    Although purportedly in the business of buying groceries in a lower-priced market and selling them wholesale in markets in which they would fetch higher prices, Shapiro’s company largely was a mirage that conducted virtually no legitimate business after 2004 and sustained itself by paying investors with the money of other investors, prosecutors said.

    “Nevin Shapiro is charged with tricking investors with false documents and false promises,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “He spent tens of millions of their money on gambling debts, lavish gifts and a luxury lifestyle built on a house of cards.”

    Authorities gave credit for the Shapiro criminal collar and an accompanying civil action by the SEC to the combined investigative efforts of the Financial Fraud Enforcement Task Force. President Obama formed the Task Force in November 2009.

    Shapiro, prosecutors said, diverted at least $38 million in investors’ funds for his own use, and investors now are out tens of millions of dollars.

    A girlfriend received goods totaling $116,000 from a charge card, which Shapiro used to rack up $640,000 in personal purchases, according to court records.

    The IRS is part of the investigative team in the Shapiro case.

    “Scammers, con artists and swindlers will do and say anything to get you to buy into their scheme,” stated William P. Offord, Special Agent in Charge, IRS-Criminal Investigation.

    Like his investigative colleagues in other Ponzi cases, Offord reuttered the age-old adage:

    “Remember the old cliche,” he said.  “If it’s too good to be true, it probably is.’”

  • U.S. Marshals, FBI, Police Capture Ponzi Figure Who Ducked Sentencing; Michael Derrick Peninger Returned To Jail Amid Reports He Cut Transmitter On Electronic Monitoring Device

    Michael Derrick Peninger was captured yesterday, nine days after he failed to show up for sentencing court in a South Carolina Ponzi scheme case.

    Authorities said he cut the transmitter on an electronic monitoring device he was ordered to wear prior to fleeing April 12. A federal magistrate judge jailed Peninger yesterday after he was arrested on a warrant issued by the federal judge in Charleston presiding over the Ponzi case.

    Peninger, 50, was convicted in October of eight counts of mail fraud and one count of making a false statement to an FBI agent. Though jailed briefly after the conviction, Peninger was freed pending sentencing after his 72-year-old mother appealed to U.S. District Judge P. Michael Duffy to permit her son to leave jail to assist with the care of her husband, who has Alzheimer’s disease.

    Duffy structured a release by which Peninger would wear an ankle monitor and submit to supervision pending sentencing. The sentencing date was set for April 12, and Peninger did not show up in court. He faced a maximum penalty of nearly two decades in prison, and prosecutors unsuccessfully argued last fall against the release.

    The U.S. Marshal’s Service “developed information that Peninger was on Daniel Island” yesterday, the agency said.

    Daniel Island is within the borders of Charleston and is the home of Peninger’s mother, although it was not immediately clear if Peninger — who had been living with his mother since his release last year — was attempting to return to her home.

    Deputy U.S. Marshals, Charleston City Police Officers and FBI Agents immediately responded to the Daniel Island area, the U.S. Marshals Service said.

    “K-9 officers tracked Peninger into a wooded area and followed his trail into the business district where Peninger was spotted walking in the 300 block of Seven Farms Drive and taken into custody,” the agency said.

    Peninger was captured as a result of teamwork, the agency said.

    “We appreciate the support from our fellow law enforcement community in apprehending Peninger,” said U.S. Marshal Kelvin Washington. “[H]e will now face the courts for his original sentence to be imposed.”

    Peninger may face more jail time for ducking sentencing court and faces the prospect of a contempt-of-court hearing.

    Prosecutors again argued yesterday that Peninger was a flight risk, and the magistrate judge jailed him.

    Just days prior to Peninger going on the lam, the CFTC obtained a judgment of more than $3.9 million against him in a civil fraud case brought in 2008.

  • BULLETIN: Another Spectacular Florida Ponzi Case Emerging; Nevin K. Shapiro Charged Criminally, Civilly In Alleged $900 Million Fraud

    BULLETIN: Nevin K. Shapiro, the founder and president of Capitol Investments USA Inc., surrendered to authorities this morning after being charged both criminally and civilly in an alleged $900 million Ponzi and fraud scheme in south Florida and elsewhere, the SEC said.

    Shapiro, 41, is a prominent Miami Beach businessman and philanthropist in the wholesale grocery business. He is expected to make a court appearance in New Jersey today.

    Most of Shapiro’s investors live in Florida or Indiana, according to the SEC complaint. Some diverted funds from their IRA’s to earn profits by investing with the grocery company, but Shapiro conducted virtually no meaningful business after 2004 and simply propped up his grocery business with a shell game that raised $880 million from investors between 2005 and 2009 before the scheme collapsed, the SEC charged.

    “Capitol’s sales were less than $300,000 in 2005 and 2006, and it had no sales from 2007 through 2009,” the SEC charged.

    “Shapiro lured investors by falsely touting Capitol’s securities as a risk-free investment with extraordinarily high returns,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “He used his prominence and prestige to gain investors’ trust in funding Capitol’s grocery diverting business, but behind their backs he diverted their money to enrich himself.”

    Grocery-diverters buy merchandise in one market and sell it in another at a higher price. Shapiro’s company, however, began operating a Ponzi scheme in 2005 after operating at a loss in 2004, the SEC charged.

    The SEC said Shapiro diverted $38 million “to enrich himself and finance outside business activities unrelated to the grocery business, including a sport representation business and real estate ventures.

    “His lavish lifestyle includes a $5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, high-stakes gambling, and season tickets to premium sporting events,” the SEC said. “Shapiro additionally tapped approximately $13 million of investor funds to pay large undisclosed commissions to individuals who attracted other investors.”

    A girlfriend received goods totaling $116,000 that were charged to Capitol’s American Express Black Card, and Shapiro himself made personal purchases of about $524,000 on the card, the SEC charged.

    All in all, the SEC said, the scheme was “a $900 million offering fraud and Ponzi scheme.” Investors were offered returns of 26 percent annually, backed by bogus claims that “Capitol’s purchase contracts and accounts receivable secured their investments.”

    Earlier this year, U.S. Attorney General Eric Holder said south Florida was “ground zero” for Ponzi schemes, noting that many of Bernard Madoff’s victims lived in the region. The government still is in the process of unwinding Madoff’s $65 billion fraud and Scott Rothstein’s $1.2 billion fraud.

    Smaller — though still massive Ponzi frauds — recently have occurred in the state, and Shapiro’s alleged $900 million fraud now is included among them.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned in a January speech in Florida. “If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

    The FBI and IRS also are involved in the Shapiro probe, the SEC said.

    “By late 2004, Capitol was operating at a loss,” the SEC charged. “From 2005 though late 2009, Capitol had almost no business operations. To hide this from investors, Shapiro merely repaid earlier investors with approximately $769 million collected from new investors in typical Ponzi scheme fashion.”

    The agency said “Capitol has never registered an offering or class of securities under the Securities Act or the Exchange Act,” and Shapiro was charged with securities fraud.

    In the past 48 hours, law enforcement and regulators have filed complaints in cases in Florida and New York that allege frauds totaling about $1 billion.

  • 4 Ponzi Probes Spotlighted In Seattle; Cases Involve ‘Phony Business Plans’ With Sports Tickets, Point-Of-Sale Machines, Oil Fields, Aircraft Parts

    EDITOR’S NOTE: If you’re keeping a “Bubba Blue” notebook on the various ways to serve up a Ponzi scheme — as opposed to shrimp — these Ponzi investigations in Washington state might deserve an entry. The story below encapsulates four major cases. It also includes a link to the charging document in the Rhonda Breard Ponzi case, a fifth major probe in the Seattle area. The Breard case is not summarized below. We’ll publish a separate story on it in the future.

    Two new Ponzi schemes have emerged in Greater Seattle, and two other cases continue to be untangled, federal prosecutors said. The four cases combined involve more than $80 million, according to records.

    James Liddell, 55, of Seattle, remains at large after being indicted last week. Prosecutors said Liddell was indicted for a scheme in which he persuaded 13 investors to hand over a total of $3 million for his purported business of refurbishing point-of-sale machines and selling them to a drug-store chain.

    Liddell operated a company known as Payright Merchant Services, and showed investors “forged sales agreements and purchase orders” to pull off the scheme, prosecutors said.

    No machines were ever bought or sold to the Seattle retailer, and there were no contracts for any such sales, according to the indictment. Some of the money was used to pay “returns” to earlier investors, but Liddell used $1.2 million for his own benefit, prosecutors said.

    Read the Lidell indictment.

    Separately, Lorenzo V. Molina Jr., 49, of Sammamish, was indicted in a Ponzi case in which he is accused of telling investors his company rehabilitated aircraft parts through third-party vendors and sold the parts at a profit to airlines.

    Molina formerly worked for Boeing, but his purported parts business was a sham that gathered $3.6 million from investors duped by fraudulent documents, prosecutors said.

    About $1.7 million was returned to investors, but Molina “used the rest of the money for things such as a grand piano, private school tuition for his children, horses and real estate in Issaquah, Maple Valley, Fall City and Arizona,” prosecutors said.

    Western Washington’s top federal prosecutor said the Molina and Liddell schemes worked because they were targeted at friends and neighbors.

    “As these indictments demonstrate, Ponzi schemes are not limited to financial advisors,” said U.S. Attorney Jenny A. Durkan. “Investment brokers such as Bernie Madoff and Rhonda Breard make headlines, but in these cases it was literally ‘the guy next door,’ who bilked friends and neighbors. Each took in millions for a purported business plan, and then fraudulently used the money for his own benefit.”

    Read the Molina indictment.

    Durkan provided updates on two other Seattle-area cases.

    Kevin A. Halverson, 51, of Bothell, was indicted in February on charges of running a Ponzi scheme involving “high profile” sports tickets and tickets for other major events. Venues for the ticketing scheme included the Super Bowl, the Indianapolis 500, concerts and shows in Las Vegas, according to court records.

    The scheme collected $10 million. Prosecutors said Halverson “purchased a small number of tickets to make the business appear legitimate, but primarily used investor money to pay off earlier investors in the manner of a typical Ponzi scheme.”

    Read the Halverson indictment.

    Meanwhile, the Robert Miracle Ponzi scheme case also is proceeding, with sentencing set for October. Miracle, 49, of Bellevue, has pleaded guilty to mail fraud and tax evasion in a scheme involving Indonesian oil wells.

    “Miracle represented to investors in his companies that they were making money from oil field development and services on oil and gas fields in Indonesia,” prosecutors said. “In fact, the proceeds of later investors were used to pay off the investments of earlier investors.

    “Between September 2004 and October 2007, Miracle took in more than $65.3 million and paid out $36.7 million as dividends to investors. The remaining [money] — some $28.6 million — was used in part for efforts to develop oil and gas on fields in Indonesia, as well as to pay for a lavish lifestyle for Miracle and his cohorts,” prosecutors said.

  • Utah Ponzi Auction Features Wildebeest, Hyena, ‘Full Body African Lion,’ Other Exotic Animals; Event Expected To Draw Large Crowd And Help Recover Some Losses

    A taxidermy of a full-body African lion is part of the proceeds of the alleged Waterford Funding LLC Ponzi in Utah.

    America’s Ponzi culture now has spawned a taxidermy auction from “assets recovered in one of the largest alleged Ponzi fraud cases in Utah,” according to website of the auctioneer.

    Among the items up for bid are a “full body African lion,” Cape Horn buffalo, African antelope and hyena, wildebeest and other exotic animals. Forty-three firearms also will be sold, along with “beautiful, top-quality office furniture,” paintings, Persian and Oriental rugs, “fine home furnishings, antiques and more.”

    Statewide Auction Co. of Salt Lake City will conduct the auction at its Utah State Fair Park facility tomorrow beginning at 6 p.m. A preview begins at 10 a.m. The event is part of the bankruptcy of Waterford Funding LLC. Waterford was owned by Travis Wright.

    The company was placed in bankruptcy last year, and Ponzi allegations emerged.

    A separate, Ponzi-related auction involving more than 200 vehicles tied to the alleged Jeffrey Lane Mowen Ponzi was held in Utah earlier this year. Mowen was jailed after his extradition from Panama, and later charged in an alleged murder-for-hire plot to kill witnesses in his Ponzi case.

    Visit the website of Statewide Auction Co. to get details of the Waterford Funding LLC auction. (Got to the bottom of the page to find a link that leads to images of other assets of the alleged Ponzi that will be sold at a later date. One of the items is a “British ‘Tele’ Booth”; another is a “Child’s ‘Baby’ Grand Piano.”)

  • Man Whose Company Supplied Debit Cards To AdSurfDaily Wanted By INTERPOL In International Money-Laundering Case; Robert Hodgins On The Lam

    Robert Hodgins: Source: INTERPOL

    The man who supplied debit cards to the AdSurfDaily autosurf is wanted by INTERPOL on an arrest warrant issued by U.S. District Court for the District of Connecticut, the international police agency says on its website.

    INTERPOL has published two photographs of Robert Hodgins, 65. People with information on Hodgins are urged to contact the General Secretariat of INTERPOL.

    Hodgins, whom INTERPOL says was born in Shawville, British Columbia, Canada, operated a Dallas-based company known as Virtual Money Inc. He was indicted under seal in 2008 in the United States on charges of assisting a Colombian narco-business launder money. He lived in the Oklahoma City area.

    His company, known as VM, was featured in advertising materials for ASD in 2007, and records suggest Hodgins or a VM designate participated in an ASD function in Orlando in late 2006. Five people have been convicted to date in the drug and money-laundering case, including two

    Robert Hodgins: Source: INTERPOL

    individuals from Medellin, Colombia, according to records. Medellin was the home base of the late drug lord and terrorist Pablo Escobar.

    Web records suggest VM supplied debit cards to other autosurfs and HYIPs, and the company’s name in mentioned in the Ponzi scheme litigation against ASD and in court papers in the PhoenixSurf Ponzi scheme.

    PhoenixSurf was sued successfully by the SEC in 2007.

    The criminal case against Hodgins was brought by the U.S. Drug Enforcement Administration after an undercover operation.

    In September 2008 — about a month after the U.S. Secret Service seized tens of millions of dollars from ASD President Andy Bowdoin amid wire-fraud, money-laundering and Ponzi scheme allegations in the District of Colombia — the indictment against Hodgins was unsealed in Connecticut.

    Some ASD members said they saw huge sums of cash and suitcases full of cashier’s checks at ASD “rallies” in American cities, leading to questions about whether the company was being used as a front for criminal enterprises.