“HYIPs use an array of websites and social media — including YouTube, Twitter and Facebook — to lure investors, fabricating a ‘buzz’ and creating the illusion of social consensus, which is a common persuasion tactic fraudsters use to suggest that ‘everyone is investing in HYIPs, so they must be legitimate.’” — The Financial Industry Regulatory Authority (FINRA), July 15, 2010
FINRA issued a warning back in 2010 against HYIP schemes, pointing out that they often trade through social-media sites such as forums, YouTube, Twitter and Facebook. The warning came on the heels of the collapse of the Genius Funds “program” ($400 million) and the filing of criminal charges in the United States against Nicholas Smirnow, an alleged former bank robber in Canada who allegedly was running the Pathway To Prosperity (P2P) Ponzi scheme. P2P is alleged to have gathered more than $70 million.
P2P even got a mention on the U.S. Department of Justice Blog. That mention came in the form of a warning about international mass-marketing fraud.
Nearly three years later, Smirnow, 55, is still listed by INTERPOL as an international fugitive.
So is Robert Hodgins, 68. Hodgins, a Canadian supplier of debit cards to HYIP schemes, is charged in a money-laundering case in the United States. It is alleged that cards Hodgins supplied were used by narcotics traffickers to offload millions of dollars in “profits” at ATMs in Medellin, Colombia.
Speaking of Colombia . . . well, it was one of the staging grounds of the infamous D.M.G. Group (DMG) multilevel-marketing pyramid scheme of David Eduardo Helmut Murcia Guzman (David Murcia). Murcia, too, was tied to narcotics traffickers. His collapsed pyramid scheme gathered hundreds of millions of dollars. The anger spilled out onto the streets.
Just about all of these schemes made absurd claims. Genius Funds, for example, promised a payout of 6.5 percent a week. Compare that absurd claim to the Profitable Sunrise claim of 2.7 percent a day through its bizarrely named “Long Haul” plan with a purported payout timed to coincide with Easter. A scheme bizarrely known as Cash Tanker was operating at the same time as Genius Funds. Like Profitable Sunrise, Cash Tanker purported to be a Christian enterprise. It’s gone now, too. So is Profitable Sunrise. Their members were cast into the sea like so much chum.
Enter the Facebook boat-sharks and the contemptible “lifelines” they’re tossing toward the people struggling to stay afloat in rough seas . . .
Despite all the warnings — despite all the publicity surrounding HYIP schemes — opportunists are descending on Facebook today to recruit Profitable Sunrise members (the people struggling in the water) into new scams. The same thing has happened repeatedly, perhaps most prominently in August 2012, after the SEC described the Zeek Rewards “program” as a $600 million Ponzi- and pyramid scheme.)
Boat-sharks posting on a Profitable Sunrise Facebook site today are promoting schemes such as “SuperWithdraw,” “Whos12,” Maxi-Cash,” “FairyFunds,” “Roxilia,” “OptiEarn,” “AVVGlobal,” “ProForexUnion” and “MajestiCrown.” Some of the emerging schemes promise to pay even more than Profitable Sunrise.
David Eduardo Helmut Murcia Guzman (David Murcia), the MLM huckster whose pyramid scheme targeted the poor in Latin America and laundered money for a Colombian narcotics operation, has been sentenced to nine years in a U.S. federal prison.
Murcia, 30, also faces a 30-year prison sentence in Colombia after his release from a U.S. jail.
“Murcia Guzman wove an intricate web of deception across continents to disguise his dirty drug money and support his lavish lifestyle,” said U.S. Attorney Preet Bharara of the Southern District of New York. “But his web has been untangled and his lifestyle dramatically curtailed by this sentence.”
Murcia was at the helm of a Colombian MLM scheme known as D.M.G. Group, which collapsed in 2008 after luring customers by offering prepaid debit cards that purportedly would elevate their standard of living. Along with five co-conspirators, Murcia laundered drug money through the MLM company and other entities, prosecutors said.
In January 2010, the U.S. Drug Enforcement Administration (DEA) brought Murcia from Colombia to the United States to face trial. Murcia, wearing a bulletproof jacket, was whisked under heavy guard from his prison cell in Bogota to a waiting DEA aircraft.
Although it is common for online criminals to promote fraud schemes by saying the operations are outside the reach of U.S. regulators and law enforcement, such claims are a myth.
Finding the United States an unfriendly environment, the so called autosurf and HYIP “industries” increasingly are relying on offshore money-exchange businesses and debit cards to entice participants, sometimes advising them that the offshore locations are “safe” havens that “shelter” U.S. residents from regulators and law-enforcement agencies.
“The so-called ‘Bernie Madoff of Colombia’ now stands convicted of money-laundering . . .”— U.S. Attorney Preet Bharara
David Murcia
BULLETIN: The Colombian mastermind of the D.M.G. Group (DMG) pyramid scheme has pleaded guilty in New York to conspiring to launder drug money in the United States.
David Eduardo Helmut Murcia Guzman (David Murcia) was extradited under heavy guard from Colombia to the United States in January. DMG was a “multi-level marketing scheme” that began in 2003, largely targeting the poor. The firm provided prepaid debit cards that permitted participants to purchase electronics through DMG, prosecutors said.
DMG’s membership ranks swelled to more than 400,000, with the scheme capturing hundreds of millions of dollars. The pyramid collapsed in 2008 — but not before Murcia and others had set up an international money-laundering operation that routed narcotics proceeds through Mexico and concealed the criminality in real estate and other holdings in the United States, prosecutors said.
“The so-called ‘Bernie Madoff of Colombia’ now stands convicted of money-laundering in Manhattan federal court,” said U.S. Attorney Preet Bharara. “Criminals have an increasingly global reach. As they develop more and more sophisticated methods of concealing their criminal proceeds, we will continue to track them, working with our law enforcement partners to bring them to justice. The United States will never be a haven for illegal funds.”
Hundreds of “subsidiary and affiliated companies” were established in a bid to cleanse dirty money, prosecutors said.
Bharara’s Terrorism and International Narcotics Unit handled the case, which includes multiple defendants and multiple guilty pleas. The DEA, ICE, the New York Police Department and the Justice Department’s Office of International Affairs played prominent roles in the case.
See Aug. 9 story about the extradition of Murcia’s legal adviser Margarita Leonor Pabon Castro, who now is among six defendants who have pleaded guilty.
EDITOR’S NOTE: It is common for fraudsters to claim that “offshore” locations insulate HYIPs, autosurfs and other investment-fraud schemes from prosecution in the United States. It is equally common for purveyors to claim the schemes are harmless. The story of the alleged DMG pyramid scheme is one in which prosecutors allege a monstrous multilevel-marketing company created hundreds of shell companies and laundered money for narco businesses. The case is being prosecuted by U.S. Attorney Preet Bharara’s Terrorism and International Narcotics Unit.
Here, now, a story that destroys some of the myths advanced on the Ponzi boards . . .
U.S. officials now have confirmed the extradition of Margarita Leonor Pabon Castro from Colombia to the United States to face charges she helped a corrupt multilevel-marketing (MLM) company launder money for narcotics traffickers.
South American media first reported the extradition last week.
Pabon Casto, 36, was the legal adviser to David Eduardo Helmut Murcia Guzman (David Murcia), prosecutors said. Murcia, the head of D.M.G. Group (DMG), was extradited under heavy guard in January, and whisked to the United States by the U.S. Drug Enforcement Administration (DEA).
DMG used debit cards as the principal part of a pyramid scheme that largely targeted the poor in Colombia. The scheme is believed to have collected hundreds of millions of dollars from as many as 400,000 people before collapsing in 2008.
Pabon Casto was Murcia’s “personal friend,” sat on boards of companies related to DMG and “also assisted in accounting matters for DMG and in hiding information from Colombia’s
Superintendencia de Sociedades, an agency responsible for the regulation of corporations,” prosecutors said.
Part of the scheme involved the establishment of “hundreds of subsidiary and affiliated companies linked to DMG in countries including Colombia, Panama, and the United States,” prosecutors said.
Pabon Casto and six others now are charged with laundering narcotics proceeds through DMG and affiliated companies.
“With her alleged participation in a sophisticated money laundering conspiracy, Margarita Pabon Castro used her legal and accounting expertise to hide millions of dollars in dirty money,” said U.S. Attorney Preet Bharara. “Alongside our law enforcement partners here and abroad, the Manhattan U.S. Attorney’s Office will continue to pursue money launderers who profit from and drive the international drug trade.”
The DEA assisted in the extradition.
“By joining efforts with our law enforcement and prosecutorial partners, we identified, indicted and extradited those responsible for a million-dollar-a-year money laundering organization who worked for drug traffickers around the world,” said John P. Gilbride, DEA special agent in charge.
EDITOR’S NOTE: The PP Blog has covered a number of stories in which U.S. residents living overseas were extradited to the United States to face Ponzi charges. The case against Ronald Paul Shade is another one — and it’s one that demonstrates that an extradition can occur even if a defendant is not charged with a federal offense.
Indeed, the warrant for Shade’s arrest was issued by a state-level Superior Court judge in California, according to Interpol. Shade’s case is instructive because it defeats some of the myths propagated on Ponzi boards such as MoneyMakerGroup, ASAMonitor, TalkGold and MyCashForums. Among the myths is that “offshore” equals “safe” for both investors and Ponzi perpetrators.
Don’t tell that to Shade, now jailed in California after being extradited from Bangkok by local — as opposed to federal — prosecutors in California. His bail was set at $3.9 million.
And don’t tell it to Jeffrey Lane Mowen, extradited from Panama to face federal Ponzi charges in Utah and later indicted in an alleged murder-for-hire plot. Here’s a quick side note on the Mowen case: If you like the recruitment fees paid by HYIP, autosurf and corrupt MLM or commission-based investment programs and make claims about the “due diligence” you’ve performed and try to impress prospects with your insider knowledge, your willful blindness may put you at great risk.
Mowen had three prior convictions in Utah for securities fraud and two for theft, according to records. Despite Mowen’s criminal record and history as a fraudster, promoters still did business with him. Their faith drained millions of dollars from investors, the SEC said. Using language apt to cause unease in the Ponzi-promoting world, the SEC said at least one promoter “either knew or was reckless in not knowing that Mowen had multiple recent felony convictions involving crimes of dishonesty.â€
Indeed, the SEC said, the promoter learned in approximately late June 2007 that Mowen had been convicted of securities fraud . . . [but] “continued to solicit new investor funds for several months while failing to disclose Mowen’s criminal history to any of the Promoters or their investors.†Downstream promoters who entrusted the promoter “conducted virtually no due diligence in connection with [his] purported investment opportunities, but transferred investor money to [him] without any documentation or limitation on his use of the funds,†the SEC said.
Perhaps the biggest myth exposed by the Ronald Paul Shade case is that going offshore takes state attorneys general and local prosecutors totally out of play. Longtime PP Blog readers will remember that the “offshore” pitch was pivotal in promotions for AdViewGlobal, AdGateWorld, MegaLido and other autosurfs that surfaced in the aftermath of the seizure of tens of millions of dollars by the U.S. Secret Service in the AdSurfDaily Ponzi scheme case. Some ads claimed that the “offshore” surfs neutralized state-level investigators.
Shade, however, was brought back to the United States at the request of the San Bernardino County District Attorney’s Office in California to face state charges filed by local investigators.
Still promoting investment-fraud schemes on the Ponzi boards and supplementing your pitches with myths about “safety” and how the overseas schemes are insulated from prosecution? Perhaps this story on the dramatic extradition of Colombian national David Murcia to the United States will help you snap out of your delusion that Ponzi and pyramid businesses cause no harm and represent “freedom” of choice. Perhaps this story on Robert Hodgins, who goes to bed at night knowing he’s wanted by Interpol, will help you shape your thinking.
The cases of John and Marian Morgan, U.S. residents extradited from Sri Lanka, also are instructive.
Finally, it’s worth noting that, after the United States charged Canadian national Nicholas Smirnow in May with operating an HYIP Ponzi scheme, a MyCashForums poster was quick to claim that “the USA has no extridition (sic) agreement ion (sic) place with the Phillipines (sic) . . . “
The claim was false. Federal prosecutors said they are seeking Smirnow’s extradition. He was accused of operating a $70 million, international fraud known as Pathway to Prosperity (P2P).
Here, now, the story of Ronald Paul Shade’s extradition . . .
A California man living in Thailand was extradited to the United States to face charges he ripped off senior citizens in a real-estate Ponzi scheme, authorities said.
Ronald Paul Shade, 39, formerly of Riverside, was arrested by local detectives Friday at Los Angeles International Airport. He was charged by investigators from the San Bernardino District Attorney’s Office with 29 felonies, including financial elder abuse, filing forged documents with the County Recorder’s Office and grand theft.
San Bernardino County District Attorney Michael A. Ramos, who also is the president of the California District Attorneys’ Association, led the probe.
Among the detectives involved in the Shade probe was Michael Leibrich, a senior investigator with the DA’s office.
“From 2006 to 2008, Shade solicited money from numerous investors for his company, Orange Crest Realty,” investigators said. “Investors were promised a high rate of return for a short-term investment. Elderly victims later discovered that their life’s savings were being used to further a Ponzi scheme.”
Shade had been living in Thailand for about two years, investigators said.
In 2008, the California Department of Corporations issued a “desist and refrain” order against Shade and his company after alleging that they were selling unregistered securities and recruiting prospects by urging them to “Get 18% APR Today†through the company’s “wonderful†investment.
Shade and the company used a now-defunct website known as OCRFunding.com to pitch the purported program, authorities said.
Among the misleading claims made to investors, according to authorities, were these:
That Orange Crest Realty was founded in 1993. (Authorities said Orange Crest Realty was not incorporated until June 2004.)
That Orange Crest Realty is a “registered investment advisor.†(Authorities said neither Shade nor the company and its associates were registered.)
That each investment was secured by actual title to specific existing real property. (Authorities said that “each investment was not secured by real property.”)
That a Deed of Trust And Assignment of Rents in the Property would be recorded with the Office of the County Assessor/Recorder and the investor would be provided with the recorded deed. (Authorities said a deed promised an investor who sent in $50,000 was not recorded and the “investor never received a recorded deed.”)
That the investor would receive regular monthly interest payments. (Authorities said “payments ceased shortly after the investment was purchased.”)
San Bernardino County investigators were assisted in the extradition by the Southwest Regional Fugitive Taskforce of the U.S. Marshals Service.
The scheme, which allegedly gathered $14 million, also fleeced investors who responded to newspaper ads, investigators said.
EDITOR’S NOTE: Finding the United States an unfriendly environment, the so called autosurf and HYIP “industries” increasingly are relying on offshore money-exchange businesses and debit cards to entice participants, advising them that the offshore locations are “safe” havens that “shelter” U.S. residents from regulators and law-enforcement agencies.
In August 2009, we reported that a Dallas-based company, Virtual Money Inc., which provided debit cards to Florida-based AdSurfDaily Inc., was indicted on charges of helping a Colombian cocaine operation launder money by providing cards that were used to convert drug proceeds to cash at ATMs in Medellin. ASD is implicated in an alleged $100 million Ponzi scheme.
In a follow-up story, we asked if autosurf and HYIP enthusiasts who describe the enterprises as harmless despite the fact they steal wealth from a large group to give it to a smaller one had yet felt a “lump” in their throats because law enforcement also had tied the offshore debit-card business to international narco-trafficking.
That lump only should be getting bigger.
The story below is about D.M.G. Group (DMG) and its operator, David Eduardo Helmut Murcia Guzman (David Murcia). DMG used debit cards as the principal part of a pyramid scheme that largely targeted the poor in Colombia. The scheme is believed to have collected hundreds of millions of dollars from as many as 400,000 people before collapsing in 2008.
Murcia, who owned two airplanes, three yachts and at least 12 luxury vehicles, was arrested in Panama in 2008, just as he was attempting to flee to Costa Rica to avoid extradition to Colombia. He was convicted of money-laundering in Colombia in December 2009, sentenced to 30 years in prison and fined $12.5 million. Viewed as a Robin Hood figure by some people, Murcia portrayed himself as a man simply interested in creating wealth for others. His arrest initially led to rioting in Colombia.
Police used tear gas to disperse protesters, and the government launched a nationwide crackdown on Ponzi and pyramid schemes and declared a state of emergency. Dozens of schemes using various corrupt business models were operating simultaneously, sucking wealth from the economy and placing it in the hands of a small number of people. At least 12 people reportedly were killed in Colombia during Ponzi/pyramid-related rioting. Only the people who got into the schemes first made money. By some estimates, 90 percent or more of the participants lost money.
One of the fraudulent companies operating at the same time as DMG was known as DRFE (Dinero Rapido Facil en Efectio), which means “Rapid Money, Easy Cash.” It, too, collapsed.
DMG, for its part, had 59 offices in Colombia; the government shuttered them all in a single day, after linking DMG money to international drug traffickers.
Here, now, the story about the dramatic extradition of Murcia to the United States yesterday . . .
David Murcia
His jailers at La Picota prison in Bogota placed him in handcuffs. They wrapped him in a heavy, bullet-proof jacket. From there they took him to the Catam military airport under heavy guard. He was led to a plane owned by the U.S. Drug Enforcement Administration (DEA). Officials made sure that the moments were captured on film and videotape. They were sending a simple message: We will come after you, no matter where you are, even if you pretend you are Robin Hood.
And with that David Eduardo Helmut Murcia Guzman (David Murcia), known as the “Bernie Madoff of Colombia” for his collapsed financial scheme, was whisked to Miami. He’ll be tried in New York on charges of conspiring to launder millions of dollars in narcotics proceeds through his company, D.M.G. Group (DMG), a house of cards propped up by a pyramid-scheme involving debit cards and promises that participants would get back 100 percent of what they paid in and perhaps more.
“Extradition signals Colombia’s continuing commitment with the U.S. in fighting drug dealers,” said New York City Police Commissioner Raymond Kelly. “It is also important in attacking the money laundering that accompanies drug trafficking. The black market peso exchange is just one of many schemes to launder drug money and corrupt once legitimate business in the process. Left to their own devices, narcotics traffickers would undermine entire economies through drug trafficking, money laundering, extortion and corruption. This was an auspicious victory in a continuing fight.”
U.S. prosecutors yesterday pointedly called DMG “a vehicle for a multi-level marketing scheme.” Participants were told to buy prepaid debit cards that operated on a points system and would permit them to buy electronics and other merchandise at DMG retail stores and enable them to get back 100 percent of what they paid in and perhaps more.
Points accumulated when purchases were made and participants introduced others to the scheme, which was sold as an opportunity to buy anything they wanted — from groceries to flat-screen TVs and motorcycles — while getting the products and at least 100 percent of the purchase price back in six months.
Murcia, 28, founded DMG in Colombia’s coca-growing region. The complex scheme ultimately led to questions about how Murcia, a high-school graduate, had figured out a way to give back at least 100 percent of the purchase price of products without operating a shell game in which money was taken from new participants to pay returns to the original participants. Murcia never could explain clearly how the program worked, and sometimes used accounting terms such as “cash flow” to deflect questions. He had assembled a massive following of devotees, many of whom zealously defended the program, saying Murcia was helping people rise out of poverty.
At first it was speculated that DMG bought merchandise in bulk and sold it to debit-card customers at grossly inflated prices to create a hugely profitable spread. That all changed, however, when investigators found $3.2 million in cash stuffed in cardboard boxes in the coca-growing region — and linked the cash to Murcia — and later linked Murcia to a reputed drug smuggler.
U.S. prosecutors now say Murcia had acquired so much money that it created a problem for him — the classic dilemma faced by corrupt operations. In the fall of 2007, Murcia and Margarita Leonor Pabon Castro, a 35-year-old co-defendant in the U.S. case, “approached another individual in Colombia and said that they had cash — apparently in U.S. dollars — that they could not deposit into the Colombian banking system.”
Murcia and Castro asked the unidentified person to set up an account in the United States. A U.S. account was opened at Merrill Lynch in the name of Blackstone International Development. Neither Murcia nor Casto was listed as owners of the account.
In March 2008, Murcia and Castro told the person who had opened the account that they had “provided $2.2 million worth of Colombian Pesos to German Enrique Serrano-Reyes, 45, in Colombia, and, in exchange, Serrano-Reyes had caused nearly $2.2 million to be wired into the Blackstone Account through 18 separate wire transfers.”
Prosecutors seized the Blackstone Account in May 2008.
When Murcia was informed of the seizure of the Blackstone Account, he “told the individual who set up the account that he should not attempt to retrieve the contents of the account, and should not under any circumstances inform the authorities of [Murcia] or [Castro’s] interest in the Blackstone Account, prosecutors said.
Also indicted in the United States was William Suarez-Suarez, 41, whom prosecutors said was the head of DMG’s Colombian operations and attempted to bribe officials in Colombia.
Suarez-Suarez, according to prosecutors, helped Murcia and “others” establish “hundreds of subsidiary and affiliated companies linked to DMG in countries including Colombia, Panama, and the United States.”
DMG also had links to the drug trade in Mexico, prosecutors said. Murcia, Santiago Baranchuk-Rueda, 34, Daniel Angel Rueda 36, and Luis Fernando Cediel Rozo, 34, “coordinated the pick-up and transportation of millions of dollars in narcotics proceeds in Mexico,” prosecutors said.
“The defendants concealed narcotics proceeds by investing them in legitimate real estate
and limited liability companies in the United States,” prosecutors said.
U.S. Attorney Preet Bharara said prosecutors and their law-enforcement colleagues would leave no stone unturned in fighting international money-laundering and drug-trafficking.
“David Murcia Guzman is charged with using his namesake company as cover for the laundering of illicit drug proceeds,” Bharara said. “[He] allegedly played a shell game with dirty money, masking millions for narco-traffickers as legitimate transfers. This extradition affirms that we will not tolerate the abuse of the U.S. banking system to stimulate the black market economy.”
John P. Gilbride, DEA Special-Agent-in-Charge, said investigators have the experience and the patience to peel back layers of the onion to expose the corruption.
“Hiding behind a corporation name did not make this business legitimate,” Gilbride said. “In fact, it was facilitating millions of narco drug dollars into pesos for drug traffickers worldwide. This extradition highlights law enforcement’s international efforts to identify and arrest those who profit from the sale of illegal narcotics.”
Bharara thanked the government of Colombia for its cooperation.
Murcia faces a prison term of 20 years in the United States, if convicted. He’ll serve any sentence that emerges in the United States, and then will be sent back to Colombia to serve his 30-year sentence there.
