Two California men have been charged with securities fraud by the SEC in an emergency court action that alleged they pushed a Ponzi scheme that collected more than $18 million.
Investors were duped into believing that a company known as Bridon Entertainment bought advertising space in bulk and resold it at a substantial profit to famous companies such as Home Depot, Federal Express, DIRECTV, Warner Brothers and Slim-Fast, the SEC said.
No such advertising deals existed and the investors were duped by “fake” contracts that included the famous names, the SEC said.
Named defendants were Dean P. Gross, 47, of Agoura Hills, and Gregory W. Laser, 46, of San Diego. Their assets have been frozen. Gross did business as Bridon Entertainment and diverted $6 million to his own use, the SEC said.
The scheme began in December 2006, according to the SEC.
“Gross provided investors a fabricated contract that appeared to be between Bridon and a representative of the well-known corporation,” the SEC said. “Gross and Laser told investors that Gross would use their money to purchase advertising time and space, and that their promised returns would be generated by the profitable resale of that advertising to the specifically identified company.
But “Gross did not have relationships with the well-known companies he claimed were his clients,” the SEC said. “Gross did not buy or resell advertising, and investors’ purported returns were not generated by the sale of advertising, but instead came from money raised from subsequent investors, in classic Ponzi fashion.”
At least 45 investors were fleeced in the scheme, which featured both short-term and longer-term investments, the SEC said. Interest rates pitched in a 30-to-90-day program ranged from 8 percent to 30 percent.
A year-long program offered rates typically between 10 percent and 20 percent.
“In some instances, Gross offered a 40 percent return,” the SEC said.
Even as stock-car fans were celebrating the news that Indy-car driving star Danica Patrick would hopscotch circuits and participate in a limited number of events in NASCAR’s Nationwide Series next year, federal prosecutors were putting together a Ponzi scheme case against a man alleged to have obtained $10 million by using NASCAR’s name.
Eliott Jay Dresher, 63, of Chatsworth, Calif., was jailed yesterday in California after a federal judge ruled him a flight risk.
In a case put together by the FBI and the U.S. Postal Inspection Service, prosecutors said Dresher “solicited money from investors with promises that their money would be used to finance a business in which [he] purchased NASCAR apparel and sold the merchandise to ‘big box’ stores such as Costco.”
Dresher, however, “did not really operate such a business and all of the funds paid to investors were ‘Ponzi’ payments that came from the victims’ principal investments,” prosecutors said.
NASCAR races are among the most popular spectator sports in the world. Fans are extremely loyal to the brand. It was not immediately clear if investigators were viewing the case against Dresher as a form of affinity fraud or perhaps brand leeching.
Affinity fraud often is an element in Ponzi schemes, which frequently are targeted at specific groups of people, including members of a particular faith or ethnicity.
Brand leeching also is associated with Ponzi models. Such approaches may include claims a company is the “next Google” or the “next Microsoft,” for instance. In the alleged $100 million AdSurfDaily Ponzi scheme, prosecutors said the company tried to leech credibility by falsely claiming that its president, Andy Bowdoin, had received a special award from the White House for business acumen.
Investigators said the Dresher scheme using NASCAR’s name operated for about 10 years before collapsing in 2008.
About 50 participants invested a total of $10 million over the years, lulled by Dresher’s guarantee that they would receive returns “typically between 20 percent and 25 percent every six months,” prosecutors said.
The Dresher case has some of the hallmarks of Ponzi schemes under investigation in Minnesota and Illinois in which investors were told their money was being used to finance sales of goods that would be resold at a significant profit.
Minnesota businessman Tom Petters, 52, was convicted in a $3.65 billion Ponzi scheme earlier this month. Meanwhile, Gerard Frank Cellette Jr., 44, is jailed in the state amid allegations he fleeced $53 million in a Ponzi scheme involving bogus printing contracts.
In Illinois, Matthew Scott, 50, was accused of running a $28 million Ponzi scheme by assuring investors their funds would be used to purchase or finance the purchase of high-speed commercial printers that would be sold to third-party buyers at a profit.
The machines were said to be valued in excess of $100,000, and Scott claimed his mark-up of 20 percent led to big profits, the FBI said.
Scott, 50, of Elmhust, Ill., was charged with mail fraud. His Chicago-area company, Gelsco, neither purchased nor financed such printers, the FBI said.
EDITOR’S NOTE: Is it any wonder so many people believe the Internet is just one giant cesspool? This is the latest news on “joe,” who graduated from Ponzi advocacy to cyberstalking in September.
UPDATED 4:28 P.M. ET (U.S.A.) Saying he wants to give the PatrickPretty.com Blog something else to “chew on” after it announced Saturday that it would share information about cyberstalkers with law enforcement, cyberstalker “joe” now has threatened to file a lawsuit against the Blog.
The lawsuit threat followed on the heels of ceaseless nuisance communications from “joe” and a previous threat by “joe” to start “fires” at the Blog by leeching off insecure computer networks to frustrate attempts to track him. On Dec. 7 between 8:24 p.m. and 8:42 p.m. (ET), “joe” sent six harassing communications from a computer network whose IP resolves to a city government in California.
It is not believed that “joe” is an employee of the city. Rather, it is believed that he used the city’s resources to mask his identity. In September, “joe” claimed he had the ability to access insecure networks near his home and “was able to get online in a few places.” He also claimed there were “a few internet cafes around me” and that the Blog had better “get ready for the return of “joe.”
PatrickPretty.com announced today that it has shared information on seven IPs used by joe, including the IP of the city government in California. The Blog also shared 14 email addresses used by “joe,” one of which used the word “boo,” another of which used the word “eerie” and yet another of which used the word “greatone.”
Some of the email addresses included nonsensical words. At the same time, the Blog since Saturday has shared information on six additional user identities employed by “joe.” The Blog previously reported that “joe” repeatedly used sexual references in his communications, referring to himself in some communications as “Joseph the phallicly gifted.†He also has employed the username “Mr. Wonderful” and “joe the magnificent (and good lookingâ€), among others.
“joe,” an advocate for autosurf Ponzi schemes who says he does not care if they are legal or not as long as they pay, has repeatedly shifted IPs, usernames and email addresses in what the Blog views as a bid to probe it for security vulnerabilities and defeat its ability to prevent his nuisance communications from being published.
In September, “joe” demanded that the Blog publish his unwelcome communications, defining himself as a “bad penny” who would not go away until the Blog agreed to his terms. He has sent dozens and dozens of harassing communications over the Internet to the Blog since then.
Despite announcing his intent to harass the Blog and his plan to leech off insecure computer networks, start “fires,” frustrate efforts to track him and create maintenance problems, “joe” now says he intends to sue.
“You just can’t tell anyone who I am because i would sue you for invasion of Privacy among other things,” joe said Saturday, after the Blog published its announcement it was sharing cyberstalking information with law enforcement. In a separate harassing communication after the Blog published its announcement, “joe” insisted he had a right to send the Blog “behind the scenes comments” and again suggested he may begin to employ YouTube to nuisance the Blog like the cyberstalker “unclefesta26.”
It was the second time “joe” raised the suggestion that he would escalate his cyberstalking mission by employing YouTube. Previously he expressed pleasure in harassing the Blog, saying he feels “some satisfaction that you seem to be intimidated by me.â€
Both “joe” and “unclefesta26” have been blocked from the PatrickPretty.com for spamming, derailing conversations and posing chronic maintenance problems. Other websites have banned them as well.
“joe’s” apparent theory behind the threatened lawsuit is that the use of aliases insulate him from criminal or civil prosecution and give him a lawful platform from which he can send repeated harassing communications.
Under “joe’s” apparent theory, a person is permitted to stalk and harass individuals and businesses on the Internet — and create labor-intensive and time-consuming maintenance work — simply by creating aliases. “joe” appears to believe that it is impossible to commit a crime or subject individuals or businesses to harassment if one does not use his actual name.
At the same time, “joe” seems to believe that those he would nuisance have a duty to permit him to nuisance them because his rights to free speech and privacy trumps the rights of those he would nuisance. Court case after court case demonstrates the fallacy of that thinking.
In 1998, for instance, the Pennsylvania Supreme Court tackled the Constitutional issues of free speech and privacy in a case in which a man was convicted of 36 counts of harassment by communication or address after sending repeated anonymous, harassing communications via wire — in this case, over telephone lines and a fax machine.
A lower court had ruled (emphasis added below) “the right to free speech is not absolute and that certain classes of speech, such as obscenity and fighting words, may be restricted.
“It found that Appellant’s . . . faxes, which were sent repeatedly and anonymously, had no legitimate purpose. The court concluded that the faxes were intended to harass and were not a form of communication safeguarded by the Constitution.”
The Supreme Court also rejected the man’s privacy argument, ruling that the mere fact a communication is sent anonymously does not insulate the sender from prosecution under harassment laws.
“Appellant’s argument, and the cases he cites in support, are misplaced because the statute at issue is directed at the harassing nature of the communications, which the legislature has a legitimate interest in proscribing,” the Supreme Court ruled.
DECEMBER 12, 2009, 12:03 P.M. ET (U.S.A.). The PatrickPretty.com Blog announced today that it has made an arrangement to share data about cyberstalkers “unclefesta26” and “joe” on its own initiative with law-enforcement and, at the Blog’s discretion, with the operators of certain websites.
The Blog’s decision to share a limited amount of information with authorities voluntarily will not affect the privacy of other PatrickPretty.com readers and posters. PatrickPretty.com has the capability of segmenting information on individual readers and posters. No user information beyond data associated with “unclefesta26” and “joe” will be shared.
“unclefesta26” also is known by the handles “Pistol” and “Pistol’s Pal.” He operates a cyberstalking and hate site on YouTube and uses crude sexual references and vulgarities in headlines to promote his site, which includes an image of the federal judge presiding over the forfeiture elements of the AdSurfDaily Ponzi scheme cases.
On his YouTube site, “unclefesta26” employs technology to put words in the mouth of the judge, causing the image of the judge to recite the name of an AdSurfDaily participant, make a disparaging remark about the participant, make a phone call to a “psychiatric hospital” and suggest that “men in white coats” bring a “straitjacket and some leg irons” to detain the participant against her will.
“joe” also is known as “Mr. Wonderful”; “joejoe”; “joe the magnificent (and good looking”); and “Joseph the phallicly gifted,” among other user identities. “joe” regularly uses vulgarities and crude sexual references or crude references to sexual organs in his various harassing communications to the Blog. ‘joe” has sent dozens of illegitimate communications to the Blog over the Internet since September.
“We are taking this action because ‘unclefesta26’ and ‘joe’ are stalking the Blog and creating an untenable situation for PatrickPretty.com and its readers,” PatrickPretty.com said. “unclefesta26” uses material from the Blog to make harassing videos on a cyberstalking and hate site he maintains on YouTube. He has delighted in sending us harassing messages to ‘Enjoy!’ his work and harassing messages with links to new videos that subject the Blog and some of its readers to harassment, while attempting to poison the brand identity of the Blog. He has licensed himself repeatedly to use the Blog’s branding materials to disparage the Blog, and recently published a video is which he captured the intellectual property of Amazon.com that appeared on the Blog, used an Amazon.com flash movie outside its intended purpose and superimposed images owned by Amazon.com to create a video designed to harass the Blog.
“unclefesta26” is diluting the value of the Blog’s intellectual property, creating confusion among members of the public, engaging in repeated acts of cyberpiracy and affecting the goodwill PatrickPretty.com has built up among readers. Readers and targets of the videos have complained to the Blog about the YouTube site. PatrickPretty.com has filed three complaints with YouTube, which has not responded to the complaints.
'unclefesta26,' also known as 'Pistol,' sent us this email message to 'Enjoy!' a YouTube video he produced to pillory the PatrickPretty.com Blog. The message was sent after he was blocked from the Blog for spamming links, derailing discussions and posing chronic maintenance problems.
“Meanwhile, ‘joe’ has sought to disrupt the Blog’s operations for months by sending a steady stream of harassing communications,” PatrickPretty.com said. “Among other things, ‘joe’ has threatened to start ‘fires’ to divert and strain our resources, and also has claimed to have access to insecure wireless networks to mask his IP address and escape detection.”
Screen shot: An outtake of a video made by PatrickPretty.com in which 'joe' threatened the Blog with 'fires' and said he could employ insecure computer networks to frustrate attempts to track him. PatrickPretty.com has the capability of segmenting nuisance communications, placing them in a queue to separate them from legitimate submissions by other readers and videotaping the contents of the queue. The queue from which this particular video was made in early September contained 19 harassing communications from joe. The video includes audio narration of 'joe's' IP addresses, usernames and email addresses, and includes dictation of select passages of his nuisance communications, which served no lawful purpose and were designed to annoy, harass,alarm and distract the Blog from its editorial mission. A 'joe' queue from Dec. 7 and Dec. 8 shows eight harassing communications over a period encompassing about four hours, including six within 18 minutes. He has sent dozens of harassing communications over the Internet since September.
“unclefesta26” and “joe” are believed to be separate individuals. “unclefesta26” purports to detest Ponzi schemes; “joe” purports to advocate for them. “joe” now suggests that he, like “unclefesta26,” is capable of posting videos on YouTube, which the Blog views as an escalation of his threats.
PatrickPretty.com’s Editorial Mission
Along with its reports on Ponzi schemes, PatrickPretty.com publishes commentary from posters who oppose Ponzi schemes. It also publishes commentary from posters who advocate for Ponzi schemes. The Blog believes that the advocacy for Ponzi schemes, though puzzling, misguided and dangerous, is an important part of the Ponzi story.
Some of our readers have expressed shock and outrage that an entire subculture of people — people who actually advocate for Ponzi schemes despite their criminality and obvious danger –Â exists. Ponzi advocates typically argue that the government has no right to limit commerce. They often view autosurf Ponzi schemes, for example, as a lawful business because there is a contract between buyer and seller and because “rebates aren’t guaranteed” under the terms of the contract. They frequently deny they are selling unregistered securities as investment contracts, even though the U.S. government has never lost an autosurf Ponzi prosecution brought under securities laws. Despite claiming they are breaking no securities laws, they typically stress that new companies they are representing (after predecessor companies based on U.S. soil were prosecuted successfully under securities laws) are based “offshore” and thus beyond the reach of U.S. law enforcement and securities regulators. Ponzi promoters’ messages often are impossibly at odds with themselves
Other Ponzi advocates hold views that are even more extreme, insisting they are “sovereign” beings answerable to no government authority. Some extremist Ponzi scheme promoters have declared their own nation-states on U.S. soil, arguing they have diplomatic immunity from U.S. law. Still others claim government has no moral authority to regulate Ponzi schemes or enforce laws because it permits things such as gambling, smoking cigarettes and consuming alcohol. Some Ponzi scheme advocates identify themselves as “Christians” or members of a particular religious faith, thus adding an element of affinity fraud to the Ponzi schemes they promote.
The Genesis Of Our Decision To Share A Limited Amount Of Information On ‘unclefesta26’ and ‘joe’ With Law Enforcement
Despite rumors spread by some Ponzi scheme advocates that PatrickPretty.com is a government entity and strange suggestions that the Blog is part of a government conspiracy to undermine free enterprise, PatrickPretty.com is not an agent for the government or part of any government entity or law-enforcement mission.
PatrickPretty.com is a privately owned publishing venture. The Blog conducts research and produces articles, essays and editorials for a general audience interested in the highly newsworthy topic of Ponzi schemes. Readers and posters of all stripes — from news junkies, online entrepreneurs and journalists to Ponzi scheme victims, members of law-enforcement agencies and employees of regulatory bodies — have equal access to the pages and the reporting of PatrickPretty.com.
Self-described Ponzi advocate “joe” is straining this Blog’s limited resources by playing a relentless game of “ring and run,” using multiple user identities, multiple email addresses and multiple IP addresses to harass the Blog. He says he will not stop, defining himself as a “bad penny.”
Beyond his harassing behavior here, “joe” started a hectoring campaign against the Blog on Scam.com, which subsequently banned him for inappropriate behavior and creating multiple user identities to send illegitimate and nuisance communications. PatrickPretty.com views “joe’s” actions as evidence of intent to dilute the value of the Blog’s brand, affect its goodwill with readers and confuse the public on multiple websites.
“joe” asserts a nonexistent right to to hector the Blog, leech off unprotected communications networks to harass the Blog and set the editorial standards by which PatrickPretty.com operates. In short, “joe” wants to dictate the terms under which we grant a voice to readers, insisting he won’t go away until we submit to his demands.
“I feel some satisfaction that you seem to be intimidated by me,†joe said. “You can deny all you want but it’s true even though [sexual reference/poster’s name deleted] is right, I’m harmless. Now if you’re a good boy and post this unedited we can consider this my final retirement. I don’t really want to keep coming on here but I just wasn’t going to be unceremoniously tossed like a bad penny and you know what they say about bad pennies.â€
We believe “joe” will not stop his resource-draining hectoring campaign, absent proactive steps by the Blog to protect its operations. During the late evening and early morning hours of Dec. 7 and Dec. 8, we received eight harassing communications from “joe” in a period of about four hours, including six within 18 minutes.
“unclefesta26” also has been banned from multiple websites for sending inappropriate and harassing communications. PatrickPretty.com believes the multiple identities created after he has been banned from various sites for misconduct constitute evidence of intent to commit a crime and to tax resources. His harassing messages prompting us to “Enjoy!” his chronic pestering and submission of links to announce new YouTube video creations also constitute evidence of intent to commit a crime, and we view his behavior as a form of extortion.
If one doesn’t play “unclefesta26’s” game, one gets pilloried on YouTube. If one does not accommodate the full license he grants himself to invade a space, one gets pilloried on YouTube.
We believe at least one major provider of free hosting space on the Internet already has taken action to prevent “unclefesta26” from engaging in cyberstalking. His YouTube site, however, remains.
An Impossible Condition
We believe the behavior of “unclefesta’26” on YouTube is consistent with the behavior of an extortionist. The site cannot be construed as legitimate satire, parody, journalism, consumer advocacy or a “fair use” of intellectual property because of his history of stalking behavior and extortive conduct.
“unclefesta26” creates an impossible condition that is inconsistent with satire, parody, journalism, consumer advocacy and “fair use.” He relentlessly harasses the objects of his supposed satire by deliberately making obnoxious posts in spaces they control, gets blocked or banned from forums because of his obnoxious behavior and then retaliates for the condition he created by cyberstalking and exacting a penalty on his cyberstalking targets by skewering them on YouTube.
There is a “cause” and “effect,” we believe, to what “unclefesta26” does. Any attempts to reason with him “cause” an escalation in his outrageous conduct and, finally, a YouTube video to be created. These videos have the “effect” of exacting a penalty and harming individuals and entities. At the same time, they cause a chilling effect on speech. We believe that some readers no longer are posting here or have curtailed their posting because they believe “unclefesta26” will stalk them and subject them to ridicule on his YouTube hate site.
In general, “unclefesta26” creates an impossible condition for forum operators and participants by insisting he is permitted to behave in any fashion he sees fit, however unwelcome and objectionable by the standards of common courtesy and common human decency that most people observe. If a forum operator attempts to assert ownership rights or disagrees with “unclefesta26” even civilly, “unclefesta26” reacts by escalating his obnoxious behavior, which further drains resources and creates maintenance problems — and ultimately results in the retaliation he carries out on YouTube. He is not using YouTube to educate, enlighten and inform. He is using it to harass.
His behavior chills speech. It puts people in fear of caustic, often vulgar reprisal, and it is consistent with an agenda of ravaging human beings. His YouTube headlines include, but are not limited to:
“Has [Name] got the balls”
“Shit for brains”
“Bullshit from [Name] . . .”
“Fat Greedy Bastards”
“Wimpy [Name] throws down the gauntlet to Wimpy [Name]”
“Breaking news from [Name] [Veiled Sexual Vulgarity]”
“The Fat Mod’s battle”
“The bastard had to get greedy”
“[Name’s] blow job”
It is for these reasons that the PatrickPretty.com is segmenting the information on “unclefesta26” and “joe” and sharing it with law enforcement voluntarily.
In the coming hours we will publish a post that revisits some of these issues and explains our point of view on the perils of publishing online during an era in which advertising revenues are plunging, publications large and small are failing, thieves and pirates are leeching off the hard work of others and cyberstalkers are on the prowl looking for ways to subject people and businesses to harm.
Our grandmother could not have imagined this era — and the incivility and criminality it has brought front and center.
In perhaps their most powerful message to date in the Age of White-Collar Fraud, police have thrown the book at a Louisiana insurance agent, accusing her of an astonishing total of 851 crimes.
For good measure, the Louisiana Department of Insurance immediately suspended Jolie R. Bonvillian’s sales license and fined her $21,250.
Bonvillian, 40, of Violet, was charged with three counts of theft totaling $2,945,988.11, Louisiana State Police said. At the same time, she was charged with 85 counts of insurance fraud, 339 counts of bank fraud and 424 counts of forgery.
“The investigation originated when troopers from the Insurance Fraud/Auto Theft Unit received a complaint from Progressive Insurance Company concerning an unusually large number of commercial auto policies being generated by Bonvillian,” police said.
“Troopers learned that Bonvillian has been a licensed insurance agent in St. Bernard Parish since 1993,” police continued. “The investigation revealed Bonvillian had generated 85 fraudulent commercial auto polices utilizing bogus policyholder names, international drivers license information and vehicle information. The Progressive commercial auto policies were created to facilitate 339 fraudulent premium finance agreements. During the investigation, troopers also learned Bonvillian had misappropriated insurance premium cash payments made to her for existing legitimate insurance policies.”
Louisiana Insurance Commissioner Jim Donelon said Bonvillian misappropriated about $149,426.
She was booked at the St. Bernard Parish Jail, authorities said.
Kevin L. Perkins of the FBI tells the Senate Judiciary Committee that the agency is investigating 1,500 cases of securities fraud and that 314 of them involve HYIP fraud in various forms.
And to think that only months ago — in February 2009 — various members of AdSurfDaily wrote to the Senate Judiciary Committee trying to elicit support for Ponzi schemes. The letter-writing campaign was spearheaded by “Professor” Patrick Moriarty and pushed by the Pro-AdSurfDaily Surf’s Up forum.
But now the FBI has told the committee, led by Sen. Patrick Leahy, D.-Vermont, that it has registered a 105 percent increase in HYIP fraud and opened 314 investigations in 2009, up from 154 in 2008.
“[M]any [had] losses exceeding $100 million,” said Kevin L. Perkins, assistant director of the FBI’s Criminal Investigations Division.
Perkins said the probes cover the gamut — from the massive Ponzi scheme fraud of Bernard Madoff to smaller variations of the Ponzi scheme.
“These schemes use money collected from new victims, rather than profits from an underlying business venture, to pay the high rates of return promised to earlier investors,” Perkins told the Committee. “This arrangement gives investors the impression there is a legitimate, money-making enterprise behind the fraudster’s story; but in reality, unwitting investors are the only source of funding.”
During his testimony, Perkins also referenced “prime-bank schemes” in which victims are told that “certain financial instruments such as notes, letters of credit, debentures, or guarantees have been issued by well-known institutions such as the World Bank, and offer a risk-free opportunity with high rates of return.”
In August 2008, in a forfeiture complaint against the assets of AdSurfDaily and Golden Panda Ad Builder, federal prosecutors revealed that Golden Panda President Clarence Busby had been sued civilly by the SEC in the 1990s after he was implicated in three prime-bank schemes. At the same time, prosecutors revealed ASD President Andy Bowdoin had been arrested for felony securities fraud in Alabama during the same decade.
Despite the Ponzi allegations against ASD and the histories of Bowdoin and Busby, Surf’s Up urged the Judiciary Committee to investigate the prosecutors who brought the forfeiture cases against ASD and Golden Panda in August 2008.
“We each need to explain [to Leahy] how thousands of innocent Americans have suffered and continue to suffer because of these incredible and despicable acts” by prosecutors, Surf’s Up urged members.
Law enforcement is investigating a stunning number of securities-fraud cases, the FBI revealed.
“The FBI continues to aggressively investigate this criminal threat, and currently has more than 1,500 related securities fraud investigations,” Perkins said.
Reporters prepare for news conference last month in the Gerard Cellette Ponzi case.
Gerard Frank Cellette Jr. was implicated by prosecutors in an alleged $53 million Ponzi scheme in Minnesota last month.
Cellette, 44, of Andover, Minn., asked a judge to jail him yesterday — and the judge granted his wish. Cellette now is Inmate No. 2009034708 in the Hennepin County Sheriff’s Jail. He was charged Nov. 5 with 36 felony counts of fraud in the offer and sale of securities.
The charges were brought by Hennepin County Attorney Mike Freeman. Cellette technically is jailed awaiting trial, but a trial may not occur because he is helping prosecutors unravel his own scheme.
Ponzi schemes are plaguing Minnesota. AdSurfDaily, an alleged $100 million Ponzi scheme operating from Florida, was popular in the state in 2008. Three weeks ago the SEC and the CFTC accused two Minnesota residents — Christian radio host Pat Kiley and money manager Trevor Cook — of operating a $190 million Ponzi scheme involving foreign currency trading.
Cook was said to have bought a private island in Canada with some of his loot — along with a submarine to access the island. Cook took the 5th Amendment at a proceeding last week.
Meanwhile, a jury in Minnesota returned a guilty verdict last week against Minnesota businessman Tom Petters in a $3.65 billion Ponzi scheme.
The early speculation in Minnesota is that Cellette knows he is going to serve time for his Ponzi scheme — so he might as well start serving it early and spare taxpayers the bill for a trial.
Ten of the 36 felony securities counts against Gerard Frank Cellette Jr. in Minnesota.
One year ago today Bernard Madoff uttered a memorable phrase, describing his securities business economically as “one big lie” — and his Ponzi house of cards came tumbling down.
Even as Madoff was uttering those three words to his sons and the FBI soon was to knock on his door, the insiders behind the AdViewGlobal (AVG) autosurf were busy putting together and getting ready to promote their own Ponzi scheme. For many, it would be their second — and they’d be greasing the wheels of their new Ponzi even as virtually the entire world was jeering Madoff and New Yorkers were demanding justice on the streets.
Hundreds and hundreds of AVG promoters appear to have been slow on the Ponzi uptake, ignoring the lesson of instant villainy the Madoff case provided and seriously misreading their ability to repackage a Ponzi scheme and sell it all over again.
Madoff was arrested Dec. 11, within 24 hours of confessing “one big lie.” His arrest amid allegations of a $50 billion Ponzi fraud created a media spectacle. The crime was unimaginably huge. In the hours and days that followed, personal, corporate and charitable fortunes collapsed. The word “Ponzi” instantly became associated with greed, criminality and reprehensible acts, and was burned into the public consciousness like never before.
One place it was not used was the Unemployable Hobo Lifestyle Forum. There is a mention of the soon-to-launch AVG dated Dec. 13, 2008, two days after the arrest of Madoff, but no simultaneous reference to Madoff or the word “Ponzi.”
“Call me if you [don’t] have [a] leader,” said Mark Simmons, the head of the forum and a witness in the Ponzi scheme case involving AdSurfDaily, a company with close ties to AVG. The headline of the thread was, “for those waiting on ADVIEWGLOBAL.”
In the autosurf Ponzi business, the word “leader” is used to describe the people who make the most money by lining up sheep and leading them to the slaughter. In the months prior to the launch of AVG, the “leaders” had led sheep to the slaughter in ASD, Golden Panda Ad Builder, LaFuenteDinero (the “fountain of money”), MegaLido, Instant2U, Frogress, DailyProfitPond, AdGateWorld, BizAdSplash and Noobing, among others.
The leaders still are leading the sheep to slaughter on various HYIP and autosurf Ponzi forums — even with Madoff serving a prison sentence of 150 years. They get paid a commission of 10 percent or more for leading people to the slaughter.
Another reference to AVG appeared on Simmons’ forum Dec. 18, exactly a week after Madoff’s arrest. Some autosurf critics say the leaders are “out of touch.” Others use less-generous phrases to describe them, painting the “leaders” as the purveyors of “Kool-Aid” for consumption by the sheep.
Some of the sheep sign up to be slaughtered over and over again. They’re sometimes also known as the “Stepfords.”
“Our specific [AVG] group will have some additional perks that will not be tied to this and will allow you to grow exponentially and outpace everyone,” Simmons said Dec. 18 on his forum. The headline of the thread was, “STAY TUNED FOR ADVIEWGLOBAL.”
Simmons was a former member of the AdSurfDaily autosurf, which was caught up in pre-Madoff allegations that it was a $100 million Ponzi scheme. The ASD allegations were made in August 2008, about four months before Madoff’s name and “Ponzi scheme” became household words. Simmons’ name was on ASD’s witness list for an evidentiary hearing held Sept. 30-Oct. 1, 2008.
He never was called to the stand. U.S. District Judge Rosemary Collyer ruled Nov. 19, 2008, that ASD had not demonstrated it was a lawful business and not a Ponzi scheme. ASD had operated from the United States. Within days of the devastating ruling against ASD, word began to spread that AVG would launch and become a sort of ASD2 — only operating “offshore” from Uruguay and out the reach of U.S. authorities
Collyer is apt to remember the ASD case for many reasons. The key ruling she made against ASD was issued on her 63rd birthday, for example.
In the months that followed, Collyer would hear from dozens of pro se litigants who appeared to be arguing in favor of a presumptive right to operate or participate in a Ponzi scheme with no interference by the government.
AVG’s formal launch occurred in February 2009, less than two months after the Dec. 13 reference on Simmons’ forum, less than two months after the spectacular Ponzi allegations against Madoff surfaced.
But the autosurf’s days of having a tin ear for news and PR were far from over. Indeed, the surf that launched in the midst of the public hue and cry over Madoff’s Ponzi scheme and in the wake of Ponzi and racketeering allegations against ASD, went on to demonstrate for all time that it considered greed a virtue.
On May 4, the same day the Obama administration announced a crackdown on offshore fraud carried out by Americans, AVG announced it had acquired a new offshore wire facility to replace one lost in March.
“I’m asking Congress to pass some commonsense [antifraud] measures,†Obama told the American people at 11:37 a.m. on May 4. At 5:44 p.m., a member of an AVG forum operated by some of the Mods and members of the Pro-AdSurfDaily Surf’s Up forum announced the new offshore wire facility.
Some of the autosurf leaders are still leading on Internet forums, but Simmons’ Unemployable Hobo forum appears not to have had an update on any online program since September
UPDATED 7:19 P.M. ET (U.S.A.) A recording posted on a public website of a Feb. 12 conference call by the AdViewGlobal (AVG) autosurf suggests an unnamed male member of the surf qualified for a $10,000 cashout within days of the company’s formal launch.
The recording leads to questions about how a participant could qualify for a large payout so soon after launch and whether others also could have benefited from early cashouts funded by members in Ponzi scheme fashion. AVG appears to have had virtually no income streams beyond fees paid by members when it launched earlier in the month.
The Feb. 12 call featured a giveaway of money-earning AVG page impressions to both members and their sponsors. One of the bonus-winning sponsors was identified as David Meade, whose bonus-winning enrollee came on the line and jokingly asked whether the bonus he received qualified for an additional matching bonus of 50 percent.
AVG relentlessly pitched bonuses to enrollees and their sponsors before announcing in June that it was suspending cashouts, making an 80/20 program mandatory and exercising its version of a “rebates aren’t guaranteed” clause.
Another sponsor who qualified for a bonus because he had enrolled a member whose name was called for a bonus was identified as Larry Alford, the husband of Barb Alford, a Moderator at the Pro-AdSurfDaily Surf’s Up forum. Yet another member whose name was called for a bonus was Joey Shiver, the brother of Judy Harris, identified during the summer as one of AVG’s owners.
Meanwhile, the call highlighted AVG’s purported “offshore” location in Uruguay, stressing that the company planned to fly high-quality servers to Uruguay on a date uncertain after the call was held.
Web records show AVG’s servers resolved to Panama, suggesting the company never completed installation of servers in Uruguay. AVG had been collecting money for weeks at the time of the Feb. 12 call, which leads to questions about whether the company was selling unregistered securities from inside the United States or selling unregistered securities illegally to U.S. residents from offshore servers, all while engaging in wire fraud and acts of money-laundering.
The conference call, hosted by Terralynn Hoy, a Moderator at both the Pro-AdSurfDaily Surf’s Up forum and a ning.com forum set up to promote AVG, did not disclose how the member amassed a large sum in only days and qualified for a cashout. But another participant in the call announced that the man excitedly expected to receive a check for $10,000.
Neither Hoy nor any other AVG official or representative who participated in the call referenced a racketeering lawsuit that had been filed less than a month earlier against ASD President Andy Bowdoin and ASD attorney Robert Garner. At the same time, no official or representative in the call referenced a second forfeiture complaint that had been filed against ASD-connected assets in December 2008, a month after Surf’s Up received ASD’s official endorsement.
In August 2008, prosecutors accused both ASD and Golden Panda Ad Builder of not disclosing information members needed to make informed decisions about joining the companies. The allegations were spelled out in a forfeiture complaint formally filed Aug. 5, 2008.
Among the assertions were that Bowdoin did not disclose his arrest in a felony securities case in the 1990s, and that Golden Panda did not immediately disclose an SEC action against its president, Clarence Busby, in the 1990s. ASD members later said Bowdoin was the silent head of AVG, which began to solicit money in December 2008, a month after a major court ruling went against ASD.
News about the December forfeiture complaint, which painted a jaw-dropping picture of insider dealings, special favors, a “silent†ASD partner, people getting paid large sums for doing virtually nothing and a claim that Russian hackers stole more than $1 million, broke on Jan. 15.
The AVG conference call, dubbed the “first” official call, was conducted Feb. 12, about 10 days after AVG’s formal launch and within 30 days of the revelation that the government had filed the December forfeiture complaint and identified members of Bowdoin’s family as beneficiaries of ASD’s illegal conduct.
Judy Harris was among those the government identified in the filing, as were her husband, George Harris, and his mother, Edna Faye Bowdoin. Edna Faye Bowdoin is Andy Bowdoin’s wife.
Two weeks after the Feb. 12 conference call, on Feb. 26, AVG announced it was shifting to a “private association” structure. One day prior, on Feb. 25, Bowdoin signed the first of several sworn court documents as a pro se litigant in the ASD case, attempting to set aside the forfeiture of tens of millions of dollars and reverse a decision he made in January to surrender his claims to the money, which had been seized by the government in August 2008 from his 10 bank accounts.
Less than a month after Bowdoin signed the court document, AVG announced the resignation of Chief Executive Officer Gary Talbert, a former ASD executive. On March 23, AVG announced its bank account had been suspended, blaming the suspension on members who wired too many transactions in excess of $9,500.
Talbert was a participant in the Feb. 12 conference call. He was introduced by Hoy. Talbert, in turn, passed the the call back to Hoy, who then introduced a person identified as marketing consultant Kathy Robertson. Robertson made the claim about the $10,000 check.
“I just talked to a friend tonight,” Robertson said in the call. “He’s cashing out and he’s gonna get a $10,000 check into his bank account. He’s more excited than he’s ever been.”
Robertson urged AVG members to take notes of her remarks, according to the recording.
“Many of you have wondered, ‘Are we a United States’ business or are we another country[‘s] business?’” Robertson said in the recording. “I gotta tell you we’re based in Uruguay. We’re definitely an offshore business, and we’ll be moving very robust servers — we’ll actually be flying them on a plane to land in Uruguay. So, even the servers that host all of the websites are going to be offshore, so go ahead and write that down as a note. We are truly an offshore business.”
Robertson said AVG members should “feel secure” in the knowledge the company was operating offshore. She did not explain how the purported offshore venue made AVG’s venture, which targeted U.S. residents and former ASD members, legal. Robertson acknowledged in the recording that AVG had gotten off to a rocky start and that some members who could not fund accounts had had a disappointing experience.
But she urged members to look to the future and see a well-honed enterprise capable of producing a seamless experience for huge numbers of participants.
Federal prosecutors said ASD was operating a $100 million Ponzi scheme from inside the United States, while engaging in the sale of unregistered securities to U.S. residents and committing acts of wire fraud and money-laundering.
Later in the call, during the page-impression giveaway, Meade came on the line to accept his bonus for sponsoring a member whose name was called for a bonus.
“Thanks a million. Appreciate it,” Meade said.
Less than two weeks after the Feb. 12 conference call, reports circulated among ASD members that the U.S. Secret Service had seized the bank accounts of unidentified ASD members. AVG announced Feb. 26 that it was switching to a “private association” structure after consulting with a company known as Pro Advocate Group.
Pro Advocate Group is associated with Karl Dahlstrom, a convicted felon who served time in federal prison in a case involving securities fraud.
UPDATED 5:24 P.M. ET (U.S.A.) Is the “joe” who posted here before being blocked for showcasing an utter lack of restraint the same “joe” who pitched four HYIPs on the Pro-AdSurfDaily Surf’s Up forum two days ago?
We don’t know.
We do know, however, that both “joes” have pushed Ponzi programs and displayed an astonishing and unsettling amount of gumption. The Surf’s Up “joe,” for instance, used egg-themed, .info URLs that redirected to HYIPs, despite the fact state or federal prosecutors have brought racketeering charges against three alleged Ponzi schemes this week alone and ASD President Andy Bowdoin and ASD attorney Robert Garner have been sued by members for racketeering.
Meanwhile, our “joe” — who as recently as three days ago still was pelting us with nuisance communications under multiple identities even after his access to posting here was blocked in September and he was warned publicly to cease — insisted we’d restore his posting privileges or else. He then embarked on a smear campaign against this Blog on Scam.com, using multiple posting identities there, too.
Scam.com banned our “joe,” who has purported to have been a Prisoner of War in Vietnam, to have served harder time than the late Mafia figure John Gotti — and also to have been a graduate of MIT, whose curriculum is heavy on mathematics.
Our “joe” hurt himself with the MIT claim. It’s highly unlikely that any MIT graduate could leave the campus without a core understanding of the math of Ponzi schemes. In the unlikely event “joe” did graduate from MIT, he’d be hard-pressed to explain to prosecutors he didn’t understand he was promoting illegal programs such as AdViewGlobal and AdVentures4U.
He’d be equally hard-pressed to explain to POWs how pushing Ponzi schemes, which nowadays are getting widespread, constant publicity for the massive damage they cause, was a noble pursuit.
Our “joe’s” most recent effort to stalk this Blog occurred Dec. 2, under yet another user identity. He used the wires to tell us that he’d be paying attention to our reports about the notorious cyberstalker “unclefesta26,” who is pillorying this Blog on YouTube and also stalking people who post here by publishing videos about them on YouTube.
“By the way I can make excellent videos and have,” our “joe” suggestively told us Wednesday over the Internet. “Ole Festa doesn’t hold a candle to me.” Our “joe” called himself “Jake” in Wednesday’s reminder he was stalking us.
“joe” has sent us dozens of illegitimate communications designed to harass since September. “joe leaves when joe wants to leave,†he said as the U.S. summer was beginning to transition into fall.
â€You’ll be scrambling to put out fires,” our “joe” promised.
“joe” no more has the right to do what he tries to do here than he does, say, to keep messaging his hometown newspaper with harassing communications (or any business) after being warned to cease and desist.
Another thing we noticed about our “joe” during the summer was that he was sensitive to the word “racketeering” and the acronym RICO. He railed against this Blog in June, after it reported that the AdViewGlobal (AVG) autosurf had been mentioned in a racketeering lawsuit against Andy Bowdoin of AdSurfDaily. Indeed, some ASD members sued Bowdoin for racketeering. (See the comments in the thread for the link above.)
Federal prosecutors later made a veiled reference to AVG in court filings in the ASD forfeiture case. Both the August 2008 and December 2008 forfeiture filings against ASD cite a racketeering statute in the body of the complaints. Regardless, plenty of ASD members went on to promote AVG, which formally launched in February 2009 — after two racketeering mentions in forfeiture complaints and after Bowdoin was sued by members for racketeering.
Jaws dropped among people who pay attention to such things. The purveyors of AVG might as well have taken out an ad in the New York Times that read, “Yes, we are racketeers — and here’s how you, too, can harvest hefty profits from our racketeering scheme, especially if you belong to a Christian denomination!!”
It’s clear that law-enforcement agencies with the power of arrest — the U.S. Secret Service, the FBI and state-level strike forces led by attorneys general and local prosecutors and police officers, for example — have had it up to their ears with Ponzi and affinity-fraud schemes and are treating purveyors like mobsters. They’re using both state and federal racketeering statutes to bring down the schemes.
It’s also clear that the SEC, which does not have the power of arrest but can sue Ponzi scheme operators back to the Stone Age and works proactively with agencies that do have the power of arrest — also has had its fill of Ponzi and affinity-fraud schemes.
How could it not? There now are allegations that Trevor Cook, implicated with Christian radio host Pat Kiley in an alleged $190 million Ponzi scheme in Minnesota, bought a private island in Canada with his loot and a submarine to access the island. Cook reportedly told his investors he discovered after purchasing the submersible craft on eBay that the waters surrounding the island were too dark to navigate by submarine, but that he planned to move his two-passenger sub to Panama, a country be believed to have clear waters.
You can’t make this stuff up. It is an embarrassment to free enterprise, an embarrassment to the United States and the rest of the world. The word “Ponzi” has become positively nuclear as more and more senior citizens in their 80s have been fleeced out of their retirements by schemers and go to bed at night wondering how they’ll ever make ends meet.
Basically, the U.S. law-enforcement and regulatory communities have been responding to the schemers’ crimes with nukes. Rarely a day passes without a detonation.
Despite major undertakings by U.S. law-enforcement and regulatory entities such as the SEC, CFTC and state-level attorneys general and securities regulators to destroy Ponzi schemes — and despite racketeering, wire-fraud and money-laundering prosecutions — the “joes” of the Ponzi world apparently continue to believe there is something honorable about banking Ponzi profits earned while banks are failing in the United States, the foreclosure rate is surging in certain areas of the country, people of faith are being fleeced in Ponzi schemes, deaf people are being targeted in Ponzi schemes and 90-year-old men and women are looking for jobs to keep a roof over their heads.
We don’t know if our “joe” is Surf’s Up’s “joe” — but we do know that “joe” is all about greed and the wanton disregard of the rules of a civilized society.
Fact is, we did scramble to put out the fires promised by our “joe.” He did affect our ability to publish and asserted a nonexistent right to harass.
“What I’m saying is get ready for the return of joe and then you can block all of these people from your site,†our “joe” said.
He suggested that, although he is Uncle Festa’s superior in video production, he won’t use YouTube to harass this Blog or its readers.
It’s our “joe’s” way: He dangles a suggestion, and then wraps it in words designed to create plausible deniability. It escapes him that the words alone constitute a crime because they are designed to chill recipients and put them in the position of scrambling to protect their property.
That’s exactly what racketeers do. They suggest. They chill. They let you know there are consequences for not playing ball with them.
“It would be fun [to make videos] but I don’t hate you like [Uncle Festa] does,” our “joe” said three days ago. “[I]n fact i don’t hate you at all. I’ll bet everyone misses me.”
In a final bit of intrigue, it’s possible that the “joe” on Surf’s Up comes from Erie, Pa. That would be ironic indeed if it proved to be true. Erie is the birthplace of Harry Markopolos, the mathematician and financial analyst who exposed the $65 billion Ponzi scheme of Bernard Madoff.
Erie has some fine high schools. Harry Markopolos was a graduate of one of them and went on to become a world-class student of math and authority on Ponzi schemes. The Surf’s Up ” joe,” on the other hand, perhaps left Erie schools and went on to become a cell-phone trafficker facing a $5 million judgment — and a purveyor of Ponzi schemes who said it was important not to have all of your Ponzi eggs in one Ponzi basket, that you should branch out into other Ponzi schemes.
“ALL MY EGGS ARE NOT IN ONE BASKET,” the Surf’s Up ‘joe said. “I MAKE $2000.00 A WEEK.â€
And the Surf’s Up “joe” said it after Erie’s Harry Markopolos made the phrase “Ponzi scheme” impossible to ignore and kick-started the nuclear responses of the state and federal governments to those who would sell financial peril so they could own a Rolls-Royce or a submarine — or even make $2,000 a week on the Ponzi misery of others.
UPDATED 2:22 P.M. ET (U.S.A.) A poster using the handle “joe” at the Pro-AdSurfDaily Surf’s Up forum advertised four egg-themed domain names that redirected to four high-yield investment programs yesterday, saying in all-caps, “ALL MY EGGS ARE NOT IN ONE BASKET.
“I MAKE $2000.00 A WEEK.”
It is unclear if the poster has a license to sell securities or act as an investment dealer or broker. The domains to which the .info domains redirected were for programs titled “Gold Nugget Invest” (7.5 percent a week); “Genius Funds” (6.5 percent a week); “Cash Tanker” (2 percent a day); and “Saza Investments” (9 percent a week).
The domains — all of which used .info extensions, the word “egg” and a numeral in their URLs — are registered to a man with the last name of “Stablein” in Erie, Pa. The spelling of the owner’s first name in domain-registration data was “Jeffrery.”
An Erie man named “Jeffrey Stablein” — note the slightly different spelling of the first name from the domain-registration data — was sued in U.S. District Court for the Western District of Pennsylvania in June and identified by attorneys as a co-conspirator in a scheme to defraud TracFone Wireless Inc., a prepaid cell-phone provider.
The Erie street address associated with Stablein in the TracFone lawsuit is the same address listed in registration data for the egg-themed .info domains. Stablein was enjoined by a federal judge from a practice TracFone attorneys described as “cell-phone trafficking.”
Cell-phone trafficking involves the “unauthorized resale and hacking” of prepaid mobile phones, TracFone attorneys said. Future violations by Stablein could result in a $5 million judgment being enforced against Stablein, according to court filings.
Attorneys described how the scheme works after a buyer acquires prepaid phones in volume.
“The phones are then passed to middlemen who alter or remove the prepaid software and resell the altered phones as new, often in counterfeit packaging, at a significant profit to unsuspecting customers domestically and abroad in Latin America, Asia and the Middle East,” according to attorneys James B. Baldinger and Steven J. Brodie of the Carlton Fields law firm.
In September, U.S. District Judge Sean J. McLaughlin handed down a stipulated judgment against Stablein and his Erie-based firm, 1st Premier Communications, banning them “from continuing to engage in the bulk purchase, sale, or unlocking/reflashing of TracFone’s wireless phones,” the attorneys said in a news release.
TracFone aggressively litigates against cell-phone traffickers, according to the company.
In 2008, Muhammad Mubashir, 28, of Sugar Land, Tex., was sentenced to 57 months in federal prison for trafficking in cell phones.
“TracFone will continue to aggressively pursue those who participate in prepaid mobile phone trafficking because it undermines our ability to provide affordable wireless phone service to our customers,†said F.J. Pollak, president and CEO of TracFone Wireless, in a statement.
The U.S. Customs Service seized a shipment of 1,300 TracFones that Mubashir was exporting to a known trafficker in Hong Kong, the company said. TracFone obtained documents proving Mubashir sold approximately 9,000 TracFones, representing more than $1 million in losses to the company.
“Schemes like those organized by Mubashir exist across the country and involve groups of ‘runners’ who purchase prepaid mobile phones from major retail outlets,” TracFone said. “The phones are then passed to middlemen who alter or remove the prepaid software and resell the altered phones as ‘new,’ often in counterfeit packaging, at a significant profit to unsuspecting customers domestically and abroad in Latin America, Asia and the Middle East.”
Some Surf’s Up posters criticized the post by “joe,” saying it was in poor taste given the serious allegations against AdSurfDaily. Tens of millions of dollars were seized from ASD President Andy Bowdoin in August 2008, amid allegations of selling unregistered securities and operating a $100 million Ponzi scheme.
Despite the allegations, some Surf’s Up posters continued to pitch autosurfs and HYIP programs, often using phrases such as “offshore” or “I got paid” as evidence of legitimacy.
One Surf’s Up poster agreed with “joe” that the programs he advertised by using the egg-themed URLs that redirected to HYIP sites were excellent.
“Your intentions are good but you are dead wrong about those particular four programs!” a Surf’s Up member exclaimed in a post directed at a member who had been critical of “joe’s” post advertising the HYIP programs.
“I also make a lot of money from those four and your remarks tell me you don’t know anything about them…..they are very reputable [companies] who have been around for years….and the money is NOT made from ‘new’ people’s money….google them and look at various forums and see what others have to say about them….I don’t even know Joe, but I can vouch for the programs!”
The government of Belize issued a warning Nov. 12 about the Gold Nugget Invest HYIP advertised by “joe” on Surf’s Up.
Surf’s Up eventually deleted “joe’s” egg-themed HYIP thread.
It is not clear if “joe” is Jeffrey Stablein, but the stipulated judgment entry in the TracFone case includes Stablein’s signature and the same address used in the domain-registration data for the egg-themed HYIP domains.
Read a document that shows that a Stablein street address in the lawsuit is the same Erie address used in the domain registration data for the egg-themed HYIP domains.
Two California men have been charged with securities fraud by the SEC in an emergency court action that alleged they pushed a Ponzi scheme that collected more than $18 million.
