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  • Full Statement Of SEC On Criminal Conviction, Prison Sentence, Restitution Order And Civil Liability Of Legisi HYIP Ponzi Operator Gregory N. McKnight

    EDITOR’S NOTE: As the PP Blog reported on Aug. 6, Legisi HYIP Ponzi-scheme operator Gregory N. McKnight was sentenced to 188 months in federal prison. McKnight is 53. He was ordered taken into custody immediately after sentencing last week and is listed as “in transit” to an unspecified detention facility. Legisi was promoted in part on Ponzi forums such as TalkGold and MoneyMakerGroup.

    The SEC today released the statement reproduced below . . .

    U.S. SECURITIES AND EXCHANGE COMMISSION

    Litigation Release No. 22776 / August 13, 2013

    Securities and Exchange Commission v. Gregory N. McKnight, et al., Civil Action No. 08-cv-11887 (E.D. Mich.)

    15 Year Prison Term for Gregory Mc[K]night, Orchestrator of $72 Million Ponzi Scheme

    The Securities and Exchange Commission announced that on August 6, 2013, the Honorable Mark A. Goldsmith of the United States District Court for the Eastern District of Michigan sentenced Gregory N. McKnight to 188 months (15 years and 8 months) in prison, followed by supervised release of 3 years, and ordered McKnight to pay $48,969,560 in restitution to his victims. McKnight, 53, of Swartz Creek, Michigan, had previously pled guilty to one count of wire fraud for his role in orchestrating a $72 million Ponzi scheme involving at least 3,000 investors. The U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against McKnight on February 14, 2012. McKnight was taken into custody immediately after the sentencing hearing.

    The criminal charges arose out of the same facts that were the subject of an emergency action that the Commission filed against McKnight and others on May 5, 2008. On that same day, the Court issued orders freezing McKnight’s assets and those of several companies he controlled, and appointed a Receiver. The Commission’s complaint alleged that, from December 2005 through November 2007, McKnight, through his company Legisi Holdings, conducted a fraudulent, unregistered offering of securities in which he raised approximately $72 million from more than 3,000 investors in all 50 states and several foreign countries. According to the Commission’s complaint, McKnight represented that he would invest the offering proceeds in various investment vehicles and pay interest of as much as 15 percent per month from the resulting profits. The complaint charged that McKnight invested less than half of the offering proceeds and that these investments resulted in millions of dollars in losses. The Commission’s complaint further charged that McKnight used investor funds to make Ponzi payments to investors and for his own use. The Commission’s complaint charged McKnight with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

    On July 6, 2011, the Court entered a final judgment against McKnight in the Commission’s action, and ordered McKnight to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties totaling approximately $6.5 million. The court also issued orders permanently enjoining McKnight from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. On July 9, 2013, McKnight’s associate Matthew J. Gagnon was sentenced to five years in prison for his role in promoting Legisi.

    For additional information, see Litigation Release No. 20563 (May 8, 2008), No. 20588 (May 20, 2008), No. 22269 (Feb. 24, 2012) and No. 22749 (July 11, 2013).

    http://www.sec.gov/litigation/litreleases/2013/lr22776.htm

  • **[UNCONFIRMED]** Report In Brazil Says Prosecutors Have Asked U.S. Court To Block TelexFree Accounts, New Signups **[UNCONFIRMED]**

    telexfreelogo**[UNCONFIRMED]** A report in Brazilian media translated by Google Translate from Portuguese to English says that prosecutors in Brazil have asked a U.S. court to prevent new members from joining TelexFree and to block the accounts of TelexFree figures Carlos Wanzeler, James Merrill, Carlos Costa and Lyvia Wanzeler.

    The PP Blog could not immediately confirm the report. If it is true, it could mean that law-enforcement agencies in Brazil have contacted their U.S. counterparts and asked them to begin the process of investigating a potential seizure of TelexFree-related funds that may be in the United States and perhaps to disable or otherwise block the functionality of the TelexFree web domains. The United States has said on various occasions that it is interested in fostering partnerships with law-enforcement agencies across the globe to combat commercial fraud online.

    As of 1:03 p.m. EDT today in the United States, the TelexFree websites remained online and appeared still to be capable of enrolling recruits.

    TelexFree has said it has U.S. arms in the states of Massachusetts and Nevada. Some U.S. afffiliates of TelexFree also appear to have formed business entities in California and Florida. Some TelexFree affiliates have claimed the “opportunity” did business through Bank of America, TD Bank and ProPay. (See July 8, 2013, PP Blog report on some of the claims.)

    Despite allegations in Brazil that TelexFree was conducting a massive pyramid scheme and that a Brazilian judge and prosecutor had been threatened with death, TelexFree nevertheless held a rah-rah session in California late last month in which an MLM pitchman appears to have tried to sustain the scheme by telling a joke about “Carlos Danger,” an online identity purportedly used by U.S. Democratic politician Anthony Weiner. A companion TelexFree promo playing in the United States on YouTube claims that people who send $15,125 to TelexFree can expect to profit to the tune of more than $42,000 in a year.

    TelexFree has a presence on well-known Ponzi-scheme forums such as TalkGold, MoneyMakerGroup and DreamTeamMoney. The forums previously were used as staging grounds for the Legisi Ponzi scheme, the AdSurfDaily Ponzi scheme, the PathwayToProsperity scheme, the Zeek Rewards scheme and the Profitable Sunrise scheme, among others. The SEC has described Zeek as a $600 million Ponzi- and pyramid fraud. The agency has described Profitable Sunrise as a fraud that may have gathered tens of millions of dollars through a series of accounts. Federal prosecutors in Illinois have described PathwayToProsperity as a fraud that made its way into at least 120 countries.

    In May, the United States indicted the Liberty Reserve payment processor and forced it offline, amid allegations that Liberty Reserve and some of its operators had engaged in a $6 billion money-laundering conspiracy. In June 2011, U.S. Attorney General Eric Holder described the amount of money being stolen online as “staggering.”

    “In recent years, we’ve seen clear, and alarming, advances in the sophistication and commercialization of crimes involving electronic networks,” Holder said.  “And the staggering volume of money being stolen online today has the potential to threaten not only the security of our nation — but the integrity of our government, the stability of our economy, and the safety of our people.”

    Nearly a year later — in May 2012 — INTERPOL said that “[Eighty] per cent of crime committed online is now connected to organized gangs operating across borders.”

    In October 2012, Lisa Monaco, then-Assistant Attorney General for National Security, said that cyber intrusions may have resulted in “the greatest transfer of wealth in history.”

    Monaco is now President Obama’s chief counterterrorism adviser.

    Some TelexFree members have claimed that the purported “opportunity” has gathered in excess of $300 million. Among other things, TelexFree has purported to be in the hotel-development business in the run-up to the 2014 World Cup and the 2016 Summer Olympics in Brazil. TelexFree, an MLM business, also purports to be in the VOIP telephone business.

    Many HYIP “opportunities” that use an MLM sales model have members and promoters in common and promise absurd rates of return. The practice has led to questions about whether groups of MLMers — however loosely associated — may be engaging in willful blindness and causing banks and payment processors to become warehouses for fraud proceeds.

    The ASD, Zeek, Legisi, PathwayToProsperity and Profitable Sunrise HYIP schemes may have gathered on the order of $1 billion, court filings suggest. Alleged PathwayToProsperity operator Nicholas Smirnow is listed as wanted by INTERPOL. So is Robert Hodgins, who reportedly once provided payment services to ASD and is listed as an INTERPOL fugitive in a money-laundering case allegedly involving the offloading of narcotics profits in Colombia.

    See Aug. 12 TelexFree report on BehindMLM.com.

  • How Bizarre Will MLM Get? YouTube Video That Drives Traffic To Empower Network Feeds On Name Of ‘CashCropCycler’ And Trades On Images Of White House, Obama And Biden

    "President Obama" and "Vice President" Biden in a video that appears to be designed to drive sign-ups for Empower Network, an MLM "program."
    “President Obama” and “Vice President Biden” in a video that appears to be designed to drive sign-ups for Empower Network, an MLM “program.”

    EDITOR’S NOTE: Our thanks to reader “Tony” for pointing out the video described below.

    UPDATED 9:26 A.M. EDT (SEPT. 10, U.S.A.): How bizarre will MLM get? Well, there may be no ceiling: A 2:47 video animation playing on YouTube depicts U.S. Vice President Joe Biden as a recent enrollee in the CashCropCycler HYIP “program” who confesses to President Obama that he’s “[j]ust out bumbling around and sticking my foot in my mouth.”

    The video has a publication date of July 17 and appears to be a bid by an affiliate of the Empower Network MLM “program” to target traffic meant for CashCropCycler and refocus it toward Empower Network. “President Obama” appears to speak with a British accent in the promo, which also features a jab against Ben Bernanke, the chairman of the Federal Reserve.

    At approximately the 0:48 mark, after “Biden” informs “Obama” that he’s just joined CashCropCycler, “Obama” seems to say this: “Bernanke started that one, didn’t he?”

    Some MLMers appear to believe that raising conspiracy theories about the Federal Reserve is helpful to MLM HYIP “programs.”

    A URL below the video at the YouTube site goes to a page at JoinVicNow.com that displays a photo of an oversized “Commissions Earned” check from Empower Network for $464,913. The check appears to be dated September 2012. It is made out in the names of “David Wood & David Sharpe” and is presented by an individual wearing a Guy Fawkes mask.

    Source: Sceen shot at JoinVicNow.com
    Source: Sceen shot at JoinVicNow.com

    CashCropCycler, a “program” promoted on the Ponzi boards, appears to have gone missing in recent days. NEOMutual, a purported “crowdfunding” company promoted alongside CashCropCycler on the Ponzi boards, also appears to have gone missing. Both “programs” planted the seed that extraordinary profits would come to enrollees.

    The Guy Fawkes mask sometimes is known as the “V for Vendetta” mask, which sometimes is used by members of “Anonymous,” the so-called hacktivist group associated with DDoS attacks on government and commercial sites.

    Here, in part, is how WikiPedia describes the mask and Guy Fawkes (italics added):

    The Guy Fawkes mask is a stylised depiction of Guy Fawkes, the best-known member of the Gunpowder Plot, an attempt to blow up the House of Lords in London in 1605. The use of a mask on an effigy has long roots as part of Guy Fawkes Night celebrations.

    Why an individual is wearing a Guy Fawkes mask in the photo depicting the Empower Network check is unclear. The company, however, has described itself as “bad ass.” (Also see July 19 report on BehindMLM.com.)

    Trading on the name of the President and Vice President of the United States was one of the things that led to the downfall of the AdSurfDaily MLM “program” in 2008. (The President at the time was George W. Bush; Dick Cheney was the Vice President.)

    After Obama replaced Bush in the White House, an affiliate of an MLM “program” known as MPB Today depicted Obama in a 2010 promo as a left-handed saluting Nazi subordinate to then U.S. Secretary of State Hillary Rodham Clinton, who was depicted as a whining drunk who’d knocked out First Lady Michelle Obama in the Oval Office. In 2012, MPB Today operator Gary Calhoun was charged in Florida with racketeering. A federal forfeiture complaint that targeted the headquarters building used by MPB Today specified the crimes of access-device fraud and fraud in connection with identification documents.

    Calhoun was sentenced to a three-year prison term last month. MPB Today MLM affiliates claimed a one-time purchase of $200 from the firm could result in free groceries and gasoline for life. Claims were made by affiliates that the U.S. government or Walmart or both had backed the MLM “program.”

    In January 2013, an online promotion turned Obama into a pitchman for a Ponzi-board “program” known as UltimatePowerProfits.

    Some members of the TelexFree  “program” now appear to believe there is MLM hay to be made while trading on the name of Democratic politician Anthony Weiner. TelexFree is under investigation in multiple states in Brazil, amid allegations its is conducting a massive pyramid scheme. Even though there have been reports in Brazil about death threats against a judge and a prosecutor, some U.S. affiliates continue to promote the purported “opportunity.”

    One promo for TelexFree claims a payment of $15,125 to the MLM firm will produce a profit of more than $42,000 in a year. The “Aunt Ethels” of the world — older people with money — will become keen on TelexFree, according to the promo.

  • UPDATE: After Claiming It Was Interested In ‘Building A Network That Ticks,’ ‘CashCropCycler’ Appears to Be DOA; ‘NEOMutual’ Also Appears To Have Gone Missing After ‘Crowdfunding’ Claims

    cashcropcyclerTouted on the MoneyMakerGroup Ponzi forum by former Zeek Rewards pitchman “mmgcjm,” a bizarre “program” known as CashCropCycler appears to have tanked. Joining CashCropCycler in the recent HYIP DOA lineup was NEOMutual, a purported “crowdfunding” opportunity that claimed it used bitcoin and a series of offshore payment processors to provide daily interest rates of 1.4 percent, 1.6 percent and 1.9 on sums  between $20 and $250,000.

    The websites of both NEOMutual and CashCropCycler are throwing error messages. Precisely when the sites went offline is unclear. In August 2012, the SEC described Zeek as a $600 million Ponzi and pyramid scheme.

    Among other things, CashCropCycler was notable for its provocative name, which led to questions about whether the “program” was designed as a taunt and perhaps was using the HYIP world to crowd-source the cultivation of marijuana. The “program” also claimed enrollees received $10 just for signing up, a practice once used by the JSSTripler/JustBeenPaid scam.

    cashcropcyclerneoAn ad for NEOMutual once appeared on the landing page of the CashCropCycler website. NEO Mutual said it was located at Revolution Tower in Panama City, Panama. Like the “Profitable Sunrise” HYIP scheme, NEO Mutual purported to be in the bridge-loan business. In April 2013, the SEC called Profitable Sunrise a scam that may have gathered millions of dollars while using a “mail drop” in England and offshore bank accounts.

    sdadprofitablesunriseIn July, the SEC issued an investor alert that warned about the dangers of potential investment scams involving virtual currencies promoted through the Internet.

    “We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions. The fraud may also involve an unregistered offering or trading platform. These schemes often promise high returns for getting in on the ground floor of a growing Internet phenomenon,” the SEC said in the warning.

    Among the strange claims on the CashCropCycler website was that the “program” was interested in building “a network that ticks.”

    A February 2013 ad for Profitable Sunrise that appeared on a classified-ads site in Montana South Dakota (Sept. 5, 2013 edit) claimed that “Finally we have the bomb.” In an April 2013 Investor Alert on Profitable Sunrise, the state of Idaho warned that “Those investors who receive compensation for soliciting other investors may themselves be subject to the licensing and anti-fraud provisions of state and federal securities laws.”

    In court filings on April 4, the SEC said Profitable Sunrise pitchmen may have pushed the “program” without even knowing for whom they were working.

  • SEC: Utah Ponzi Schemer With ‘Loans’ Program Ripped Off Church Associates, Family Members, Friends, Seniors — And Some Of The Money Went To ‘Multilevel Marketing And Web-Based Advertising Business Opportunities’; Separately, Newspaper Reports Allegations Of Cash Handoffs To Investors In Parking Lots

    secsheinzIn the latest affinity-fraud scheme detected in Utah, an Orem man conducted a $4 million offering fraud and Ponzi scheme aimed at church associates, family members and friends, including senior citizens and the “recent widow of a church associate” whom he volunteered to help with finances after she lost her husband, the SEC said.

    Some of the money scammed by Steven B. Heinz was used “to pay his adult children to fund various business opportunities they are involved in, including multilevel marketing and web-based advertising business opportunities,” the agency said.

    The SEC did not identify the “programs” in a complaint filed yesterday that led to an emergency asset freeze.

    Heinz is 56. He is associated with a “financial planning and insurance” entity known as S.B. Heinz & Associates Inc. of Provo, the SEC said.

    “Heinz promised some investors that they would earn tax-free income if they provided a ‘loan’ to Heinz to invest for them,” the SEC said.

    And Heinz “has issued investment contracts to investors which guarantee returns ranging from 6% to 120% per year,” the SEC alleged.

    Separately, the Deseret News is reporting allegations that he “paid returns in cash, often asking his clients to meet him in grocery store parking lots for the handoff.”

    Regulators and law enforcement have been warning for years about affinity fraud in Utah.

    From a statement yesterday by the SEC (italics added):

    The complaint alleges that since January 1, 2012, Heinz acted as an investment adviser and solicited nearly $4 million from more than fifteen former clients, family members, and friends to enable him, through his company S.B. Heinz, to execute rapid buy and sell orders of futures contracts. The complaint further alleges that investor funds are being used to falsely create the appearance of a successful investment business although S.B. Heinz has actually lost approximately $1.5 million executing Heinz’s high risk futures contract trading activities. In addition, the complaint alleges that Heinz pays “returns” to earlier investors using new investor funds, used investor funds for his own personal purposes and that S.B. Heinz used investor funds to pay business expenses, including the salary for its secretary and its office rent.

    Named a relief defendant in the case as the alleged recipient of ill-gotten gains was Susan K. Heinz, Heinz’s wife. The SEC said Heinz “reportedly makes large monthly cash payments to his wife” and alleged that he’d drained $1 million to fund “personal expenses such as paying for family members to accompany him to Mexico on vacation.”

    In addition to duping the widow, the SEC said, Heinz also duped an elderly couple.

    Heinz, the SEC alleged, “convinced the elderly couple to liquidate their investments and invest those funds with him personally. Heinz did not disclose to the couple that they would incur $45,000 in penalties as a result of early liquidation of their investments.”

  • RECOMMENDED READING: Jordan Maglich In Forbes On Green-Lighting Of SEC Lawsuit In Alleged Ponzi Scheme Involving Bitcoin — And Why Zeekers Should Pay Attention

    recommendedreading1A federal judge in Texas has ruled that investments in the alleged Bitcoin Savings and Trust HYIP Ponzi scheme met all three prongs of the Howey Test and constituted an “investment contract” under federal securities laws.

    The ruling by U.S. Magistrate Judge Amos L. Mazzant of the Eastern District of Texas means that a lawsuit filed last month by the SEC against Trendon T. Shavers of McKinney will proceed. Shavers challenged the jurisdiction of the court, asserting that BTCST investments were not securities because Bitcoin is not money and is not part of anything regulated by the United States. He further contended that his transactions were were all Bitcoin transactions and that no money ever exchanged hands.

    For its part, the SEC argued that the BTCST offerings were both investment contracts and notes, and, thus, securities. Among other things, the SEC alleged that Shavers promised investors up to 7 percent weekly interest based on BTCST’s Bitcoin market arbitrage activity, which supposedly included selling to individuals who wished to buy Bitcoin ‘off the radar’ in quick fashion or large quantities.  In reality, BTCST was a sham and a Ponzi scheme in which Shavers used Bitcoin from new investors to make purported interest payments and cover investor withdrawals on outstanding BTCST investments.”

    Read Maglich’s dissection of the ruling and the ramifications at Forbes.

  • URGENT >> BULLETIN >> MOVING: Legisi HYIP Operator Gregory McKnight Sentenced To More Than 15 Years In Federal Prison

    McKnight. From U.S. court files.
    McKnight. From U.S. court files.

    URGENT >> BULLETIN >> MOVING: Gregory N. McKnight, the operator of the $72 million Legisi HYIP Ponzi scheme popularized in part on the TalkGold and MoneyMakerGroup forums, has been sentenced to 188 months in federal prison for wire fraud and ordered to pay more than $48.9 million in restitution.

    McKnight also was ordered to serve three years’ probation following his prison release. Legisi collapsed in 2008.

    Legisi pitchman Matthew John Gagnon was sentenced last month to serve five years in federal prison and to pay $4.4 million in restitution.

    The criminal cases against Gagnon and McKnight were prosecuted by the office of U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan. The civil cases were prosecuted by the SEC.

    Legisi bizarrely made members affirm they were not associated with the SEC, the IRS, the FBI and the CIA — along with “Her Majesty’s Police,” the Intelligence Services of Great Britain and the Serious Fraud Office.

    Prosecutors said McKnight engaged in “semantic obfuscation” in which investors were told they were joining a “loan program,” not making an “investment.”

    Among Legisi’s payment processors was e-Bullion. The Legisi receiver is pursuing claims tied up after the 2008 arrest of James Fayed, the operator of e-Bullion.

    Fayed was convicted in 2011 of ordering the murder of his wife, a potential witness against him. Pamela Fayed was slashed to death in a Greater Los Angeles parking garage in July 2008. The SEC brought the Legisi fraud prosecution in May 2008, just two months before Pamela was killed.

    E-bullion has been linked to several Ponzi schemes. In court filings on June 6, receiver Robert D. Gordon said more than 85 percent of the $72.6 million directed at Legisi had flowed through the defunct processor.

    The Legisi investigations were led by the SEC, the U.S. Secret Service and state regulators in Michigan.

  • Series Of News Releases From Purported MLM Trainer Plants Seed That Federal Trade Commission Has Given Green Light To Several Opportunities, Including Herbalife

    EDITOR’S NOTE: The PP Blog called the Federal Trade Commission to get its take on these news releases, which use the agency’s name and imply that the FTC  recently has given several MLM “opportunities” a clean bill of health. The agency did not immediately respond.

    What would you think if you read a headline on Google News yesterday such as this: “Herbalife Pyramid Scheme Rumors Untrue: FTC Speaks out on Pyramid Definition.”

    Would you think, perhaps, that the FTC recently had conducted an investigation into Herbalife’s business practices and “spoke out” yesterday in defense of the firm after determining that it had been subjected unfairly to “rumors” that it was orchestrating a pyramid scheme — and that any questions about the the legality of Herbalife had been laid to rest by the government?

    And what would you think if you read headlines such as these:

    “Adzzoo Pyramid Scheme Accusations False – FTC Explains Pyramid Scheme Definition”
    “Javita Pyramid Scheme Accusations – FTC Settles Pyramid Definition”
    “ARIIX Pyramid Scheme Evidence – FTC Settles Pyramid Scam Definition”
    “Agel Pyramid Scheme Accusations False – FTC Explains Pyramid Scheme Definition”
    “Ignite Electric Pyramid Scheme Rumors Not True – FTC Speaks on Pyramid Definition”
    “Creative Memories Pyramid Scheme Accusations Untrue – FTC Settles Pyramid Scam Definition”
    “Photo: ACN Pyramid Scheme Accusations Incorrect – FTC Clarifies”
    “Photo: Celebrating Home pyramid scheme true or false? FTC Clarifies”

    Each of the headlines listed above has appeared online in recent days — some of them carried by Google News, which published the feeds of SBWire, a news-release service. The release that uses both the FTC’s name and Herbalife, for example, carries an Aug. 5 dateline from Altamonte Springs, FL. The release that references the FTC and Javita carries an Aug. 2 dateline from Orlando, FL.

    The release on Javita uses this deck: “Javita Pyramid Scheme question answered. FTC decides on Pyramid meaning.” Meanwhile, the release on Herbalife carries this deck: “Herbalife Pyramid Scheme Accusations Are Without Merit. Consumers Can Now Intelligently Determine Themselves Herbalife Pyramid Allegations Are Not True Based On FTC Pyramid Definition.”

    The release that references Herbalife goes on to assert that Herbalife is “not a pyramid scheme at all by the FTC’s definition.”

    Herbalife’s MLM program has been in the news for months. Billionaire Bill Ackman claims it is a pyramid scheme; Herbalife denies the assertion.

    Each of the news releases referenced above appears to be a bid to sell an MLM “leads” program by planting the seed that the FTC recently has given the green light to each of the companies. The basis of the claims curiously appears to be a 15-year-old speech (May 13, 1998) an FTC official gave on the subject of pyramid schemes that in part defined pyramid schemes as schemes that “promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public.”

    That the speech was given in 1998 and may have less relevance 15 years later was not made clear in any of the news releases. Beyond that, the thinking of agencies such as the FTC and SEC may evolve as the schemes themselves evolve.

    In the 1998 speech, the FTC official went to to say (italics added):

    “Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company’s incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company’s distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.”

    We’ll leave it to you to decide if it is wise for MLmers to try to shoehorn a 15-year-old speech into news releases in 2013 that imply the FTC recently has scrubbed each of the “opportunities” referenced above and made a legal conclusion that no pyramid schemes exist.

     

  • EDITORIAL: Want To Build Your U.S. TelexFree Downline While An Active Pyramid-Scheme Investigation Is Under Way In Brazil? Ignore Or Downplay The Probe And Tell A ‘Carlos Danger’ Joke

    Scott Miller goes for a "Carlos Danger" laugh line at a TelexFree event in California.
    Scott Miller goes for a “Carlos Danger” laugh line at a TelexFree event in California.

    EDITOR’S NOTE: TelexFree has two executives named Carlos — Carlos N. Wanzeler, and Carlos Costa. Neither of them is “Carlos Danger.”

    TelexFree, an MLM “opportunity,” has been under investigation in multiple states in Brazil since at least late June. There have been reports of death threats against a judge and a prosecutor — and there have been reports of assaults against journalists covering the alleged scam in Brazil.

    None of this appears to have motivated TelexFree to cancel/postpone a California MLM rah-rah session in late July.

    Scott Miller, according to a video playing on YouTube, was one of the featured TelexFree speakers at the Newport Beach event. Members of his group claim in videos that, if one sends $15,125 to TelexFree to purchase a “contract,” one will emerge with guaranteed earnings of at least $1,100 a week for a year. The math of the claim is basically this: $1,100 a week for 52 weeks equals $57,200. Subtract the original outlay of $15,125, and emerge $42,075 on the plus side.

    Put another way, plunk down a little more than $15,000 and watch it virtually triple or quadruple in a year. Would Bernard Madoff have dared to be so bold?

    The plain answer is no. Madoff roped in his Ponzi victims with suggestions of vastly lower annual returns.

    But all of this TelexFree tripling or quadrupling of money is possible — to hear the firm’s cheerleaders tell it on YouTube — if recruits carry out a simple task: place an ad for the “opportunity” at free classified sites online. And you can make more in pure dollar terms by sending more, the cheerleaders say.

    If you find it strange that TelexFree is continuing to conduct business in the United States against the backdrop of alleged threats against judicial officers in Brazil even as some TelexFree promoters try to drive business to the firm by videotaping a statue of Jesus Christ in Rio de Janeiro, you may find it stranger yet that New York City mayoral candidate Anthony Weiner’s name has made its way into a TelexFree sales pitch.

    Nothing suggests that confessed sexting aficionado and former Congressman Weiner has anything whatsoever to do with TelexFree. But his in-the-news name apparently was one too rich for Miller to ignore from the stage in Newport Beach.

    Miller told the assembled TelexFree masses in California that 75 percent of the people in MLM are women.

    “Even Anthony Weiner — ‘Carlos Danger’ — can meet someone in this industy,” Miller cracked. Carlos Danger reportedly was an online name name used by Weiner.

    MLM and/or affiliate schemes have been known to trade on the names of famous politicians of both major American political parties, occasionally even planting the seed that the famous politicians even had endorsed the “opportunity.” The $119 million AdSurfDaily MLM Ponzi scam traded on the names of (Republican) President George W. Bush and Vice President Dick Cheney, for example. The Mantria Ponzi scheme ($54.5 million) traded on the name of former President Bill Clinton, with one of the pitchmen encouraging prospects to join the [Donald] Trump network after the 2009 collapse of Mantria. Clinton is a Democrat who continues to be a major figure on the world stage after an affair with an intern nearly toppled his Presidency; Trump is a billionaire, an occasional MLM cheerleader and an often-rumored GOP Presidential candidate who appears to enjoy trying to tweak President Obama, a Democrat, by pandering to the “Birther” conspiracy-theory vote.

    In 2010, an affiliate of the MPB Today MLM “program” tried to drive traffic to the now-shuttered “opportunity” whose operator is jailed by positioning Obama and then-U.S. Secretary of State Hillary Rodham Clinton as Nazis, with Obama’s family being positioned as welfare recipients eager to eat dog food.

    With each passing day, MLM seems to be creating bigger and bigger PR disasters for itself.  We’re left wondering: What is funnier? The joke about Anthony Weiner or the fact it was told by an MLMer whose group apparently believes that sending an entire year’s salary for many Americans to TelexFree during an active investigation will cause the investment to mushroom while Bernard Madoff is knocking another year off his 150-year sentence?

    In any event, the apparent message in some U.S. MLM circles today is that you can build a downline in TelexFree even during an offshore pyramid probe by ignoring or downplaying the investigations and deflecting the attention of the audience further by trotting out your best “Carlos Danger” lines.

    And you can triple or quadruple your money while doing so, of course.

  • HAWAII REPORTER: Man Indicted In Investment Scheme Allegedly Claimed To Be A ‘United Nations Ambassador’

    recommendedreading1The Hawaii Reporter and other media outlets are reporting that Curtis Wayne Ross of Honolulu has been indicted on wire-fraud charges in an investment scheme in which he allegedly claimed to be a well-connected multimillionaire and a “United Nations ambassador” with special tax privileges.

    From the Reporter (italics added):

    “Ross was neither a UN ambassador with special tax privileges nor a multimillionaire investor with international trade connections, according to federal court records.”

    Four investors allegedly got scammed for a total of $167,000, amid claims that Ross lured them in with claims he could provide “high yielding returns of between 17 percent and 400 percent,” the publication reported.

    Claims about special tax privileges and diplomatic connections sometimes have been associated with the “sovereign citizens movement.” Whether Ross is an adherent to “sovereign” poppycock is unclear.

    Some “sovereign citizens” have declared themselves office-holders or diplomats immune to arrest.

    In 2012, purported “sovereign citizen” Monty Ervin was sentenced to 10 years in federal prison in a scheme involving bogus trusts. Ervin earlier had declared himself “governor” of Alabama in its “original jurisdiction” and a “Most Christian Prince.”

    Earlier this week, purported “sovereign citizen” James Timothy “Tim” Turner — the purported “President” of a purported government known as the “Republic for the united States of America” (RuSA), was sentenced to 18 years in federal prison in a bizarre tax scam.

    Ross has been issued a summons to appear in court. The AP is reporting that the FBI says he “moved away from Hawaii and is believed to be living in Atlanta.”

  • United States Issues Travel Alert; State Department Cites Potential For Terrorist Attacks Carried Out By al-Qa’ida And Affiliated Organizations In Middle East And North Africa; Some Embassies Will Be Closed On Sunday

    U.S. Secretary of State John Kerry
    U.S. Secretary of State John Kerry

    From the U.S. Department of State, dated Aug. 2, 2013:

    “The Department of State alerts U.S. citizens to the continued potential for terrorist attacks, particularly in the Middle East and North Africa, and possibly occurring in or emanating from the Arabian Peninsula. Current information suggests that al-Qa’ida and affiliated organizations continue to plan terrorist attacks both in the region and beyond, and that they may focus efforts to conduct attacks in the period between now and the end of August. This Travel Alert expires on August 31, 2013.”

    Full statement here.

    Also see: AP video report, “Threat Closing Some US Embassies on Sunday.”

    Also see: New York Times report, “State Department Issues Global Travel Alert.”

    Also see: Fox News report, “US issues global travel alert over Al Qaeda threat, prepares to close embassies.”