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Tag: Bossteam

  • 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.

  • 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.

  • 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.