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Tag: 1UOL

Notes/Analysis On TelexFree: A Little Like AdSurfDaily/AdViewGlobal, TextCashNetwork, Zeek Rewards, Profitable Sunrise And World Marketing Direct Selling

TelexFree affiliates have shared a photo of President James M. Merrill posing in front of an office building in Massachusetts. The photo, however, is not proof of TelexFree’s legitimacy and raises questions about whether the company was trying to plant the seed it had a massive physical presence in the United States.

UPDATED 10:22 P.M. EDT (U.S.A.) The purported TelexFree “opportunity” is under investigation by multiple agencies in Brazil, its purported base of operations despite competing claims the company is headquartered in the United States. The notes below concern TelexFree’s U.S. presence and positioning. They are presented in no particular order of importance. TelexFree says it is in the communications business.

TelexFree has a footprint in Massachusetts at 225 Cedar Hill Street, Suite 200, Marlborough. It is a shared office facility. Ads for the building suggest a conference room with video capabilities can be rented by the hour. One suggested use of the room is for attorneys to rent it to conduct depositions. Some attorneys practicing in the state and federal courts use the building as a business address.

Other lessees include the Massachusetts Library System (MLS), which describes itself as “state-supported collaborative” to foster “cooperation, communication, innovation, and sharing among member libraries of all types.” MLS uses Suite 229, according to its website.

TelexFree operates as an MLM. One of the problems in the MLM sphere is that purported “opportunities” and their promoters have been known to dupe participants by leasing virtual office space to create the illusion of scale or of a massive physical presence. Such was the case with a Florida entity associated with AdViewGlobal, an AdSurfDaily knockoff scam that purported to pay 1 percent a day. As the PP Blog reported on May 31, 2009 (italics added):

Research suggests a company with which AVG has a close association is headquartered in a modern office building in the United States. The building was constructed in 2003. Office functions and conferencing can be rented by the hour. Two large airports are nearby, and a major Interstate highway is situated one mile from the building.

It is a virtual certainty that AVG, which purported to operate from Uruguay, actually was operating from the U.S. states of Florida and Arizona and using a series of business entities to launder the proceeds of its fraud scheme. AVG disappeared mysteriously in June 2009.

On Dec. 14, 2011, the PP Blog reported that Text Cash Network (TCN) — another purported MLM “opportunity” — was using a virtual office in Boca Raton, Fla., in a bid to create the illusion of scale. TCN promoters published photos of a glistening building with TCN’s name affixed near the crown of the building. The Boca Raton Police Department, however, said the firm’s name did not appear on the building.

Although the PP Blog is unaware of any bids to Photoshop TelexFree’s name on a large office building, affiliates have shared photos of TelexFree President James M. Merrill posing in front of the large Massachusetts building. So there can be no confusion, TelexFree does not own the building. TelexFree affiliates/prospects should not rely on the photo of the building as proof of the legitimacy of the company. The photo itself raises questions about whether Merrill and TelexFree were trying to create the illusion of scale. Even though the answer could be no, the negative inferences that can be drawn from the photo contribute to MLM’s reputation for serial disingenuousness.

TelexFree also has a presence in the state of Nevada. Records show that an entity known as TelexFree LLC is listed as “Domestic Limited-Liability Company” situated in Las Vegas. Listed managers include Carlos N. Wanzeler, Carlos Costa and James M. Merrill. TelexFree operates in Massachusetts with an “Inc.” version of the name — i.e., TelexFree Inc., having undergone a name change in February 2012 from Common Cents Communications Inc. In Massachusetts, James Merrill is listed as the registered agent, president, secretary and director of the firm, with Carlos Wanzeler listed as treasuer and director. Unlike the Nevada “LLC” version of TelexFree, Carlos Costa appears not to hold a title in the Massachusetts “Inc.” entity.

The footprints in the United States are important in the sense that they establish a business presence in the country should TelexFree become the subject of U.S. investigations akin to what is happening now in Brazil, where pyramid-scheme and securities concerns have been raised. Along those lines, records of the Financial Industry Regulatory Authority (FINRA) appear not to list TelexFree — despite the fact affiliates in the United States have claimed members acquire “stock” from TelexFree that can be sold through TelexFree and that affiliates purchase “contracts” from TelexFree.

One YouTube video viewed by the PP Blog shows a TelexFree affiliate purportedly cashing out his stock through his TelexFree back office. The affiliate appears to be speaking in U.S. English, citing the date as March 19, 2013. In the video, the affiliate describes his pitch as a “quick withdrawal video” — i.e., proof that TelexFree is legitimate because it pays.

“OK,” the narrator intones. “I’m going to sell all my stock.” The video shows a tab labeled “Stock” and a subtab styled “Repurchase” in the back office.

The narrator then clicks on a series of graphics styled “REPURCHASE” and tells the audience that he wants to show it all the “stock that I have that converts to actual money.” He then proceeds to a “Withdraw” subtab under a “Statement” tab. These actions eventually expose a screen that shows an “AVAILABLE BALANCE” of $927.61 for withdrawal.

For a brief moment, the acronym “BT&T” flashes on the screen, suggesting the TelexFree affiliate is seeking to have his earnings from stock sales relayed through North Carolina-based Branch Banking & Trust. The interesting thing about that is that the alleged $600 million Zeek Rewards Ponzi- and pyramid scheme claimed it had a banking relationship with BB&T.

In May 2012 — on Memorial Day — Zeek mysteriously announced it was ending its relationship with BB&T. It was unclear from the TelexFree affiliate’s video whether he was a BB&T customer or whether TelexFree was. What is clear is that the SEC moved against Zeek in August 2012, accusing the company of securities fraud and selling unregistered securities as investment contracts. The U.S. Secret Service said it also was investigating Zeek.

In this TelexFree promo running on YouTube, the acronym BB&T flashes on the screen in a TelexFree affiliate’s back office.

Among the problems with HYIP schemes is that banks can become conduits through which illicit proceeds are routed or stockpiled. Zeek used at least 15 domestic and foreign financial institutions to pull off its fraud, according to court filings.

Because HYIPs offer commissions to members who recruit other members along with “investment returns,” legitimate financial institutions can come into possession of money tainted by fraud.

Like Zeek (and AdViewGlobal and AdSurfDaily), TelexFree has a presence on well-known forums listed in U.S. court records as places from which Ponzi schemes are promoted.

TelexFree shares some of the characteristics of fraud schemes such as Zeek, AdViewGlobal, AdSurfDaily, Profitable Sunrise and others. ASD, AVG and Zeek, for instance, had a purported “advertising” element. So does TelexFree.

TelexFree affiliates claim they get paid for posting ads online for the purported “opportunity.” Zeek affiliates made the same claim.

It is highly likely that Zeek and TelexFree have promoters in common, a situation that potentially is problematic, given that some affiliates may have used money from Zeek to join TelexFree — and the court-appointed receiver in the Zeek case is pursuing clawbacks against “winners.” In short, some of the winnings could have been spent in TelexFree.

An online promo for Zeek in July 2012 claimed North Carolina-based Zeek had 100,000 affiliates in Brazil alone. TelexFree affiliates are claiming that their “opportunity” now has hundreds of thousands of affiliates, which suggests TelexFree has achieved Zeek-like scale. Whether it enjoys Zeek-like, money-pulling power on the order of $600 million is unclear.

What is clear is that TelexFree, like Zeek before it, is spreading in part through the posting of promos on classified-ad or similar sites across the United States. Profitable Sunrise, another HYIP, spread in similar fashion. Dozens of U.S. states issued Investor Alerts or cease-and-desist orders against Profitable Sunrise, which the SEC accused of fraud in April 2013.

To gain an early sense of the scale TelexFree may be achieving in the United States, the PP Blog typed into Google the term “TelexFree” and the names of several U.S. states known to have taken actions against Profitable Sunrise. This revealed URLs such as “TelexFreeOhio” and “telexfreetexas.blogspot.com,” for two examples. It also showcased classified-ad (or similar) sites on which TelexFree promos are running or have run.

Finally, the state of Massachussets was the venue from which the prosecutions of the infamous World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid-schemes were brought in federal court. Those fraud schemes were targeted at Cambodian-Americans. The state does not take kindly to affinity fraud. In March, Massachusetts securities regulators charged a man in an alleged fraud bid against the Kenyan community.

Among the claims of the MLM hucksters pitching WMDS and 1UOL was that members could purchase an income. Some TelexFree affiliates are making similar claims.

The WMDS and 1UOL frauds became infamous as the source of death threats, including one against a federal prosecutor.

Media outlets in Brazil have reported that death threats have surfaced over the TelexFree scheme.

For the reasons cited above and more, it would be surprising if things end well in the United States for TelexFree, which has Zeek and ASD-like signatures of MLM disasters waiting to happen.

Jul 4, 2013
Now, Boat-Sharking For ‘Biwako Bank Limited’: Promos Appear On Facebook Site For Profitable Sunrise And Claim Enterprise Is ‘Japan’s Strongest Bank’

In 2010, FINRA warned that HYIP scammers may provide a “Typo Tip-Off.” In 2013, an enterprise whose affiliates are targeting victims of the alleged Profitable Sunrise pyramid scheme says it is trying to attract “costumers.”

Biwako Bank Limited caught our attention yesterday after a boat-shark appeared on a Facebook Profitable Sunrise site to promote it while making this claim: “**THIS IS NOT AN HYIP , THIS IS A BANK**”

The claim is at odds with a claim on the MoneyMakerGroup Ponzi forum that Biwako has a “GoldCoders’ HYIP Manager License.”

Regulators have warned for years that internal inconsistencies are one of the hallmarks of HYIP fraud. In 2010, the Financial Industry Regulatory Authority (FINRA) noted that HYIP scammers also often present a “Typo Tip-Off.”

“Watch out for online postings, website copy or emails that are riddled with typos and poor grammar,” FINRA said. “This is often a tip-off that scammers are at work.”

Now, with Profitable Sunrise apparently dead in the water after actions by the SEC and numerous state and provincial regulators in the United States and Canada over the past two months, Biwako is informing prospects in a video playing on its website that the enterprise exists to connect “costumers” to new opportunities. It also claims that compounding is “avaliable.”

Meanwhile, it publishes an investment calculator and appears to imply an association with CNN and Time magazine.

And despite a Facebook boat-shark’s claim that Biwako is not an HYIP, the website of the purported “opportunity” lists four color-coded “plans” that purport to provide daily payouts of between 1.95 percent and 3.05 percent. The highest-paying plan — the “Red Plan” at 3.05 percent a day — advertises a percentage even higher than the purported “Long Haul” plan of Profitable Sunrise.

The “Long Haul” plan claimed to pay 2.7 percent a day.

Earlier this month, North Carolina issued a warning about “reload scams” aimed at Profitable Sunrise victims.

Like Profitable Sunrise, Biwako also is being promoted on the Ponzi boards.

Also see March 27 PP Blog story about Facebook boat-sharking and March 31 story. (The March 31 story reports that promotions for a “program” known as TelexFree claim participants can purchase an income that varies by the amount they invest. Under one scenario outlined in a video, participants who send in $15,125 purportedly are buying an income of $1,100 a week for a year.)

The TelexFree pitch was similar to pitches for the infamous World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid schemes, which were exposed in 2005 and operated by James Bunchan and Seng Tan. Those scams resulted in federal prison sentences for both Bunchan and Tan.

Apr 29, 2013
Appeals Court Upholds 20-Year Prison Sentence Of Seng Tan, Mercedes-Driving Pyramid Schemer Who Blamed Hurricane Katrina For Payment Delays And Told Members That The ‘Gods’ Had Sent Her To Make Them Millionaires

EDITOR’S NOTE: Simply put, the World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid scheme of James Bunchan and Seng Tan was one of the ugliest — if not the ugliest — in U.S. history. Bunchan eventually was implicated in a a murder-for-hire plot in which 12 witnesses and a federal prosecutor in Massachusetts were discussed as targets.

Bunchan was convicted in both the pyramid case and the murder-for-hire case, which was brought separately. He was sentenced to a combined 60 years in federal prison, sentences upheld by the U.S. Court of Appeals.

Tan was sentenced to 20 years for her role in the WMDS/1UOL pyramid scheme, which also was a Ponzi scheme. The U.S. Court of Appeals for the First Circuit now has upheld that conviction. The opinion of the panel was written by Circuit Judge Ojetta Rogeriee Thompson in exceptionally straightforward language apt to put readers “right there.”

A link to the full opinion appears at the bottom of this story . . .

“She usually made quite an entrance, showing up in a chauffeur-driven Mercedes . . . Tan’s pitch was quite attractive. She and Bunchan were millionaires, she said, and the ‘gods’ had sent her to make ‘the Cambodian people’ millionaires too.” — First Circuit Judge Ojetta Rogeriee Thompson, writing for the court and denying the appeal of Seng Tang in the WMDS/1UOL pyramid-scheme case, March 23, 2012

An affinity fraudster who ran a $20 million pyramid scheme with her husband has lost her bid to overturn her conviction and 20-year prison sentence.

Writing for the U.S. Court of Appeals for the First Circuit, Judge Ojetta Rogeriee Thompson laid out the thinking of a three-judge panel that denied the appeal of Seng Tan, who ran the fraud scheme with James Bunchan.

Using exceptionally straightforward language in the 17-page opinion, Thompson recounted the nature of the pyramid case. The opinion began with a subhead titled “SETTING THE STAGE.”

“A federal jury convicted James Bunchan and Seng Tan, a husband and wife team, of numerous mail-fraud, money-laundering, and conspiracy crimes committed in furtherance of a classic pyramid scheme that swindled some 500 people out of roughly $20,000,000 in the early to mid-2000s,” the opinion began. “Fellow scammer Christian Rochon pled guilty to similar charges on the first day of trial, and his testimony in the prosecution’s case helped seal the couple’s fate.”

Thompson next described the venture, below a subhead titled “THE SCHEME.”

“Bunchan founded and owned two self-styled multi-level marketing (MLM) companies — World Marketing Direct Selling (WMDS) and Oneuniverseonline (1UOL) — that supposedly made a mint selling health and dietary supplements. In a legit MLM venture — think Avon, Mary Kay, Amway (companies Tan had worked for) — each person who joins the sales force also becomes a recruiter who brings in other persons underneath her. But the venture survives by making money off of product sales, not off of new recruits.

“Not so with WMDS and 1UOL,” Thompson continued. “Neither sold much of anything, and both raised gobs of money almost exclusively by recruiting new investors, also called members.”

“Here,” Thompson continued, “is how it all worked.” (Italics added.)

Bunchan tasked Tan with drumming up new members, something she was born to do, apparently. Both she and Bunchan are Cambodian émigrés. And they focused their recruitment efforts primarily on Cambodians living here, many of whom were first-generation Cambodian-Americans who had limited educations and spoke little English. As “CEO Executive National Marketing Director,” Tan ran informational seminars for potential investors, meeting them at hotels, their homes, and elsewhere. She usually made quite an entrance, showing up in a chauffeur-driven Mercedes. And she spoke to the attendees in their native language (Khmer), stressing their common background too (including their shared experiences living in Cambodia during the murderous reign of the Khmer Rouge).

Tan’s pitch was quite attractive. She and Bunchan were millionaires, she said, and the “gods” had sent her to make “the Cambodian people” millionaires too. She bragged about how profitable both companies were thanks to high product sales, which earned members at the “Distributor” level fantastic sales commissions. But a member did not have to sell a single item to make money, she explained. For a lump-sum payment of $26,347.86, an investor could skip the Distributor level, become a “Director I,” and get an immediate “bonus” of $2,797, plus $300 every month for the rest of her life, her children’s lives, their children’s lives, and so on. Promotional pamphlets also promised investors that if they recruited more members and kicked in more money (any where from $130,000-$160,000), they could become “Gold Directors” and earn even higher never-ending monthly payouts (something like $2,500 a month). And Tan urged persons short on cash to take out second mortgages or home-equity loans or to borrow money from their retirement accounts to finance their investments, and more than 150 people did. She even had members sign forms so that the loan proceeds would be wired directly to WMDS or 1UOL.

When prospective investors asked her point-blank whether they had to sell company merchandise to get money, Tan answered no. She and Bunchan reduced their promises to writing, with Tan even signing letters guaranteeing monthly returns basically forever.

In words that could describe many corrupt ventures, Thompson noted that the “scheme started out swimmingly.

“WMDS and 1UOL used newly-invested money to trick old investors into thinking that the good times were here to stay,” Thompson wrote. “Not knowing any better, members were ecstatic. Bunchan and Tan were too, obviously. And with cash pouring in, the pair used the companies’ coffers as their own personal piggy bank.”

The Beginning Of The End — And A ‘Hurricane’ Explanation

It frequently is the case in the universes of corrupt “opportunites,” including HYIPS, that the weather gets blamed when payment problems develop — so much so, that explanations involving high winds have become an investment-fraud cliché.

Such was the case in the WMDS/1UOL scam.

“[Tan] started having trouble signing up new investors,” Thompson wrote. “So WMDS and 1UOL stopped mailing out the monthly checks. Members revolted, naturally. Tan tried to quell the uprising, blaming the ‘delay’ on banking glitches caused by Hurricane Katrina and telling members that they would get their checks soon — out-and-out lies, the record reveals.”

Even more fraud clichés came into play, including thefts from family members to prop up the scheme, the continued gathering of funds while the enterprise was tanking and the issuance of selective payouts to calm nervous investors and sustain the deception.

“Worse still,” Thompson wrote, “after getting an earful from irate investors, Tan flew to Minnesota and raked in hundreds of thousands of dollars — bilking her son-in-law out of $150,000 and his friend out of $300,000 — making the same false promises of unending returns she had made before. And she herself decided which lucky member would get a check from the new money — an ill-conceived stopgap measure, it turns out.”

The ruling also includes a footnote that speaks to yet-another investment-fraud cliché: the appointment of a “name-only” executive to become the face of an enterprise. This was the alleged role of Rochon, the purported “president.”

“A high-school graduate, Rochon became president (in name only, though) for one reason, and one reason only: Bunchan wanted an ‘American face’ for his companies, and his neighbor Rochon (a Caucasian of Canadian decent) apparently fit the bill,” the footnote reads. “And after renting Rochon a suit jacket and taking him to a professional photographer, Bunchan had Rochon’s photo plastered all over the companies’ promotional pamphlets.”

Read the ruling and the dissection of the legal issues here.

Mar 27, 2012
BULLETIN: Appeals Court Upholds Conviction Of James Bunchan, Pyramid Schemer Who Scammed Investors, Plotted Murder Of 12 Witnesses And Identified Federal Prosecutor As Possible Homicide Target

BULLETIN: The U.S. Court of Appeals for the First Circuit has upheld the conviction of James Bunchan in a murder-for-hire plot that grew from a pyramid scheme that gathered $20 million and mostly targeted people of Cambodian descent.

Federal prosecutors described the pyramid scheme as “devastating,” saying it relied on smoke and mirrors to fleece more than 500 victims, many of whom lacked command of English and had little formal education.

While awaiting trial in the pyramid case, Bunchan discussed hiring a hitman to kill Assistant U.S. Attorney Jack Pirozzolo of the District of Massachusetts. Pirozzolo specializes in prosecuting economic crimes.

Bunchan was the founder and owner of World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL), which were positioned as purveyors of cosmetics, health and dietary supplements.

The pyramid scheme collapsed in early 2005. Federal prosecutors said the companies generated money almost exclusively through the recruitment of new investors or “members.”

While jailed in Massachusetts awaiting trial in the pyramid case, Bunchan hatched a murder-for-hire plot that called for 12 people be believed would testify against him to be killed. The FBI became aware of the plot and staged a sting in which Bunchan believed an assassin named “Jamal” would carry out the murders for a fee.

“Jamal” actually was an undercover police officer posing as a hitman.

Bunchan first was convicted on the pyramid charges and sentenced to 35 years in federal prison. After the pyramid trial, he was tried on charges flowing from the murder-for-hire plot. A jury returned guilty verdicts in the murder-for-hire plot, and Bunchan was sentenced to 25 years.

All in all, Bunchan’s pyramid scheme resulted in sentences totaling 60 years. His bids to overturn convictions in both cases now have failed.

Pirozzolo, who joined the Justice Department in 2003 and encountered the Bunchan pyramid case two years later, was promoted to First Assistant U.S. Attorney for the District of Massachusetts last year.

In 2007, Pirozzolo received the Justice Department’s Director’s Award for his role in the investigation and prosecution of illegal mutual fund market timing conduct occurring at Prudential Securities Inc.

Pirozzolo also received the Chief Postal Inspector Award for his work on the Prudential market timing cases. In 2008, he received a Victim Rights Award for his work on the Bunchan case.

Visit Leagle.com to read the murder-for-hire appeals decision against Bunchan.

Nov 25, 2010