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  • In Alberta, 1 in 3 Report Being Approached With A Possible Fraudulent Investment, Securities Commission Says

    recommendedreading1Carefully checking and protecting before investing is part of the theme behind Fraud Prevention Month in Alberta, the Alberta Securities Commission said today.

    As part of its initiative, ASC rolled out a noontime “free lunch” in Calgary. The agency said it used the Mighty Skillet food truck at City Hall “to offer Calgarians a free sandwich and encourage them to make use of the ASC’s online resources.

     The idea, ASC says, was to drive home the point that “No lunch is free – including today’s.”

    As another key part of the initiative, Alberta created Checkfirst.ca, a site that includes a “quiz to educate Albertans about the risk for investment fraud,” ASC said.

    “One in three Albertans report being approached with a possible fraudulent investment,” ASC said.

    Read ASC’s statement on the fraud-prevention initiative. Visit the ASC website.

  • INVESTOR ALERT: Statement From Alabama Securities Commission On High-Yield ‘Opportunities,’ Bitcoin, Iraqi Dinars — And More

    EDITOR’S NOTE: This statement from the Alabama Securities Commission is dated March 12, 2014. The PP Blog has applied in-house formatting elements to the statement. Other than that, the statement is verbatim.

    INVESTOR ALERT – Understanding high-risk investments
    What you don’t know CAN hurt you!

    MONTGOMERY, ALABAMA (March 12, 2014) As our state’s and the country’s economy slowly improves, Alabama citizens could still be at risk for losing their hard-earned money to high-risk investment products that guarantee or promote unrealistically high rates of return with little or no exposure to loss. The Alabama Securities Commission (ASC) receives numerous inquiries about exotic-sounding, high-yield investment “opportunities” that, in many cases, are revealed to be unregistered investments touted by unlicensed individuals who employ vague or unrealistic trading strategies.

    And, with the rapid evolution and marketing potential of social media and the internet, investors may be lured by the illusion that most such opportunities are legitimate. The ASC alerts Alabama investors about two current, high-profile, high-risk investment opportunities that have the potential to seriously compromise their personal financial assets if not investigated thoroughly and carefully.

    BITCOIN issues

    Virtual or digital currencies, such as Bitcoin, have recently become popular as an alternative to cash or traditional lines of credit. Bitcoin and numerous other “crypto-currencies,” may be traded on online exchanges for conventional currencies, including the U.S. dollar, or used to purchase goods and services, usually online.

    Unlike traditional currencies, virtual currencies’ value can fluctuate radically according to user demand. In some cases, investors who trade on virtual currency exchanges have experienced trouble redeeming the digital currency or in cashing-out. The potential for fraudsters to use crypto-currencies to perpetrate financial scams is enticing due to the currencies not being issued by a governmental authority or financial institution, and having less regulatory oversight than transactions in conventional currencies.

    “The increasing prevalence of Bitcoin and other digital currencies has provided a fertile environment for financial criminals to make money on the increasing popularity and acceptance of these products,” said ASC Director, Joseph Borg. “The value of Bitcoin and other crypto-currencies can be highly volatile and investors should be aware that investments that incorporate ambiguous money systems can lead to very real risks, including the potential to lose one’s money!”

    Iraqi Dinar issues

    The Iraqi dinar “investment opportunity” is a scam that has existed for more than a decade and has regained some of its former popularity. As with many foreign exchange currency trading frauds, the dinar investment opportunity is often pitched as a “can’t miss” method by which the interested investor can profit from a severely undervalued Iraqi currency that is “certain” to appreciate in value in just a short time.

    Fraudsters engaging in the dinar scam promise that extravagant profits can be realized if the investor buys the dinar at today’s values, typically 1,000 or more dinars to one U.S. dollar. The investor then exchanges the dinars for dollars at a later date, once the dinar exchange rate has improved.

    ASC Director Borg cautions that foreign exchange currency trading is very risky for main street investors.

    “Often, promoters of foreign exchange currency trading schemes, such as those involving the Iraqi dinar, lure investors with the promise of “control” over a large amount of foreign currency with a relatively small initial outlay. Fraudsters often predict inevitable increases in the currencies’ value, which will supposedly lead to huge returns over a short time, with little or no downside risk.”

    According to Borg, investors should not be fooled by the promise of easy money.

    “As with any traded commodity, investing in foreign currencies can be extremely risky and generally unsuitable for all but the most seasoned investors who can afford the high risk.”

    Commodity trading platforms are subject to federal and state regulations; potential investors may contact the U.S. Commodity Futures Trading Commission (CFTC) at www.cftc.gov for more information; check registration status and disciplinary history of commodities at the National Futures Association (http://www.nfa.futures.org/) or call NFA at 800-676-4632; and contact the ASC at www.asc.alabama.gov or call 1-800-222-1253 to determine if an investment opportunity and the person making the office are properly registered.

    What you can do

    The Alabama Securities Commission encourages all Alabama citizens to learn and incorporate
    sound and proven investment techniques as a means to grow and safeguard their personal financial assets:

    • Check and verify. Before you buy, always independently verify with state and federal regulators who you are dealing with and whether the seller of the investment opportunity and the product is properly registered.
    •  Exercise skepticism. Be aware that many individuals who offer strategies for getting rich quickly make their money on the sales of their books or seminars. Ask yourself why they’re sharing their secrets with you instead of keeping it to themselves.
    • Beware of guarantees. Be suspect of anyone who promises or guarantees an investment will perform a
    • predictable way or will generate consistent or unreasonable returns.
    • Be suspect of complex strategies. Avoid any investment opportunity that touts complex or exotic-sounding techniques to achieve unusual success. Investors should be able to clearly discern what kind of opportunity is being offered; who is offering it; how does it make money; what is required to get your money out of the investment; and what are the risks.

    Avoid pushy salespeople and claims of urgency. No reputable financial professional should pressure you or insist that you “act now” when considering an investment opportunity. If it is such a good deal today, it will be a good deal tomorrow—after you have had a chance to check and verify.

    Contact the ASC with inquiries concerning securities broker-dealers, agents, investment advisers, investment adviser representatives, financial planners, registration status of securities or debt management programs, to report suspected fraud or to obtain consumer information. The ASC provides free investor education and fraud prevention materials in print, on our website and through educational presentations upon request.
    # # #

  • YouTube Video Pitchmen For Profitable Sunrise Hit By Subpoenas From SEC

    John Schepcoff says he potentially lost more than $193,000 in Profitable Sunrise but that a new “program” is “1,000 percent” better.
    John Schepcoff says on YouTube that he potentially lost more than $193,000 in Profitable Sunrise but that a new “program” operating from Hong Kong is “1,000 percent” better.

    EDITOR’S NOTE: Much remains murky about Profitable Sunrise, the alleged purveyor of five HYIP “plans,” including one bizarrely dubbed the “Long Haul” that purported to pay a preposterous 2.7 percent a day. The “Long Haul” payoff was dubbed the “Easter Gift.” Investors were told it would arrive April 1 — but it never materialized.

    One thing that is abundantly clear is that Profitable Sunrise potentially has created legal exposure and inconvenience for individual pitchmen, even though purported operator “Roman Novak” appears to be gone like a thief in the night.

    Still pushing HYIP schemes?

    _____________________________

    At least three Profitable Sunrise pitchmen — including at least two who pushed the “program” on YouTube — have been subpoenaed by the SEC to appear at depositions this month. The agency’s move is occurring in the aftermath of the depositions of at least two other Profitable Sunrise figures in Florida and Utah in April.

    In July 2010, the PP Blog reported that the Financial Industry Regulatory Authority (FINRA) warned investors worldwide “to stay away from HYIPs,” saying that they use social-media sites such as YouTube, Twitter, Facebook and online forums and “rating” sites to spread Ponzi misery globally.

    At least two of the men named in the new round of subpoenas went on to push other purported “opportunities” after the SEC described Profitable Sunrise in April as a murky HYIP that had used a “mail drop” in England and a series of offshore bank accounts in multiple countries to scam investors potentially of tens of millions of dollars.

    A subpoena was docketed yesterday in federal court in Atlanta for John Schepcoff of Carmichael, Calif. Schepcoff also is known as James Schepcoff, according to the SEC. His deposition has been scheduled for June 12 at 10 a.m. in San Francisco.

    After pitching Profitable Sunrise on YouTube prior to its March collapse amid especially murky circumstances, Schepcoff returned to YouTube in late April and began pitching yet another murky “program” purportedly operating from Hong Kong. Although the identity of the Hong Kong “program” was unclear, records suggest it was a Zeek Rewards-like “opportunity” known as “Better-Living Global Marketing.”

    In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme that had pushed unregistered securities on hundreds of thousands of people and duped them into believing they were receiving a legitimate return of about 1.5 percent a day. The U.S. Secret Service also said it was investigating Zeek.

    A subpoena also was docketed in Atlanta yesterday for video pitchman Melton McClanahan of Fairfield, Calif. McClanahan was identified in a March order by the Alabama Securities Commission (ASC) as a Profitable Sunrise agent. McClanahan then posted a YouTube video denying he was an agent and yet claiming the information he passed along to lure prospects “was given to me.”

    McClanahan’s deposition is scheduled for June 11 at 10 a.m. in San Francisco.

    An SEC subpoena also was docketed yesterday in Atlanta for Don Gillette of Miami. Gillette reportedly told members of his Profitable Sunrise downline that he was turning to a new “program” that “must have a realistic earning potential of at least $500 a day or more,” according to a post at the RealScam.com antiscam forum.

    Details about the scheduling of Gillette’s deposition are unclear.

    As part of its ongoing Profitable Sunrise probe, the SEC also has subpoenaed records at PayPal and at Societe Generale in New York, according to the docket of U.S. District Judge Thomas W. Thrash Jr. in Atlanta. Whether Profitable Sunrise or its members were using the companies to move money is unclear.

    One of the problems with HYIP schemes is that they may cause laundered funds or proceeds of criminal enterprises to pass through or be placed on deposit at legitimate financial institutions.

    News of the new round of Profitable Sunrise subpoenas follows on the heels of the takedown last month of Liberty Reserve, amid allegations it had orchestrated a $6 billion money-laundering conspiracy. Liberty Reserve was popular with HYIP scammers and other criminals.

    NOTE: Thanks to the ASD Updates Blog.

     

  • In Case Reminiscent Of Profitable Sunrise, Alberta Securities Commission Finds That Dale Joseph Edgar St. Jean And Gregory Dennis Tindall Made False Statements And Conducted Ponzi Scheme

    recommendedreading1Two men conducted an offering fraud tied to a purported “bridge lending” business and wiped out investors in a $52 million Ponzi scheme, the Alberta Securities Commission said yesterday.

    Some of the allegations against Dale Joseph Edgar St. Jean and Gregory Dennis Tindall were remarkably similar to allegations in the United States against the Profitable Sunrise “program,” which also had a purported bridge-loan business. While the Profitable Sunrise “Long Haul” plan promised 2.7 percent a day and purportedly was operated by “Roman Novak,” St. Jean and Tindall promised far less: between 15 percent and 22 percent a year.

    St. Jean and Tindall were at the helm of entities known as TransCap Corporation and Strata-Trade Corporation, the ASC said. The agency was among the first to issue a warning against Profitable Sunrise earlier this year.

    “The ASC panel found that payments to TransCap and Strata-Trade investors were funded from their own and their fellow investors’ money, ‘by definition, an unsustainable ‘Ponzi’ scheme,’” ASC said in a statement. “Investors (Albertans among them) having been lured by deceptive or false information into investing in a Ponzi scheme, their pecuniary interests were placed at serious risk.  Indeed, there appears to be no money remaining to pay them any interest owing or repay their principal investments.”

    Another similarity between the St. Jean and Tindall capers and Profitable Sunrise is that investors appear to have dealt mostly with pitchmen regurgitating the company line, not the operators.  (Garbage In, Garbage Out (GIGO) recited by commission-based pitchmen is an element in many Ponzi schemes, including AdSurfDaily in 2008. It’s often the case that the pitchmen aren’t financial professionals and are not licensed to offer securities.)

    It remains unclear whether “Roman Novak,” the purported operator of Profitable Sunrise, actually exists.

    With respect to the St. Jean/Tindall caper, Tindall’s “current whereabouts are unknown,” ASC said in its decision.

    Both men were charged by the SEC in a 2010 case that alleged they were managing members of a $34 million offering fraud based in Florida that led to the collapse of two hedge funds known as Arcanum Equity Fund LLC and Vestium Equity Fund LLC and subsequent bankruptcy filings.

    Bridge-loan scams are not rare — and may feature an offer that sounds plausible on the surface: a company solicits loans from one subset of customers at a lower interest rate to lend out to another subset at a higher interest rate, purportedly profiting from the spread. The “business” brings both securities laws and lending laws into play. (See the California Desist and Refrain Order against Profitable Sunrise.)

    In the HYIP sphere, the “model” quickly can become absurd on its face. Profitable Sunrise, for instance, was positioned as an enterprise that paid MLM-style affiliate commissions on three levels while also paying out preposterous sums of compound interest on a daily basis. (The infamous AdSurfDaily Ponzi scheme ($119 million) operated with a similar confluence of payout schemes between 2006 and 2008, although ASD did not purport to be a bridge lender.)

    One of the most infamous bridge-lending scams in U.S. history was the Nicholas Cosmo and Agape World Inc. scam, a Ponzi scheme that gathered more than $400 million and put Cosmo in federal prison for 25 years. Some of his pitchmen also were charged criminally.

    Some HYIP pitchmen may make boiler-room cold calls to fleece marks. Others may line up their so-called “warm market” as investors, perhaps by sponsoring seminars and webinars and encouraging family members, friends and business and social acquaintances to attend.

    Members of one Alberta family alone lost more than $1.6 million to the St. Jean/Tindall scam, ASC said in its decision.

    One investor (“TL”) and his wife plowed $1.22 million into the scam after being advised by a pitchman that TCC was “in the business of offering short-term loans at high interest, that St. Jean was its president, and that an investment in TCC was ‘without . . . risk’ – it was ‘supposed to be solid’, and ‘there was no threat of losing principal or interest.’”

    Profitable Sunrise, meanwhile, told investors that “investments in the program were insured by a leading investment bank,” the SEC said in bringing fraud charges in April 2013.

    Secrecy often is an element of HYIP scams.

    “In response to a Staff demand for documents evidencing contracts for securities purchases, ‘forward committing contracts’ and bridge financing contracts, St. Jean responded that TCC was ‘engaged in these business activities through other entities under private and confidential agreements’ and ‘[t]herefore [did] not have any specific documentation respecting any specific trade transaction,’” ASC said in its decision.

     

  • BULLETIN: Alberta Securities Commission Issues Warning On ‘Profitable Sunrise’ After First Calgary Financial Observes ‘Trend’ Of ‘Suspicious’ Overseas Transactions

    breakingnews72BULLETIN: The Alberta Securities Commission (ASC) has issued a warning on the Profitable Sunrise “program.” The Canadian agency’s move followed on the heels of reports from First Calgary Financial that “several of its Calgary customers have attempted to withdraw significant amounts of funds from their accounts for wire transfers to the Czech Republic,” ASC said.

    “Albertans should be aware that Profitable Sunrise and its agents are not registered to sell securities in Alberta,” the agency said.

    ASC is Alberta’s securities regulator. The agency noted that the Securities Division of the North Carolina Secretary of State issued a cease-and-desist order to Profitable Sunrise last month, amid allegations that the “program” was selling unregistered securities.

    “It’s important for investors to know that there is no such thing as a high return, no risk investment,” said Bill Rice , chair and CEO of the ASC. “If you are persuaded to send money overseas, it may be difficult, if not impossible to get it back if something goes wrong.”

    The United Kingdom’s Financial Services Authority issued a warning on Profitable Sunrise last week. So did the Alabama Securities Commission in the United States.

    First Calgary is Canada’s ninth-largest credit union. A First Calgary executive said the company contacted ASC after observing unusual transactions.

    “Our front-line employees are trained to identify suspicious transactions by members so that we may be able to stop them from becoming the possible victims of an investment scam,” said Debbie Pratt, vice president of retail banking for First Calgary Financial.  “In this case, we noticed a trend and a quick call to the ASC allowed us to alert our members.”

    Profitable Sunrise lists a business address in the United Kingdom. Regardless, the enterprise is soliciting funds to be sent to Raiffeisenbank AS in the Czech Republic, according to North Carolina investigators. An entity known as Melland Company SRO was listed in Profitable Sunrise wiring instructions as the beneficiary, according to the North Carolina order.

    A credit union used by a North Carolina-based Profitable Sunrise investor blocked at least one transaction directed toward the Czech bank, citing suspicions of fraud, according to the order.

    Among other claims, Profitable Sunrise purported to offer a “Long Haul” plan that paid 2.7 percent a week with an Easter payout. The Profitable Sunrise “program” is being pitched on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup.

    Zeek Rewards, which the SEC in August 2012 called a $600 million Ponzi- and pyramid scheme, was promoted in part from the same forums. Some individuals have promoted both Zeek and Profitable Sunrise.

     

  • URGENT >> BULLETIN >> MOVING: Alabama Issues Warning On ‘Profitable Sunrise’

    breakingnews72URGENT >> BULLETIN >> MOVING: The state of Alabama has issued a warning on Profitable Sunrise. The move follows on the heels of a cease-and-desist order issued last week by North Carolina.

    The warning comes in the form of an “investor alert” issued by the office of Joseph Borg, the director of the Alabama Securities Commission.

    “We want to make our citizens aware of the potential perils of web-based investment marketing,” said Borg. “As with all investment opportunities, investors should thoroughly scrutinize any offer, especially if it comes from a foreign country,” Borg said. “Most investment offerings, as well as the person making an investment offering, must be registered with the Alabama Securities Commission. This is a critical first step in protecting the public from con artists and investment fraud.”

    Borg urged “anyone in Alabama who has invested with Profitable Sunrise to contact the ASC’s Enforcement Division at 1-800-222-1253.”

    From ASC (italics added):

    An investigation of Roman Novak, Radoslav Novak and their company, Inter Reef, Ltd., doing business as Profitable Sunrise, revealed that the men allegedly promoted at least five different “investment plans” through a website that offered rates of return ranging from 1.6% per business day to 2.7% per business day for periods of from between 180 to 240 business days. Investors were told that their money would be used to fund short-term, “risk-free” loans to businesses, and that “all funds deposited with us are insured against loss” by a leading investment bank. Further investigation revealed that victims had been instructed to wire money to financial institutions in Eastern Europe, including one bank identified as being in the Czech Republic. ASC records revealed that neither of the men, nor the company they represent, are registered to conduct securities business in Alabama, as required by the Alabama Securities Act.

    Read the ASC warning.

  • Canadian Regulators Attack ‘Pay It Forward’ Scheme; Many Autosurfs, Cash-Gifting And MLM Schemes Use Similar Marketing Approach

    Trading off a popular phrase, Kerry John O’Neill’s “pay-it-forward” scheme has landed him in trouble with Canadian securities regulators, wiped him out financially and implicated an associate who helped him sell the scheme.

    O’Neill even named his scheme the “Pay It Forward Program” (PIF), according to the British Columbia Securities Commission (BCSC), which accused him of collecting $9.6 million from 943 investors by telling them they could expect returns ranging from 100 percent to 300 percent in 90 days.

    “Pay it forward” is a marketing buzzword phrase. The phrase often is associated with autosurf, cash-gifting and MLM schemes that recruit affiliates. The “pay-it-forward” sales approach has emerged as a potential marker of a financial fraud.

    Broke and living in public housing, O’Neill now has become the subject of an investigation by the Alberta Securities Commission (ASC). Like BCSC, ASC is seeking sanctions against O’Neill, who was banned in September 2009 from the securities business in British Columbia.

    BCSC accused O’Neill of selling unregistered securities as investment contracts. Although Pay It Forward was not an autosurf, similar prosecutions have been brought against autosurf operators in the United States.

    “Between November 2005 and December 2006, O’Neill solicited investors to join the PIF Program and enter into investment contracts (the PIF Securities) with him,” BCSC said. “No prospectus was ever filed for the PIF Securities and none of the exemptions under the Securities Act . . . applied to their distribution. O’Neill was not registered under the Act when he distributed the PIF Securities.”

    Banned along with O’Neill by BCSC was Renee Marie Helmig, also known as Nisha Helmig.

    Helmig, of North Vancouver, admitted she “used false information provided by O’Neill to make misrepresentations to investors and potential investors to convince them to invest in Pay it Forward,” according to BCSC.

    O’Neill’s particular brand of “pay-it-forward” involved a scheme by which investors were told that “their funds would be used to buy and sell distressed merchandise,” BCSC said.

    Here is how money invested in the scheme was distributed, according to BCSC:

    • $6.4 million to pay amounts owed to other investors.
    • $1.1 million to purchase merchandise.
    • $213,000 for “other investment opportunities.”
    • $56,000 for O’Neill’s personal expenses.

    The remainder was used for “expenses related to the distressed merchandise business,” BCSC said.

    “[M]ost investors did not earn any return on their investments, but rather lost some or all of their investment capital,” BCSC said. “[T]he payments O’Neill made to investors did not come from profits he made from buying and selling distressed merchandise. Instead, O’Neill paid investors with other investors’ funds.”

    “O’Neill has been unemployed since the PIF Program ended” in April 2007, BCSC said. “He lives in subsidized housing and his only income is a monthly disability benefit.”