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  • DEVELOPING STORY: Thai Police Bust ‘UFunClub,’ Yet Another Cross-Border Network-Marketing Program; Case May Involve $307 Million

    ufunclubUPDATED 9:10 A.M. EDT U.S.A. It’s whack-a-mole via MLM or network marketing — again.

    There are reports in Thai media about a major pyramid/Ponzi bust involving a cross-border “program” known as “UFunClub.” (See links below.)

    No American suspects appear to have been arrested or named so far, but Americans have promoted UFunClub. One of them, according to BehindMLM.com, is Jamison Palmer.

    On Feb. 19, 2015, the PP Blog contacted the Alabama Securities Commission for comment after it observed a promo online for “UFunClub” attributed to Melton McClanahan, an American implicated in the cross-border “Profitable Sunrise” scheme broken up by state regulators and the U.S. Securities and Exchange Commission in 2013.

    Even as McClanahan was pitching UFunClub, he was pitching “Unison Wealth,” a Ponzi-board “program” pushed by Achieve Community huckster Rodney Blackburn. Achieve Community was taken down by the SEC in February 2015.

    ASC did not respond to the request for comment on UFunClub and Unison Wealth, and it is unclear whether they are under investigation in the United States. What is clear is that McClanahan was issued a cease-and-desist order by ASC for his alleged role in pushing Profitable Sunrise. He also was subpoenaed by the SEC in the Profitable Sunrise case.

    It’s also clear that some network marketers are moving from scheme to scheme to scheme in an ongoing and insidious environment of whack-a-mole. Schemes using a common network of promoters are feeding off each other.

    From a Bangkok Post story on UFunClub (italics added):

    Deputy Prime Minister Prawit Wongsuwon instructed police to investigate the case and quickly hunt down and arrest the suspects.

    Police have been working alongside the Consumer Protection Police Division, the Office of The Consumer Protection Board and the Anti-Money Laundering Office in the investigation. The company’s operating licence was revoked.

    Like other schemes, UFunClub spread in part on social media, according to a report at Nationmultimedia.com (italics added):

    OCPB secretary-general Amphon Wongsiri said the U-Fun group mobilised investments through the website www.u-fun-u-token.com, www.youtube.com and many other avenues including via direct contact by its agents.

    Recent whack-a-mole schemes include TelexFree, Wings Network, Zeek Rewards, eAdGear, iFreeX and EmGoldEx.

  • GlobalNews.ca: Pyramid Scheme Was Operating Out Of British Columbia Nursing Home

    cautionflagTwo senior managers at the St. Michael’s Centre nursing home in Burnaby allegedly were running a pyramid scheme targeted at women and have been fired, GlobalNews.ca is reporting.

    Workers — rather than residents — were the apparent targets. The Royal Canadian Mounted Police are investigating, the publication reported.

    Whether the scheme was operating as a “gifting” program was not immediately clear. In 2013, there were reports in British Columbia about a “women’s circle” gifting scam in the province.

    Such schemes may adopt a theme of “women helping women.” There have been criminal prosecutions flowing from such schemes in the United States and the United Kingdom.

    In November 2014, Idaho Attorney General Lawrence Wasden issued a warning about a “women’s” program operating in that U.S. state.

    Some promoters who push gifting scams also participate in other forms of the pyramid- or Ponzi scheme. Such was the case among certain participants in “Blessing Gold Club.”  They simultaneously were pushing a scheme known as Better-Living Global Marketing, a “program” whose business model strongly resembled that of the Zeek Rewards scheme taken down by the SEC in 2012.

    BLGM now is the subject of a criminal investigation in Hong Kong.

     

  • BULLETIN: SpotFN, ‘Binary Options’ Platform, Issued Cease-And-Desist Order In Missouri

    spotfmBULLETIN: (Updated 5:52 a.m. EDT April 8 U.S.A.) A “binary options” platform operating out of England allegedly plucked $82,742 from four Missouri investors, telling one of them that his money “had been stolen by former employees and could only be retrieved by paying a service fee and taxes to the companies’ supposed insurance company, Allianz Tiriac, located in Romania.”

    The office of Missouri Secretary of State Jason Kander has issued a cease-and-desist order that applies to SpotFN.com, Spot FN LLC, Spot CEO James Kingsley and “affiliated New York companies Binary Holdings and Binary Academics,” Kander’s office said.

    Spot does not appear to be an MLM. But some MLM “programs” are pushing binary-options schemes.

    Among the issues in Missouri is that the Spot and Binary entities “and Kingsley are not registered to offer investment advice or act as broker-dealers in the state of Missouri,” Kander’s office said.

    “Email and online-based investment opportunities such as this are a common practice by scammers to lure investors,” Kander said. “If you or someone you know was approached via email with an investment opportunity — especially by a foreign-based company — contact my office before turning over your hard-earned money.”

    According to a statement by Kander’s office, Spot told a story about “guaranteed” profits and used the Internet and telemarketers to line up business for binary options, “which are bets on whether an event will happen at a specific time.”

    Prospects were told to “send their investment funds through a website via their credit card, and their funds would be invested either by a ‘robot trader’ or an ‘executive trader,’ with a higher fee. In some instances, investor credit cards were charged without the investor’s knowledge or authorization,” Kander’s office said.

  • In Asking Court To Reject Proposed Herbalife Class-Action Settlement, Objectors Point To Clawback Actions Flowing From Zeek Case

    EDITOR’S NOTE:  Clients of attorney Douglas M. Brooks object to the proposed Herbalife-class-action settlement on a number of grounds. This story focuses on only one of them: one that cites “clawback” actions flowing from the Zeek Rewards’ Ponzi- and pyramid case. The Zeek clawback actions underscore the litigation dangers MLM distributors may encounter after harrumphing for a mother ship alleged to be a fraud.

    Risk may be particularly elevated if distributors emerged with a profit or if they offered deceptive “leads” or “training” programs . . .

    The PP Blog accessed the objections of Brooks’ clients through the website of TruthInAdvertising, which also is objecting to the proposed Herbalife settlement.  The link appears at the bottom of this story . . .

    Source: Screen shot from federal court filing.
    Source: Screen shot from federal court filing.

    At least 18 individuals objecting to a proposed class-action settlement in Dana Bostick v. Herbalife International of America Inc et al say the $17.5 million settlement, as stipulated by both sides, could shield “high-level distributors” from “clawback” lawsuits.

    All of the objectors have filed complaints against Herbalife with the Federal Trade Commission, according to their Bostick declarations. They are represented by Massachusetts attorney Douglas M. Brooks.

    Brooks has litigated against Herbalife in the past and has advocated the position that “The Multi-Level Marketing Industry Causes Substantial Injury to Consumers.”

    In their objections, Brooks’ clients specifically argue that “The Release in the Settlement Stipulation is too broad in that it will release claims against high level Herbalife distributors.” As examples of the types of Herbalife distributors who could be sued for return of winnings, the objectors cite “leads” providers and providers of “training” courses.

    Although the Bostick case was not brought by the government, the FTC has been investigating Herbalife since March 2014. “[S]everal state Attorneys General” also are investigating the company, the objectors contend.

    Made “under penalty of perjury,” their affidavits in Bostick list complaints to the attorneys general of Illinois, Nevada and Connecticut.

    Should one or more agencies bring a case against Herbalife, lawsuits against certain individual distributors could provide an additional compensation remedy. This particular route to recovery would be blocked under the current stipulated settlement agreement, the objectors say.

    They also say the current pot of $17.5 million is far too small and that the stipulated agreement is defective in other ways.

    Objectors Cite Zeek, Fortune Hi-Tech Cases

    “The potential for claims against Herbalife’s high level distributors is not merely theoretical,” the objectors contend. “For example, in an action by the receiver arising out of the SEC’s prosecution of a multilevel marketing firm known as Zeek Rewards, the court recently certified a defendant class comprised of the ‘net winners.’”

    The case is known as Bell v. Disner. Kenneth D. Bell, a North Carolina attorney and the court-appointed receiver in the SEC’s Ponzi- and pyramid case against Zeek filed in August 2012, is suing more than a dozen individuals for a combined sum in the millions of dollars. He’s also suing certain alleged shell companies used by distributors to harvest illicit profits from Zeek.

    At the same time, Bell is suing more than 9,000 other individuals or business entities in a defendant class-action case that already has been certified by a federal judge. The class consists of U.S. Zeek affiliates who allegedly received sums in excess of $1,000 from Zeek.

    These actions combined pursue the recovery of about $283 million Zeek allegedly paid out to top promoters in an environment in which “over 92% of the money paid in to Zeek came from net losers.”

    Zeek appears to have created approximately 800,000 losers, according to court filings

    “[B]ecause ZeekRewards’ net winners ‘won’ (the victims’) money in an unlawful Ponzi and pyramid scheme, they are not permitted to keep their winnings and must return the fraudulently transferred winnings back to the Receiver for distribution to Zeek’s victims,” Bell wrote in March 2014.

    Since that time, he also has sued dozens of alleged Zeek winners with addresses in Australia, New Zealand, the United Kingdom, the British Virgin Islands, Canada and Norway. The actions also seek the return of millions of dollars.

    But the Zeek clawbacks are not a unique example of the type of litigation that may surface if an MLM company is accused of fraud, the Herbalife objectors represented by Brooks say.

    “In an action by the Federal Trade Commission and four state Attorneys General against the multilevel marketing firm Fortune Hi-Tech Marketing, the court-appointed receiver recently received approval to commence litigation against ‘highly compensated representatives,’” they say.

    NOTE: Access objection through TruthInAdvertising.org.

     

  • Did Internal Ponzi Cause Bramer Bank Of Mauritius To Crumble?

    EDITOR’S NOTE: On May 10, 2012, on the news site of Zeek Rewards, the Rex Venture Group-operated “program” based in Lexington, N.C., announced it was moving part of its customer-service operation to Mauritius. Mauritius is an Indian Ocean island nation with a population of about 1.3 million.

    Zeek did not identify the Mauritius outsourcing company. Nor did it say who had recommended it or explain precisely why it had chosen Mauritius.

    “First and foremost, we are over-doubling our current affiliate services staff both in-house and in Atlanta and are bringing on an overseas branch in Mauritius to manage 24/7 inquires,” Zeek said. “Since we have affiliates in so many countries and support tickets come in around the clock, we will have operators training on the opposite side of the planet shortly, which is a very exciting development.”

    It is unclear if Zeek ever sent money to an outsourcing firm in Mauritius. Although it is known that Zeek used offshore payment vendors,  nothing in the public record suggests these were based in Mauritius.

    On Aug. 17, 2012, a little more than three months after Zeek announced its Mauritius support operation, the SEC described Zeek as a combined Ponzi- and pyramid scheme that had gathered hundreds of millions of dollars.

    **_____________________**

    UPDATED 9:15 A.M. APRIL 4 EDT U.S.A. Did a $693 million internal Ponzi scheme at Bramer Bank in the Indian Ocean island nation of Mauritius cause the bank to crumble?

    Prime Minister Anerood Jugnauth used the term “Ponzi” when describing the bank, Reuters reported today. (In a 4:44 4sWeb Tv video on YouTube dated today, the prime minister can be heard saying “Ponzi scheme” at about the 1:22 mark.)

    On April 2, the Bank of Mauritius, the central bank of the nation of about 1.3 million people, revoked Bramer’s banking license and appointed a receiver.

    This was followed today by the suspension of Bramer’s securities on the Stock Exchange of Mauritius.

    Troubles at Bramer had an immediate ripple effect. The Financial Services Commission of Mauritius appointed a conservator over BAI Co (Mtius) Ltd., an insurance company operating under the same umbrella company as the bank. “BAI” stands for British American Investment.

    Ponzi-scheme cases often have confusing — if not wild — backstories and sidebars.

    The video below was published under a “BramerBank” account on YouTube on Nov. 17, 2014. It depicts Bramer in a highly favorable light, reporting on an award the bank received from Global Finance Magazine, an American publication. The video appears to have been produced by MBC, the public-broadcasting company of Mauritius. The Ponzi allegations would surface only months later.

    A Facebook site of Bramer appears now to be inaccessible or to have gone missing. Google cache, however, shows a March 31 post attributed to “Bramer Banking Corporation.” The post claims Bramer had been the subject of criminally “malicious comments” on Facebook and that the bank had filed a report with police.

    The screen shot below shows the cached post:

    bramerfacebookcache4315small
    Just two days before regulators shut it down, Bramer Bank claimed on Facebook that it was being smeared.

    Authorities in Mauritius appear to have moved aggressively against the firm within the next 48 hours.

    The central bank said it had conducted an on-site examination of Bramer “from 22 January to 20 February 2015.

    “On 27 February 2015, the Bank conveyed to [Bramer] a number of significant deficiencies (going back to 2012) that had been noted during the examination,” the central bank continued.

    In revoking the license, the central bank said it “considers that [Bramer] has been carrying on business in a manner which is contrary or detrimental to the interest of its depositors and the public. The [central] Bank also considers that the conditions prevailing at [Bramer] pose serious systemic risks to the domestic financial system.”

  • COURTING TROUBLE: In Bogus Promo, Obama Shown As Pitchman For ‘MyAdvertisingPays’

    On April 2, a video depicting President Obama as a fan of the MyAdvertisingPays "program" appeared on YouTube. An "Obama voice" was dubbed into the video. Text below the video reads, "Mr. President speaks about the new advertising revolution."
    On April 2, a video depicting President Obama as a fan of the MyAdvertisingPays “program” appeared on YouTube. An “Obama voice” was dubbed into the video, which also shows the Presidential Seal. Text below the video reads, “Mr. President speaks about the new advertising revolution.”

    Depicting then-President George W. Bush as a fan of the AdSurfDaily MLM HYIP “program” backfired in spectacular fashion in 2008, drawing the attention of the U.S. Secret Service. Federal agents eventually seized more than $80 million in an asset-forfeiture case. ASD President Andy Bowdoin, accused of operating a cross-border Ponzi scheme, was indicted. He later pleaded guilty to wire fraud.

    Bush left the White House in January 2009, after Barack Obama was elected President. By August 2010, according to the FTC, “medical discount” hucksters were trading on Obama’s image.

    By September 2010, contrived images of Obama appeared in sales promos for the MPB Today MLM “program.”

    MPB Today operator Gary Calhoun later was charged with racketeering. Assets were seized. A conviction followed.

    In 2013, with Obama now in his second term, he was depicted in a promo as a pitchman for a scheme known as Ultimate Power Profits. That “program” had promoters in common with Zeek Rewards, which the SEC described in 2012 as a combined Ponzi- and pyramid scheme that had gathered hundreds of millions of dollars.

    Against this backdrop, a YouTube video that appeared online today positioned Obama as a pitchman for MyAdvertisingPays, a Ponzi-board scheme like ASD, MPB Today, Ultimate Power Profits, Zeek and many others.

    News about the 0:33 MAPS’ video titled “My Advertising Pays, Obama” first appeared on the RealScam.com antiscam forum.

    MAPS already may be on borrowed time. That’s because MAPS has links to both the Zeek and TelexFree schemes. TelexFree, alleged to have gathered more than $1.8 billion, also traded on the illusion the U.S. government backed the “program.”

    The video for MAPS puts MAPS-friendly words into the President’s mouth.

    “My AdvertisingPays pays its members every 20 minutes,” a mimicked voice of Obama’s says. “I highly recommend you to join MyAdvertisingPays.”

    The video concludes with, “God bless MyAdvertisingPays.”

     

     

  • UPDATE: IntellaShares Now Under Scrutiny By Save The Children

    From the IntellaShares website.
    From the IntellaShares website.

    IntellaShares, a collapsed “program” with a presence on the Ponzi boards and purportedly prepping for “relaunch,” now is under scrutiny by Save the Children.

    Jeremy Soulliere, a spokesman for Save the Children USA, confirmed the inquiry to the PP Blog this morning. Save the Children USA is an arm of Save the Children Federation Inc., the internationally prominent charity.

    “We are going to look into this matter further,” Soulliere wrote.

    The PP Blog reported yesterday that IntellaShares was publishing a graphic of a check on its website that implied a donation of $478 had been made or will be made to “Save The Children Foundation.” The memo line of the check reads, “Charity Spotlight – Feb/2015.”

    Text accompanying the check reads, “The Following Amount Will Be Donated For the Period Feb. 17-28/2015. Thank You To All Members For Making This Possible!”

    Another page on the IntellaShares website claims that the “program” donates “20% of Total Collected Membership Fees to THE FEATURED CHARITY.”

    This potentially means that Save the Children will not be the sole nonprofit whose name gets dangled by IntellaShares. The site suggests that the Global Music Project was the featured charity last month.

    Separately, BehindMLM.com, which covers emerging MLM frauds, reported yesterday that IntellaShares appeared to be threatening “disputers” and people who asked too many questions with entry on a “BLACKLIST” that “will be available to program owners only.”

    Precisely who controls the purported blacklist wasn’t specified by IntellaShares. The language, however, was menacing.

    “So be careful what you do now it could result in loss of ability to become a member of any program in short order,” IntellaShares advised members, according to BehindMLM.

    A post on the MoneyMakerGroup Ponzi forum today includes content attributed to IntellaShares. It declares “[t]oday is a beautiful day in the internet world” because “INTELLASHARES WILL BE OPEN FOR NEW SIGN UPS AND FUNDING TODAY!”

    This hashtag was attributed to IntellaShares: “#TOOBADABOUT30PEOPLEWEREBLACKLISTED.”

    At least one Ponzi-board poster was not amused.

    “They think that threatening people can suppress peoples opinion, that doesn’t sound like people that are for the people,” the poster ventured. “Sounds like facism to me. What a joke.”

    Scams trading on the Ponzi boards and on social-media sites such as Twitter, Facebook and YouTube are infamous for trying to enforce rigid thinking and mute criticism — sometimes by threat. At the same time, it is not unusual for such schemes to use the names of a famous charity or famous for-profit business as part of a bid to create a veneer of legitimacy.

    IntellaShares, which plants the seed “program” participants will receive $3.25 for every $2.50 they send in, appears to have collapsed shortly after launch earlier this year.

    Thuggery is not unusual in the HYIP sphere of MLM or network marketing.

    In early 2014, a “program” known as Banners Brokers threatened to lock the accounts of members “found to be contributing to the negativity on the Internet.” Participants further were threatened with a forfeiture of earnings and encouraged to report doubters to management.

    Banners Broker tried to sugarcoat its thuggery by calling it an effort to implement a “Community Watch” program.

    By October 2014, documents filed by the the Royal Canadian Mounted Police in July 2014 surfaced. These documents described Banners Broker as a “pyramid scheme that over time evolved into a straight Ponzi scheme in which new victims were recruited to stave off requests for withdrawals and complaints from older ones.”

    Investigative documents in Canada describe Banners Broker as a “criminal enterprise.” The U.S. Secret Service used the same phrase when describing the AdSurfDaily Ponzi scheme.

    Like Banners Broker and ASD, IntellaShares purports to be an “advertising” program.

    IntellaShares may be trying to skirt securities laws by claiming on its website that “REVENUE SHARING IS NOT GUARANTEED.”

    ASD, which once purported to have gifted 100,000 “ad packs” to a charitable venture, made a similar claim in 2008 . So did the Zeek Rewards scheme in 2012.

    Both ASD and Zeek collapsed after interventions by law enforcement.

    The SEC yesterday declined to comment on IntellaShares.

  • British Columbia Bans U.S. Resident From Securities Market, Says She Was Pushing Fraud Schemes For Commissions

    breakingnews72The British Columbia Securities Commission, which regulates securities in the Canadian province, has banned a U.S. resident who allegedly promoted a series of schemes on commission.

    “Sharon Downing has admitted that she engaged in an illegal distribution of securities,” BCSC said.

    Downing, according to BCSC, promoted schemes for Thomas Arthur Williams and six entities engaged in raising money illegally.

    Some of the cash went to persons with criminal records or who were securities-fraud recidivists, BCSC charged, describing money movement as akin to a Ponzi scheme.

    The agency identified the companies as:

    • Global Wealth Creation Opportunities Inc.
    • Global Wealth Creation Opportunities Inc. (Belize).
    • Global Wealth Financial Inc.
    • Global Wealth Creation Strategies Inc.
    • CDN Global Wealth Creation Club RW-TW.
    • 2002 Concepts Inc.

    The case demonstrates that persons living in the United States who push illegal schemes based in Canada can be charged by provincial regulators.

    Downing not only pushed the schemes for commission as a “finder,” she also invested in them, BCSC said.

    “Downing invested $60,000 of her own money in the Global Group of Companies and has no reasonable prospect of its recovery,” the agency said in a settlement agreement with her.

    All in all, Downing drove $180,000 in business to the Global entities, receiving $3,231 in commissions, the agency said.

    Williams, BCSC said in 2014 when he and the Global entities were charged, is a British Columbia resident who was “the directing mind, director and officer” of the purported opportunities.

    The 2014 notice alleged that “Williams made promises to investors, including that their investments were shielded from securities laws, that he would provide returns of at least 2% interest per month with a potentially higher interest rate on a ‘best efforts’ basis, and that he would preserve the integrity of their funds.”

    It is somewhat common for scammers to claim that securities laws do not apply to the investment programs they are offering.

    “During the relevant period, none of the respondents were registered under the Act in any capacity, and the Global Group of Companies has never filed a prospectus in respect of the distribution of its securities,” BCSC said.

    The schemes “raised approximately $11.7 million from 123 investors between February 2007 and April 2010,” BCSC alleged.

    And, the agency charged, “Williams invested about $5.8 million of investor funds with individuals and companies introduced by or connected to persons who had criminal or regulatory histories of securities fraud. Williams did not inform investors about the fraudulent background of the people he was dealing with, nor did he receive any returns or principal from any of the investments he made.

    “Williams did not inform his investors that none of his investments produced any returns, but rather continued to raise more money from investors, provided monthly statements showing fictitious returns of up to 4% on their investments, and paid ‘interest’ and principal payments to some investors from other investors’ money,” BCSC said.

    Under the settlement agreement, Downing will pay BCSC the $3,231 in commissions she had posted.

    The agreement also prohibits her “from trading in securities (with limited exceptions), and from becoming or acting as a promoter or registrant for a period of three years. Downing is also banned, for the same period, from acting in a management or consultative capacity in connection with the securities market, and from engaging in investor relations activities.”

  • SEC Declines Comment On ‘IntellaShares’ And Its Purported ‘BLACKLIST’; Ponzi-Board ‘Program’ Trades On Name Of Save The Children

    IntellaShares reportedly is threatening members who file disputes -- all while trading on the name of Save The Children. Photo source: screen shot from website of IntellaShares.
    IntellaShares reportedly is threatening members who file disputes — all while trading on the name of Save The Children. Photo source: 4/1/2015 screen shot from website of IntellaShares.

    UPDATED 11:31 A.M. EDT U.S.A. In 2010, the Federal Trade Commission took action against an online venture known as iWorks. This allegation appeared on Page 7 of the FTC’s Dec. 21, 2010 complaint:

    “They have also attempted to drive down their chargeback rates by threatening to report consumers who seek chargebacks to an Internet consumer blacklist they operate called ‘BadCustomer.com’ that will ‘result in member merchants blocking [the consumer] from making future purchases online!’”

    BehindMLM.com is reporting today that a “program” known as “IntellaShares” appears to be threatening participants with entry on a “BLACKLIST.”

    IntellaShares appears to have launched earlier this year and then experienced a prompt collapse. Despite this, the “program” claims on its website that it has or will donate $478 to the “Save The Children Foundation.”

    It is unclear if IntellaShares actually was referring to Save the Children Federation Inc., the internationally prominent Connecticut charity that operates at SaveTheChildren.org.

    BehindMLM has described IntellaShares as a “$2.50 micro Ponzi investment scheme.”

    The “program” has a presence on well-known Ponzi-scheme forums such as MoneyMakerGroup. There are assertions of an imminent “relaunch.”

    So far this year, the SEC has taken actions against two Ponzi-board “programs”: Achieve Community and Wings Network. In Congressional testimony on March 19, the agency said it is targeting scams that operate “under the guise of ‘multi-level marketing’ and ‘network marketing’ opportunities.”

    Such scams may use social media such as forums, YouTube, Twitter and Facebook to target marks. Some may imply they are linked to a charity or perform good deeds with money sent in by participants.

    In 2009, for instance, a Ponzi scheme known as AdViewGlobal purported to be involved in an effort to preserve the rain forest. AdViewGlobal, which was a knockoff of the 2008 AdSurfDaily Ponzi scheme, later disappeared.

    Like IntellaShares, AdViewGlobal purported to be in the “advertising” business. It also had a presence on the Ponzi boards.

    In 2011, a Ponzi-board “program” known as “Club Asteria” promised weekly payouts of up to 8 percent while trading on the name of the American Red Cross. During the same year, a TalkGoldPonzi forum promoter pitching both Club Asteria and a separate scam known as JSSTripler/JustBeenPaid (730 percent a year) claimed that filing disputes with payment processors meant that “all members will suffer.”

    IntellaShares may be operating out of New York.

    The SEC this morning declined to comment on IntellaShares. The FTC did not immediately respond to a request for comment.

    Update 11:31 a.m. The FTC said this morning that it “hasn’t brought any enforcement actions involving IntellaShares.”

    Whether it would remains an open question. The agency has an aggressive enforcement history when consumers end up on the receiving end of threats or are duped into joining work-at-home “programs.”

  • Two Former Federal Agents Involved In Silk Road Probe Were Bitcoin Thieves And One Was An Extortionist, Justice Department Says

    recommendedreading1UPDATED 8:33 P.M. EDT U.S.A. There must be some long faces at the U.S. Drug Enforcement Administration and the U.S. Secret Service today. That’s because two federal agents once assigned to a Task Force investigating the illicit Silk Road marketplace have been charged with federal crimes.

    Carl M. Force, 46, of Baltimore, was a DEA special agent who earned a salary of about $150,000 a year, according to a criminal complaint. He was charged with wire fraud, theft of government property, money laundering and conflict of interest.

    Shaun W. Bridges, 32, of Laurel, Md., was a special agent for the Secret Service. He was charged with wire fraud and money laundering. His salary was not revealed. He was a member of the Secret Service’s Electronic Crimes Task Force.

    The law-enforcement community recoils at this type of thing, because it engenders mistrust and erodes public confidence in the police. Agents who read the narrative in the criminal complaint filed by a special agent for the IRS Criminal Investigations unit are simply going to wince.

    One specific allegation against Force is that he sought to extort $250,000 from a subject under investigation by posing as a different person known as “Death From Above.”

    Silk Road was the criminal marketplace allegedly operated by Ross Ulbricht, also known as “Dread Pirate Roberts.” Ulbricht was the target of Force’s extortion plot, according to the complaint.

    The alleged extortionate scam?  Posing as a killer and telling Ulbricht — already under investigation by Force in his official capacity — that he’d be permitted to live and would not be ratted out if he agreed to turn over a quarter of a million dollars.

    Force also posed as “French Maid,” allegedly mining cash from Ulbricht by telling him he could keep him informed about the government’s Silk Road probe.

    While these things were going on, Force allegedly was communicating with Ulbricht as “bop,” his official undercover name.

    Force, a 15-year DEA veteran, allegedly infiltrated Silk Road in his official capacity as an undercover agent. Here is part of what the Justice Department said today (italics/carriage returns added):

    According to the complaint, Force was a DEA agent assigned to investigate the Silk Road marketplace.  During the investigation, Force engaged in certain authorized undercover  operations by, among other things, communicating online with “Dread Pirate Roberts” (Ulbricht), the target of his investigation.

    The complaint alleges, however, that Force then, without authority, developed additional online personas and engaged in a broad range of illegal activities calculated to bring him personal financial gain.  In doing so, the complaint alleges, Force used fake online personas, and engaged in complex Bitcoin transactions to steal from the government and the targets of the investigation.  Specifically, Force allegedly solicited and received digital currency as part of the investigation, but failed to report his receipt of the funds, and instead transferred the currency to his personal account. 

    In one such transaction, Force allegedly sold information about the government’s investigation to the target of the investigation.  The complaint also alleges that Force invested in and worked for a digital currency exchange company while still working for the DEA, and that he directed the company to freeze a customer’s account with no legal basis to do so, then transferred the customer’s funds to his personal account.  Further, Force allegedly sent an unauthorized Justice Department subpoena to an online payment service directing that it unfreeze his personal account. 

    The “digital currency exchange company” at which Force was moonlighting as a “de facto compliance officer” while on the DEA payroll was CoinMKT. He also was a CoinMKT investor — apparently with funds he’d stolen — and even permitted his name and likeness to be used in CoinMKT materials.

    Rancid criminality also was alleged against Bridges, a six-year Secret Service veteran. From the Justice Department (italics added):

    Bridges allegedly diverted to his personal account over $800,000 in digital currency that he gained control of during the Silk Road investigation.  The complaint alleges that Bridges placed the assets into an account at Mt. Gox, the now-defunct digital currency exchange in Japan.  He then allegedly wired funds into one of his personal investment accounts in the United States mere days before he sought a $2.1 million seizure warrant for Mt. Gox’s accounts. 

     

     

  • BULLETIN: Receiver Sues USHBB Inc., Maker Of Zeek Videos — And Ties Firm To AdSurfDaily Ponzi Scheme

    breakingnews729th UPDATE 9:01 P.M. EDT U.S.A. Indianapolis-based USHBB Inc. and three of its principals — James A. Moore, Robert Mecham and Oscar H. Brown — have been sued by the court-appointed receiver in the Zeek Rewards Ponzi- and pyramid-scheme case.

    Receiver Kenneth D. Bell alleges USHBB, a producer of videos, also did work for the AdSurfDaily Ponzi scheme “and one or more other failed MLM operations.”

    Though not referenced specifically in the complaint, one of those operations was “NarcThatCar,” a bizarre pyramid scheme that collapsed in 2010.

    Bell raised concerns months ago that some MLMers or network marketers simply were proceeding from scheme to scheme to scheme. The receiver previously tied alleged Zeek winner Todd Disner to the ASD Ponzi scheme.

    Not only did USHBB and its principals mine $676,848 from Zeek for producing videos and marketing materials that duped vast numbers of Zeek participants,  Moore, Mecham and Brown piled up hundreds of thousands of dollars in illicit profits as Zeek affiliates, Bell charged.

    Brown, better known as O.H. Brown, used “ushbb” as his Zeek affiliate name and amassed $168,642.70, Bell alleged.

    Moore scored $109,130.64 under multiple usernames, including “geniweb” and “ttm,” Bell alleged.

    Mecham piled up “at least $868,542.17 through his shell companies Five Star Marketing, LLC and The End Media, LLC, under multiple usernames, including ‘napier2’ and ‘theend,’” Bell alleged.

    Moore resides in Indianapolis, according to the complaint. Mecham is a resident of Bountiful, Utah, and Brown lives in Mount Pleasant, S.C.

    Mecham and Brown received transfers of $25,000 each from a Zeek “insider” in August 2012, the same month Zeek collapsed, according to the complaint.

    Brown, according to the complaint, potentially knew that the SEC was looking at Zeek in June 2012 and dashed off a panicked email to Zeek executive Dawn Wright-Olivares.

    What appears to have happened, according to the complaint, was that a technology company with which USHBB did business was contacted by the SEC, prompting Brown to tell Olivares:

    “Heads up!!!! Our IT partners, RMR development received a telephone call from the SEC today regarding yougetpaidtoadvertise and what organizations were associated. This was a very short call I am told. Not sure what will come of this but this is an alarm at least that the government is looking. We need to get squeaky clean and quick!”

    Olivares, charged civilly by the SEC and criminally by federal prosecutors in the Western District of North Carolina in 2013, allegedly shared inside information with USHBB and Brown.

    From the receiver’s complaint (italics added):

    Further, the Defendants were involved in the Zeek scheme’s operation and the Insiders’ decisionmaking. For example, in August 2011, ZeekRewards adjusted some of the terminology it used publicly in an attempt to disguise the “Compounder” as a legitimate retail profit sharing mechanism. The Compounder’s name was changed to the “Retail Profit Pool,” but the substance of this investment vehicle did not change. USHBB was or should have been fully aware of this deceitfulness in which it participated.

    In a June 24, 2011 email, Dawn Wright-Olivares wrote to O.H. Brown regarding a webinar that USHBB had created for Zeek: “I started to do minor edits . . . ([Y]ou’ll see them where I started to say Retail Profit Pool) lol instead of Compounder . . . . ” She further wrote to Brown: “the silent cap [for bid expiration] reality will be 125% but we can’t SAY it as you know.”

    Wright-Olivares pleaded guilty to investment-fraud conspiracy and tax-fraud conspiracy in February 2014.

    Consistent with USHBB’s “dubious track record” in ASD and other schemes, the company and its principals “assisted the ZeekRewards scheme by creating multiple videos that served as promotional tools for ZeekRewards,” Bell alleged.

    Titles included:

    • “One Penny Billionaire.”
    • “You Get Paid to Advertise.”
    • “Got 20 Seconds.”
    • “The Dog Gone Truth.”
    • “Spin the Wheel.”

    “The videos were carefully produced to mislead and deceive victims into participating in the scheme, convincing victims that with minimal effort they could earn significant financial returns from the Zeek scheme,” Bell alleged.

    And, he alleged, “These videos assisted the Insiders in promoting the alleged ease with which affiliates could earn passive profits by investing in the scheme and selling membership in the scheme to others. Affiliates were told to mention the ZeekRewards program to a prospective affiliate or advertise it on a web page, and then email or otherwise provide them a link to the USHBB videos, which upon information and belief convinced other unwary victims to sign on . . .

    “The videos were a key component in proliferating the RVG Ponzi scheme, causing significantly more victims and financial loss than otherwise would have occurred absent Defendants’ actions.”

    RVG stands for Rex Venture Group, the alleged operator of Zeek. It was controlled by Paul R. Burks of Lexington, N.C. Burks also has been charged criminally.

    ASD was a $119 million Ponzi scheme broken up by the U.S. Secret Service in 2008. NarcThatCar was a “program” that purported to pay MLM “program” members to recruit other members and to record the license-plate numbers of vehicles parked at restaurant chains, big-box retailers, universities, doctors’ offices and throughout neighborhoods from coast to coast.

    The information purportedly would be entered into a database that could assist the U.S. Department of Homeland Security locate terrorists and lenders repossess automobiles. The bizarre scheme disappeared after it caught the attention of the Better Business Bureau and investigative journalists.

    Bell is seeking treble damages and the return of ill-gotten gains from the USHBB defendants.

    NOTE: Our thanks to the ASD Updates Blog.