UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”
U.S. District Judge Donovan W. Frank issued a temporary restraining order against Brown and her company, Investors Income Fund X LLC. The order was issued April 8.
Brown, 46, of Golden Valley, was accused of operating a “sham” fund into which investors plowed more than $1.1 million between July 2009 and March 2010.
“Brown told her investors that Fund X is a ‘bond fund’ with fixed annual returns of 8% or 9%,” the SEC said. “[S]he distributed fictitious ‘returns’ to investors, furthering the fiction that Fund X was a legitimate and successful investment opportunity.”
But Brown “misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself and build . . . office space for her new business,” the SEC said.
Investors Income Fund X LLC was registered as a corporation in South Dakota, the SEC said.
“Unbeknownst to her victims, Fund X is a sham — Brown’s alter ego,” the SEC said.
The case features allegations of siphoning, forgery, cherry-picking clients of Brown’s former employer and issuing fraudulent “returns” in Bernard Madoff-like fashion. It also occurred against the backdrop of March 17 Congressional testimony by FBI Director Robert Mueller III that U.S. companies increasingly were relying on shell corporations to commit fraud.
Minnesota Fraud Cases
In recent months, investigators and prosecutors in Minnesota have opened up a number of major fraud probes. The combined cases are alleged to have drained hundreds of millions of dollars from investors. In some instances, prosecutors and regulators have asserted that companies used multiple names to commit fraud.
Petters was convicted last week of presiding over that was described as the largest financial-fraud case in Minnesota history: a $3.65 billion Ponzi scheme.
Petters displayed “stunning criminality,” prosecutors said. One of the victims wrote, “Our society, unfortunately, is becoming plagued with too many people like this, and like Bernard Madoff. Tom Petters needs to learn that there are severe consequences for his incomprehensible behavior.”
Meanwhile, the SEC, the CFTC, the FBI, prosecutors and a court-appointed receiver are poring over records to reverse-engineer the alleged Trevor Cook/Pat Kiley Ponzi scheme. Court records suggest multiple company names were involved and that the scheme involved at least $190 million and caused investor losses of at least $139 million.
Money was moved “all over the world,” according to court filings.
Cook and Kiley were sued by the SEC and the CFTC in November. Cook was charged criminally last month. Prosecutors said he was “aided and abetted by others.†In this document, the National Futures Association, which also filed an action that references Cook, asserted that $75 million from a purported Swiss fund may have been directed at a mysterious investor known only as “Fased.”
The purported payment occurred while Cook, a Minnesota resident, allegedly was managing money for a Canadian company known as KINGZ Capital Management Corp. KINGZ name also has been linked to an autosurf known as AdViewGlobal (AVG), which had close ties to an autosurf known as AdSurfDaily (ASD).
On May 4, 2009 — on the same day the Obama administration announced a crackdown on international financial fraud — AVG announced that KINGZ had become its facilitator for international wire transfers. KINGZ denied the assertion, saying it believed it had been targeted in a scam. The company painted the picture that AVG was attempting to route money to itself through a U.S. shell company.
AVG purportedly operated from Uruguay.
Florida-based ASD, which members said was popular in Minnesota, was implicated in August 2008 by the Secret Service in a Ponzi scheme. A federal judge has issued orders of forfeiture totaling more than $80 million in the ASD case. ASD used at least three names, according to records: AdSurfDaily, AdSalesDaily, and ASD Cash Generator.
Prosecutors also linked ASD to at least two other autosurfs: LaFuenteDinero (the “fountain of money”) and Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.
In February, the U.S. Secret Service alleged that Minnesota resident Steve Renner was operating a Ponzi scheme through a company known as INetGlobal and companies related to the firm. The scheme, the Secret Service said, largely targeted Chinese members who may have little or no facility in English.
Renner denies the allegations. Prosecutors described the case as a “major fraud and money laundering investigation,” saying INetGlobal came to life during a period in which federal agents were seizing tens of millions of dollars in the ASD case amid Ponzi, wire-fraud and money-laundering assertions.
An ASD member introduced an undercover Secret Service agent to INetGlobal, the agency said in court filings.
Other recent fraud cases in Minnesota include the Gerard Cellette Jr. Ponzi case ($53 million); the Charles “Chuck†E. Hays case ($20 million); and the Kalin Thanh Dao case (up to $10 million).
The court-appointed receiver in the fraud case against the parent company of the Noobing autosurf has asked a federal judge for the authority to add Noobing to the receivership probe.
Larry Cook, the receiver, said that Noobing and 14 other companies under the Affiliate Strategies Inc. (ASI) umbrella have become the subjects of “numerous inquiries” from “tax authorities,” creditors and “former independent contractors.”
Cook did not identify specific parties that made inquiries, but noted that “each of the Subsidiaries used the same post office box as the Receivership Defendants.”
Noobing targeted people with hearing impairments in its promotions. It is known that some Noobing members have contacted the Federal Trade Commission, which is spearheading the ASI probe, along with the attorneys general of Kansas, Minnesota, North Carolina and Illinois.
At least one deaf member of Noobing says she has contacted a sheriff’s department in California about the company.
News that Cook is seeking judicial approval to add Noobing to his receivership probe came on the same day that the U.S. Secret Service said it was conducting an intense probe of INetGlobal, which operated a Minneapolis-based autosurf.
In an application for a search warrant in a Ponzi case against INetGlobal, the Secret Service referenced the AdSurfDaily Ponzi scheme case, saying a member of ASD had attempted to recruit an undercover Secret Service agent into the INetGlobal scheme.
ASD members and members of a closely connected surf known as AdViewGlobal also promoted Noobing, as did INetGlobal members, according to web records.
Steve Renner, the owner of INetGlobal, was convicted in December of four felony counts of income-tax evasion for his conduct with other companies earlier this decade.
Autosurfs are notorious for keeping poor records or no records at all, and autosurf participants are notorious for engineering schemes to milk tax-free income.
Cook said tax reporting is required, and is seeking an order that pertains to Noobing and 14 other ASI umbrella companies. Cook listed Noobing’s name at the top of the list.
“In order to complete the tax reporting requirements and otherwise address the creditors’ and other claims, the Receiver seeks a clear order that he is the Receiver for the Subsidiaries,” Cook said.
And, he added, “Counsel for the [FTC] has reviewed this Motion and concurs.”
ASI and a number of companies were sued last year in a scheme involving government grants. Noobing went offline in the immediate aftermath of the FTC probe.
UPDATED 10:40 A.M. ET (U.S.A.) Federal and state agents have raided the Minneapolis offices of Inter-Mark Corp., seeking evidence of a Ponzi scheme, the Star Tribune of Minneapolis/St. Paul is reporting.
Inter-Mark Corp. is operated by Steve Renner, who also operates a purported “advertising” service known as INetGlobal. In a scene that resembled the August 2008 raid at the headquarters of Florida-based AdSurfDaily, agents in Minnesota were seen carting boxes of documents and computers.
ASD was implicated in a $100 million Ponzi scheme.
Renner has been under investigation for at least 17 months and likely longer. He was indicted on charges of tax evasion in September 2008, about a month after the ASD raid. He was convicted in December 2009 of evading more than $332,000 in taxes between 2002 and 2005.
Renner, 54, “diverted substantial funds from his business, Cash Cards International (CCI), between 2002 and 2005 to pay his personal living expenses as well as to make personal investments in coins, oil wells, art, stamps, and vintage musical instruments,” prosecutors said in December.
He also used CCI funds to promote his musical band, “Stevie Renner and the Renegades,†prosecutors said.
“From 2001 to 2006, Renner owned CCI, an Internet-based stored-value card and money
transmission business, with locations in Minnesota, South Dakota, and Hawaii,” prosecutors said. “Although he was legally obligated to file federal income tax returns and pay all federal taxes owed, he failed to file his income tax returns with the Internal Revenue Service for tax years 2002 through 2004 until March 5, 2006, the date on which he also filed his 2005 federal income tax return.”
“Tax evasion is not a victimless crime,†said Julio La Rosa of the IRS, upon Renner’s conviction.
“Honest, hardworking taxpayers pay the price when others choose to evade their tax obligations,” La Rosa said. “As this verdict shows, those that cheat will get caught.â€
Renner faces up to 20 years in federal prison in the tax case.
Renner also is associated with a domain known as AdPacs.com, which is throwing a server error. It is believed that AdPacs promoters also promoted the AdViewGlobal (AVG) autosurf, which had close ties to ASD.
Affiliates of Steve Renner's AdPacs.com pushed AdViewGlobal just prior to its February 2009 launch. This screen shot of search result that appeared online more than a year ago lists the name of Juan Fernandez, the CEO of AdSurfDaily. ASD is implicated in a $100 million Ponzi scheme. AVG launched AFTER the federal seizure of tens of millions of dollars in the ASD case. Like ASD President Andy Bowdoin, Fernandez took the 5th Amendment at an evidentiary hearing in September 2008. Now, Renner's company is the subject of a major federal probe. ASD sold "ad-packs." AVG referred to its version of "ad-packs" as "viewer impressions" after the phrase "ad-packs' became radioactive.
As was the case with the ASD raid in Florida, local media caught the events at Renner’s office yesterday on video. Minnesota has been plagued by Ponzi schemes. Some ASD members from Minnesota have been among the loudest advocates for ASD President Andy Bowdoin.
The Minnesota Financial Crimes Task Force assisted in the raid.
Earlier this month, the Secret Service announced the formation of an Electronic Crimes Task Force (ECTF) based in Memphis. The agency also has ECTFs in St. Louis, Kansas City, New Orleans and Europe.
“One of the top priorities for the Secret Service continues to be combating the computer
related crimes perpetrated by domestic and international criminals that target the U.S.
financial infrastructure,†said Secret Service Director Mark Sullivan.
“The Secret Service, in conjunction with its many law enforcement partners across the United States and around the world, continues to successfully combat these crimes by working closely with experts from all affected sectors to constantly refresh and adapt our investigative methodologies.â€
UPDATED 12:01 P.M. ET (U.S.A.) Has the pressure of being challenged on multiple legal fronts led to a split in the extended family of AdSurfDaily President Andy Bowdoin?
The depths of any split are unclear, and it is believed that Bowdoin has the continued support of some members of the Bowdoin/Harris family.
But interviews conducted by the PP Blog and information obtained through sources suggest Bowdoin is unable to travel internationally, no longer is living in Quincy, Fla., does not enjoy the uniform support of the extended Bowdoin/Harris family and has been blamed by some for engulfing them in the flames of a legal nightmare.
At least one family member has contacted federal prosecutors, according to a source. How prosecutors responded to the overture, which was said to have been made in the summer of 2009, is unclear.
On Saturday, numerous vehicles were parked at a Florida property associated with Bowdoin’s wife, Edna Faye Bowdoin, according to a source. Edna Faye Bowdoin is the mother of George Harris, the reputed co-owner of Bowdoin/Harris Enterprises and the AdViewGlobal autosurf, as well as the head of ASD’s purported “real-estate” division.
Several women were present, but Bowdoin was not seen, the source said.
A second source knowledgeable about the Bowdoin/Harris family described the family as a “family divided.” The PP Blog interviewed the second source in August 2009, and has not published comments from the interview until today.
The source spoke with the PP Blog on the condition of anonymity, and demonstrated knowledge of the family by voluntarily answering questions posed by the Blog prior to the interview and during the interview. The Blog was satisfied that the source could offer insight into the thinking of certain family members.
“There is already an unbelievable amount of friction in the family right now because of everything that Andy has done,” the source said. “This is very much a family divided.”
Less than a month after the Blog conducted the interview, the state of Florida revoked the corporate registrations of ASD and Bowdoin/Harris Enterprises Inc. because neither company filed annual reports despite the continuing presence of active litigation involving both firms and despite being given a five-month window to file required documents.
Neither Bowdoin nor family members explained why the corporate registrations were permitted to lapse. Only four days prior to the revocation, which could have been prevented by the simple filing of papers, Bowdoin told ASD members in a conference call that he had big plans for ASD.
On the same date Florida revoked the corporate registrations — Sept. 25, 2009 — federal prosecutors turned up the heat on Bowdoin by accusing him in court filings of trying to lie his way back into the federal forfeiture case against ASD’s assets.
Prosecutors made a veiled reference to AdViewGlobal in their filings, saying Bowdoin perhaps “was just buying time while searching for a different exit strategy that failed to materialize. Maybe Bowdoin thought that before the government brought its charges he (like some of his family members) could move to another country and profit from a knock-off autosurf program that Bowdoin funded and helped to start.”
Three days later, on Sept. 28, prosecutors turned up the heat again, filing a Secret Service transcript of an ASD conference call and advising a federal judge that Bowdoin was telling her one story and members another.
In the weeks that followed, U.S. District Judge Rosemary Collyer ruled that Bowdoin no longer had standing in the case. Bowdoin then attempted unsuccessfully to have Collyer removed as the judge.
Collyer has granted the government’s forfeiture petition in a case filed in August 2008 involving tens of millions of dollars. Bowdoin now is seeking a reversal of that order, claiming it came as a result of judicial error. Prosecutors, however, said the judge did not err and that Bowdoin’s arguments are “impenetrably illogical.”
Purportedly headquartered in Uruguay, AdViewGlobal, which crashed and burned in June 2009, had close family, membership and promotional ties to ASD.
In the August 2009 interview, the source described George Harris and his wife, Judy Harris, as “very worried.”
“Judy heard that the Secret Service was staring to investigate [AdViewGlobal,]” the source said.
Certain family relationships are fractured beyond repair, the source said.
“These relationships are done,” the source said. The source said that paranoia was gripping certain family members and that there were efforts to compartmentalize knowledge and limit use of the telephone.
“They became very shady,” the source said.
Andy Bowdoin led family members and members of ASD and AdViewGlobal down the primrose path, the source said.
AdViewGlobal was described by Bowdoin as a “wonderful idea,” the source said, noting that Bowdoin described the successor autosurf as ASD with tweaks.
AdViewGlobal launched after ASD’s assets were seized amid Ponzi, wire-fraud, securities fraud and money-laundering allegations.
Andy Bowdoin wanted to proceed with AVG, according to the source, “because, with a few little tweaks, this company can make it.”
In June 2009, less than a year after ASD’s assets were seized, AdViewGlobal announced a suspension of cashouts, exercising its version of a “rebates aren’t guaranteed” clause.
How much money the surf collected and how much it paid out are unclear.
David Krywenky of KINGZ Capital Management: Source: Marketwire
UPDATED 5:25 P.M. ET (U.S.A.) KINGZ Capital Management Corp. (KCM) might have been used or contemplated for use as a tool in two far-reaching, incredibly elaborate Ponzi schemes, according to an analysis of public records and other information.
One of the schemes ultimately appears to have consumed tens of millions of dollars in a squalid venture that used a royalty theme trading off the name “Crown.” It involved purported forex trading in Switzerland under the name “Crown Forex SA” and an American namesake called “Crown Forex LLC” allegedly set up to confuse investors and perhaps authorities.
The other scheme, which appears to have been nipped before it could mushroom on a grand scale, sought to kickstart a rapidly collapsing autosurf believed to be an offshoot of an existing criminal enterprise desperately seeking to extend its reach from the United States into the Caribbean, Central America, South America and perhaps Europe to keep itself alive.
The first scheme, which included other confusingly similar corporate names such as Oxford Global Partners LLC and Oxford Global Advisors LLC, became the subject of fraud charges filed by the SEC and the CFTC in November. Investors appear to be out tens of millions of dollars.
Charged in the $190 million November case were Trevor Cook, former Christian radio host Pat Kiley and several other companies. The allegations paint the picture that Crown Forex LLC set up a U.S.-based bank account to siphon money investors believed was destined for the Swiss entity, which they knew as Crown Forex SA.
“Cook and [Pat] Kiley, directly and acting through others, deposited checks from many investors, into a U.S. bank account in the name of a domestic shell company, with a name — Crown Forex, LLC –Â that was misleadingly similar to the Swiss firm Crown Forex, S.A.,” the SEC said.
Cook was jailed earlier this week for violating a court order that required him to turn over assets.
Separately, the National Futures Association (NFA) charged KCM in September with permitting Cook — who was not accredited and previously was disciplined by NFA for highly questionable business practices — to manage a KCM fund that purportedly contained “somewhat above and below $300 million” between September 2008 and July 2009.
KCM now has been permanently banned from NFA membership. David Krywenky, KCM’s vice president, has been banned for three years.
It’s anybody’s guess how much money the fund actually contained and what happened to the money. The SEC, the CFTC and a court-appointed receiver are turning over numerous domestic and international rocks to find assets of Cook and Kiley’s alleged epic fraud.
NFA’s allegations against KCM are disturbing. Not only was Cook managing a KCM pool known as KCI, according to the allegations, Cook’s Oxford Global Partners “appeared to be the only investor” in the KCI pool and all of the pool’s money was dumped into Crown Forex SA, a company in which Cook purportedly owned a majority stake and a company Swiss authorities declared bankrupt.
Was Cook At The Intersection Of A Second Scheme?
The second scheme to which KCN’s name has been linked was called AdViewGlobal (AVG), an autosurf purportedly headquartered in Uruguay but believed actually to have operated from inside the United States, most likely from Florida but perhaps also from Arizona. Autosurfs pose as “advertising” companies to skirt securities laws, authorities say.
AVG had close family, membership and promoters’ ties to AdSurfDaily, a Florida company implicated by the U.S. Secret Service in a $100 million Ponzi scheme. Federal prosecutors are well aware of AVG. So are attorneys suing ASD President Andy Bowdoin and ASD attorney Robert Garner for racketeering.
KCM’s tie to AVGÂ — according to AVG — was as the surf’s new facilitator of offshore wire transfers after AVG earlier had lost access to a bank whose name was not disclosed. AVG, among other things, claimed to own a payment processor known as eWalletPlus.
Records suggest eWalletPlus was an extension of corporate shells in Nevada and Arizona. At least two other companies claimed to own eWalletPlus during the same time period in which AVG claimed ownership. In March 2009, AVG announced its back account had been suspended. Problems with eWalletPlus were reported at the same time.
AVG identified KCM as its new wire facilitator on May 4, 2009, the same day the Obama administration announced a crackdown on international financial fraud. KCM denied AVG’s claim on May 7, saying it believed AVG had targeted it in a scam and perhaps was tying to use a third company based in Florida to route money to itself.
KCM identified the third company as Living Legacy One LLC. Records in Florida identified Gerald Castor as Living Legacy One’s principal, and a communication from AVG identified Castor as an employee of the surf’s “Compliance” department.
Michael P. Krywenky, David Krywenky’s father, denied any AVG ties in an interview with the PP Blog. The interview was conducted in May 2009, after Michael Krywenky contacted the Blog and asked it to remove a story citing AVG’s wire claim.
The Blog declined to remove the story. Instead, it published a story about Michael Krywenky’s denial. The story was based on an interview the Blog conducted with Michael Krywenky and an email Michael Krywenky sent the Blog on May 7, 2009.
“I think that we may be victims of a scam here and we are investigating this further at our end as well,” Michael Krywenky said in the email. “Thank you for bringing this to our attention. In the meantime, we please (sic) remove this posting since it contains false information that is detrimental to our company.”
A month later, in June 2009, the SEC began to investigate the Cook/Kiley entities. By September 2009, the NFA was accusing David Krywenky and KCM of permitting Cook to manage an investment fund and not making a claim for money lost when the Swiss entity went bankrupt.
Whether NFA questioned David Krywenky and KCM about AVG is unclear.
“KCM and D. Krywenky failed to act in the best interests of KCI’s participants, both known and unknown, in that when they knew or should have known that funds on deposit at Crown Forex, SA were frozen pursuant to that firm’s bankruptcy they took no action on behalf of the KCI pool to participate in the bankruptcy as a creditor or otherwise protect KCI’s equity,” NFA said.
NFA further accused David Krywenky and KCM of turning a blind eye to Cook, now implicated with Kiley in a colossal fraud.
AVG, which shielded members from knowing the identities of its owners by signing communications “The AVG Management Team,” never explained how it had identified KCM as a possible facilitator. The surf also ignored Michael Krywenky’s public denial that it had any business relationship with AVG, explaining that the wire deal it had announced as completed only days earlier — up to and including providing detailed wiring instructions — had fallen through as a result of failed negotiations.
Meanwhile, the surf also did not address Michael Krywenky’s claim that AVG appeared to be trying to route money to itself through Living Legacy One, the entity associated with Castor.
Michael Krywenky said KCM was consulting with attorneys to address AVG’s false claims and that the company had taken steps to ensure AVG could not receive money through KCM. AVG spent the balance of May promoting the launch of a new website and telling both prospects and recruiters that they could earn matching bonuses of 200 percent for sending money to the company or causing money to be sent to it.
Like ASD, AVG used offshore payment processors such as Canada-based Solid Trust Pay.
AVG collapsed in June, taking an unknown amount of money with it. Before the collapse, AVG identified George and Judy Harris of Tallahassee, Fla., as its owners. They previously had been identified as “Trustees” of AVG’s “private association,” which had cited U.S. Constitutional protections while purporting to he headquartered in Uruguay.
AdSurfDaily members later said ASD President Andy Bowdoin was a silent partner in AVG, claiming that Bowdoin had dispatched George Harris to Switzerland to establish bank accounts.
George Harris is Bowdoin’s stepson. The Harrises were named beneficiaries by the U.S. Secret Service of ASD’s illegal conduct in December 2008. AVG formally launched two months later, in February 2009, after the Harrises and Bowdoin’s wife, Edna Faye Bowdoin, had been named recipients of ill-gotten ASD gains — and after a major court ruling went against ASD, and after Bowdoin had been named a defendant in a racketeering lawsuit brought by members.
In May 2009 — the month during which AVG purportedly had turned to KCM to establish a wire facility and during a period in which Trevor Cook allegedly was managing money for a KCM entity known as KCI — the alleged Cook/Kiley Ponzi scheme appears to have been collapsing.
Cook has not been publicly linked to AVG. At a minimum, however, someone within AVG appears to have identified Barbados-based KCM as a solution to the company’s wire problem — and the NFA allegations establish a tie between KCM and Cook.
At least for a few days in May 2009, AVG was sufficiently confident that its wire problem was solved, so much so that it provided members detailed wire instructions with KCM’s name and an account number.
Given the nature of NFA’s allegations that Cook somehow had wormed his way into KCM’s purported forex operations with KCM turning a blind eye, it is reasonable to ask whether Cook also somehow had wormed his way into an intersection at which he could have cherrypicked funds from other KCM customers — and whether AVG and other autosurfs and HYIPs had turned to KCM to solve domestic banking and wire problems.
Investigators might be interested in determining if Cook somehow positioned himself to cherrypick fresh autosurf cash and apply it to his alleged existing Ponzi scheme, thus funding it with proceeds from other Ponzi schemes. Indeed, it is reasonable to ask if Cook’s influence with KCM extended from the forex fund to other areas of the business.
Why?
Because KCM, which became an NFA member in November 2007, issued two news releases less than a year later — in October 2008 — announcing it was managing more than $330 million. In a release dated Oct. 15, 2008, KCM said it had “received investment subscriptions of $334,263,000.” In a release eight days later — on Oct. 23, 2008, KCM said “clients who participated in their first raise of just over $330 Million US . . . have reported a very steady and consistent cash flow and rate of return.”
The Star-Tribune of Minneapolis/St. Paul, quoting a lawyer for KCM, reported in November 2009 that Cook offered to provide KCM start-up funding. KCM executives met Cook at a function in West Palm Beach, Fla., according to the attorney. Florida has become Ground Zero for Ponzi schemes.
A Mysterious Investor
NFA asserted in this filing that Cook perhaps peeled off $75 million from the purported Swiss fund and directed it to a mysterious investor. Cook also was alleged to have changed “passwords” on KCI “accounts” as part of the scheme.
KCM, according to the NFA allegations, “permitted Cook to effectuate a purported $75 million withdrawal from KCI’s trading accounts for a purported [Oxford Global Partners] investor who was identified to them by Cook only as “Fased.”
KCM is said to be cooperating with investigators from more than one state and federal agency.
It is unclear if “Fased” is a person, a business, an acronym, a proper name, a misspelling of the word “phased” or a slang spelling of “phased,” an amalgamation of some sort or a complete fiction.
What is clear is that Cook allegedly was managing money for KCM, a company to which AVG said it had turned last year to facilitate offshore wire transfers. AVG’s announcement — and the subsequent actions by the NFA, the SEC and the CFTC, may put KCM at the intersection of two murky worlds — the worlds of underground currency-trading schemes and offshore autosurf and HYIP schemes that promise enormous returns.
It’s worth investigators’ time to check it out — if for no other reason than to rule out the possibility that Cook also was playing the autosurf and HYIP games either as an investor or by somehow positioning himself at an intersection in these noxious worlds to siphon funds and divert them to his alleged principal Ponzi scheme.
What’s more, an HYIP known as Gold Nugget Invest (GNI) collapsed earlier this month, several weeks after NFA brought its action against KCM, and the SEC and CFTC brought their actions against Cook and Kiley.
GNI reportedly was having trouble accessing needed funds in a European bank, but announced a “Re-organization” plan that would reduce payouts from 7.5 percent a week to a mere 20 percent a month.
No, it’s not a misprint. GNI purportedly launched in October 2006, the same month AdSurfDaily was preparing for launch. ASD promoters advertised returns of 1 percent a day for viewing “advertisements.” Prosecutors said it operated as a virtually pure Ponzi scheme.
Some GNI members have referred to money — or representations of money — in their “ewallets.” It is unclear if the “ewallets” to which they refer have any connection to eWalletPlus or if the term “ewallet” is being used as a generic.
What is clear is that HYIP, autosurf and forex schemes have many players in common — and that tremendous sums of money go missing routinely.
UPDATED 1:18 P.M. ET (U.S.A.) A company that denied any ties to the AdViewGlobal autosurf after AVG listed it as a facilitator of offshore wire transfers has been permanently banned by the National Futures Association (NFA) amid allegations that it failed to uphold high ethical standards and failed to supervise its operations.
KINGZ Capital Management Corp. (KCM), which operates in Barbados and has corporate officers in Canada, was banned as a result of permitting Trevor Cook to manage an investment pool, according to NFA.
Cook is one of the two central figures in the alleged Cook/Pat Kiley Ponzi scheme in Minnesota.
AdViewGlobal (AVG) is not mentioned in NFA’s Business Conduct Committee complaint against KCM and its vice president, David M.S. Krywenky.
Michael P. Krywenky, president and chief executive officer of KCM, issued a public denial in May that KCM had any ties to AVG. Michael Krywenky’s denial came after AVG identified KCM as a newly acquired facilitator of offshore wire transfers.
AVG made the announcement that KCM was facilitating wire transfers on the same date — May 4, 2009 — the Obama administration announced a crackdown on international financial schemes. Three days later, on May 7, 2009, Michael Krywenky told the PP Blog that KCM had no connection with AVG, suggesting that AVG had tried to route money to itself through an account in the name of a separate company, Living Legacy One LLC of Florida.
Link To Alleged Cook/Kiley Scheme
David Krywenky let Cook take control of an offshore investment pool that a KCM-related entity known as KCI was supposed to be operating, according to NFA’s complaint. Cook was neither an NFA member nor properly registered with the Commodity Futures Trading Commission (CFTC), NFA charged.
NFA is a self-regulatory body.
“In July 2009, NFA received information that indicated that KCM had links to an intertwined group of NFA Member and non-NFA Member entities and individuals that had come under some scrutiny because of difficulties that some investors had encountered in trying to retrieve their investments,” NFA said in a Sept. 30 charging document.
As its investigation proceeded, NFA learned that a Cook-controlled entity — Oxford Global Partners — “appeared to be the only investor in KCM’s KCI pool and that all of the pool’s money had purportedly been deposited with an entity named Crown Forex, SA, a non-NFA Member firm that is regulated by the Swiss Financial Market Supervisory Authority and that was put into bankruptcy by that body in May 2009,” NFA said.
Cook and Kiley later were implicated in an alleged Ponzi- and forex-fraud scheme involving at least $190 million, according to the SEC and the CFTC. A federal judge jailed Cook earlier this week until he turns over tens of millions of dollars linked to the alleged Cook/Kiley scheme.
NFA charged KCM with “cheating, defrauding or deceiving another person or attempting to do so.” The company consented to the permanent ban without admitting or denying the allegations.
David Krywenky also was charged with failing to uphold high ethical standards and failing to supervise. Like KCM, he neither admitted nor denied the allegations.
Should David Krywenky wish to become an NFA associate after his ban, he’ll be required to pay a fine of $25,000, NFA said.
AdViewGlobal Cited KCM Tie In May
In March 2009, AVG announced its bank account had been suspended because too many participants had wired transactions in excess of $9,500. The surf said it was working on a remedy.
Its purported remedy — routing wire transfers to itself with KCM as a facilitator — was announced with great fanfare on May 4, only hours after Obama appeared on national television to announce a crackdown on offshore fraud schemes.
AVG provided specific, detailed wiring instructions. Members were given the instructions under a headline titled, “BREAKING NEWS Fund your Advertising.†The instructions appeared on an AVG forum operated by some of the Mods and members of the Pro-AdSurfDaily Surf’s Up forum.
The instructions later were deleted, AVG members said. AVG never addressed KCM’s denial, choosing instead to explain that negotiations it had described as completed had broken down.
By June 25, AVG announced it was suspending members cash-outs and exercising its version of a “rebates aren’t guaranteed” clause, thus empowering itself to keep all money previously sent in by members who were expecting to receive not only 100 percent of their money back, but also a profit. AVG has close ties to AdSurfDaily, implicated in a $100 million Ponzi scheme.
Critics observe that the “rebates aren’t guaranteed” clause effectively is a license to steal. Autosurfs, which operate as virtually pure Ponzi schemes and position themselves as “advertising” companies, dangle the promise or suggestion of an investment return, sometimes gathering tens of millions of dollars.
Investigators say such clauses are designed to skirt securities laws.
EDITOR’S NOTE: This list summarizes several programs pushed by members of AdSurfDaily, a Florida company implicated in an alleged $100 million Ponzi scheme. In some cases, the programs were pushed prior to the seizure by the U.S. Secret Service in August 2008 of 15 bank accounts linked to ASD or Golden Panda Ad Builder, one of the companies implicated in the ASD scheme. Each of the programs listed below came to a dubious end or continue to exist in an unclear, shadowy form. This list is presented in no particular order and does not include every HYIP/autosurf pitched by ASD members.
UPDATED 3:16 P.M. ET (U.S.A.)
Gold Nugget Invest (GNI): Collapsed Friday. HYIP. Government of Belize issued warning in November. Ownership hidden behind proxy. Business model unclear. Presented as betting arbitrage, but perhaps was involved in forex. Advertised payout of 7.5 percent per week. Possibly linked to European banking investigation. Changed rules on the fly. Still collecting money after “Re-organization.” Purportedly launched in October 2006, the same month ASD was preparing for launch.
Genius Funds/Cash Tanker/Saza Investments: Pushed by ASD member “joe” in a post on the ProASD Surf’s Up forum just prior to collapse of GNI. CashTanker, which used a graphic depicting Jesus, now has tanked after advertising payouts of 2 percent a day. “joe” pitched GNI, Genius Funds, Cash Tanker and Saza Investments in an egg-themed promotion in which the word “egg” was used in domain names that redirected to the HYIPs. “joe’s” egg-themed domain that redirected to Cash Tanker now redirects to a program called PTV Partner, an HYIP that bills itself “The Ultimate High Yield Asset for your Financial Portfolio!” “joe’s” egg-themed pitch was based on the screaming notion that “ALL MY EGGS ARE NOT IN ONE BASKET. I MAKE $2000.00 A WEEK.†A street address for the egg-themed domains corresponds to an address in a federal lawsuit involving cell-phone trafficking.
Regenesis 2×2: Matrix in Seattle area. Records seized by U.S. Secret Service in July 2009. Operators kept under surveillance for five weeks. Multiple search warrants issued. Discarded records found in Dumpster. Sold “commission centers†for $325. Touted itself the “THE ECONOMIC STIMULUS PLAN FOR YOU.†Site appears to have been registered behind a proxy in Europe. Jeffrey William Snyder, one of the individuals kept under surveillance, was a convicted felon on probation for a previous securities scheme.
GoldenPandaAdBuilder: So-called “Chinese” version of ASD. Assets seized in two forfeiture complaints in ASD case. Operated by Clarence Busby of Georgia. Records in now-dismissed RICO lawsuit against Busby identified him as “Rev.” at least 120 times. Busby was implicated by SEC in 1990s in three prime-bank schemes that promised enormous payouts. Purportedly became Golden Panda president after going fishing with ASD President Andy Bowdoin in April 2008. Federal judge ordered forfeiture of more than $14 million from Golden Panda in July 2009. Busby now purported “chief consultant” of BizAdSplash (BAS). Ceased payouts in July 2009, after declaring “crisis” and claiming members were overpaid. Went offline. Returned online. Went offline again for about two weeks during 2009 Holiday season. Now back online.
BizAdSplash (BAS): (Also see GoldenPanda entry above.) BAS launched in aftermath of seizure of assets in ASD/GoldenPanda case. Assets seized in civil complaints in ASD/GoldenPanda case total about $80.52 million. Clarence Busby purported to be chief consultant of BAS. BAS touted purported offshore registration in Panama. Georgia corporation records show version of surf’s name used address of UPS Store No. 2644 in Kennesaw, Ga.
Noobing: Pitched as alternative to ASD after seizure. Noobing targeted deaf people. Deaf member says she reported Noobing to FBI and sheriff’s department in California. There are recent suggestions that deaf members also reported Noobing to SEC. FTC and attorneys general of Minnesota, Kansas and North Carolina joined in suing Affiliate Strategies Inc. (ASI), Noobing’s parent company, in alleged scheme offering guaranteed government grants from economic stimulus funds. Illinois now has joined the FTC action. Original lawsuit filed in July 2009. Like ASD, ASI owned a jet ski. Court-appointed receiver sold it at auction. Receiver performed a preliminary exam of Noobing’s records and determined surf was upside down by approximately $550,000. Noobing gathered money in aftermath of seizure of ASD’s bank accounts. Surf slashed payouts in early 2009, citing unclear ruling in ASD case. Site offline since FTC lawsuit, which did not name Noobing.
DailyProSurf (DPS): DPS is a largely unknown and mysterious surf site registered by ASD President Andy Bowdoin in August 2006, about two months prior to the formal birth of ASD. Records suggest DPS operated prior to registration, although its ownership was unclear. (NOTE: The story in the DPS link in this paragraph also contains information on 12DailyPro and PhoenixSurf, two surfs sued successfully by the SEC.)
AdVentures4U (ADV4U): Surf tanked in August 2009. Reportedly had more than 60,000 members. Members identified Steve R. Smith as owner. Smith also purported owner of venture called TradingGold4Cash. In confusing note to ADV4U members, Smith purportedly said his family received threats. Used ASD-like “rebates aren’t guaranteed” excuse upon payout suspension. Urged members not to contact payment processors. Site reportedly conducted business with hotmail address.
CEP: Judicially declared Ponzi scheme. Smashed by SEC. ASD once advertised it accepted funds through CEP Trust, the payment processor associated with the CEP Ponzi scheme.
MegaLido: Pushed by ASD members in aftermath of seizure of ASD’s assets and positioned as a safe, “offshore” alternative, MegaLido tanked late in 2008, during the Christmas season, a few months after the ASD seizure. MegaLido purportedly had 27,000 members. MegaLido might have had a tie to Instant2U, another surf that tanked during the 2008 Holiday season. “MegaLido Rocks!†one ASD promoter blared, noting excitedly that it paid 12 percent a day and “It’s Offshore!†Instant2U advertised 14 percent a day.
Frogress: Pitched by ASD members in aftermath of seizure. Frogress tanked in January 2009, just after the Christmas holiday in 2008.
DailyProfitPond: Another surf pitched by ASD members in aftermath of seizure. DailyProfitPond tanked in December 2008, in the days leading up to Christmas. One DailyProfitPond promoter said it was possible to start with $12 and turn it into $12,000. The “return†was listed as 150 percent over 30 days.
AdViewGlobal (AVG or AVGA): Surf with ASD/Bowdoin ties. Formally debuted in February 2009, with a push from the now-defunct Pro-ASD Surf’s Up forum and ASD members. Tanked in June 2009 after collecting untold millions of dollars.
Perhaps one of the most bizarre autosurfs ever to enter the “industry.” Switched to “private association” structure after reportedly meeting with felon convicted in a 1990s securities scheme. Cited U.S. Constitutional protection despite purported headquarters in Uruguay.
AVG disclaimed any ties to ASD, despite fact its CEO was a former ASD executive who submitted a sworn affidavit in the ASD case. Issued news release disclaiming ASD ties; release was signed by an ASD employee who had testified in federal court for ASD in 2008. Said the fact AVG’s graphics appeared on ASD-controlled website was “operational coincidence.”
Announced bank account “suspension” in March 2009, blaming it on members who wired too many transactions in excess of $9,500. Announced CEO resignation, saying CEO would remain in “accounting” department. Announced new wire facility as done deal in May 2009. Company it identified as wire facilitator issued public denial, suggesting AVG was trying to funnel money to itself through a shell company.
Shell company operated by man with two large bankruptcy filings, including one in which an address listed as an apartment was the address of a mail drop. Purported AVG “compliance” department head was sued twice in 2008 for noncompliance with federal law. AVG claimed to own eWalletPlus payment processor. Actual eWalletPlus ownership far from clear. At least two people close to AVG money had spectacular bankruptcy filings. Andy Bowdoin, whom members later said was AVG’s silent head, was arrested for felony securities violations in the 1990s and entered guilty pleas.
AdGateWorld (AGW): Now-defunct surf launched after ASD seizure. Later purportedly sold to interests in the “Middle East.” Claims cannot be verified. AGW linked to ASD member Jack Schrold, a Florida attorney once suspended from the Florida bar for misconduct. Schrold was sued successfully by the FTC for the actions of his credit-repair firm, and also was convicted separately of knowledge of the commission of conspiracy and wire-fraud. AGW announced its death as “End of Dream.” Blamed members in announcement: “This honest and legitimate approach using the advertising rebate model apparently did not meet the expectations of the herd mentality.â€
PaperlessAccess: Mysterious upstart surf. ASD President Andy Bowdoin appeared in a video for Paperless Access in 2009, after the ASD seizure. Video appeared online in March 2009 — during time frame in which AVG was announcing bank-account suspension and the departure of its CEO. PaperlessAccess positioned as way for ASD members to regain money seized by the government. Bowdoin did not identify the owners of Paperless Access, describing them only as a small group of people. Nor did Bowdoin mention that the government was establishing an ASD refund program.
PremiumAdsClub (PAC): Tanked in February 2009. Members said it collected money right up to the end.
AggeroInvestment: Had PAC ties. Advertised 60 percent a month, plus bonuses. Collected money to the bitter end.
QBusinessSolution: Surf with purported ties to former ASD executive Juan Fernandez, who took the 5th Amendment in the ASD forfeiture case. # # #
UPDATED 11:50 A.M. ET (U.S.A.) There were reports yesterday that things have become so strange at Florida-based AdSurfDaily that a convicted sex offender has emerged as a sort of PR voice for the company. ASD is implicated by the Department of Justice in a $100 million Ponzi scheme, amid allegations of wire fraud, money-laundering and the sale of unregistered securities. Two forfeiture complaints filed against the firm in 2008 also cite a racketeering statute.
After 17 months, more than 165 court filings — some of which can only be described as bizarre — and more than $1 million spent on legal fees by ASD President Andy Bowdoin, the company lost one of the forfeiture cases this week. It was filed by federal prosecutors and the U.S. Secret Service in August 2008, and is the “bigger” of the two cases.
“Bigger,” of course, is a relative term. For the purposes of this post, “bigger” is defined only as involving more money. A second forfeiture case filed by federal prosecutors and the Secret Service in December 2008 involves less money — but is equally grave. In some ways, the second case, which had not been adjudicated to conclusion but may be soon, is even graver than the August 2008 case. The December case defines Bowdoin family members and unnamed others as the beneficiaries of ASD’s fraud. The December case puts the alleged beneficiaries of the fraud squarely in the sights of a potential criminal prosecution for felonies that could lead to prison time.
We believe Bowdoin is more worried about the December case than he is the August case — even though no claims ever were filed in the December case. The names of his wife, his stepson and his stepson’s wife are mentioned repeatedly and prominently in the December case. Prosecutors also have hinted that they are very well aware of the AdViewGlobal (AVG) autosurf, which has Bowdoin family and promotional ties and rose to early prominence after ASD’s assets were seized, a racketeering lawsuit was filed against Bowdoin, a key court ruling went against ASD — and after Bowdoin had chosen to surrender his claims to the money seized in the August 2008 complaint.
Bowdoin then changed his mind, attempting to reassert his claims to the money seized in the August complaint by re-entering the case as a pro-se litigant. Bowdoin’s former paid counsel — a prominent law firm — informed the court that Bowdoin did not consult with it before filing the series of pro se motions.
None of Bowdoin’s pro se motions made an ounce of sense. They were so unclear, in fact, that the judge had to construe a meaning, which is to say what Bowdoin was attempting to do was not clear on the face of the motions. At one point, he appears to have attempted to reverse a decision he never made — namely, to submit to the forfeiture outlined in the December 2008 case. Bowdoin did not file a single document to gain standing in the December case or to make a claim — in fact, no potential claimant did.
And yet Bowdoin seems initially to have tried to overturn a forfeiture to which he never had submitted. Only later did Bowdoin file a specific pro se motion to overturn the August forfeiture. ASD members were so fixated on the August complaint — the “bigger” one in money terms — that they missed the nuclear danger of the December complaint. Lots of potential jail time is described in the December complaint.
Here is Bowdoin’s initial pro se filing to rescind the forfeiture, which was entered into the record Feb. 27, 2009. This motion addresses only property seized in the December 2008 complaint. Bowdoin never even established standing in the December case. Neither he nor attorneys employed by him or family members filed a single document in the case. So, as noted above, Bowdoin initially tried to overturn a forfeiture in a case in which he had no standing and perhaps would have trouble even gaining standing.
His pro se motions were a trainwreck and created even more problems for ASD. The judge ordered Bowdoin’s soon-to-be-former counsel to state their intentions and to instruct Bowdoin on important matters of law before asking for formal permission to withdraw from the case. One of the important matters was that corporate litigants cannot proceed pro se. Corporate litigants must use professional counsel. It is clear from the filings that Bowdoin’s pro se helpers overlooked this obvious flaw in the initial filings. Bowdoin later hired two new paid lawyers to help him navigate the choppy waters and to attempt to undo some of the damage caused by the pro se pleadings.
Now, it’s important to point out here that the Pro-ASD Surf’s Up forum — now suddenly defunct — championed Bowdoin’s pro se pleadings and was positively giddy for days after he attempted to re-enter the case. Bowdoin was heaped with praise. Prayers went out. People cheered him on as though his pro se advisers had scored some sort of dramatic win. As always was the case on Surf’s Up, the prosecution was condemned. Bowdoin urged ASD members to write to President Obama to gain his support in Bowdoin’s fight against the Secret Service.
The disconnect was both startling and troubling.
At some point during the late summer or early fall of 2009, someone apparently sympathetic to Bowdoin’s cause started this site at IContact; it’s called “Official ASD Update” and, from what we can tell, has all of one post. One of the names referenced on the site is “Edna Bowdoin” — the name of Bowdoin’s wife — but it is not clear that Ms. Bowdoin ever was at the site. Even so, her name appears in this Dec. 28, 2009, reference.
On some days, it is hard to quantify all the sadness associated with the ASD case.
One thing that is not hard to quantify is the madness. That madness finally eroded the lion’s share of Bowdoin’s support base. Prosecutors deserve a lot of credit for neatly undermining the wink-nod nature of autosurfs in a series of court filings. These filings showed the autosurf “industry” for what is: a cesspool that relies on the repetition of lies to suck new money into the schemes.
The IContact site, which perhaps was conceived as a new channel through which Bowdoin would communicate with members to keep them on his side as his court challenge continued, never emerged as a “voice” for Bowdoin. The madness had driven away the vast, vast majority of the ASD constituency. He even had lost much of the Surf’s Up crowd — something he must have realized. Why even start a second site if you’re confident in the existing communications network?
These days Bowdoin appears to be relying on a small network of insiders to stay in communication with the troops. Surf’s Up is gone. The second forum never gained a following.
Now, according to members, a person with a conviction for sex crimes involving children, is doing PR work for ASD. Whether it’s “official” or not is beside the point. The mere fact it is being done puts the madness associated with ASD on full display for any person on the email list of the promoter to see.
Yesterday (and previously) we wrote about the Interagency Financial Fraud Task Force established by President Obama in November 2009. We also wrote about a speech yesterday by Attorney General Eric Holder outlining responsibilities of the Task Force. Holder gave the speech in Florida, which was no accident. Florida is Ground-Zero for mortgage fraud, Ponzi schemes and various forms of securities and financial fraud — not that other states also do not have the same problems.
We compiled the President’s Executive Order establishing the Task Force and Holder’s speech into a PDF. The document includes the entire Executive Order and the entire speech.
We’ve titled the document, “So, You Want To Join A Ponzi Scheme? Two Good Reasons To Say ‘No’ When A Friendly Upline Sponsor Approaches You In Person Or Via Email And Asks You To Join A Paid-To-Click ‘Advertising’ Program Online Or A ‘High-Yield Income Program’ (HYIP).”
Many, many people have turned their backs on the so-called autosurf “industry” because of their experiences with Andy Bowdoin and ASD. That’s a good thing, of course: Ponzi = Pain. We write about the pain caused by Ponzi schemes every day on this Blog.
Despite the daily news on Ponzi schemes and financial fraud, however, many, many people continue to participate in the schemes. They do so at their own peril, as Holder said yesterday. The White House and the Justice Department clearly have thrown down the gauntlet on mortgage fraud, securities fraud, Ponzi schemes and other types of financial fraud that can undermine local, regional and national economies — and the economy in the homes of families across the world.
What the government is doing is dreadful news to the Ponzi pushers — but it is good news for the global economy and to families across the world. We provide the document in the spirit of education, and sincerely hope that it can make at least a small difference in the lives of people who continue to believe there is something noble about collecting commissions for selling people into misery.
Thank you, Readers, for your daily visits.
Patrick
P.S. In case you missed the link above to the PDF, here it is again. Forum owners are invited to make a copy of this document and post the document in their respective forums.
After more than 17 months, more than 165 court filings and more than $1 million in legal fees, ASD President Andy Bowdoin has lost the August 2008 civil forfeiture case and the government has been granted title to $65,838,999.70 seized from Bowdoin’s 10 Bank of America accounts.
U.S. District Judge Rosemary Collyer, whom Bowdoin attempted to have disqualified from the case last month, has entered a default judgment and final order of forfeiture in the case.
In a footnote, Collyer said the order decreeing forfeiture “resolves all remaining issues and this forfeiture action in its entirety.”
As PatrickPretty.com first reported last year, three of Bowdoin’s accounts contained the exact same sum: $1,000,388.91. Why the accounts contained the exact same sum remains a mystery.
Another mystery is why Bowdoin, 75, initially submitted to the forfeiture on Jan. 13, 2009 — a year ago next week — but then changed his mind more than a month later and attempted to reassert his claims as a pro se litigant. Bowdoin’s former attorneys, Akerman Senterfitt, said in court filings that Bowdoin began to file pro se “without consulting with counsel and without bothering to advise counsel that he would be submitting motions on his own.”
Akerman Senterfitt filed a motion to withdraw as Bowdoin’s counsel, saying its representation of him had become unreasonably difficult.
Bowdoin’s pro se re-entry in the case coincided with the shift by the AdViewGlobal (AVG) autosurf to a “private association” structure. This shift was announced to AVG members on Feb. 26, 2009, after AVG said it had consulted with a company known as Pro Advocate Group.
Bowdoin signed the first of his pro se pleadings just one day before, on Feb. 25, 2009. Pro Advocate Group, which says it can help people practice law and medicine without a license through a private-association structure, is associated with Karl Dahlstrom.
In 1997, Dahlstrom was sentenced to 78 months in federal prison for his participation in a securities scheme. In court documents in a tax case, Karl Dahlstrom is described as having “been in the abusive trust business for many years.”
Bowdoin has not publicly revealed the identities of his pro se advisers, describing them as members of a “group.” Nor has Bowdoin revealed how much he paid for the pro se advice.
Bowdoin, however, told members in a letter published on the now-defunct Pro-ASD Surf’s Up forum in March 2009 that he had paid his professional lawyers $800,000 before firing them. In September 2009, Bowdoin said his legal fees had exceeded $1 million.
“Now I’ve spent over a million dollars in legal fees to get your money back, and to stay out of prison,” Bowdoin said on Sept. 21, according to a transcript by the U.S. Secret Service. Bowdoin made the remark in a conference call with members. The Secret Service transcribed the call, and then filed the document in court.
Collyer refused to disqualify herself last month, saying Bowdoin no longer had standing in the case.
Collyer earlier ordered the forfeiture of more than $14 million from the bank accounts of Golden Panda Ad Builder, whose assets also were seized in the ASD case.
Bowdoin did score a win of sorts in the forfeiture litigation. He asked for — and was granted — an evidentiary hearing in 2008 to refute the government’s Ponzi allegations and to ask for the emergency release of $2 million because the company could not pay its rent and hosting bills and needed money to implement a new business plan.
Prosecutors did not object to the hearing, but pointed out that Bowdoin had $1 million in a bank on the Caribbean island nation of Antigua in an account under a different name.
Bowdoin asserted his 5th Amendment right against self-incrimination, advising the court through counsel that he would not testify at the evidentiary hearing he had requested. Surf’s Up described the performance of ASD’s witnesses at the hearing as uniformly “excellent,” while at once describing the government’s case as “not so much.”
At the same time, the forum helped spread the rumor that the government had admitted that ASD was not a Ponzi scheme.
In November 2008, Collyer ruled that ASD had not demonstrated at the hearing that it was a lawful business and not a Ponzi scheme. A month later, prosecutors filed a second forfeiture complaint against ASD-connected assets, restating the Ponzi allegations despite the Surf’s Up claim that prosecutors had admitted ASD was not a Ponzi scheme.
The AVG autosurf was laying the groundwork for launch within days of Collyer’s November 2008 ruling against ASD. Promoters highlighted its purported location in Uruguay as a reason to join.
AVG suspended cashouts in June 2009, exercising its version of a “rebates aren’t guaranteed” clause.
Dozens of pro se litigants attempted to intervene in the ASD case, largely causing the court docket to swell from about 40 entries in January 2009 to its current total of 166.
UPDATED 5:25 P.M. ET (U.S.A.) Has the Pro-AdSurfDaily Surf’s Up forum followed in the footsteps of a Pro-AdViewGlobal forum and disappeared for the ages?
The URL for Surf’s Up — http://asdmembers.ning.com — is displaying the same message the AVG forum displayed when it vanished last summer after the controversial autosurf with close ASD ties stopped paying members. Surf’s Up also is known as the ASD Member Advocates Forum.
Surf’s Up received the official endorsement of ASD in November 2008, just days after a pivotal court ruling went against ASD.
“This social network has been taken offline by its owner,” the Surf’s Up site now says. Although there is an additional note that “It’s likely that the owner will bring it back online shortly,” the AVG site had the same note and never returned.
Other autosurfing-related sites hosted on ning.com have displayed the same message — never to return.
The note on Surf’s Up began to appear at some point today today. A “Page Not Found” message is found in the upper-left corner of the screen. The precise time the site went offline is unclear.
Also unclear are why the site went offline and who took it offline.
At one point, Surf’s Up had moderators in common with the AVG site. Recently, though, the Surf’s Up Mods who maintained the AVG forum have made few — if any — appearances on Surf’s Up.
The AVG forum debuted in the early days of AVG’s existence. References to AVG began to appear online in December 2008, less than a month after a Nov. 19, 2008, ruling by U.S. District Judge Rosemary Collyer that ASD had not demonstrated it was a lawful business and not a Ponzi scheme at an evidentiary hearing it requested.
AVG said it was headquartered in Uruguay. Members promoted it as a safe, offshore alternative to ASD that was outside the jurisdiction of U.S.-based regulators and law-enforcement agencies. Some participants later said Bowdoin was the silent head of AVG.
AVG suspended members cashouts in June 2009.
Surf’s Up made news during the Christmas holiday by publishing holiday greetings from ASD President Andy Bowdoin, implicated in an alleged $100 million Ponzi scheme. The forum also published a third-party note in which Bowdoin purportedly asked members for help in obtaining video of ASD “rallies” that might be helpful to his case.
Some ASD members said they were shocked that Bowdoin appeared to be addressing members as though it was business-as-usual for the embattled firm, which may owe members millions of ad impressions. Federal prosecutors said the surf engaged in wire fraud, money-laundering and the sale of unregistered securities — all while operating a massive Ponzi scheme.
EDITOR’S NOTE: This story is about securities and fraud allegations leveled in Colorado against Philip R. Lochmiller and others. The case was brought amid assertions Lochmiller was operating a real-estate Ponzi, although the backdrop of the story is similar to the backdrop of the story on the “advertising” Ponzi allegations against Florida-based AdSurfDaily. Some of allegations against Lochmiller are strikingly similar to the allegations against ASD President Andy Bowdoin. Part of the story backdrop also shares a common venue: Vernal, Utah.
Lochmiller had a real-estate development in Vernal, which also was home base to the so-called “Arby’s Indians,” a sham “tribe” of which ASD mainstay Curtis Richmond was a member. The “tribe” used the address of a Vernal doughnut shop as the address of its “Supreme Court,” and became known as the “Arby’s Indians” because it held a meeting at an Arby’s restaurant in Provo, Utah, in 2003.
There are no assertions that the Lochmiller, ASD and “Indian” cases are in any way related or that Lochmiller had any ties to ASD or “tribal” figures. However, ASD members — as well as members of AdViewGlobal (AVG) and Golden Panda Ad Builder (GP) — may find the similarities in the Lochmiller and ASD cases instructive.
Here, now, the story . . .
A Colorado man sentenced to prison in California in the 1980s on state charges of securities fraud was indicted Dec. 15 in Denver on federal charges of securities fraud. Philip R. Lochmiller, 61, of Mack, settled in Colorado after his release from prison and started a new company, prosecutors said.
That Grand Junction-based company, which first was called Valley Mortgage in the 1990s and is known today as Valley Investments, now is at the center of a new firestorm in a complex Ponzi scheme case that includes spectacular allegations of forgery and real-estate fraud in Colorado, Idaho and Utah.
Investor losses could exceed $30 million. Also indicted and arrested for multiple felonies in the Colorado case were Philip R. Lochmiller II, 38, of of Olathe, Kansas, and Shawnee N. Carver, 33, of Grand Junction. If convicted, the defendants face dozens of years in federal prison. Each is free on bond, awaiting court appearances and trial.
Lochmiller II is Lochmiller’s son.
Certain assets, including a Rolex watch and a vintage 1955 GMC 450 American fire truck, already are being auctioned by a court-appointed receiver to raise money for an estimated 400 fraud victims.
Family Fraud Affairs
Records show that Philip R. Lochmiller was sentenced to three years in a California state prison in the 1980s after he was charged with 60 counts of securities fraud and pleaded guilty to about half of them.
Also sentenced to prison in the California case were Lochmiller’s mother and brother. Jo Alice Lochmiller, Lochmiller’s mother, pitched the California scheme involving a Vista-based company known as Lochmiller Mortgage Co. on TV. She was sentenced to three years.
Lochmiller’s brother, Stephen Lochmiller, was sentenced to four years, according to news accounts at the time.
The 1980s scheme operated in the Greater San Diego area and resulted in 1,600 investors being bilked out of a total of $5 million. Jo Alice Lochmiller, who pleaded guilty to 10 counts and was sentenced to three years on the most serious one and given concurrent three-year sentences on the other nine, appealed her sentence.
Jo Alice Lochmiller argued her intent was not to fleece customers but to raise money for Lochmiller Mortgage. She further argued that she should not be punished for each separate sale of unregistered securities and that her sentence was unfair because it subjected her to double punishment.
A California appeals court consisting of a three-judge panel unanimously rejected her claim.
“Because each unlawful sale [of unregistered securities] occurred at different times for different amounts of money to different victims, punishment for each separate sale is not prohibited by Penal Code section 654. A single object, to obtain money, does not bar multiple punishment for separate crimes,” the panel wrote.
“The situation here is analogous to that of the robber who commits several robberies and claims he had one objective, to gain money,” the panel wrote.
Citing case law, the panel wrote, “[W]here there are consecutive robberies in several communities . . . over a period of several hours, a defendant may not bootstrap himself into avoidance of additional penalties by claiming that the series of divisible acts, each of which had been committed with a separate identifiable intent and objective, composed an indivisible transaction.”
“Lochmiller, through her part in the unlawful scheme, took the life savings of a group of elderly citizens,” the panel wrote. “She did so by making separate sales to 11 individuals on 10 occasions over a 3-month period. This was not one act or one indivisible course of conduct. To accept her argument, she could have continued to take the savings of every citizen in San Diego County and be punished no more than if she had done so to one individual.”
Parallels To ASD
The Colorado Ponzi case against Philip Lochmiller, his son and Carver is drawing comparisons to the fraud case against Florida-based AdSurfDaily and Georgia-based Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.
Federal prosecutors said Philip Lochmiller did not disclose his previous felony conviction in a securities case to investors; prosecutors made the same assertion against Bowdoin, adding that Golden Panda President Clarence Busby did not reveal his previous run-in with the SEC in a securities case alleging that Busby was involved in a prime-bank scheme.
At the same time, prosecutors in the Lochmiller case said both Lochmiller and Lochmiller II had bankruptcy filings that were not disclosed to investors. Busby also had a bankruptcy that was not disclosed to Golden Panda members, prosecutors in the ASD case said.
At the same time, the AVG autosurf — purportedly based in Uruguay and now collapsed – appears to have close Bowdoin family ties and appears to have risen from the ashes of the alleged ASD Ponzi scheme. Prosecutors alleged Philip Lochmiller’s family scheme in Colorado surfaced after his previous scheme in California collapsed and that the Colorado scheme also collapsed.
Company name changes also are present in both the alleged Lochmiller and ASD schemes, according to court records.
Feds Outline The Lochmiller Colorado Scheme
“Between November of 1999 through April 2008, Valley Investments acquired five properties purportedly to develop affordable housing subdivisions,” prosecutors said. “To finance the properties, Lochmiller and Lochmiller II advertised and solicited investments from individuals by promising a short duration high percent interest rate to be paid monthly. The advertisements characterized the investment as a ‘solid security’ secured and recorded by a Deed of Trust in the investor’s name.”
The properties were in Colorado, Idaho and Vernal, Utah. With respect to the Vernal property, prosecutors said, Lochmiller, Lochmiller II and Carver “secured at least 12 separate investments, all with purported first Deeds of Trust, on Lot 34, Country Living Park, a lot with a rental trailer.”
Indeed, prosecutors said, the trio sold 12 “first” positions on the same Utah property. Similar shenanigans were pulled in Idaho and Colorado, and prosecutors alleged that some people bought “first” positions in properties that already had been sold.
Despite the fact Lochmiller was warned in 2001 by the Colorado State Securites Commission to cease and desist from selling unregistered securities, the scheme continued unabated, prosecutors said.
In January 2004, “[Philip] Lockmiller and others traveled by air to Cancun, Mexico,” prosecutors said. In February 2004, Philip Lochmiller “caused two wire transfers for $25,000.00 each, one from his Mesa National Bank account and one from his Community First Bank account, to be sent to a recipient in Mexico as a down payment on the purchase of a furnished condominium located in Puerto Aventuras, near Cancun, Mexico.”
In April and May 2004, Philip Lochmiller made various wire transfers to pay for the condominium in the famous resort area of Cancun, prosecutors said, adding that Lochmiller and his son traveled to Mexico by air at least 18 times.
“The Lochmillers and Carver continued to misrepresent to investors that the business was thriving, and did not disclose to new investors how their money was being used,” prosecutors said. “Also, because there were not sufficient funds, the defendants did not file all of the Trust Deeds on behalf of investors, and most of the filed Trust Deeds were not the first encumbrance of the properties named and were thus worthless.”
Carver was charged with notarizing forged signatures of investors for fraudulent releases of Deeds of Trust.
“Investors should always remember the old saying that if it looks too good to be true, it probably is,†said U.S. Attorney David Gaouette of the District of Colorado. “Unfortunately, there are many people out there who are unscrupulous and tempting potential investors with false claims. Law enforcement will investigate these criminals and our office will prosecute them, but the public needs to be wary and only invest after thoroughly checking out these claims of large profits.â€
A veteran FBI agent said the agency was pursuing financial fraudsters aggressively.
“These arrests demonstrate the FBI’s continuing commitment to aggressively investigate complex financial crimes, especially when the targeted victims are vulnerable and elderly,†said James Davis, special-agent-in charge of the Denver FBI office.
Davis lauded victims for their willingness to cooperate in getting to the bottom of the mess.
“We are especially appreciative of the tremendous cooperation from the victims in this case. The success of this investigation to date is tribute to the combined efforts of our federal law enforcement partners, including the IRS-CID, U.S. Postal Inspection Service, and the U.S. Attorney’s Office in Grand Junction.â€
An IRS agent who specializes in financial crime said the agency was leaving no stone unturned in the case.
“Money laundering creates an untaxed economy that uses legitimate businesses to conceal criminal activity,†said Christopher M. Sigerson, special-agent-in-charge of IRS Criminal Investigation Unit in Denver. “IRS-CI has the financial investigators and expertise to follow the money and deprive criminals of their gains.â€
He was backed by a colleague in the U.S. Postal Inspection Service.
“Postal Inspectors partnered with fellow law enforcement agencies in this investigation to assure the arrest of individuals utilizing the U.S. Mail for fraudulent means,†said U.S. Postal Inspector In Charge Shawn Tiller. “This is an offense the Postal Inspection Service takes very seriously.â€
Philip R. Lochmiller faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, 20 counts of money laundering and 10 counts of mail fraud.
Lochmiller II faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, eight counts of money laundering and 10 counts of mail fraud.
Carver faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, and 10 counts of mail fraud.
UPDATED 7:52 A.M. EDT (April 13, U.S.A.) On the very day Tom Petters was sentenced in Minnesota to 50 years in prison for operating a colossal Ponzi scheme, a federal judge froze the assets of Renee Marie Brown after the SEC accused her of ripping off clients by persuading them to invest in a mysterious vehicle known as “Fund X.”
