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  • What MLMers/Network Marketers Can Learn From BCSC’s ‘Bossteam’ Case And Similar Cases — Including The SEC’s DFRF Enterprises Action

    ponziblotterLet’s say you’re an MLMer or network marketer. Your email inbox begins to fill up with offers for a scheme that purports to be an “advertising program” favored by famous brands. Spammers are trying to blast their way into your social-media accounts.

    The messages: You’re going to be rich in no time. Beyond that, you’re going to receive valuable shares in a startup.

    This was Bossteam E-Commerce Inc. — and it was a noxious Ponzi fraud whose “Inc.” designation was meaningless and served as a reminder that a corporate registration is not proof no scam is occurring.

    AdSurfDaily ($119 million) was an “Inc.” running a fraud. Bernard Madoff was at the helm of an LLC involved in the largest Ponzi scheme in U.S. history. (NOTE: MLMers/network marketers should think about these things that next time they point to an “Inc.” or “LLC” designation” as proof of legitimacy. TelexFree, accused of operating a combined Ponzi- and pyramid scheme that gathered on the order of $1.8 billion, was both an “Inc.” and an “LLC.” Rex Venture Group “LLC” operated the Zeek Rewards scheme believed to have gathered on the order of $897 million. At one point in time, promoters of ASD, TelexFree and Zeek pointed to corporate registrations as proof no scam was occurring. The same thing happened with DFRF Enterprises, currently in the news.

    As the PP Blog reported in May 2012, the Bossteam “program” surfaced in British Columbia and allegedly sold memberships for up to $5,000 each. Prospects allegedly were told they’d get paid for clicking on ads and could exchange purported “private” shares through a purported “internal trading platform.”

    But “Bossteam committed fraud when they created the false impression that Bossteam members and well-known local and international businesses were paying Bossteam to advertise on its websites,” a panel of the British Columbia Securities Commission found in a decision dated yesterday. “This was untrue, as the majority of ads appearing on Bossteam’s websites were associated with Bossteam’s own accounts, and not to accounts for parties that had paid Bossteam to post their links.(NOTE: Bossteam is hardly alone in this category. Remember EAdGear?)

    ASD, Zeek and TelexFree also had purported “advertising” elements.

    It gets worse — and MLMers/network marketers need the learn from this history.

    From the BCSC panel’s decision yesterday (italics/bolding added/spacing approximated):

    The panel found that each of the respondents breached the Act by:

    • distributing securities of Bossteam without first having filed a prospectus, contrary to section 61(1);
    • engaging in conduct that perpetrated a fraud on those who purchased securities of Bossteam, contrary to section 57(b);
    • withholding information concerning the sale of securities of Bossteam in response to a demand for production issued under section 144 of the Act, contrary to section 57.5; and
    • attempting to conceal or withhold information concerning the sale of securities of Bossteam by instructing others to deny Bossteam had offered such securities to the public and to refer to the concept of online trading as being planned for the future, contrary to section 57.5.

    Put another way, Bossteam first ripped off its members and then tried to draft them into an international conspiracy to cover up the fraud scheme.

    The decision involved the conduct of Bossteam, Guan Qiang Zhang (also known as Victor Zhang) and Yan Zhu (also known as Rachel Zhu).

    Among the panel’s conclusions was that “Zhang contravened section 57.5 of the Act by attempting to conceal information concerning the sale of Bossteam securities when he instructed others to stop referring to Shares as shares and instead call them consumer credits.”

    It is common for HYIP scammers to try to tweak language to skirt securities laws. Both before and after the tweaks, the scammers may seek to dupe the fleeced masses into doing the same thing — a circumstance that leads to a flood of misinformation on the web.

    One of the classic fraudulent tweaks occurs when a scheme purports to be morphing from a private offering into one that soon will trade on one or more public stock exchanges. Here is part of what the BCSC said in its May 2015 Investor Alert on the DFRF scheme.

    The BCSC has become aware that [Daniel Fernandes Rojo] Filho is offering investments to British Columbians with returns of up to 15% per month. Filho is also promising that DFRF will soon be listed on a public stock exchange, after which the value of members’ investments will triple within 30 days. Members will continue to receive up to 15% per month on their investment. These returns are economically impossible. Also, when selling securities, it is illegal to represent that those securities will be listed on an exchange without certain conditions being met.

    Daniel Fernandes Rojo Filho also has been cited in filings as Daniel Fernandez Rojo Filho.

    The SEC announced its action against Filho, DFRF and others last week. Here is part of what the agency said (italics added):

    The SEC alleges that Filho and others began selling “memberships” in DFRF last year through meetings with prospective investors primarily in Massachusetts hotel conference rooms, private homes, and businesses.  DFRF promoted the investment opportunity through online videos in which Filho falsely claimed that the company had registered with the SEC and its stock would be publicly traded.  As DFRF’s marketing reach widened, membership sales dramatically increased from under $100,000 in June 2014 to more than $4 million in March 2015 alone.

    And from the SEC’s complaint (italics added):

    Since late March 2015, the defendants have claimed that DFRF is registered with the Commission, its stock is about to become publicly traded, and current investors may convert their membership interests into stock options at $15.06 per share. At first, Filho represented that public trading would start in mid-April 2015. Since then, he has announced several delays and offered various excuses. On June 17, 2015, he claimed that, although public trading has not begun, the value of DFRF stock now exceeds $64 per share.

    DFRF and Bossteam were not precisely alike, but both schemes allegedly were offering frauds that operated as Ponzi schemes and duped investors with talk of  trading shares. Bossteam allegedly lined up about $14 million, with DFRF coming in at about $15 million.

    Bossteam has been cease-traded. Zhang and Zhu have been banned from the British Columbia securities trade. Fines and disgorgement against the pair total $28 million.

    Many current online HYIP schemes share a common story of above-market returns, with shared wealth being enjoyed by the masses. These may be advanced as private or public offerings, with references to in-house platforms or public stock exchanges. The term “IPO” also is used in some schemes.

    In recent years, the schemes have led to losses that cascade across the globe. The schemes may be positioned as “offshore” and therefore safe or even guaranteed. There may be accompanying claims prestigious banks or insurance companies provide financing or a guarantee against losses.

    Among the SEC defendants in the DFRF case is Heriberto C. Perez Valdes, 46, of Miami. The SEC alleged that he is a manager of a Massachusetts DFRF entity “with responsibility for “all administrative and executive work.’”

    The agency further alleged that Valdes also is “an administrator of Platinum Swiss Trust, a purported Swiss private bank that is not actually authorized to conduct banking activities in Switzerland. (Emphasis added.) “He has made materially false and misleading statements about DFRF in public meetings and videos posted on the internet.”

    How deep did the deception go? Perhaps deep into Boston Harbor.

    “On October 16, 2014, DFRF sponsored a public event on a cruise ship in Boston harbor,” the SEC alleged. “Several videos of the event were posted on the internet. In one video, Filho states that DFRF makes a gross profit of 100% on its gold production in Africa, it needs the investors’ money to ‘leverage’ its credit line in Switzerland and triple its available funds, it pays 15% per month to investors (but cannot promise to do so without violating the law), and the investors’ money is fully insured. In a second video, Valdes states that the investors’ money is held in Switzerland and is fully guaranteed.”

    Like other schemes (including TelexFree), an insurance company was said to provide DFRF members a safeguard against losses.

    Here is part of what the SEC alleged against DFRF defendant Jeffrey A. Feldman, 56, of Boca Raton, Fla. (Italics added.)

    He is the sole officer and director of Universal Marketing Group, Inc., a Florida corporation. He claims to be the U.S. representative of Accedium Insurance Company (“Accedium”), which is based in Barbados and London. In July 2007, he filed for personal bankruptcy. In 1998, he was found guilty of fraud and forgery for having received $2.5 million in premiums from a rental car chain for insurance policies that he did not actually obtain. In 1996, the state of Florida revoked his license to sell insurance after he pleaded no contest to charges that he submitted false insurance claims for losses he supposedly suffered from Hurricane Andrew. He has made materially false and misleading statements about DFRF in public meetings and videos posted on the internet.

  • British Columbia Securities Commission Issues Investor Alert On DFRF Enterprises Or Other ‘Companies Associated With Daniel Fernandez Rojo Filho’

    breakingnews72URGENT >> BULLETIN >> MOVING: (Updated 6:30 p.m. EDT U.S.A.) The British Columbia Securities Commission has issued an Investor Alert on “DFRF Enterprises LLC, DFRF Enterprises Ltd., or other companies associated with Daniel Fernandez Rojo Filho.”

    This appears to be the first such warning about DFRF in North America.

    The claims associated with Rojo Filho and the enterprises are “economically impossible,” BCSC warned.

    “Several” of the claims are “characteristic of investment fraud,” the agency warned.

    From the Investor Alert (italics added):

    The BCSC has become aware that Filho is offering investments to British Columbians with returns of up to 15% per month. Filho is also promising that DFRF will soon be listed on a public stock exchange, after which the value of members’ investments will triple within 30 days. Members will continue to receive up to 15% per month on their investment. These returns are economically impossible. Also, when selling securities, it is illegal to represent that those securities will be listed on an exchange without certain conditions being met.

    Other claims being made by Filho include:

    • investors’ principal is guaranteed and safe
    • investor funds are held offshore
    • he manages $144 billion in assets
    • the company is extracting ten tonnes of gold per month from its mining properties in Mali, Africa
    • 25% of the profits are donated to social and humanitarian causes
    • existing members who refer new members are paid commissions of 10%

    Several of these claims are characteristic of investment fraud. The BCSC urges investors/members, sales agents, or members of the public who have been approached or have information about DFRF Enterprises LLC, DFRF Enterprises Ltd or Daniel Filho to contact the BCSC inquiries line at 604-899-6854 or 1-800-373-6393 (toll free).

    The PP Blog first wrote about Rojo Filho five years ago this month, reporting on his alleged role in a Ponzi scheme known as Evolution Market Group/Finanzas Forex. His name next appeared on the Blog in January 2015, in the context of DFRF, another high-yield scheme.

    In February 2015, BehindMLM.com reported that DFRF had been sued in Massachusetts under the racketeering (RICO) statute.

    Whether DFRF is under investigation by U.S. law enforcement is unclear. Two days ago, the PP Blog sought comment on DFRF from three U.S.-based law-enforcement agencies. None responded.

    Earlier on Monday, BehindMLM.com reported that DFRF had dropped the names of the SEC and the FBI in a YouTube sales pitch uploaded in December 2014.

    DFRF reportedly operates out of Florida and Massachusetts. The BCSC warning specifically referenced the city of Orlando, Fla.

    The enterprise also claims it operates out of Vancouver, B.C., BCSC said.

    On Monday, the PP Blog observed a DFRF video in which a presenter talked about “gold,” “humanitarian social projects, a “letter of credit,” a “global note,” a “master bond,” “insurance” and a purported guarantee.

    Such a presentation leads to questions about whether DFRF is a hybrid mixture of a “traditional” HYIP, a prime-bank scheme and a shiny-object scheme.

     

  • British Columbia Bans U.S. Resident From Securities Market, Says She Was Pushing Fraud Schemes For Commissions

    breakingnews72The British Columbia Securities Commission, which regulates securities in the Canadian province, has banned a U.S. resident who allegedly promoted a series of schemes on commission.

    “Sharon Downing has admitted that she engaged in an illegal distribution of securities,” BCSC said.

    Downing, according to BCSC, promoted schemes for Thomas Arthur Williams and six entities engaged in raising money illegally.

    Some of the cash went to persons with criminal records or who were securities-fraud recidivists, BCSC charged, describing money movement as akin to a Ponzi scheme.

    The agency identified the companies as:

    • Global Wealth Creation Opportunities Inc.
    • Global Wealth Creation Opportunities Inc. (Belize).
    • Global Wealth Financial Inc.
    • Global Wealth Creation Strategies Inc.
    • CDN Global Wealth Creation Club RW-TW.
    • 2002 Concepts Inc.

    The case demonstrates that persons living in the United States who push illegal schemes based in Canada can be charged by provincial regulators.

    Downing not only pushed the schemes for commission as a “finder,” she also invested in them, BCSC said.

    “Downing invested $60,000 of her own money in the Global Group of Companies and has no reasonable prospect of its recovery,” the agency said in a settlement agreement with her.

    All in all, Downing drove $180,000 in business to the Global entities, receiving $3,231 in commissions, the agency said.

    Williams, BCSC said in 2014 when he and the Global entities were charged, is a British Columbia resident who was “the directing mind, director and officer” of the purported opportunities.

    The 2014 notice alleged that “Williams made promises to investors, including that their investments were shielded from securities laws, that he would provide returns of at least 2% interest per month with a potentially higher interest rate on a ‘best efforts’ basis, and that he would preserve the integrity of their funds.”

    It is somewhat common for scammers to claim that securities laws do not apply to the investment programs they are offering.

    “During the relevant period, none of the respondents were registered under the Act in any capacity, and the Global Group of Companies has never filed a prospectus in respect of the distribution of its securities,” BCSC said.

    The schemes “raised approximately $11.7 million from 123 investors between February 2007 and April 2010,” BCSC alleged.

    And, the agency charged, “Williams invested about $5.8 million of investor funds with individuals and companies introduced by or connected to persons who had criminal or regulatory histories of securities fraud. Williams did not inform investors about the fraudulent background of the people he was dealing with, nor did he receive any returns or principal from any of the investments he made.

    “Williams did not inform his investors that none of his investments produced any returns, but rather continued to raise more money from investors, provided monthly statements showing fictitious returns of up to 4% on their investments, and paid ‘interest’ and principal payments to some investors from other investors’ money,” BCSC said.

    Under the settlement agreement, Downing will pay BCSC the $3,231 in commissions she had posted.

    The agreement also prohibits her “from trading in securities (with limited exceptions), and from becoming or acting as a promoter or registrant for a period of three years. Downing is also banned, for the same period, from acting in a management or consultative capacity in connection with the securities market, and from engaging in investor relations activities.”

  • SPECIAL REPORT: eAdGear ‘Program’ Allegedly Traded Falsely On Names Of Famous Companies And Brands; SEC Contacted Google, Yahoo, Target, Victoria’s Secret (And More) To Refute Claims; Separately, ‘Bossteam’ Enterprise In Canada Operated In Similar Fashion, Records Show

    From an SEC exhibit filed last week in the SEC's case against eAdgear, an alleged international pyramid- and Ponzi scheme that gathered $129 million said largely to have targeted Asian communities.
    From an SEC exhibit filed last week in the SEC’s case against eAdGear, an alleged international pyramid- and Ponzi scheme that gathered $129 million. Redactions by PP Blog.

    EDITOR’S NOTE: eAdGear, which had entities in California and Hong Kong, “primarily” targeted “investors in the U.S., China, and Taiwan” and gathered $129 million in a combined pyramid- and Ponzi scheme that engaged in brand-leeching, the SEC alleged last week. An MLM scam known as WCM777, which allegedly gathered more than $80 million, also engaged in brand-leeching while targeting Asian communities, according to court filings. The SEC sued WCM777 in March 2014. Among the SEC’s alarming allegations against WCM777 was that it planted a false seed that it had partnerships “with more than 700 major companies such as Siemens, Denny’s, and Goldman Sachs.”

    ** ______________________**

    UPDATED 3:14 P.M. EDT SEPT 29 U.S.A. Irrespective of their primary target audiences and whether their promos are in English, Chinese or another language, HYIPs and investment-fraud schemes often trade fraudulently on the names of famous companies and engage in brand-leeching to create a veneer of legitimacy. In 2008, for example, the purported AdSurfDaily advertising “program” falsely traded on the names of then-U.S. President George W. Bush, Google, Kodak, Pepsi, Macy’s, USA Today, NBC and many more.

    “This new approach to Internet advertising has businesses of all sizes, from small home based businesses to large corporations such as Google, Starbucks, Kodak, etc., joining ASD,” a 2008 promo for ASD read. “Not only are there over 75,000 small businesses advertising with ASD, but now major corporations are as well. Remember, a part of the daily rebate comes from the revenue corporations pay to advertise with ASD.”

    It was all a crock. The U.S. Secret Service, which opened an undercover probe in July 2008, went on describe ASD as a “criminal enterprise.” ASD President Andy Bowdoin was convicted of wire fraud in the ASD Ponzi case. He is serving a lengthy term in federal prison.

    Even while it was operating, ASD talked about a nascent “Chinese” arm known as Golden Panda Ad Builder. In retrospect, it now appears that plans to involve Asian populations in HYIP schemes were well under way at least by 2008 and since have evolved into frauds that were even larger than ASD. (ASD gathered $119 million and has been eclipsed in dollar volume by at least three Internet-based investment scams since then: TelexFree (possibly $1.2 billion); Zeek Rewards (c. $850 million); and eAdGear ($129 million). Falling just short of making this list were Zhunrize (allegedly $105 million) and WCM777 (allegedly $80 million). It is clear from court filings that Zeek also had a presence in Asian communities.)

    There also was a tertiary scam inside the ASD scam. Indeed, promos for an entity known as ASD Offer Universe encouraged members to click on Google ads so ASD would earn fees of up to $5 a click. Here’s now that promo began (italics added):

    “ASD ENTERS INTO AGREEMENT WITH GOOGLE FOR NEW CONSUMER SITE. Months ahead of schedule, Google and ASD Offer Universe are now teaming up to show Google ads on the site. Google, after seeing all of the major advertisers already being shown on ASD Offer Universe agreed to enter into a relationship with ASD.”

    Brand-leeching is a form of  “reputation parasitism.”

    Did the eAdGear “program” channel long-ago events at ASD to help its massive pyramid scheme grow?

    ASD was a purported “advertising” firm that operated a “rotator.”

    Let’s compare what happened at ASD in 2008 to what the SEC now says happened at eAdGear, accused by the agency last week of operating a $129 million pyramid- and Ponzi scheme and positioning itself as an advertising company and an SEO firm.

    By at least March 2014, the SEC says in court filings, investigators learned of a promo for eAdGear that read, “Google and Yahoo are partnering up with eAdGear for SEO services!!”

    In the land of serial promoters of MLM or direct-sales HYIP scams, it’s as though the ASD case never happened.

    The name-dropping and toxic disingenuousness associated with eAdGear hardly were limited to the abuse of the names of Google and Yahoo, according to SEC exhibits filed in the eAdGear case. It appears there were at least 253 incidents of brand-leeching associated with eAdGear. Indeed, eAdGear appears to have planned its ascent to the upper echelon of the fraud sphere by deliberately placing bogus ads for famous companies into its ad “rotator” to create a false sense that its “program” was legitimate.

    Target Corp., the famous retailer, had its brand leeched, the SEC alleged. So did Lbrands, the Columbus, Ohio-based company that owns Victoria’s Secret

    Now, let’s look at some of the behind-the-scenes investigative work performed by the SEC. Court filings by the agency show that, on July 1, 2014, the SEC issued a subpoena to Yahoo to check on the eAdGear-associated claims.

    Yahoo responded on July 10 by advising the SEC that it had “identified no contracts or agreements with eAdGear[].”

    Meanwhile, according to court filings, the SEC made an inquiry at Google on June 30. Google responded on July 22, advising the agency that it “is not aware of any commercial relationship between [eAdGear] and Google.”

    Because ads for famous companies, including Target, Gap Inc. and Victoria’s Secret, had appeared in the eAdGear “rotator,” the SEC contacted those companies. (The response by L Brands Inc., owners of Victoria’s Secret, is shown above.)

    Target responded by searching its database of vendors to which it had issued payments. No records surfaced for eAdGear, according to the SEC. Gap, similarly, informed the SEC that it had no record of doing business with eAdGear.

    What else does the SEC have? Well, according to court records, it has internal eAdGear email correspondence that shows an employee was instructed to place 253 links to famous companies in its rotator.

    These companies included Avon, Sears, Nordstrom, eBay, QVC, HSN, J.C. Penney, Banana Republic, Dillard’s, Kohl’s, Macy’s, Amazon.com, Men’s Wearhouse, Kmart, New York magazine and more.

    Finally, let’s compare the SEC allegations to the August 2014 findings of the British Columbia Securities Commission concerning a “program” known as “Bossteam” that became the subject of a 2012 Ponzi warning in Canada.

    These are among BCSC’s  assertions — under a subheading titled “False impression of paid advertisements and advertising revenue”:

    • Bossteam described itself on its websites, in documents and in presentations as an online advertising business having huge growth potential and ready to become a leading global online advertising company. It referred to well-known online businesses such as Google, Amazon and eBay, and to the fast-growing advertising revenues of these businesses.
    • Although hundreds of “ads” appeared on the advertising platforms, the majority of the ads posted on Bossteam’s websites were associated with Bossteam’s own administrative accounts (accounts accessible by those controlling its systems) and not to accounts for advertisers or members who had paid to post links to their websites on Bossteam’s websites.
    • Ads associated with Bossteam’s administrative accounts included webpages for well-known local and international businesses.
    • Local businesses whose webpages appeared on Bossteam’s websites included a restaurant, a security systems company, a heating company and a private career college. Websites of well-known businesses and personalities included World Wrestling Entertainment, Miriam Webster and Britney Spears.
    • Posting the websites of local and international businesses on Bossteam’s websites without payment created a false impression that such businesses were advertising on Bossteam’s websites and paying Bossteam to do so.

    Because Bossteam and eAdgear were similar businesses and appear largely to have targeted members of the Asian community, one has to wonder whether the schemes had promoters in common. For now, at least, the answer is unclear. What is clear is that some promoters simply move from one fraud scheme to an another when the “program” of the moment craters or encounters regulatory scrutiny.

    Serial HYIP huckster and Zeek figure T. LeMont Silver currently is in name-dropping overdrive for BitClub Network, one of his latest “programs.” Silver’s name has surfaced in private lawsuits involving eAdGear and an interconnected enterprise known as Go Fun Places, which is referenced in the SEC’s eAdGear case. (For one instance, see the reference to Go Fun Places within the letter from L Brands to the SEC in the graphic above.)

    NOTE: Our thanks to the ASD Updates Blog.

  • BRITISH COLUMBIA: Man Under Investigation For $5K Offering Fraud Launched Double-Down Scam; Won Sang Chen Cho Banned From Securities Markets; BCSC Says He ‘Poses A Serious And Continuing Risk’

    breakingnews72A British Columbia man already under investigation for duping investors $5,000 at a time doubled down and then went for $10,000, the British Columbia Securities Commission said.

    Won Sang Chen Cho, also known as Craig Cho, now has been banned for life from the securities trade, the agency said.

    Cho, the agency said, “poses a serious and continuing risk to investors and to our markets.”

    In addition, he has been ordered to make restitution of $20,569 to scammed investors and to pay a $200,000 administrative penalty.

    BCSC identified Cho’s businesses as Chosen Media and Groops Media. The firms were cease-traded.

    From a BCSC statement (italics added):

    Between January 2011 and February 2012, Cho, doing business as Chosen Media, promoted securities on the Vancouver Craigslist website and sought minimum investments of $5,000. The panel found that Cho raised $101,846 from five investors, to whom he returned purported investment returns of $62,000.

    Cho admitted to promising extremely high rates of return that were “risk free”, and to telling prospective investors that he would deposit their funds into accounts at various sports betting websites. He admitted that he told investors that profit would be generated by the “generous signup and reload bonuses” provided by the sports betting websites.

    The panel also found that in December 2012, during the course of the Chosen Media investigation, Cho sent an e-mail promoting an investment with Groops Media requiring a minimum $10,000 investment. He admitted that this was after he had been warned by BCSC staff that he must comply with prospectus requirements when distributing securities through Chosen Media.

  • BCSC: Scammers Ripped Off Canadians In Forex Scam In Which Money Was Wired To Costa Rica; At Least 1 Investor Duped Into Making Payment Of $13,000 Purportedly For U.S. Taxes In Ill-Fated Bid To Recover Lost Principal

    breakingnews72EDITOR’S NOTE: The PP Blog reported yesterday about a massive alleged penny-stock scam married to an advance-free fraud scheme in which investors were duped into believing they were interacting with IRS employees trying to collect taxes and a law firm interested in recovering funds from the stock swindle. Federal prosecutors in Brooklyn said the scammers simply posed as IRS agents and fabricated the law firm. Some of the money from the $140 million, multipronged caper ended up in Beirut.

    There now is word that investors in Canada’s province of British Columbia were swindled in a similar 2012 scheme in which they were instructed to wire money to Costa Rica.

    The British Columbia Securities Commission is investigating an alleged cold-call swindle in which three investors in the Canadian province lost a total of $80,000 to an entity using a poached virtual office and purporting to operate from Chicago.

    The name of the entity, according to BCSC, was Strategic Global Investments (SGI).

    SGI claimed to be “a Chicago-based investment firm in the business of foreign exchange and commodities trading,” BCSC said.

    Regardless, SGI asked investors to wire money “to the company’s bank account in Costa Rica,” BCSC said.

    The purported firm called investors with an offer for “gold options,” BCSC said.

    But SGI was not registered with BCSC. Nor was it registered with the National Futures Association and the Commodities Futures Trading Commission.

    Moreover, BCSC said, “SGI’s claimed head office belongs to a Virtual Office Company that never leased it to SGI.”

    Although any number of scams have used virtual offices, the allegations in British Columbia suggest that scammers now are simply claiming to be virtual-office lessees without actually renting space.

    But it gets even more disturbing than even that. Indeed, BCSC is alleging that SGI lulled investors who sought the return of their money by telling them that :

    • The investor owed U.S. taxes.
    • SGI was merging with another company.
    • The authorities were investigating the investor for money laundering because he made too much money too quickly.

    “One victim sent $13,000 to deal with the U.S. taxes but still did not get any money back,” BCSC said.

    In fact, BCSC said, “To date, not a single investor has recovered a cent from SGI.”

    SGI’s website “is no longer accessible,” BCSC said.

    Prior to going missing, BCSC said, the site claimed that:

    • It has been doing business since 1998 with clients in over 70 countries.
    • It trades commodities and foreign exchange.
    • It has a head office in Chicago.
    • Investors are in control of their money at all times.

    At least one investor sent SGI an additional $58,000 after being told that the initial purchase had earned huge returns, BCSC said.

    Coupled with the investigation in New York, the investigation in British Columbia may demonstrate that fraudsters not only are creating new and better ways to steal, but also are extorting money from their marks by using the names of government agencies and the names of specific crimes such as money-laundering to instill fear.

  • In Wake Of Profitable Sunrise Alert, British Columbia Issues 2 More Warnings Against HYIPs; Like Profitable Sunrise, Both ‘Programs’ Had Presence On TalkGold And MoneyMakerGroup Ponzi Forums

    recommendedreading1EDITOR’S NOTE: Thanks to PP Blog reader “Tony” for pointing us to the British Columbia Securities Commission (BCSC) warning against the Lucra Fund and Goldenarium HYIP schemes. Earlier this month, BCSC issued a warning on the Profitable Sunrise scheme.

    The British Columbia Securities Commission has issued warnings on HYIP “programs” known as Lucra Fund and Goldenarium. BCSC’s move follows on the heels of its move earlier this month to issue a warning against Profitable Sunrise.

    All three “programs” had a presence on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup. The Zeek Rewards “program,” which the SEC in August 2012 described as a $600 million Ponzi- and pyramid scheme, also had a presence on the forums. So did many other collapsed schemes, including the $119 million AdSurfDaily Ponzi scheme, the $72 million Legisi Ponzi scheme and the alleged $70 million Pathway to Prosperity Ponzi scheme. P2P spead Ponzi misery to at least 120 countries, according to the U.S. Postal Inspection Service.

    BCSC said it became aware of Lucra Fund on March 11 “after a BCSC staff member received a promotional e-mail.

    “The sender of the e-mail wrote that Lucra Fund offered 5.5% daily returns, and promised a referral commission,” the agency said.

    And, it noted, “[t]he Lucra Fund website stopped working soon afterwards.”

    Among the talking points of Lucra Fund was that it employed “DDoS Protection By BlockDos,” according to a pitchman’s post at MoneyMakerGroup.

    That appears to be the same firm that provided protection for Profitable Sunrise. The Profitable Sunrise website also has gone missing. (At the time of this post, the Profitable Sunrise website has been inaccessible for nine days.)

    On March 19, BCSC said, the agency “became aware of what appears to be a BC-connected promotion of Goldenarium through Twitter. Similar to Profitable Sunrise, this high-yield investment promotion offered a minimum investment of $10 and high daily returns. It also offered a referral fee.

    “The Goldenarium website no longer works, and people on numerous Facebook pages connected to the scheme are questioning whether the entity will reactivate its website,” BCSC said.

    In August 2012, a pitchman on the DreamTeamMoney Ponzi forum described Goldenarium as “a company registered in England and Wales (United Kingdom) that “fulfills all the necessary requirements to provide a serious and highly reliable service to all our customers.
    In order to accomplish that we not only strictly comply with both United Kingdom’s Law and International Law.”

    Profitable Sunrise also described itself as based in the United Kingdom. It is now the subject of at least 30 Investor Alerts or cease-and-desist orders in the United States and Canada. The United Kingdom and New Zealand also have issued warnings against Profitable Sunrise.

    Before its 2011 collapse, "insectrio" used the logos of DreamTeamMoney, TalkGold and MoneyMakerGroup in sales pitches.
    Before its 2011 collapse, “Insectrio” used the logos of DreamTeamMoney, TalkGold and MoneyMakerGroup in sales pitches.

    In August 2011, the PP Blog wrote about the collapse of a bizarre “program” known as Insectrio that advertised an “Egg” plan purported to pay 103 percent after one day, a “Larva” plan purported to pay 120 percent after five days and other plans advertised to pay even more. It was enabled by the offshore processors LibertyReserve and PerfectMoney, two of the processors used by Profitable Sunrise.

    LibertyReserve and Perfect Money also are referenced in the SEC’s October 2010 fraud complaint against Imperia Invest IBC, a scheme that targeted deaf investors. Imperia also had a presence on the Ponzi boards.

    Insectrio used the logos of DreamTeamMoney, TalkGold and MoneyMakerGroup in promos.

    In July 2010, after the collapse of the P2P and Genius Funds HYIP schemes, the Financial Industry Regulatory Authority (FINRA) issued a warning about HYIP schemes,  pointing out that they trade through social media.

    FINRA specifically warned about websites that “Rank the latest programs and provide details of ‘payout options.’” At the same time, it warned about sites that “Allow web designers to buy ready-made HYIP templates and set up an ‘instant’ HYIP.” Meanwhile, it warned about sites that “Blog, chat and ‘teach’ about HYIPs.”

    “Some HYIP ‘investors’ proffer strategies for maximizing profits and avoiding losses — everything from videos showing how to ‘make massive profits’ in HYIPs and ‘build a winning HYIP portfolio’ to an eBook on how to ‘ride the Ponzi’ and get in and out before a scheme collapses,” FINRA said.

    “Other HYIP forums discuss how to enter ‘test spends,’ how to identify new HYIPs to maximize one’s chances of being an early stage payee and even how to check when a HYIP’s domain name expires so you can guess how long it might pay returns before shutting down,” FINRA noted.

    Read BCSC’s March 22 Investor Alert against Lucra Fund and Goldenarium. (The document references the earlier warning against Profitable Sunrise.)

  • DEVELOPING STORY: [BULLETIN]: Filings Suggest New Strain Of Autosurfing Cancer Discovered In Canada; British Columbia Securities Commission Investigating ‘Bossteam E-Commerce Inc.’ Amid Ponzi Allegations

    BULLETIN: A potential new form of online fraud that sells memberships for up to $5,000, purportedly pays participants for clicking on ads and also invites them to exchange “private” shares in the venture through a purported “internal trading platform” has been discovered in Canada, according to the British Columbia Securities Commission (BCSC).

    The scheme recorded more than $1.2 million in combined deposits in Canadian and U.S. dollars in less than four months and “has no real source of income other than funds received from investors,” according to a statement taken by BCSC investigators.

    In alarming preliminary findings announced yesterday as part of an Executive Director’s Bulletin designed to fast-track a developing Ponzi-scheme case, BCSC said the purported “opportunity” opened two bank accounts in Canada — one for Canadian dollars, and one for U.S. dollars.

    “From October 2011 to January 24, 2012, the accounts received numerous deposits in the form of cheques and inter-bank transfers in amounts ranging from $2000 to $5000,” BCSC alleged.

    By Jan. 24, the agency said, “$688,746.15 had been deposited into the Canadian dollar account” and “USD$590,527.26 had been deposited into the U.S. dollar account.”

    More than $405,000 was withdrawn from the Canadian-dollar account, with as much as $212,954 directed from the account to make Ponzi payments, according to the preliminary report.

    Although the report does not specifically reference affinity fraud, it alleges that “[a] website targeted at Hong Kong residents offers an investment in ‘YouAd Credits.’”

    The BCSC document references a site known as “youadworld.” When the PP Blog visited the site, a page loaded that read in part:

    “Our unique operating mechanism is attracting subscribers from all over the world. Your advertisements will have the most steady increasing, loyal audience.”

    Named in the BCSC action are Bossteam E-Commerce Inc. of Burnaby, B.C.; Yan Zhu, also known as Rachel Zhu; and Guan Qiang Zhang. Both Zhu and Zhang are listed as Burnaby residents.

    From BCSC (italics added):

    6. Bossteam offered two types of securities to residents of British Columbia through its Website (Bossteam Investments). To be eligible to purchase either of these securities, an investor first had to purchase a membership for $2000 or $5000.

    (a) The first security was a profit sharing agreement that provided a share of Bossteam’s profits to investors who clicked on a certain number of Internet advertisements.

    (b) The second security was a share of Bossteam offered by the Website through an “Initial Private Share Offering.” Bossteam offered 8 million shares, with dividends on these shares paid quarterly. The Website stated that Bossteam had issued 400,200 shares. The Website also provided an internal trading platform where investors could trade their shares.

    The BCSC probe began with anonymous tips, the agency said.

    As the investigation evolved, Zhu and Zhang denied offering Bossteam “shares.” Meanwhile, a story about a purported website hacking in December 2011 surfaced as an explanation for the offering of the “shares” and “Zhu lied about her involvement with the Hong Kong Website,” BCSC alleged.

    And Zhu, who is registered with the Mutual Fund Dealers Association of Canada as a dealing representative and with the Insurance Council of British Columbia as a life-insurance agent,  “falsely claimed she had told her mutual fund dealer employer about her outside business activities with Bossteam,” BCSC alleged.

    “She is the sole director of Bossteam,” BCSC said.

    When investigators interviewed Zhu’s husband, he told them that “Bossteam has no real source of income other than funds received from investors” and that “funds paid to investors came from the investment monies of other investors,” BCSC alleged.

    Read the preliminary order.

  • VANCOUVER SUN: Investors From At Least 3 Countries Plowed Millions Into Scheme That Has Led To Suspension Of British Columbia Notary Public; Ponzi Probe Triggers Questions About Overlooked Red Flags And Lack Of Due Diligence By Salesman

    EDITOR’S NOTE: Some investors in Canada, the United States, the United Kingdom and potentially elsewhere got an unpleasant Valentine’s Day surprise when they learned that an investment scheme into which they had plowed millions of dollars was under investigation by the British Columbia Securities Commission (BCSC) in Canada.

    In the early stages of the probe, it appears as through the investment was pushed through mainstream channels. Even so, the case may provide a learning experience for would-be Ponzi-board purveyors who’ve been nudged toward the darkness by the serial scammers who populate the boards.

    Indeed, the BCSC action exposes the myth that here are no consequences for ignoring or downplaying red flags and not performing legitimate due diligence before recommending an investment scheme. 

    The PP Blog’s brief and a link to recommended reading are below . . .

    On Feb. 14, BCSC issued this Investor Alert on Rashida Samji and Arvindbhai B. Patel. Samji is a notary public. Just a week earlier — on Feb. 7 — her license was suspended by the BC Society of Notaries Public. Her property has been put under the control of a custodian.

    Patel, a financial planner and mutual-fund salesperson, allegedly recommended Samji’s investment scheme, which “offered a 12% annual return,” BCSC said, noting that the funds were “purportedly held in a trust account administered by Samji.” (Italics added.)

    What Ponzi-Board Promoters Can Learn From BCSC Action

    Although the purported opportunity was not the type typically promoted on the Ponzi and fraud boards and there has been no suggestion that Samji’s alleged program was offered on the boards, the events surrounding Patel have produced a cautionary tale. It is one that upstart promoters should embrace and use as a reason not to follow their Ponzi-cesspit colleagues into the darkness.

    Of concern to Ponzi-board purveyors, whether upstart affiliates, serial cheerleaders for investment schemes or the owners of “programs”:

    • Patel is under investigation by the British Columbia government for recommending the scheme.
    • BCSC has filed liens against his real estate.
    • Certain of his other assets have been frozen, including his retirement savings and brokerage accounts.
    • Electronic communications appear to have been used to introduce prospects to the scheme.
    • Patel allegedly plowed his own money into the scheme and introduced others who followed his lead and plowed money into the scheme.

    Patel has not formally been accused of wrongdoing. Even so, the investigation to date showcases the legal thicket that may rise to consume individuals who recommend or actively promote highly questionable investment schemes.

    Because BCSC has tied Patel to Samji’s scheme, it has taken measures to stop the damage in its tracks by denying him the ability to dissipate or liquidate assets. His financial life effectively is on hold as the investigation continues — and that is something that can happen to Ponzi-board promoters at any point in time.

    Of further relevance to Ponzi-board hucksters is another series of facts: the opportunity Patel allegedly recommended promised returns of “only” 12 percent annually and he appears to have known Samji in some real-world way — i.e., his contact with her may not been have been exclusively virtual in nature, meaning he has actually seen her or can speak about her intelligently.

    On the Ponzi boards, promoters routinely tout investment schemes that promise returns that dwarf the returns allegedly promised by Samji — and they may have no contact with scheme operators beyond the virtual. This means they may have even less legal cover if a government action or other litigation ensues. They may not even be able to demonstrate they were engaging with a real person or business entity if called to the witness stand to explain their actions as promoters.

    The PP Blog highly recommends this story that appears today in the Vancouver Sun.

    Of particular note is Patel’s explanation to the BCSC for his alleged conduct,  portions of which the the newspaper published after obtaining a transcript of a proceeding last week. The proceeding has led to questions about red flags that were ignored and due diligence that was shelved in favor of simply believing Samji’s line.

    Not questioning a “line” or performing even minimal due diligence is something that happens daily — even hourly and minute-by-minute — on the Ponzi boards. Virtually all downstream consequences on both promoters and victims are ignored as promoters fire up “I got paid” posts.

    A snippet from the newspaper account on Patel’s explanation to BCSC. (Italics added):

    “I asked her if I could talk to someone at Mark Anthony Group and see if I could verify the structure of the investment,” he told the panel.

    “She indicated to me, basically, it’s very confidential information – She told me she had consulted a lawyer and she did not require any disclosures or memorandums.”

    Any person who has spent so little as five minutes on the Ponzi boards has seen this type of explanation advanced. “Program” sponsors may refer to lawyers without naming them, imply secrecy is required and preemptively deny that any disclosures are required. Promoters then parrot the information, whether or not it is true. Such “explanations” about purported confidentiality requirements and the need to compartmentalize information frequently accompany HYIP “programs” and prime-bank swindles.

    Before Patel even uttered his explanation, here is what BCSC had to say:

    “We felt it was important to warn investors not to send any money to either of these individuals,” said Lang Evans, director of enforcement for the BCSC. “We encourage anyone who had dealings with Samji or Patel to contact the BCSC.”

    Visit the BCSC information page on the case.

  • Man, 85, Accused Of Selling Unregistered Securities In ‘Shipwreck’ Venture; Recidivist Huckster Hawked Sunken-Treasure Offer While Banned Because Of Previous Misconduct, BCSC Says

    Ten years ago, when John Arthur Roche McLoughlin was about 75 years old, the British Columbia Securities Commission accused him of selling unregistered securities in a venture known as Grandby Development Corp., a purported fertilizer company.

    BCSC imposed a five-year ban that prohibited McLoughlin from acting as a director or officer of any issuer. Because McLoughlin did not meet the requirements to lift the ban, including paying a $25,000 assessment, the ban remained in effect, according to records.

    Now, at 85, McLoughlin has been accused of selling unregistered securities in a purported Irish venture in which investors were told they’d receive a share of treasure recovered from shipwrecks. The scheme, according to records, raised about $312,00 for the company, known as Blue Lighthouse Ltd.

    McLoughlin initially protested the $20,000 penalty BCSC sought to impose for his conduct in the treasure-salvaging venture, which he sold as an agent for Blue Lighthouse through a British Columbia firm known as MCL Ventures Inc., according to records.

    BCSC then increased the penalty by $30,000 and banned McLoughlin for 15 years. He next could seek to sell securities when he was approximately 100 years old, according to the ruling.

    “As McLoughlin engaged in the same misconduct for which he had previously been sanctioned and continued to breach the orders against him in spite of repeated warnings from BCSC staff, the panel increased the $20,000 fine sought by the commission to $50,000,” the agency said.

    BCSC also “cease-traded MCL Ventures Inc.,” the agency said.

  • Another HYIP Pushed By ASD Members Now DOA; Cypriot, Canadian Securities Regulators Issue Warnings About Genius Funds; Regulator Seeks Criminal Probe

    Regulators in Cyprus have referred Genius Funds for criminal investigation and released a warning that the company “[is] not permitted to provide investment and ancillary services in the Republic.”

    Genius Funds, a darling of the HYIP world,  was heavily promoted on the Ponzi boards. The program also is known as Genius Investments. The program was referred for criminal investigation by the Cyprus Securities and Exchange Commission, which also issued the warning. The announcement that the case was referred for criminal investigation was made Friday in Cyprus.

    One of the matters referred for criminal investigation pertained to a question about whether Genius Funds used a “falsified document that possibly stated that it possessed an operational license which was not authentic,” the Cypriot regulator said.

    Separately, Canadian securities regulators also have acted against Genius Funds, permanently banning the HYIP “for illegally selling securities,” the British Columbia Securities Commission (BCSC) said.

    Genius Funds’ website is throwing a server error.

    The program was pitched on the pro-AdSurfDaily Surf’s Up forum in December by a poster who dubbed himself “joe.” Genius Funds was one of four HYIP’s pitched by “joe” in an egg-themed promotion. The egg-themed domains redirected to HYIP programs.

    All of the programs appear to have failed or gone missing, but the egg-themed domain names now redirect to other HYIPs.

    “ALL MY EGGS ARE NOT IN ONE BASKET,” the Surf’s Up pitchman said in all-caps. “I MAKE 2000.00 A WEEK.”

    Some ASD members continued to promote autosurfs and HYIPs after the federal seizure of tens of millions of dollars from the personal bank accounts of ASD President Andy Bowdoin in August 2008. The Surf’s Up forum went missing earlier this year.

    In recent weeks, the Golden Panda Ad Zone forum (also known as the Online Success Zone forum), another website from which ASD members pitched autosurf and HYIP programs, also went missing.

    BCSC opened its probe into Genius Funds after receiving a tip from “a financial institution,” the agency said.

    Read the Genius Funds’ announcement from Cyprus. Read the announcement from Canada.