In June 2010, the U.S. Department of Justice used its Blog to warn about the emerging threat of “mass marketing fraud,” specifically citing the criminal allegations of a $70 million Ponzi fraud against Nicholas Smirnow of Pathway To Prosperity (P2P).
P2P was promoted on the TalkGold and MoneyMakerGroup Ponzi forums.
A little over a month later, in July 2010, the Financial Industry Regulatory Authority (FINRA) described the HYIP sphere as a “bizarre substratum of the Internet” and issued a fraud alert. FINRA also referenced the P2P case. At the same time, it pointed to the collapsed Genius Funds Ponzi, believed to have consumed $400 million.
Genius Funds also was promoted on TalkGold and MoneyMakerGroup.
In December 2010, the interagency Financial Fraud Enforcement Task Force led by U.S. Attorney General Eric Holder specifically warned the public to be wary of social-networking sites and chat forums. The warning was part of “Operation Broken Trust,” a law-enforcement initiative in which investigators described more than $10 billion in losses from recent fraud cases.
One of the cases described was the SEC’s action against Imperia Invest IBC, a murky offshore business accused of stealing millions of dollars from the deaf.
Imperia Invest also was promoted on TalkGold and MoneyMakerGroup.
Last week, promoters of a Virginia-based company known as Club Asteria (CA) announced on the Ponzi boards that PayPal had frozen CA’s funds and blocked its access to the PayPal system. Although CA has been presented as a wholesome “opportunity” recognized by the Internal Revenue Service as a nonprofit organization (see graphic below), the CA promoter who announced the PayPal news last week on MoneyMakerGroup simultaneously was promoting two “programs” that purportedly pay 60 percent a month.
Some CA promoters claim CA pays 520 percent a year. Even jailed Ponzi schemer Bernard Madoff would blush at such advertised rates of return.
MoneyMakerGroup is referenced in federal court filings as a place from which Ponzi schemes are promoted. So is TalkGold, another well-known forum in the HYIP world.
This morning — also on the MoneyMakerGroup — a different CA promoter announced that CA’s Andrea Lucas had responded to last week’s PayPal news. Even as the CA member was announcing on a known Ponzi scheme and criminals’ forum that Lucas had issued a statement on the PayPal matter, he simultaneously was promoting two HYIPs and something called One Dollar Riches.
“OneDollarRiches allows you to parlay a small investment of just one dollar into a constant stream of cash, day in and day out!” according to its ad. “You can make 100 times your investment in just a few days by following our simple step by step instructions.”
The mere presence of CA promotions on the Ponzi boards leads to questions about whether the firm’s receipts are polluted by Ponzi proceeds. Paying members from such proceeds would put CA members in possession of tainted money — and banks into which they deposited those proceeds also would be in possession of tainted money.
Lucas, according to the CA website, now has publicly acknowledged last week’s actions by PayPal. Details, though, were spartan. CA did not say how much money PayPal had frozen. Meanwhile, the firm instructed members to fund their accounts by using offshore processors.
At the same time, CA urged members not to spread bad news about the company on forums. Members who shared negative information were subject to having their CA accounts revoked, according to the company.
“Members shall not publically (sic) disparage, demean or attack Club Asteria, its members, services or charitable activities,” CA remarks attributed to Lucas on the CA website read. The remarks were dated May 16 and appeared in the “News” section of the site.
In the same announcement, Lucas acknowledged that a “small group” of CA members “used their PayPal accounts to cheat fellow members.”
The company claimed it had turned the members “over to the authorities,” but did not identify the authorities or say whether they were based in the United States or elsewhere.
CA, which said PayPal was “acting with integrity,” then counseled its members to rely on offshore processors.
“First, if you have been paying for your membership through PayPal, please discontinue your subscription with PayPal immediately and start using one of the other approved payment processors AlertPay, Towah or CashX to ensure that your membership stays current,” the remarks attributed to Lucas read.
“Second, Do NOT use online forums, websites or social networks to lodge blame or complaints about PayPal or your Club Asteria team,” the remarks continued. “There is no benefit or purpose in this, and it only serves to create discord and spread rumors. Not only that, doing so is a direct violation of Code of Ethics & Conduct, Rule 8 and can result in immediate revocation of your membership.”
CA’s bizarre announcement occurred against the backdrop of thousands of bizarre promos for the firm that appear online. Some promos claim $20 spent with CA monthly turns into a lifetime income of $1,600 a month. Others claim CA is a “passive” investment opportunity, which raises questions about whether CA — whose members claim the program typically pays out about 3 percent to 4 percent a week or up to 208 percent a year — is selling unregistered securities as investment contracts.
Lucas has been referred to in promos as a former “chairman” and “vice president” of the World Bank. Several promos have described her as a Christian “saint.”
CA’s claims that only a “small group” of members is causing problems may be dubious. Wild claims have been made in promo after promo for the firm, which says it is not in the investment business.
