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Tag: affinity fraud

  • BULLETIN: George Theodule, HYIP Ponzi Huckster Identified In 2008 By SEC, Arrested On Criminal Charges

    breakingnews72George Louis Theodule, identified by the SEC in a 2008 civil case as a multimillion-dollar Ponzi huckster and affinity fraudster largely targeting the Haitian community through so-called “investment clubs,” now has been arrested on criminal charges, federal prosecutors in the Southern District of Florida said.

    Investors were duped into believing Theodule’s HYIP “program” through entities known as Creative Capital Consortium LLC and A Creative Capital Concept$ LLC had been endorsed by a regulatory agency, the SEC said in December 2008

    The FBI and the Florida Office of Financial Regulation joined in the probe, prosecutors said.

    “This case provides an egregious example of someone exploiting the trust of members of their own community,” said OFR Commissioner Drew J. Breakspear.

    “Ponzi schemes, affinity fraud schemes, and high-yield investment fraud scams such as this pose a serious threat to people,” said U.S. Attorney Wifredo A. Ferrer.

    Theodule, formerly of Wellington, Fla., is 52. He has been charged with with multiple counts of wire fraud, securities fraud and money-laundering, prosecutors said.

    “This is a stark reminder that promises of large returns with little risk should immediately send up red flags and make investors run the other way,” said Michael B. Steinbach, special agent in charge of FBI’s Miami office..

     

  • 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.”

  • UPDATE: Statue Of Jesus Christ Used In TelexFree Promo On YouTube

    Depictions of Jesus Christ were used in the Profitable Sunrise and the equally bizarre “Cash Tanker” HYIP schemes — and now are being used in promos for TelexFree, an MLM “opportunity” under investigation in Brazil amid pyramid-scheme and securities concerns.

    It looks as though the statue of Christ the Redeemer in Rio de Janeiro has been used in promos for both TelexFree and Profitable Sunrise, which the U.S. Securities and Exchange Commission said in April 2013 was a fraud scheme operating in part through a “mail drop” in England.

    1.

    From a promo for TelexFree playing on YouTube.
    From a promo for TelexFree playing on YouTube. Another part of the video shows money being tossed by one TelexFree pitchman and raining down on another.

    2.

    From a Profitable Sunrise promo.
    From a Profitable Sunrise promo.

     

  • Philly Affinity Fraudster Traded On Coca-Cola’s Name And Ran Ponzi, Feds Say

    ponzinews1EDITOR’S NOTE: Affinity fraud takes many forms. The case against Constant Damas appears to have been one that married an appeal to a common nationality to an appeal to the taste buds and brand recognition. Scammers often trade on the names of famous companies and individuals. And they often issue appeals to people of common ancestry or background.

    UPDATED 8:56 P.M. EDT U.S.A. A 45-year-old Philadelphia man who worked as an account manager at Coca-Cola Co. used his famous employer’s name to dupe people into investing in his Ponzi scheme, the office of U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania said.

    Constant Damas swindled more than $1 million from at least 20 people over a period of five years, federal prosecutors said.

    Damas is a native of Haiti and targeted the Haitian community, including family members and friends, prosecutors said.

    He has pleaded guilty to two counts of wire fraud. From a statement by prosecutors (italics added):

    Between 2007 through the end of 2012, Damas, who was an account manager at Coca-Cola Company, misrepresented to various individuals, including family members and friends in his Haitian community, that he was an investment manager at Coca-Cola.  He told his victims that, through this position, he could invest their money in Coca-Cola’s investment opportunities.  In fact, Damas did not hold this position and no such opportunities existed.  To entice his victims, Damas often made the following false representations to them:  he would collect a sum of money from the victims as their “principle” investment; the victims would receive an interest payment of a certain amount every month; and they could receive their principle payment upon request.  Damas, however, did not return the full “principle” investment amount back to his victims, and many of the victims did not receive any of their funds back or any interest payments.  Upon his arrest in February 2013, Damas admitted to federal agents that this was a “scam business.”

    Damas is scheduled to be sentenced Sept. 30. He potentially faces decades in federal prison.

  • DIABOLICAL: Purported ‘Christian’ Enterprise With Purported Ties To Catholic Church Launches Spam Campaign For Purported ‘Loan’ Program And Bizarrely Tries To Sanitize It By Linking To PP Blog Story On Profitable Sunrise Scam

    The scam/spam pitch from "ALL SAINTS."
    The scam/spam pitch from “ALL SAINTS.”

    Is it channeling Profitable Sunrise as part of an affinity-fraud/identity-theft reload scam? An enterprise that bizarrely is calling itself  “ALL SAINTS CATHOLIC CHURCH LOAN FIRM” purports to have an office in England and appears to be targeting Catholics and Christians in general to be fleeced in a purported “loan” program.

    The spam/scam pitch begins, “I am so disappointed of fake loan companies on the internet . . .”

    The PP Blog received spam from the purported enterprise at 7:53 a.m. and 7:55 a.m. today. The ribald spam campaign includes a link to this March 6, 2013, PP Blog story: URGENT >> BULLETIN >> MOVING: Alabama Issues Warning On ‘Profitable Sunrise’

    Longtime PP Blog readers are aware that things can be downright diabolical in the fraud sphere, with criminals sometimes using the names of government agencies to create the impression that an enterprise is legitimate or even endorsed by the government or a media company. The aim of the “ALL SAINTS” scammers appears to be to plant the seed that law enforcement has scrubbed the scheme, that the loan program won’t meet the same fate as Profitable Sunrise in Alabama (or elsewhere) and that the PP Blog backs “ALL SAINTS.”

    It’s also possible that the “ALL SAINTS” scammers are seeking to use html links to the PP Blog to improve the search-engine penetration of their scam. Meanwhile, there are other, more nefarious possibilities, including bids to affect the server performance of the PP Blog and to dupe people into believing the “offer” originates at the PP Blog.

    The “offer” appears to originate at an IP of 180.215.23.27 in Bangalore, India. The PP Blog is published in the United States.

    Profitable Sunrise purported to be a “loan” program based in England. In April, the SEC called it a scam that may have collected tens of millions of dollars.

    It was not immediately clear whether “ALL SAINTS” had an accompanying, Profitable Sunrise-like HYIP scheme. What is clear is that the “ALL SAINTS” enterprise is fishing for personal information, something that could be linked to identity theft.

    Here is part of the fractured spam pitch (verbatim/italics added):

    Welcome to ALL SAINTS CATHOLIC CHURCH LOAN FIRM we are international Christian loan firm and Lenders that has offered Loans to various individual and firms in Europe, Asia, Africa and other parts of the world,Are you in need of a loan? Do you want to pay off your bills? Do you want to be financially stable? We offer all types of loan, please email us back with the amount and duration of the loan you require. the bible says” Luke 11:10 Everyone who asks receives; he who seeks finds; and to him who knocks, the door will be opened.

  • FBI: Affinity Fraudster Sued By SEC Launched Follow-Up Scam; Shervin Neman Allegedly Paid Law Firm, Earlier Victims With Money From New Mark — And Then Wrote A Bad Check For $2.35 Million

    ponzinews1Shervin Neman, the alleged affinity fraudster sued by the SEC last year in a Ponzi scheme targeted at the Persian-Jewish community, now has been arrested by the FBI in Los Angeles.

    Neman, 31, also is known as Shervin Davatgarzadeh, the FBI said. The Century City resident was arrested today on a three-count indictment charging him mail fraud and wire fraud, amid allegations he hatched a new fraud scheme after the SEC brought its civil charges in April 2012.

    The SEC described Neman last year as the operator of a “purported hedge fund” that married a real-estate flipping scheme involving purported foreclosures to purported opportunities to profit from IPOs conducted by Facebook, Groupon, LinkedIn and Angie’s List.

    “The month after the SEC filed its lawsuit, Neman solicited $2 million from another victim with false promises that Neman could obtain pre-IPO shares in Facebook, according to the indictment,” the FBI said. “Neman allegedly used the funds obtained from the new victim to pay, among other things, most of his earlier victims and the law firm representing him in the SEC action. Neman then had victims who had been ‘paid back’ write e-mails saying that Neman did not owe them money, according to the indictment, which goes on to say that Neman used these e-mails as part of his defense in the SEC case. In June 2012, Neman sent to the later victim a $2,235,800 check that purported to be the return on the Facebook investment, but that check bounced, according to the indictment.”

     

  • Indiana Man Who Dressed As Pastor As Part Of Ponzi Swindle Sentenced To Prison; Bradley Collins Told Marks ‘He Only Worked With God-Fearing, Church Going People And Was Blessed To Be Blessing Potential Investors’

    “[Bradley] Collins worked under the guise of a religious man and told his victims he only worked with God-fearing, church going people and was blessed to be blessing potential investors. His portrayal of a Christian man put many of his victims at ease, increasing the amount of funds they invested.” — Indiana Secretary of State Connie Lawson, April 26, 2013

    recommendedreading1An Indiana man authorities said sometimes dressed as a pastor to dupe his marks in a $30 million Ponzi swindle has been sentenced to eight years in prison and ordered to make restitution of $2.2 million.

    Bradley Collins, 55, of Fort Wayne, also has agreed to testify as a government witness in a federal prosecution in Michigan involving a conspirator, authorities said.

    Collins scammed at least 129 investors, about 59 of whom lived in Allen County, the venue of the state-level prosecution.

    “Today’s sentencing sends yet another message that Indiana is not a place for white collar crime such as affinity fraud,” said Connie Lawson, Indiana Secretary of State.

    Lawson lauded the office of Allen County Prosecutor Karen Richards and the state Securities Division “for their hard work in protecting Hoosiers from scam artist such as Mr. Collins.”

    In October 2012, the Journal Gazette of Fort Wayne identified the Michigan man as David McQueen, reporting that Collins was alleged to have worked as a sales agent for McQueen.

    Collins pleaded guilty to selling unregistered securities.

    Indiana was one of more than two dozen U.S. states that issued Investor Alerts or cease-and-desist orders against the Profitable Sunrise HYIP “program” earlier this year.  Authorities have described Profitable Sunrise as an affinity scam. Some states have identified alleged sales agents for Profitable Sunrise.

    Lawson’s office noted that “[a]lmost all of Collins victims report he claimed to be a good Christian man and preyed on their religious beliefs. In some cases, he even dressed as a pastor to draw victims into the scam.”

  • UPDATE: Louisiana Joins Growing List Of States That Have Issued Investor Alerts On ‘Profitable Sunrise’; [UPDATE: Tennessee, Too]

    breakingnews72EDITOR’S NOTE: Information from Tennessee was received after this story was published. The Tennessee info is published in the Comments thread below . . .

    UPDATED 8:18 P.M. EDT (U.S.A.) Louisiana has issued an Investor Alert on the Profitable Sunrise HYIP, joining a growing list of U.S. states and Canadian provinces to have done so.

    Profitable Sunrise has a presence on well-known Ponzi-scheme forums such as TalkGold and MoneyMakerGroup. The “program” purportedly is operated by Roman Novak and is trading on Bible verse.

    “Consumers who have invested with Profitable Sunrise are encouraged to contact the Securities Division of the Office of Financial Institutions at (225) 925-4512,” the office of Louisiana Commissioner of Securities John Ducrest said.

    With Louisiana’s action, the unofficial total of U.S. states or Canadian provinces issuing Investor Alerts or cease-and-desist orders against Profitable Sunrise now stands at 27. (See current list here.)

    From the statement by Ducrest’s office (italics added):

    Investments are purportedly used to provide short-term loans to companies at 3% interest per day.  The company’s website also states that investors may earn money by recruiting others through a referral program that pays 5% of deposits generated from recruits.

    Consumers should be aware that neither Profitable Sunrise, nor its investment products, are registered in Louisiana as required by the Louisiana Securities Law.  High-yield investment programs often have common red flags of fraud that consumers should be looking for, such as unusually high yields; lack of information regarding the investment operator; unclear methodology for achieving returns; off-shore operations; incentives to recruit new investors; and online advertisements containing typographical errors and grammatical mistakes.

    Link to Louisiana news release.

  • URGENT >> BULLETIN >> MOVING: KABOOM! 2 Connecticut Women Found Guilty In Cash-Gifting Pyramid Scheme

    breakingnews72URGENT >> BULLETIN >> MOVING: (2ND UPDATE 6:44 P.M. ET U.S.A.) Both of the defendants on trial in federal court in Connecticut in a cash-gifting pyramid scheme known as Women’s Gifting Tables have been found guilty of wire fraud and filing false tax returns.

    The jury returned the verdicts against Jill Platt, 65, and Donna Bello, 56, this afternoon. Both women live in Guilford. They were charged in May 2012. A third woman, Bettejane Hopkins, 66, of Essex, pleaded guilty.

    In returning the guilty verdicts in about two hours, the jury rejected defense contentions that the women believed their cash-gifting “program” that gathered $5,000 from each participant and used a food theme was legal.

    Prosecutors called it a fraud scheme designed to enrich some participants at the expense of others.

    “As the jury’s swift verdict of guilty on all counts makes clear, ‘Gifting Tables’ are pyramid schemes and illegal, plain and simple,” said U.S. Attorney David B. Fein. “These defendants enriched themselves while fraudulently misrepresenting material facts about the Gifting Tables and conspired to hide their income from the IRS. I commend the agents of IRS Criminal Investigation for their thorough investigation of this matter, which is ongoing.”

    Fein this afternoon threw down the gauntlet against cash-gifters.

    “During the trial, the jury heard evidence that other Gifting Tables continue to operate in Connecticut,” he said. “The jury’s verdict today is fair notice to anyone participating on Gifting Tables that any money received is taxable income and that they may be involved in an illegal pyramid scheme.”

    Included among the damning evidence against Platt and Bello was email correspondence, prosecutors said.

    “I’m pleased to see that the jury saw that the ultimate purpose was the enrichment of the defendants,” said William P. Offord, IRS Criminal Investigation Special Agent in Charge of New England.

    From a statement late this afternoon by prosecutors (italics added):

    Evidence at trial included several emails, including an email sent by Platt in March 2009 that told a participant: “It’s sort of a joke that I refer to our freezer as the ATM.”  Later in March 2009, Bello complained to Hopkins and another individual about two recruits, stating: “They have had enough parties. Its [sic] costing us a small fortune in their food and wine delights. No more parties until they commit with the cash.”

    In June 2009, Bello sent an email that said “I am not a . . . saint . . . . I’m teaching you all how to make an extra 80 grand a year . . . . Isn’t that enough?”

    Platt and Bello were found guilty of one count of conspiracy to commit wire fraud, one count of conspiracy to defraud the IRS and a combined total of 15 counts of wire fraud. (Eleven against Bello and four against Platt.) Meanwhile, the jury found Bello guilty of two counts of filing a false tax return. Platt was found guilty of one count of filing a false tax return.

    Sentencing is set for May 15 before Chief U.S. District Judge Alvin W. Thompson. The women potentially face years in prison.

    Cash-gifting schemes may surface as forms of affinity fraud. They often are targeted at people of faith, and purveyors may claim the “programs” are legal.

  • NEW HAVEN REGISTER: Witness Says Alcoholics Anonymous Members Were Recruited For Cash-Gifting Scheme And That ‘Largest Conflict I’ve Ever Seen’ In AA Ensued

    EDITOR’S NOTE: In May 2012, the PP Blog reported that three women had been arrested on federal charges in Connecticut that flowed from an alleged cash-gifting pyramid scheme. One of the women has pleaded guilty. Two others now are on trial.

    Cash-gifting often is associated with affinity fraud. The alleged Connecticut scheme centered around women with common interests, for example. Cash-gifting schemes also may be targeted at members of a common faith or belief system, members of a specific racial or ethnic group, members of specific occupations or members of virtually any group with common interests or common problems.

    No individual or member of an organization may be truly safe in the context of affinity fraud, considering that schemes even have been targeted at members of the military and their loved ones. Now, it seems, not even members of Alcoholics Anonymous — an American treasure with international reach that has helped countless participants in their daily struggle against the clutches of alcoholism —  were off limits to a person or persons desiring to recruit members into the cash-gifting scheme.

    ** _________________________________ **

    recommendedreading1The New Haven Register is reporting that “Julie,” a witness in the “Women’s Gifting Table” trial in federal court in Connecticut, testified that members of Alcoholics Anonymous were recruited for the scheme, which caused dissension among people battling to stay sober.

    “Julie” was introduced to cash-gifting by her AA sponsor, Julie testified, according to the Register.

    From the Register (italics added):

    Eventually, there were eight AA members involved in tables and Julie attempted to recruit more. What followed was “the largest conflict I’ve ever seen in Alcoholics Anonymous,” she said. “It’s a violation of a trusted relationship. I trusted people to save my life, and people trusted me to save their lives, and to take advantage of that situation was a problem.”

    “Julie” testified that she quit the scheme after news broke that former Connecticut Attorney General Richard Blumenthal had launched an investigation.

    Gifting is the business of parasites, Blumenthal said in November 2009.

    Blumenthal now is a U.S. Senator.

    On Jan. 31, the Register reported that some people believe the unsolved murder of a woman in 2010 may be tied to the cash-gifting scheme.

     

  • BULLETIN: Now, An Affinity-Fraud Scheme Targeting Lebanese And Druze Communities, SEC Says; Agency Seeks Asset Freeze Against Firas Hamdan And FAH Capital Partners

    From an SEC evidence exhibit.
    From an SEC evidence exhibit.

    BULLETIN: The SEC has gone to federal court in Houston, alleging that Firas Hamdan was conducting an affinity-fraud scheme targeted at the Lebanese and Druze communities. The agency is seeking an asset freeze against Hamdan and his unregistered company, FAH Capital Partners Inc. The scheme is alleged to have gathered about $6 million over five years.

    “Hamdan’s affinity scam preyed upon people’s tendency to trust those who share common backgrounds and beliefs,” said David R. Woodcock, director of the SEC’s Fort Worth Regional Office. “Hamdan raised money by creating the aura of a successful day trader among friends and family in his community, and he continued to mislead them and hide the truth while trading losses mounted.”

    Hamdan is 49. The SEC says he has an address in Houston and previously used an address in Sugar Land.

    “Hamdan is well-known in the Houston-area Lebanese and Druze communities and has enjoyed a reputation as a successful day trader,” the SEC said in its complaint.  “He is also a former treasurer of the Houston branch of the American Druze Society (‘ADS’), a non-profit cultural organization to which many Houston-area members of the Druze religion belong.”

    Falsified records helped drive the scam, the SEC said.

    As has been the case in other scams, Hamdam allegedly claimed he used a “proprietary trading algorithm.”

    “Hamdan explained to investors that his algorithm was ‘plugged into’ his trading account at TD Ameritrade to further minimize investor loss,” the SEC charged. “Hamdan promised investors that, as a result of this algorithm, he could guarantee the fixed monthly return based on the amount they invested with him.”

    As has been the case with other scams, Hamdan also talked about “promissory notes.”

    “Although the precise terms of the notes appear to vary among investors, the notes generally provide for returns of approximately 30% per year,” the SEC charged.

    Read SEC Investor Alert on affinity fraud.

    A snippet (italics added):

    Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. The group could be a religious group, such as a particular denomination or church. It could be an ethnic group or an immigrant community. It could be a racial minority. It could be members of a particular workforce – even members of the military have been targets of these frauds. Fraudsters target any group they think they can convince to trust them with the group members’ hard-earned savings.

    At its core, affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. Fraudsters use a number of methods to get access to the group. A common way is by enlisting respected leaders from within the group to spread the word about the scheme . . .

    Read the SEC complaint against Hamdan.