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Tag: autosurf scams

  • UPDATE: E-Bullion, Firm Alleged To Have Provided Payment Services To ASD, Linked To Alleged Legisi Ponzi Scheme; Like ASD, FEDI Fraud Scheme Called Payments ‘Rebates’

    Andy Bowdoin

    UPDATED 2:25 P.M. ET (U.S.A.) Still pushing autosurf and HYIP frauds?

    Last week, the PP Blog reported that the U.S. Secret Service and federal prosecutors had established a link between California-based E-Bullion and Florida-based AdSurfDaily. E-Bullion is a shuttered payment processor whose owner, James Fayed, is awaiting trial on charges of murdering his wife, Pamela Fayed, whom prosecutors said wished to cooperate in the E-Bullion probe.

    It was the first public assertion by the government that ASD had a tie to E-Bullion.

    The Blog further reported that E-Bullion had been linked to at least three alleged Ponzi or fraud schemes: ASD, Gold Quest International (GQI) and Flat Electronic Data Interchange (FEDI), whose convicted operator, Abdul Tawala Ibn Ali Alishtari, was associated with convicted Ponzi schemer Brian David Anderson.

    Alishtari, also known as Michael Mixon, was convicted in 2009 of financing terrorism. Anderson, a FEDI pitchman, was sentenced to federal prison for his role in yet-another Ponzi scheme known as Frontier Assets. He also has been linked to a mysterious scheme known as the “Alpha Project.”

    Like ASD’s Andy Bowdoin, Alishtari donated money to the National Republican Congressional Committee, according to the Federal Election Commission database. Documents reviewed by the PP Blog show that payments from the FEDI scheme were referred to as “rebates.” ASD also called its payments to participants “rebates.”

    Today the PP Blog is reporting that federal investigators also have established a link between E-Bullion and Legisi, a company whose operator, Gregory N. McKnight, was accused by the SEC in May 2008 of operating a massive Ponzi and fraud scheme based in Michigan. During the same month, the SEC also accused GQI of operating a massive Ponzi and fraud scheme from Las Vegas. Investigators likewise established a GQI link to E-Bullion.

    Documents reviewed by the PP Blog show that records maintained by E-Bullion were the subject of a subpoena issued on Aug. 6, 2008 — five days after tens of millions of dollars were seized by the U.S. Secret Service from bank accounts controlled by ASD’s  Bowdoin. The subpoena was issued in the Legisi case.

    As the PP Blog previously reported, the Secret Service, which used undercover operatives in the ASD case, also used an undercover operative in the Legisi case. In fact, the Blog reported, the Secret Service undercover operative and an undercover operative from the state of Michigan, had a face-to-face meeting with Legisi’s McKnight in his office.

    Legisi later began to act in a fashion that only can be described as bizarre, allegedly morphing into a sort of super-secret enterprise that was exhibiting clear signs of paranoia. Investors, for example, were asked to submit to a loyalty oath and pledge that they weren’t government investigators or informants.

    The AdViewGlobal autosurf, which has close ties to ASD, later began to operate in a similar fashion, morphing into a so-called “private association,” scolding members for asking questions in public and exhibiting paranoia.

    “This Association of members hereby declares that our main objective is to protect our rights to freedom of choice regarding our advertising and marketing information and conduct, through maintaining our Constitutional rights,” AVG announced on its website in February 2009.

    Court records show that the Secret Service also employed undercover operatives in the investigation of the INetGlobal autosurf. An affidavit in the case notes that at least two operatives were present at an INetGlobal function in New York earlier this year and that one undercover agent had been introduced to INetGlobal by an ASD member.

    ASD President Andy Bowdoin was indicted earlier this month on federal charges of wire fraud, securities fraud and selling unregistered securities. Prosecutors alleged he was operating a Ponzi scheme that had gathered at least $110 million. The indictment accused Bowdoin of making campaign donations to the National Republican Congressional Committee with proceeds from the ASD Ponzi scheme.

    Six days ago, prosecutors alleged in a forfeiture complaint that ASD member Erma Seabaugh used E-Bullion in November 2007 to transfer $10,510 to ASD. The alleged transfer occurred about six months before E-Bullion’s name surfaced in the GQI and Legisi cases brought by the SEC.

    When investigators later searched the home of James Fayed in the murder investigation, they found “approximately $60,000 in cash wrapped in plastic material; approximately $3,000,000 in gold; and approximately 31 firearms, including one with a long-range night vision scope, along with thousands of rounds of matching ammunition,” prosecutors alleged.

    Pamela Fayed was stabbed to death in a California parking garage on July 28, 2008. The Secret Service, which had begun its investigation of Bowdoin less than a month earlier, seized his assets three days later, on Aug. 1, 2008.

    The agents said Bowdoin was moving large sums of money outside the United States and had talked about buying a home in another country. In September 2008, the month after ASD’s assets were seized, an indictment was unsealed in Connecticut that accused Robert Hodgins of Virtual Money Inc. of helping a Colombia narcotics operation launder money at ATMs in Medellin.

    Virtual Money Inc. once provided debit cards to ASD, according to an ASD downline group.

    CLOSING NOTE: Read this chilling document from the case against Fayed in California.  Also see this 2007 report from CBS News. CBS reported FEDI operator Alishtari claimed to be “[National Republican Congressional Committee] New York State Businessman of the Year. ASD members later would make similar claims about Bowdoin.)

  • EDITORIAL: Prized Magazine ‘Newsweek’ Acquired For $1; Publishing Continues To Bleed — Even As Autosurf Cheerleaders Say They Have The Answer To Lagging Ad Sales

    The Associated Press reported yesterday that the Washington Post sold Newsweek magazine — an American treasure — for $1. The Post also absorbed $10 million in debt for Newsweek, which lost nearly $30 million last year.

    How much is $30 million? Well, it’s about $1.6 million less than AdSurfDaily President Andy Bowdoin had in a single bank account from his alleged “advertising” Ponzi scheme. It’s also less than one-half the total sum ($65.8 million) the U.S. Secret Service seized from 10 Bowdoin bank accounts.

    This is painful to watch on a couple of levels: First, American publishing companies continue to bleed profusely, leading to a situation in which American treasures are being sold for $1 and skilled administrative, management, editorial, production, sales and advertising professionals are losing their jobs or working for far less money.

    Second, problems in the U.S. economy in general are providing a launching ground for hucksters who would have you believe that Newsweek, the Seattle Post-Intelligencer and many other cherished publications could have saved themselves a lot of heartache by turning to the “autosurf” business model.

    In the autosurf business model as practiced by ASD, a company such as Microsoft that perhaps had relied on Newsweek  to advertise in print could have paid ASD $1 million to advertise online. ASD would have placed Microsoft’s ad in its magical advertising rotator. From that $1 million, Microsoft would have “earned” $10,000 a day more or less for the next 125 days, thus not only “earning” back the full $1 million, but also fetching a “profit” in the neighborhood of $250,000 on top of it.

    And Microsoft also would have sold a bunch of software by advertising on ASD, which purported to have a “captive” audience consisting of advertisers it was paying to view the ads of their fellow ASD advertisers. With Microsoft as a theoretical ASD advertiser, it could have boosted its bottom line by watching ads from a theoretical Apple, for example. The “rebates” Microsoft earned — coupled with the profits from the sale of software products displayed in ASD’s rotator — would have made both Microsoft and America happy, according to ASD’s devoted flock of commission-based, MLM salespeople.

    ASD, its fans said, had the perfect solution: Microsoft would have been paid more money than it spent, meaning it would have emerged in a better cash position within 125 days of doing business with ASD.  The ASD salesperson who recruited Microsoft also would have been paid — $100,000 for the $1 million sale alone. ASD would have made money. The U.S. economy would have continued to gain steam.

    Except it was not perfect, of course. In fact, is was all a colossal lie, according to the U.S. Secret Service, which accused ASD in August 2008 of operating a massive Ponzi scheme. Any money that ASD advertisers received from ASD came from other advertisers.

    So, it is plain to see that ASD was not a good deal for “advertisers” — theoretical or otherwise. ASD could have killed off Microsoft had its management been uninformed enough or desperate enough to trust a single word ASD ever said. Horror of horrors: Why would Microsoft want to limit its ASD ad spend to $1 million? Why not $10 million or $100 million — or more? Why not plow its “profits” right back into ASD, which advertised dramatically higher profits than, say, Bernard Madoff?

    After ASD killed off Microsoft, it would have killed off that MLM salesperson, the one who was paid $100,000 for Microsoft’s $1 million in business while Microsoft itself was paid $1.25 million more or less.

    Indeed, like Microsoft, the ASD MLM salesperson pitching ASD’s cancer would have had to return the “profit” he was paid from the proceeds of a criminal enterprise, even if it meant selling his home to raise the cash.

    But how to sell a home in this economic environment — you know, with all the foreclosures and such, all the bank failures and such — and all of the falling prices of real estate and such because of all the foreclosures and such?

    Want to add an extra layer to the ASD madness? Some ASD promoters who declared themselves committed, free-market Capitalists insisted that companies such as Microsoft would not be interested in profits, that they’d be happy enough just to display their ads and not get paid.

    The corporate benevolence of companies such as Microsoft would have resulted in ASD profits that were redistributed to smaller companies and Mom-and-Pop advertisers, thus creating wealth across the social spectrum. Some of the very same Capitalists who made these claims later complained about what they described as the Socialist redistribution schemes of the U.S. government.

    It also seemed not to occur to the autosurfing Capitalists who were rooting for a Socialist redistribution scheme — a scheme whereby big companies such as Microsoft would finance the profits of smaller players — that companies such as Microsoft could have started an autosurf at any time they wanted and crushed ASD like a bug.

    It’s a pretty safe bet that Microsoft, unlike ASD, could have kept its autosurfing site from going offine and could have produced a site that didn’t look as though it had been assembled by amateurs using a script kit. Meanwhile, it’s also a pretty safe bet that Microsoft wouldn’t have been looking for ways, say, to peel off cash to put Bill Gates in a new Lincoln or a relative of Bill Gates in a sporty, new Honda.

    Along those lines, it’s also a pretty safe bet that Microsoft would not have been seeking ways, say, to route millions of dollars offshore so it could be retrieved later by “management” who suddenly found themselves cash poor and without a country.

    Ay, just another day in Ponzi America, a country that has more than a few people who believe the business cure for what ails America is an ASD-like scheme that runs 24/7/365. You can read all about such schemes on the Ponzi boards — and you can induce people into the schemes and get paid a commission, which you can deposit into your FDIC-insured bank.

    Newsweek, like the Post Intelligencer, didn’t go the autosurf route, despite the fact it could have done exactly what ASD did: Lied to its advertisers by telling them that NewsweekDailyProSurf.com was the cure for all their ills, a cure that would have returned 125 percent more or less in 125 days more or less.

    No, Newsweek sold itself for $1 in a bid to save itself. We wish this American treasure the best as it seeks to retool.

    Finally, did you hear that the affiliate braintrust pitching the purported MPB Today “grocery” program on the ASA Monitor Ponzi and criminals’ forum is promoting an MPB Today “rebate” program?

    Read the AP story on the sale of Newsweek for $1.

  • GUEST COLUMN: Payment Processors That Give Refunds Unilaterally Help Surf ‘Industry’ Live To See Another Day

    Editor’s Note: This is a guest column by Gregg Evans.

    Online Payment Processors, Enablers of Scams

    By Greggory B. Evans, PhD

    Recently it came to light that online payment processor Solid Trust Pay had decided unilaterally to refund some participants in the besieged autosurf ASD Cash Generator. In doing so, it appears STP may have violated Canadian abandoned accounts regulations, but even if by some quirk of lightly regulated Canadian processors, this policy is ripe for abuse and almost assuredly resulted in inequitable treatment.

    ASD accepted payments from any number of methods, including direct deposits into bank accounts, as well as other online payment processors. In giving refunds based solely upon their own records, STP has no way of knowing if they are refunding people who are in fact otherwise in profit and made withdrawals from other processors.

    If these funds had been in the United States, where ASD assets were seized last August, this money would have been pooled into a consolidated estate and, according to statements from the Justice Department, been available for refunds to losers in the scam, refunds based upon the complete records of ASD, from all sources.

    Another apparent problem with STP’s refund policy is it flies in the face of traditional practice, where merchants who have funds that belong to customers who have no activity have absolute rights to their property for periods that range from 7 years in most U.S. States, up to the Canadian Policy that abandoned accounts in excess of $1,000 of 10 years at the merchant, and an additional period of up to 90 years, or indefinitely.

    Accounts of more than $100 but less than $1000 are retained by merchants in Canada for 10 years, and then turned over to the Canadian Central Bank, where they are held for 30 more years.

    The stated policy of Solid Trust Pay is to consider accounts “inactive” after 180 days, at which point they have in at least this case refunded some, but apparently not all, of the remaining funds in an account to the accounts from which it arrived.  Their method of determining how much each participant receives is not known, and from personal knowledge of mine, some participants receive no refund at all.  The reasons for this, the formula for determining refunds, and any fees STP retains for their trouble is not clear.

    It’s also not exactly clear that Canada, or Ontario where STP is located, place any limit on the fees a payment processor can charge, and in fact it may be perfectly legal for them to keep the biggest share of the funds and claim it as fees. Well, except for the unclaimed funds laws, which apparently they were unaware of.

    A poster here who identified herself as a representative of STP claimed that their refund policy had the approval of their attorney. I find that hard to believe, it sounds more to me like they didn’t realize that all merchants have to comply with laws that most people not versed in business practices don’t even know exist.  It seems to me that a lot of what the processors do is much like the Ponzi schemes they support, made up as they go along. In the same post, the STP representative said that they try to screen their customers for legitimate businesses.  This is a claim I find laughable at best.

    STP and other online payment processors exist in, support, and largely make possible the easy-money Ponzi scheme culture of HYIP and autosurf programs. Without them, the “industry” could not exist. Scammers, crooks and money-launderers need a transfer system that provides irreversible payments, and they also provide some measure of invisibility for the “Admins” of online money scams.

    Regulations in Canada have tightened up the invisible part, but these processors are still providing one-stop shopping for Ponzi schemes and autosurfs — and, to be sure, any number of criminals who at least have the sense to keep their activities a bit more low key.  But I digress.

    Let’s look at some of the customers STP has had in the past, these pillars of business who they were very careful to check and make sure they were legitimate businesses.  Aside from ASD, some of their more notable clients are P2P, or Pathway to Prosperity, an Internet HYIP Ponzi whose leader is currently wanted in Canada and is a fugitive from Justice.  Megalido was also an STP customer, this program popped up right around the time ASD was raided, and played to the ASD crowd as a way to recoup their losses.

    Mrs. VIP/Global Marketing Solutions was another STP-supported program; they suspended payments when they said they got new owners in December, the payments were supposed to begin again in 6-8 weeks, it’s been 7 months and no sign yet of them resuming payments.

    Another one I’m researching is DR Fund, a program heavily promoted by Jake Amedee and friends over at ASA Monitor, which is itself a clearing house for fraud and Ponzi schemes. I could name dozens more of these “legitimate” businesses, which I’m sure STP knows have stolen tens of millions of dollars from the public, much of it money from people who were told they were investing in real businesses, and of course, with their assurance that they screen their customers, STP is at least partly responsible for those losses.  At least more so than Bank of America, named in a lawsuit lawsuit brought by some ASD victims.

    Meanwhile, in a reply to a post I made asking questions about their business practices, the STP spokesperson whined about customers complaining about their policies on refunds. A quick look in the forums where Ponzi scams are promoted will reveal that when a program suspends payments for a short period of time, people begin discussing where and how they can get the payment processors to consider refunds.

    Unilateral Refunds Institutionalize The Abuse

    Payment processors should never give refunds directly to the people who play these scams. Legally, until a court of competent jurisdiction says otherwise, the money still belongs to the person who owns the account. Any unilateral action by the processors short-circuits the legal rights of whomever the money rightfully belongs to, whether that is the scammer, or if the authorities so determine, the victims of the scam.

    Regardless, that’s not a decision the money-handlers should or even could make with any fairness. A few situations like that and it’s likely the participants will begin as a practice of making all deposits with the processor most liberal in refund history, and all withdrawals from another account. So what.  Tell your customers you cannot refund their payments, the whole point of your business is irreversible payments.

    Granted, your customers are for the most part people who play scams for whatever reasons, most of them have no regard for the people who lose in order for them to make profits. They engage in illegal money frauds, and now they want the protection that “real” businesses afford them.  Too bad.  They’re in a lousy industry for fairness or ethical business practices. The same goes for STP and the other payment processors who cater to HYIPs, autosurfs and unregistered online investing.  You built your business on being the pseudo legal link in criminal enterprises.

    You might, and I stress the word “might,” be following the letter of the law. Or you may be trying to stay on the legal side of the law and due to your own ignorance be falling a little short, as I suspect your refund policy does.  But let me ask, if your grandmother asked about your business, and wanted the full unadulterated truth about the things you do, would you feel good telling her?

    Would you be proud explaining at the family reunion how you make your money? And not the best face you can put on it, you have to imagine telling granny about every single program you accommodated that turned out to be a cheap Ponzi scheme, how many millions of dollars were lost be people who risked more than they could afford to lose, how many marriages fell apart, homes were lost, children missed meals, and how you make it possible for this industry to thrive?  I suspect not.

    Further, if you really can with a straight face tell me you’re actually proud of the misery you help cause, I suspect you might be a sociopath, and you might have sold your granny out for a few fees.

    I’m calling you out, Solid Trust Pay.  I double dog dare you to tell the crooks who utilize your services to hit the road.  Hire a compliance auditor who knows how to do a little due diligence, and by that I don’t mean checking at ASA Monitor to see how many “I got paid” posts there are, but someone who knows enough about accounting, law, business and investing to look at what a company is doing and what it’s just claiming to do.  I ask, no, let me rephrase that, I DEMAND you make your refund policy transparent and I’ll be checking with the Office of the Public Guardian and Trustee to find out what the exact law is on your policy and asking them to give your practices a look as well.

    I also feel very strongly that you should disclose the fees you took on the refunds not only from ASD, but also MegaLido and any other funds you decided to return. Court records indicate that ASD moved several million dollars to you days before they were raided, but I see only a pittance in refunds. Granted, not every participant posts their refunds, but surely if you returned a few millions we’d see an aggregate of more than a few thousand dollars in discussions.

    You enable an entire industry of crime.  Eventually, the regulations will catch up to you.

  • Readers Ask: Are The Surf Promoters REALLY That Stupid?

    duhWe’ve received a number of comments from readers that fall along these lines: Are the people promoting autosurfs despite what has happened to AdSurfDaily, LaFuenteDinero and Golden Panda — and the collapse of MegaLido (and others) — REALLY that stupid?

    The short answer is maybe. Each and every one of them is risking the same personal fate as Andy Bowdoin and others before him. Like Bowdoin, they could find themselves enjoying a quiet breakfast one morning when the life-altering knock comes to the door. Because Bowdoin involved family members, knocks also came to the doors of loved ones. The Feds now intend to sell their property, too. Why? Because it was obtained illegally from proceeds of a crime.

    So why continue to promote autosurfs, perhaps even become a “founder” in one of them? Here’s the long answer:

    Damage Control

    For some promoters, it’s actually a tortured form of damage control because they know they’re crooks. To acknowledge the government is right is to acknowledge a crime — and to create a problem with downline members in the autosurf under investigation or in other surfs yet to make the Feds’ radar screens.

    Depending on the level of a downline member’s losses, he or she just might be inspired to sue or actually even call authorities. The promoters don’t want that to happen, so they project an air of confidence. The gambit is that “confidence” in the program and business model — even if it has been blasted to smithereens by the Feds — minimizes the chances of getting arrested or sued by people whose pockets they’ve picked.

    Did you know that “con man” is short for “confidence man?”

    Think about it: The government has just pulverized three autosurfs — not one, not two, but three. Most people would take that as a strong clue that there is nothing to be confident about, that prosecutors understand precisely what is going on, precisely how to dismantle the operations and precisely how to litigate against autosurfs to make it virtually impossible for the government to lose a case.

    The only people “confident” in the model are the con artists. It’s part and parcel to their existence. It’s what they do.

    Henceforth, prosecutors will need only to summon the ASD, LaFuenteDinero and GoldenPanda litigation templates, insert the facts concerning any new surf they seek to dismantle, file the paperwork in the appropriate U.S. District Court — and wait for the surf operator to fold, perhaps after he or she spends hundreds of thousands of dollars to defend a case that can’t be won.

    Like Andy Bowdoin did.

    Greed

    Another reason people continue to promote autosurfs or become an autosurf founder is because they’re just plain greedy and have decided to ignore the consequences. They’ve seen how ASD put $100 million on the table, and have envisioned themselves receiving a big chunk of a like amount.

    Greed definitely is in play in some cases. If someone sends you an email promoting a new surf site in the aftermath of the ASD experience,  it makes little sense to ponder the motivation. Simply assume it’s greed or criminality.

    Addiction

    Yet another reason some people continue to promote is because they’re addicted to the surfs. It’s almost akin to a morbid drug, alcohol or gambling addiction. Despite obvious, painful consequences, they have the need to serve the addiction.

    Did you notice how some people recoiled when commentators said that the government’s seizure of ASD cash was the equivalent of seizing drug money? The comparison was perfectly rational — the illegal sale of drugs poses a clear and present danger to society, and the illegal sale of securities poses a clear and present danger to society — but the comparison separated some people from their senses or caused them to change the subject.

    What does ASD have to do with drugs? they asked, often testily. Acknowledging an addiction is horribly painful, which is why addicts prefer the disease to the cure.

    All of these are reasons why the answer to the “stupid” question has to be maybe. Criminals, greedy people and addicts aren’t necessarily stupid — but, of course, some of them are.

    Crowds have been lining up to perform street justice on Ponzi purveyors in New York in the wake of the Bernard Madoff scandal. The more patient public, for its part, has never been more interested in seeing Ponzi purveyors brought to the official halls of justice — and yet the autosurf promoters don’t seem even to know there never has been a worse time to be in the Ponzi business.

  • Breaking News: More ASD-Connected Assets Seized; Bowdoin Blamed Company Troubles On Russian Hackers

    Federal prosecutors quietly went to court last month, filing a second forfeiture complaint against assets tied to AdSurfDaily Inc. The complaint paints a jaw-dropping picture of insider dealings, special favors, a “silent” ASD partner, people getting paid large sums for doing virtually nothing — and a claim that Russian hackers broke into ASD’s servers and stole more than $1 million.

    ASD President Andy Bowdoin never reported the theft to police or other authorities. He also told different people different stories about the cash struggles ASD was having before the autosurf changed its name to ASD Cash Generator, prosecutors said.

    “Mr.  Bowdoin told some individuals that he had to stop operating the program over the Internet as AdSurfDaily after one or more Russians hacked into his program and caused the ASD operation to issue approximately $1 million to one or more Russians,” prosecutors said.

    Bowdoin explained the money was taken “before [he] discovered that the Russians had not paid any money to ASD to secure for themselves a portion of its revenue stream (as so-called ‘rebates’),” prosecutors said.

    The new forfeiture complaint, which is filed in the District of Columbia but has been assigned a different case number than the still-active August forfeiture complaint, names currency, real estate, luxury vehicles, a 20-foot Triton Cabana boat, jet skis, trailers and computer equipment as the property the government seeks to seize as additional proceeds of an illegal Ponzi scheme.

    Prosecutors seek $634,266 previously deposited in Bartow County Bank in the name of Golden Panda Ad Builder. The money previously was ceded to the government by ASD President Clarence Busby and his daughter, Dawn Stowers.

    In addition, they seek a 2009 Lincoln MKS in the name of Bowdoin/Harris Enterprises; a 2009 Acura registered to Hays McDougal Amos; a 2008 Honda CRV registered to Judy Shriver Harris and George Franklin Harris; a 20-foot Triton Cabana boat, Mercury outboard motor and trailer; two 2007 Bombardier jet skis and a 2008 Confab trailer.

    At the same time, they seek the old Masonic Hall building Bowdoin purchased for $800,000 cash in Quincy, and a home in Tallahassee that was purchased with ASD funds that Bowdoin’s wife diverted to her son, George Harris, with the assistance of Harris.

    On June 10 and June 11 alone, Bowdoin’s family members and employees used $239,957 derived from ASD funds to make personal purchases, prosecutors said.

    Bowdoin’s wife, Edna Faye Bowdoin, worked with her son on June 10, 2008, to create an account at Capital City Bank, into which more than $177,000 in ASD funds were transferred from Bank of America, prosecutors said.

    On June 23, 2008, Harris used $157,216 of the money to pay off the mortgage on the Tallahassee home he occupied with his wife, Judy Harris, prosecutors said.

    “In short, Edna Faye Bowdoin and her son, George Harris, created an entity that funneled ASD proceeds into a bank account from which funds were provided to George Harris, and his wife, to pay off their home mortgage,” prosecutors said.

    Andy Bowdoin and Edna Faye Bowdoin created Bowdoin/Harris Enterprises to help “conceal from the government their expenditures and assets they purchased,” prosecutors said.

    Insider Dealings

    It is clear from the new forfeiture complaint that investigators have interviewed many people, including Bowdoin relatives, and spent considerable time chasing paper. The brackets in the quoted passages below are emphasis we added.

    “Mr. Bowdoin and associates [note the use of the plural] issued ad packages to friends and family (who  paid nothing for the ad packages) as free investment, and compensation programs,” prosecutors said.

    “Mr. Bowdoin, and others [note the plural] working with or associated with ASD, also gave ad packages to employees/workers as compensation for services performed for ASD,” prosecutors said.

    “These individuals also were able to pull out considerable funds from the so-called rebate program even though in many [note the use of the word “many”] cases they put little, if any, of their own money into the scheme,” prosecutors said.

    “For example, a former employee took over $30,000 out of ASD after putting in nothing. Another former employee pulled out over $300,000 after putting in about $10,000,” prosecutors said. “One ASD promoter pulled out almost $100,000 after putting in less than $1,000.”

    Family Spending Spree

    Here is a list of major family transactions last summer that used ASD funds, according to prosecutors.

    • June 10, 2008: Edna Faye Bowdoin and her son, George Harris, opened at account at Capital City Bank, funding it with $177,900 transferred from ASD’s Bank of America accounts. Harris later used $157,216 of the deposit to pay off the Tallahassee home he shared with his wife, Judy Harris.
    • June 11, 2008: Judy Harris and George Harris used $28,607 to purchase a 2008 Honda CRV. The vehicle was paid for with ASD company check No. 1337. On Aug. 8 — about a week after ASD’s assets were seized in the initial complaint — a lien was placed on the vehicle to secure a $5,000 loan Judy Harris took out with a family member.
    • June 11, 2008: ASD Chief Executive Officer Juan Fernandez issued an ASD check for $33,450 that was used to pay for a 2009 Acura registered to Hays McDougal Amos.
    • June 28, 2008: ASD Check No. 2708, for $20,506, was used to purchase the jet skis and a trailer. The bill of sale was made out to ASD, and Edna Faye Bowdoin signed for the goods.
    • July 1, 2008: A check from Bowdoin/Harris Enterprises for $23,445 was used to purchase the Triton boat and other equipment. The funds Bowdoin/Harris used originated in ASD’s Bank of America accounts.
    • July 28, 2008: A cashier’s check from Bowdoin/Harris for $48,244 was used to pay for the Lincoln. The funds originated in ASD’s accounts.

  • AdSurfDaily: Bowdoin The Envy Of Con Artists Worldwide

    andybowdoinbwASD President Andy Bowdoin demonstrated that any person with access to an autosurf script can put tens of millions of dollars on the table if he or she can meet two minimal conditions: the ability to recruit a few key MLM promoters, and the ability to be influenced by MLM promoters who know how to take the business to the next level by playing fast and loose with the truth.

    One of the reasons autosurfs continue to proliferate is because other con men can’t stand the thought that Bowdoin — himself a con man — relieved people of nearly $100 million in a matter of only weeks.

    “Con man envy” perhaps is Bowdoin’s greatest contribution to the autosurf trade. He is proof of the nefarious dream. Surfs have been popping up left and right since people learned Bowdoin had huge amounts of money stockpiled in banks (and in the form of uncashed checks) and had gone on a real-estate and vehicle-buying frenzy.

    Did you think they were popping up because the model was the product of genius and a utopian desire to let all people share in wealth created by a perfect machine?

    Bowdoin surrendered tens of millions of dollars to the government yesterday, demonstrating the machine is not perfect and no healthy ingenuity is involved. Bowdoin, for instance, spent $500,000 to place a deposit so ASD could process credit-card transactions from Antigua. He didn’t seek members’ approval; he simply did it, thus placing his enterprise in even greater danger of collapse. Members also paid for the properties, vehicles and toys he or insiders bought — each one of them weighting down the Ponzi even more.

    Andy, who deposited corporate funds into personal accounts over which he had sole signatory authority, had new houses and new cars, places to go and people to meet. He’d finally arrived at age 74, and some people even were happy to trade wages for the earning power of all those “ad packs,” which became a new form of currency in Quincy and elsewhere.

    And Bowdoin’s donation of 100,000 “ad packs” to a charity? That also weighted down the Ponzi, putting even more stress on members. The donation alone created a $365,000 liability for ASD at the advertised pay-out rates, even more over time with compounding.

    Any volunteer or employee who’d accept “ad packs” instead of cash was a friend to Bowdoin, who simply could transfer the responsibility to pay for the “ad packs” and their earning power to members.

    Still think ASD had a prayer of surviving?

    Bowdoin also was spending money like a sailor who’d been at sea for six months and suddenly, excitedly, unexpectedly found himself in possession of a big paycheck on shore in the Bright City.  Lots of sailors spend money not because they need to, but because they can. Andy had become a big man in Quincy: Realtors and auto dealers couldn’t wait to see him or members of his family.

    Some of the new surfs have ties to ASD, either directly or through sentiment. We know this because some of the people promoting the new enterprises traded on ASD’s pain to create buzz for the upstarts.

    Cynical does not even begin to describe it.

    A “Poor Andy” theme has been an early selling point in promotions. Part of it is because folks with big downlines don’t want to get sued by people they brought into the program, and they don’t want to have their “profits” disgorged by the government or a receiver it appoints. By casting Bowdoin as a victim of a foundationally corrupt government, promoters hope to keep the heat off themselves while launching new enterprises that essentially are ASD packaged with different words.

    ASD was a Ponzi; the new autosurfs soon will become Ponzis, if they’re not already Ponzis. “Rebates aren’t guaranteed” is a Ponzi signature, a disclaimer the companies use on the theory it will insulate them from claims. It didn’t work for ASD; it won’t work for the new companies.

    Why? Because it’s the equivalent of saying that bank-robbery laws don’t apply to you simply because you make a formal statement that bank-robbery laws don’t apply to you. To the Ponzi purveyor, however, the words themselves are self-validating. We aren’t a Ponzi because rebates aren’t guaranteed. They also serve the secondary purpose of sounding reasonable, putting the onus on you to recognize you’re granting the operator license to keep your money and become rich when the Ponzi math becomes too inconvenient.

    Virtually all Ponzis pay in the early stages; it’s what keeps money flowing into the system. But “rebates aren’t guaranteed” is the “out” — one that can be exercised at any point in time and for any reason, including “We just want to keep the money now.”

    Shame on prosecutors for not understanding “rebates aren’t guaranteed” are the magical words that make the enterprise wholesome, a business of which society can be proud  — even as family members are shunned and lose the esteem and respect of other family members for introducing them to such a wholesome pursuit.

    There’s a good chance your friendly autosurf promoter is in deep trouble with his or her own family for ASD and Golden Panda losses and the grief associated with a court battle –and that the promoter is selling the new autosurf in a bid to recover losses and get back in the good graces of people they love.

    And there also is a chance the promoter is trying to recover personal losses by selling yet another autosurf.

    The Bowdoin Roadmap

    By getting caught, Bowdoin accidentally provided a roadmap on how not to get caught — at least not right away. Few autosurf promoters these days would dare claim that Google endorsed the enterprise after entering into a “partnership.” Fewer yet would dare claim that the President of the United States had given the autosurf operator  his stamp of approval at a White House dinner.

    There is shorthand for this: President = Secret Service, and Secret Service = No Stone Unturned.  Thus — at least temporarily — ends the ridiculous notion that the President is on board the autosurf ship. It was nothing more than a lie that achieved virality. The Google lie also went viral.

    And the rallies, the ones at which faithful volunteers collected members’ money and paperwork on camera and laid it neatly in plastic baskets? Thanks to Bowdoin, new owners will put the lid on rallies and the collection of money by volunteers — customers, after all, might have trouble reconciling why a professional advertising company is using volunteers to round up the loot. (The irony of placing money in plastic baskets in a case what went on to become a money-laundering prosecution is almost too much to contemplate.)

    But don’t rest easy, even as you’re reverse-engineering Bowdoin’s mistakes to make sure your operation doesn’t repeat them and get on the Feds’ radar screens.

    Here’s how the new autosurf operators will get caught, despite what they’ve learned from Bowdoin’s experience and despite reportedly moving to “offshore” locations such as Panama and Uruguay:

    • The word “offshore” itself will signal investigators that the new enterprise studied the ASD case and determined one of ASD’s core “weaknesses” was its domestic location. Some people already are bragging about this. Early promoters of “offshore” surf sites have claimed the sites provide protection from the SEC, the IRS and state attorneys general. Some of these people are the same people who promoted Google “partnerships” and White House ties.
    • A hiccup by a payment processor or an international probe of payment processors could neuter autosurfs and leave tens of thousands of participants holding the bag. There is a distinct possibility that governments worldwide will crack down on processors that do business with autosurfs. In the post-Bernard Madoff Ponzi era — and with the global economy shedding jobs as wealth continues to evaporate — nations will take a closer look at the international wire business.
    • Credit-card issuers and banks will more closely monitor transactions. They’re tired of posting hundreds of billions of dollars of losses. Shareholders will demand additional controls and regulation.
    • Some autosurf promoters are trading so heavily on government resentment that it has become a signature of Ponzi fraud. Even at this moment, promoters are trying to build your resentment so you’ll give them more money. They’ll tell you that the government is antibusiness, anti-little guy, antiwealth, and they’ll point to the $700 billion U.S. corporate bailout and employ other populist rhetoric to make you believe that real patriots play the autosurf game. The loudness, coupled with the brazen conduct of promoters, will put them squarely in the sights of regulators and prosecutors.
    • The U.S. government is well aware that autosurfs exist, but agencies lack the money to police them individually. One possible approach is to work with domestic and international agencies to engineer a sting operation. Such an approach has political support because voters are tired of reading about Ponzi schemes and how wealth is being depleted by people with smiles on their faces and access to a computer. It’s not outside the realm of possibility that the government will work proactively with a TV network to record the actual planning and final execution of the sting. The networks live for this kind of thing, and the public loves to see it. (One new autosurf already is using a reference to the NBC television network to sanitize the opportunity, an act as reckless as claiming the President is your buddy when he is not. The shorthand for the pitch is Autosurf = NBC, an utterly preposterous claim. NBC doesn’t pay viewers, and NBC doesn’t tell its advertisers that they’ll get back 125 percent of their ad spend for viewing ads on NBC for a few minutes a day.)
    • Bernard Madoff fallout is having a profound effect on individuals and the government. Madoff fallout alone is bad news for Ponzi operators. The word is positively nuclear. People now understand what a Ponzi scheme is and the dangers of such schemes because they can put a face to it.
    • Autosurf operators will not be able to control the behavior of the most unscrupulous promoters, an age-old song. Despite ASD headlines — despite Madoff headlines — the seamy underbelly of this underground business once again will emerge.

    The traditional autosurf pattern already is in play at the up-and-coming sites. Have you noticed roll-outs being called “Phase One” and the promises that more and more good things will follow?

    And, hey, no sense insulting you by referring to you as a plain member. Puff out your chest and proudly wear the new title of “account executive” or “VIP.” Feel good about yourself knowing your friendly promoter thinks so highly of you.

    Just be ready to feel the scorn of your family and friends — and perhaps even see yourself on TV — when the post-Bowdoin breed of autosurfs meets its inevitable fate.

    In any event, you’ll still have the “rebates aren’t guaranteed” defense” to make you feel better.

  • 2008 Concluded With ‘Ponzi-Equals-Pain’ Message

    Bernard Madoff
    Bernard Madoff

    Dear Readers,

    Our best to you with the dawning of the new year — and our thanks for making this Blog one of your stopping points.

    If you have a moment in the coming days, think about leaving a comment that answers this question: What will you remember most about 2008?

    One of the things we’ll remember most is the AdSurfDaily, LaFuente Dinero and Golden Panda Ad Builder case. As mentioned in a previous post, we never intended to do more than a few posts on the subject.

    The ASD case kept itself in the news, though, mostly because of the behavior of some of its more ardent supporters. Andy Bowdoin’s own declaration that Satan was at work — as well as comparing what the company was confronting to the 9/11 terrorist attacks — set the standard for some of the oddities that followed.

    There were Kool-Aid campaigns to Bill O’Reilly of Fox News; letter-writing campaigns to the

    Elie Wiesel, Ponzi Victim
    Elie Wiesel, Ponzi Victim

    Inspector General for the Justice Department; petition drives to the U.S. Senate; a call for a million-person march on Washington; prayer campaigns; name-calling; rants; a gleeful forum party after the Sept. 30-Oct. 1 evidentiary hearing concluded; claims that the prosecutors, Secret Service agents and judge were brainless.

    None of these messages was consistent with a comprehensible PR strategy or the behavior one normally would expect from a company that called itself a professional advertising firm. The presence of numerous other autosurfs also didn’t help. ASD’s claim of offering an exciting, new business model was just plain silly. Scam.com and other sites have been covering autosurfs for years.

    Another thing that didn’t help ASD were the Ponzi allegations against financier Bernard Madoff. The accusations alone brought the word “Ponzi” into widespread public use. The Wall Street Journal and Bloomberg News, in particular, have been providing exceptional coverage of the Madoff case. Practically everyone knows what a Ponzi is now, something that could affect juror pools in the ASD case. Madoff has become a national disgrace, a punch-line for late-night comics and a source of global disgust and heartache.

    “Ponzi” has become a radioactive word. In short, “Ponzi” = “pain” — the kind of pain that destroys people, dreams, fortunes and the good works of charities, endowments and universities.

    The word “Ponzi” became central to many lives in 2008. It is our sincere hope that 2009 will be defined by a much better word:

    Prosperity.

    Our warm wishes to you.

    Sincerely,

    Patrick

  • Madoff Case Sparks Talk Of ‘Clawbacks’

    Bernard Madoff
    Bernard Madoff

    BLOG UPDATE 2:19 P.M. EST (U.S.A.): La Tribune, a French business newspaper, is reporting that a founder of Access International Advisors, a hedge fund with large sums invested with Bernard Madoff, has been found dead in his New York City office building.

    Rene-Thierry Magon de la Villehuchet, 65, was found this morning. The French newspaper called it a suicide, as have other media outlets, but the medical examiner hasn’t listed a cause of death.

    Here, below, our earlier post . . .

    In the CEP autosurf Ponzi scheme case, a court-appointed receiver filed dozens of lawsuits against program “winners,” forcing them to return profits on the theory there can be no winners in an illegal enterprise. The receiver, William F. Perkins, placed CEP in bankruptcy and then methodically went about the task of clawing back money for the estate.

    Perkins, who effectively is running CEP as a debtor-in-possession, has negotiated settlements with a number of winners.

    Last month he triumphed over CEP’s owners, Clayton Kimbrell and Trevor Reed, in a civil trial for fraud and breach of fidiciary duty.

    Judge James E. Massey ordered Kimbrell and Reed to return about $1.5 million in fraudulent transfers they made to themselves, family members, employees and other CEP principals.

    Some of the clawback cases against CEP winners still are being heard, about 17 months after the initial filing. More than 20 trials against individual defendants are scheduled next month in U.S. Bankruptcy Court in Atlanta.

    CEP was declared a Ponzi by a federal judge, while Madoff remains an alleged Ponzi operator who told authoritites that the Ponzi could amount to $50 billion in losses.  The July 2007 SEC complaint against CEP said about $12 million flowed through the firm in an illegal securities offering.

    Perkins maintains a CEP website from which visitors may access all the court documents. It’s well worth a visit.

    Talk in the Madoff case has turned to what the court-appointed receiver might do to recover cash. Owing to the size of the alleged scheme, things could get downright ugly. In theory, people who made withdrawals could be ordered to return them — and this group includes individual investors, money managers and charities.

    Lawyers are apt to use terms such as “fictitious profits” and “fraudulent conveyance” to describe redemptions by investors before the Ponzi collapse. The prospects are horrifying because investors didn’t know anything untoward was occurring behind the scenes, and many of them likely have spent all or part of the money.

    See this Bloomberg News story.

    If the case follows the CEP model, Madoff and insiders — if any — could be forced to return illegal transfers. Prior to his arrest, Madoff said he wanted to distribute up to $300 million to employees. If such transfers were made — recently or in years past in the form of bonuses — it’s possible that the money could be ordered returned even if spent.

    Ugly doesn’t even begin to describe the battles that could ensue. Charities that relied on Madoff to manage money used for good deeds and took dedemptions could be targeted to pay the money back. There is the potential for pain in many, many places, and it’s possible the clawbacks could go back six years.

    Blinded to the reality that Ponzi schemes can have devastasting consequences, some autosurf supporters still are arguing that the government has no business sticking its nose in where it doesn’t belong.

    Incredibly, an autosurf whose launch is set for next year has targeted nonprofits in early promotions. Promoters have suggested it’s a great way to publicize the business and get cash flow.

    AdSurfDaily, which has ceased to operate in the wake of the government’s August seizure of nearly $100 million, promoted at least one nonprofit, funding it with $100,000 in “ad packs” and asking members to contribute.

    “ASD President, Andy Bowdoin, has generously donated 100,000 ad packages to this organization,” the ASD Breaking News site said on July 5, about a month prior to the seizure.

    ASD encouraged members to send donations for the charity to ASD headquarters and even to transfer “donations from your [ASD] Cash Balance.”

  • Ad View Global, New ‘Advertising’ Program, Debuts

    This morning we read an early pitch for Ad View Global (AVGlobal), a new “advertising” company that is coming online in the wake of the $100 million government seizure of assets tied to AdSurfDaily Inc.

    AVGlobal, according to the promoter’s ad we read, is positioning itself as a guarantee against the recession and poor economy. You’ll have to plunk down a minimum of $360 to get paid for viewing ads. ASD’s minimum purchase was $10, so AVGlobal wants 36 times more to get you started earning fabulous amounts of money for viewing ads while the economy is in the tank.

    Talk about stoking the furnace.

    AVGlobal, which for shorthand purposes also is called AVG, is headquarted in Uruguay, according to the promoter. You shouldn’t worry about this, he implied, because the company has banking relationships throughout the free world and “many” of its employees are “citizens” of the United States or other affluent countries.

    It’s not clear if the “citizens” employed by AVG will continue to live in the United States while they’re running a business from South America.

    At least two of the employees are identified in the promotion, and at least one is an ASD executive: “Gary,” whose last name wasn’t mentioned, appears to be the head man, and Juan Fernandez, chief executive officer of AdSurfDaily, is listed as “national sales manager.”

    Whether Fernandez’ job is to serve exclusively as “national sales manager” for a single country is unclear. One would think a company headquartered in Uruguay might appoint an “international sales manager,” as opposed to a more localized “national sales manager.”

    “National Sales Manager” is an interesting title, to be sure.

    Fernandez, through counsel, notified the federal judge in the ASD case that he would take the 5th Amendment against self-incrimination if called to testify at the Sept. 30-Oct. 1 evidentiary hearing. The judge ruled last month that ASD had not demonstrated it was operating legally and not a Ponzi scheme at the hearing.

    Just two paragraphs below the place in the pitch where the promoter mentions “Gary” and Fernandez by name, he insists “there is no connection with the company ASD . . .”

    There is no disclosure at any point in the pitch about ASD’s legal troubles and the risk associated with participating in an autosurf. What’s important, according to the promoter, is that you can “Make Your Financial Life Recession Proof” by joining Ad View Global, which permits you to plunk down up to $9,500 a day for ad purchases.

    One of the reasons ASD put itself on federal radar screens is because it permitted purchases of $10,000 or more, something that catches the attention of banks, the U.S. Secret Service and the IRS. Banks and the Secret Service and the IRS can become suspicious even of $9,500 transactions, though. They’re smart enough to understand that, if $10,000 is viewed as the magic cutoff to avoid suspicion, some folks just might dial it down a bit.

    It appears that everyone who joins AVGlobal gets dubbed an “account executive,” but if you want to earn you have to become a “VIP” account executive. VIP stands for “Viewing Incentive Program.”

    The promoter stressed that AVGlobal is selling “page impressions,” not simple advertisements.

    “Imagine if NBC paid you to watch their station during the hours of 4:00pm – 8:00 pm each evening, regardless of time zone?” the promoter droned. “What if they had hundreds of thousands of people worldwide that they could guarantee to be watching NBC during this time period? Just how valuable would this time be worth?”

    Exciting stuff, to be sure.

    Hmmm. Perhaps NBC should start paying people for viewing ads, only after making a minimum $360 purchase, registering as account executive VIPs and running things out of South America, of course. If the venture proved to be a Ponzi scheme, NBC could use its own news division to sanitize its own Bernard Madoff or Andy Bowdoin-like scandal.

    Here’s a headline idea: “Make Your Financial Life Recession Proof.”

    Oops. Already taken by AVGlobal. Regardless, NBC has lots of talented writers. Someone will be able to come up with a good headline if the network enters the paid-to-view-ads fray.

    It’s a plain fact that people are hurting as a result of poor economic times. It’s also a plain fact that many folks are turning to the Web to learn ways to supplement their income. Here’s hoping they decide against viewing “page impressions” for a living.

    The Feds believe that ASD President Andy Bowdoin was running a criminal enterprise that sold unregistered securities, called them “advertisements” and operated as a Ponzi scheme. Bowdoin’s own attorneys say he is the target of a criminal probe, and he has been sued in a separate action under federal racketeering laws.

    As pointed out above, Juan Fernandez, Bowdoin’s own CEO, took the 5th at the ASD evidentiary hearing. So did Bowdoin.

    Bowdoin also has been sued by Bill McCollum, the attorney general of Florida, under pyramid statutes. Not long ago Bowdoin claimed during a conference call that “Ponzi” allegations had been dropped in Florida, but “Ponzi” allegations never even were brought in Florida, McCollum’s office said. The state always used pyramid statutes, unlike the federal government, which brought Ponzi allegations.

    Now AVG has emerged, using a similar business model, changing a few things, running things offshore and asking for at least $360 up front so people can play. Perhaps they’ll even get the chance to meet the “national sales manager.”

  • EDITORIAL: $7,260 An Hour: The Dangerous Allure Of Autosurfs

    I first learned about Ad Surf Daily and Andy Bowdoin in July, prior to the asset seizure, back when I served as a Moderator at the Warrior Forum. ASD members swore by the company, flocking to the forum in droves when Andy Bowdoin had become a topic of widespread conversation on the Web.

    Some of the Warrior Forum discussions became heated, and people who had no previous connection to the forum suddenly registered as members. ASD supporters, it seemed, couldn’t even fathom that other people might have opposing points of view. Few senior Warriors have anything good to say about autosurfs and cash-gifting programs. In general, they see them as poor excuses for a business pursuit, let alone an actual business.

    Lots of Warriors make their own information and/or software products, largely eschewing cash-gifting and autosurfs as the playgrounds of hype purveyors. The dream of many senior Warriors is to make products that fill an information vacuum and add value to customers’ lives. Some of them are “How To” publishers. Others write software and scripts or sell MRR, rebrandables or Affiliate products. Virtually all of them are resigned to the fact that actual work is involved. It takes time to build a brand and a business. Very few see the act of plunking down $12,000 and surfing for six minutes to claim a daily paper profit of $120 a noble pursuit.

    Walking Back The Claims

    One of the first claims we read about ASD was that a member was making $1,000 a day ($365,000 a year) passively by surfing a handful of websites with a daily time investment of only a few minutes. If true, it would have meant the member had directed about $100,000 at the company or accumulated that amount by surfing and reinvesting. The most shocking extrapolation, however, was that $100,000 could morph into $365,000 in a year’s time.

    No legitimate company offers such a return. It was a dead giveaway that ASD’s days were numbered, even though people were citing the $1,000-a-day profit claim in promotions as a reason to join. They might as well have taken out an ad in the New York Times that read, “We Are Just Dying For The Government To Investigate Our Favorite Autosurf Because It Likely Is A Ponzi Scheme.”

    Some of the biggest Warrior Forum fights involved cash-gifting programs. Perhaps the biggest of all occurred when an ad for a gifting program accidentally got approved by a tired, overworked Mod in the Warrior Special Offers (WSO) forum. WSOs are supposed to be products you created. This particular WSO was a 30-page PDF ad for a gifting program, complete with pictures of fabulous homes, fabulous cars and fabulous piles of money. Senior members went nuts, and the ad was deleted quickly with a sincere apology.

    Naturally some opportunistic members stepped in to speak out in support of gifting programs, defending them with velvet talk and claims of superior knowledge and unquestioned propriety, despite very public warnings from the Federal Trade Commission. Senior members don’t let that kind of talk go unchallenged. Gifting as a business? You’re kidding, right?

    Most senior members feel the same way about autosurfs.

    Due Diligence?

    All kinds of declarations were made that people had done comprehensive due diligence on ASD. The thought alone was preposterous, as are current claims about comprehensive due diligence having been performed by investment companies that directed money at disgraced financier Bernard Madoff, now accused of running a massive Ponzi scheme.

    It is simply impossible to perform due diligence on a financial product absent verifiable financial data. “Trust” is not a synonym for “due diligence,” no matter now many times promoters confuse the terms, either deliberately or because a neuron misfires and instructs them to invest based on feeling, not fact.

    The phrase “I got paid” used in autosurf promotions also is not due diligence. Ponzi schemes thrive precisely because they pay people. Then those people tell other people they got paid. The cycle repeats itself until:

    • A.) The mathematical deception no longer is sustainable because too many people want too much money simultaneously. (Madoff reportedly faced $7 billion in simultaneous redemptions and had run out of shells to move.)
      B.) The Ponzi becomes too worrisome for the operator or technological problems become unmanageable and drain interest or create a run on the bank.
      C.) The autosurf Ponzi operator decides he is going to keep all the money he’s collected because he’s reached a secret target and covered himself in the Terms of Service.
      D.) The government intervenes.

    Echoes On The Web

    The same defenses that surfaced for Andy Bowdoin have surfaced in other autosurf Ponzi schemes. Research the scheme, and you’ll find the defenses, up to and including the all-caps, screaming, deflection defenses.

    “IT’S NOT A PONZI SCHEME, [EXPLETIVE!]” is, perhaps, the signature deflection, with the “HOW DARE YOU EVEN SUGGEST THIS UPSTANDING BUSINESS PERSON WOULD BE INVOLVED IN SOMETHING UNTOWARD?” deflection coming in a close second. “GET READY FOR THE LAWSUIT” comes in a close third.

    Some purveyors of autosurfs are so accustomed to people saying “yes” and settling for velvet talk in response to legitimate questions that they reflexively demonize anyone who strays from the company line. They’ll try to maintain the veneer of superior knowledge even if the autosurf is in failure mode, explaining that such occurrences are a natural part of doing business online and demonstrate the need to have a “diverse” portfolio.

    They’ll sell autosurfs as an investment in one breath and, in the next, deny that customers had purchased an investment. Why? Because they don’t want to get sued by their downlines and don’t wanted to be named a defendant in a fraud or a securities beef.

    It’s common for them to suggest they pitched a failed autosurf in good faith, pointing out that nobody should have invested more than they could afford to lose. Forum posters, including people who got fleeced, want to think the best of their sponsors and even thank them for their “candor.” It’s a curious online cousin to Stockholm Syndrome.

    What’s lost in the discussion is the fact the government clearly views the autosurf model as illegal, because virtually all autosurfs operate as Ponzi schemes that sell unregistered securities and because they raise concerns about criminality.

    Anyone can purchase an autosurf script or even find one for free. Plug in the variables — the daily “rebate,” for example — and you’re the owner of your very own Ponzi scheme. A terrorist could join and you wouldn’t know. A criminal surfing team could join and you wouldn’t know. A criminal or terrorist could be the autosurf operator and you wouldn’t know.

    Another common defense is that the government doesn’t understand the model. Yet another is that the autosurf operator has discovered the magic pill that makes the model legal, separating it from illegal programs that use a similar model but exclude the magic pill. Still another is the selective-enforcement defense: With so many other autosurfs out there, why go after this one? When all else fails, of course, the most ardent defenders always can attack the prosecutors as mindless fools, free-market opponents, Socialists, perhaps even calling them names and comparing them to Satan.

    One defense staple is the argument that the government has no right to mess with autosurf Ponzi schemes if it continues to permit Social Security to operate. Indeed, changing the subject is a critical skill if your aim is to defend the autosurf trade.

    $7,260 An Hour

    One particularly desperate defense for Bowdoin, uttered by a supporter in the aftermath of Bowdoin’s decision to take the 5th Amendment at the Sept. 30-Oct. 1 evidentiary hearing, was that he was “too honest” to testify.

    One of the questions prosecutors could have asked is how it was possible to morph $100,000 into $365,000 in a year’s time — simply by clicking on ads — when there were no additional profit centers that generated huge amounts of revenue.

    Walk it back: Give Bowdoin $100,000. Surf for six minutes a day (2,190 minutes over the course of the year, or 36.5 hours). Emerge with your $100,000 principal back, and a tidy profit of $265,000. Your profit computes to $7,260 an hour. ($265,000/36.5 hours.)

    Yes, $7,260 in profit per hour from clicking on ads. Where did that money come from? Work just three hours and you’ve topped the yearly earnings of an average Walmart employee. In just nine hours you’ve topped the average yearly earnings of a middle-class manufacturing worker or teacher in the United States. See, now, why selling the autosurf dream is so important?

    It’s always convenient to hate bureaucrats and the cops until you need them.

    Smoke And Mirrors

    The argument that Bowdoin was selling “advertising” and not a financial product is absurd. So is the corresponding argument that ASD was an autosurf like none other, the one that figured out how to get everything nice and legal. The ASD Terms of Service (TOS) was among the most consumer-unfriendly documents we have ever read.

    Basically, participants were agreeing to give Bowdoin license to collect amounts from $10 to $12,000 (or more, with special permission), while empowering him to keep the money even if he chose to quit paying rebates. “Advertising” purchases were nonrefundable. Rebates weren’t guaranteed. Essentially all he had to do was show ads to honor the contract.

    Boxed In

    What’s interesting about the Feds’ approach to Bowdoin is that, to date, they’re not trying to bust the contract. They’re saying, in effect, “OK, Mr. Bowdoin. Want to hide behind your contract? Well, start showing your customers’ ads without paying a corresponding rebate. Let’s see how happy somebody who paid you $40,000 will be if you run off 40,000 ads, one painful $1 click at a time.”

    As a side note — and using a figure of $50 million as a conservative estimate of Bowdoin’s advertising liability — Bowdoin would have to deliver 50 million clicks if ASD came back online. Where is the audience going to come from if the deal doesn’t include rebates for viewing? It could take forever for the ads to be displayed.

    Nice contract, huh?

    What the government did by telling Bowdoin he was permitted to show ads is neatly expose the wink-nod nature of autosurfs. Imagine the insurrection that would result if ASD suddenly came back online and began to run off 50 million ads — $50 million worth of ads backed up in the queue — one painful click at a time. Every person who complained to the government would neatly expose himself or herself as a co-conspirator, a wink-nod participant. After all, rebates weren’t guaranteed. Only ad views were guaranteed. You paid for advertising only, right?

    What Bowdoin’s TOS seems to have done is box in participants as possible co-conspirators.

    In our view, prosecutors’ best card is the assertion he was selling securities and calling them advertisements.  We base this view on the fact the government is 3-0 in autosurf prosecutions, dating back to 12DailyPro and including CEP and PhoenixSurf.

    One difference — and it’s a notable one — is that Bowdoin didn’t surrender upon seizure and has a well-known law firm challenging the government’s forfeiture case on his behalf.

    That ASD is lawyered up, however, does not change the plain fact that the government believes — as it did in previous auotsurf cases — that the autosurf model involves the sale of unregistered securities disguised as advertisements.

    Prosecutors weren’t born yesterday. They lack the budget and manpower to chase down all autosurfs, but they understand the game. And, in this particular area of law, they have significant advantages over defense lawyers because the law is weighted toward them. It’s that way by design: Ponzi schemes and the sale of unregistered securities on a mass scale pose a clear and present danger to the economy.

    From the government’s point of view, a security is a security no matter what you call it. You can call it an “advertisement” until the cows come home and it still will be a security.

    Emerging Models

    “New” autosurf models emerging in ASD’s wake appear to be incorporating even more smoke and mirrors to skirt regulation, perhaps even moving offshore or adding gaming or social-networking elements. The rebate underpinnings still appear to be in place, which means they, too, will come under scrutiny. It’s highly likely that their own promoters will bring them down because they won’t be able to restrain themselves from using glutonnous hype.

    Remember that $1,000-a-day claim? New operators won’t be able to stop the hype purveyors, any more than Bowdoin could stop them.

    I never planned to do more than a few stories on ASD’s troubles. What kept my focus riveted were constant attacks against this Blog by ASD supporters. Almost all of it was drivel, nonsense of the highest order, often served up in ad hominem or passive-aggressive fashion. I never minded posting opposing points of view. What I minded was a lack of sober thought and the stunning commitment to intellectual dishonesty. In all the time I’ve published news and opinion on ASD, I have not received a single comment from an ardent ASD supporter that did not attempt to change the subject in some way.

    Not one.

  • MegaLido Autosurf, Pushed By ASD Members, Vanishes

    We’ve written previously that members of an autosurf known as MegaLido had reported their support requests had been ignored and they they were seeking refunds from AlertPay and SolidTrustPay.

    MegaLido members now say the site itself has gone offline.  The paid-to-surf site rose to prominence in the weeks after the government seizure of AdSurfDaily’s assets, with some ASD members touting MegaLido as a safe, offshore alternative. Reports suggest as many as 27,000 people joined MegaLido, whose promoters clearly traded off ASD’s miseries.

    One forum poster said today that all 10 autosurfs in which he was a participant were encountering various problems, meaning they were failing or perhaps on the verge of doing so.

    Here’s the thing about autosurfs:

    • It is a virtual certainty they are operating as Ponzi schemes, a cousin to the type of alleged fraud pulled off by Bernard Madoff.
    • They are virtually impossible to police.
    • The SEC has a history of shutting them down. The Justice Department also is involved in the autosurf fray these days. Witness the civil forfeiture complaint against the assets of AdSurfDaily, including the seizure tens of millions of dollars.
    • You don’t know if your fellow autosurfer is a criminal or terrorist.
    • You don’t know if the autosurf operator is a criminal or terrorist. It is likely that the U.S. government, at least, would view him as a criminal if he is using the Andy Bowdoin/ASD playbook.
    • It is impossible to perform due diligence.
    • Virtually all autosurfs engage in the sale of unregistered securities, calling themselves “advertising companies” that offer “rebates.” Equivalent words also are used, all to avoid regulatory scrutiny.
    • There is nothing to prevent an autosurf operator from gathering a planned amount of funds and then running off with the money. Early “pay-outs” may be designed just to create buzz and keep money flowing into the system.
    • Receivers have a history of suing autosurf participants to force the return of illegal profits. Madoff wasn’t operating an autosurf, of course. But attorneys are lining up to sue institutions and people and who received redemptions from Madoff on the theory of ill-gotten gains.
    • Participating in an autosurf puts you at risk of losing money, being sued or even arrested.