Source: FBI graphic from Jan. 4, 2016, retrospective on the E-Bullion case from 2008.
Still pushing Ponzi-board schemes in the age of cross-border fraud and terrorism?
In a retrospective on the 2008 E-Bullion case, a retired FBI special agent says convicted murderer James Fayed was scamming HYIP scammers.
“He just pocketed the money from all these high-yield investment programs after they ran,” said Maura Kelley. “And the money continued to come in because the word didn’t get out right away that they weren’t paying. And people were still investing.”
In 2011, Fayed, then 48, was sentenced to death for the brutal contract slaying of Pamela Fayed, his wife and a potential witness against him. Indeed, the effective bagman for a host of Ponzi-board swindles ultimately turned to homicide in a bid to cover his tracks.
Pamela was stabbed 13 times and left to die outside a Los Angeles-area parking garage.
E-Bullion has been linked to multiple Ponzi schemes, including Legisi, Gold Quest International and FEDI. The FEDI scheme has been linked to Abdul Tawala Ibn Ali Alishtari, also known as Michael Mixon. Ali Alishtari pleaded guilty in 2009 to financing terrorism and fleecing investors in the FEDI scheme.
So, a man with murder in his heart also was supplying financial services to Ali Alishtari, an HYIP swindler who believed he was funding the purchase of night-vision goggles for a terrorist training camp in Afghanistan.
Upon the conviction of Alishtari, U.S. Attorney Peeet Bharaha of the Southern District of New York offered remarks. As the PP Blog noted, here is part of what Bharaha and the FBI said:
“Alishtari . . . admitted that he stole millions from investors and knowingly financed what he believed to be tools of terror. In enriching himself, Alishtari displayed a deliberate disregard for the financial and personal security of others.”
Investigators said Alishtari “facilitated the transfer of $152,000, with the understanding that the money would be used to fund training for terrorists.
“In the latter half of 2006,” according to investigators, “Alishtari agreed to discreetly transfer these funds for an undercover officer, believing that the money was going to be used to purchase night vision goggles and other equipment for a terrorist training camp in Afghanistan. During his guilty plea, Alishtari admitted that he sent the money from the United States knowing that the funds were to be used to help finance alleged terrorist activity in Pakistan and Afghanistan.”
“While reviewing the ASD website in the District of Columbia, [an undercover agent] found a posting within ASD’s News section, apparently posted by ASD on July 2, 2008. The title of the posting was, “Alert Pay & Direct Deposit are being phased out July 31, 2008.” According to ASD’s posting, “We have notified BOA not to accept cash or personal checks for deposit account – English or Spanish.” ASD further stated, “Please remember that the preferred method of purchasing Ad Packages is by mailing a Check or by Solid Trust Pay . . . Solid Trust Pay is a Canada based money transmitting and payment company that, like the e-Gold system, operates over the Internet. It appears that beginning August 1, 2008, Solid Trust Pay will be ASD’s preferred method for receiving funds from members, and for paying rebates and commissions to members . . . Within the past two weeks, ASD has wired several million dollars to Solid Trust Pay from its BOA Accounts. A TFA also learned that earlier in July 2008, a bank other than BOA closed the last account that was controlled by Bowdoin or family members after that bank determined, and explained to them, that an investigation by the bank determined that Bowdoin appeared to be operating a Ponzi scheme.” — AdSurfDaily Ponzi scheme forfeiture complaint, August 2008
TelexFree affiliate promos encouraging participants to register for International Payout Systems (I-Payout) began to appear online in recent hours. Just last month, TelexFree affiliates were encouraged to register for Global Payroll Gateway, another e-Wallet vendor that supposedly would solve TelexFree’s payment problems as a pyramid-scheme probe moved forward in Brazil. There now are reports online that GPG has dumped TelexFree, leading to questions about whether TelexFree is trying to port its alleged fraud scheme to yet another vendor — I-Payout. Source: Google search results.
In 2008, the U.S. Secret Service effectively accused the AdSurfDaily MLM “program” of playing a game of payment-processor roulette as U.S. law enforcement put the squeeze on certain money-movers, the willfully blind enablers of online fraud schemes.
ASD, a $119 million HYIP Ponzi scheme that led to a 78-month prison sentence for operator Andy Bowdoin, started out by accepting “e-Gold and Virtual Money,” according to a Ponzi-scheme forfeiture complaint filed in federal court in August 2008.
But ASD, according to the complaint, realized e-Gold had come under investigation for enabling the laundering of money, something that could put the heat on ASD.
“Shortly after publicity surrounding the government’s investigation into e-Gold appeared, ASD discontinued using the e-Gold system as a means for receiving member funds,” the complaint alleged.
And even as these events were occurring, according to court filings in the ASD case and in other cases, Robert Hodgins, a supplier of debit cards and the operator of Virtual Money Inc. — now listed by INTERPOL as an international fugitive — came under investigation in Connecticut amid allegations he was assisting in the laundering of narcotics proceeds in Medellin, Colombia, and prepping himself to assist in the laundering of funds in the Dominican Republic.
Virtual Money, whom some ASD members said was supplying debit cards to ASD, also was linked to the PhoenixSurf Ponzi scheme, according to court filings.
In December 2010, federal prosecutors alleged that ASD also had accepted money from e-Bullion, a California firm that processed payments for Ponzi schemes, including the $72 million Legisi HYIP scheme in Michigan that led to prison sentences for operator Gregory McKnight and pitchman Matthew John Gagnon. E-Bullion operator James Fayed has been sentenced to death for ordering the brutal contract slaying of his wife, a potential witness against him. Pamela Fayed’s throat was slashed repeatedly in the shadows of a Greater Los Angeles parking garage, her husband seated on a nearby park bench “like he doesn’t have a care in the world.”
ASD, according to court filings, also used AlertPay and SolidTrustPay, money-movers based in Canada that have been linked to multiple Ponzi schemes, including the alleged $600 million Zeek Rewards Ponzi scheme broken up by the SEC last year.
Not even Bowdoin’s arrest in 2010 stopped him from pitching fraud schemes, according to court filings. Facing serious criminal charges for his actions in ASD, Bowdoin (in 2011) became a pitchmen for the OneX “program,” which federal prosecutors later alleged to be a pyramid scheme recycling money in ASD-like fashion. Among Bowdoin’s fellow OneX pitchmen was T. LeMont Silver, later of Zeek and later of JubiMax and GoFunPlaces, two MLM “programs” that are suing each other amid allegations of financial fraud.
At one time, OneX claimed to have a relationship with SolidTrustPay. It then claimed to have ended that relationship and to have started a relationship with I-Payout. Earlier, I-Payout had listed the uber-bizarre TextCashNetwork MLM “program” with ties to the Phil Piccolo organization as a “selected client.” TextCashNetwork now appears to have disappeared, but still is operating with the acronym “TCN” — this time as TrueCashNetwork. How the “new” TCN is processing payments is unknown. What is known is that someone associated with the “new” TCN has sent emails to “winners” in the Zeek scheme in an apparent bid to get them to flog for the new iteration, an apparent investment arm of which is being promoted as an opportunity to earn an interest rate of 50 percent.
Now — as incredible as it seems — promoters of the alleged TelexFree pyramid scheme operating in Brazil and the United States now are claiming that TelexFree is using I-Payout, known formally as International Payout Systems Inc. Equally incredibly, this is happening less than a month after TelexFree promoters advised TelexFree participants to register with Global Payroll Gateway (GPG), another eWallet company and supplier of debit cards, as a means of getting paid after payouts to Brazilian members of TelexFree were blocked in Brazil.
Just last month, TelexFree affiliates were encouraging prospects to register with Global Payroll Gateway (GPG). In recent hours — and amid reports GPG has given TelexFree the boot — TelexFree affiliates have been urged to register with I-Payout. Source: Google search results.
There are reports online, including on Facebook from self-identified members of TelexFree, that GPG gave TelexFree the boot in recent days. No sooner did those reports surface than videos went up on YouTube encouraging TelexFree members to register for I-Payout.
One of the reports that TelexFree suddenly had shifted from GPG to I-Payout is published on the MoneyMakerGroup forum. MoneyMakerGroup’s name appears in U.S. court files as a place from which Ponzi and fraud schemes are promoted. Both FINRA and the SEC have warned that HYIP schemes spread in part through social-media sites such as forums, YouTube and Facebook.
Because international MLM HYIP fraud schemes often have promoters in common — and because the schemes are promoted on Ponzi cesspits such as MoneyMakerGroup and TalkGold — proceeds from the schemes can flow into banks at the local level, putting them in the position of becoming warehouses for the ill-gotten gains of participants, including winners and insiders. The use of stored-value debit cards such as those in play in HYIP schemes can lead to the quick dissipation of assets, meaning that victims of an HYIP scheme may have limited hope (or even no hope) that a recovery can be made for their benefit.
The most recent incongruous events involving TelexFree are occurring even as at least one judge and one prosecutor involved in the TelexFree pyramid probe in Brazil reportedly have been threatened with death. And, as was the case with ASD, some promoters of TelexFree have claimed an ability to expedite the flow of money to the scheme — perhaps through back-office transactions within the TelexFree system.
BULLETIN: The SEC has asked a federal judge to permit the receiver in the Legisi HYIP Ponzi-scheme case to pursue funds tied up after the arrest of James Fayed, the operator of the e-Bullion payment processor. Fayed was convicted in 2011 of ordering the murder of his wife, a potential witness against him. Pamela Fayed was slashed to death in a Greater Los Angeles parking garage in July 2008. The SEC brought the Legisi fraud prosecution in May 2008, just two months before Pamela was killed.
E-bullion has been linked to several Ponzi schemes. In court filings on June 6, receiver Robert D. Gordon said more than 85 percent of the $72.6 million directed at Legisi had flowed through the defunct processor. Gordon asked Judge George Caram Steeh of the Eastern District of Michigan for an order “to receive and collect any remission or restoration of funds recoverable or payable to Legisi investors pursuant to forfeiture actions brought by the United States” in federal court in Los Angeles.
The SEC now says Steeh should issue the order because Gordon’s efforts could “lead to the recovery of millions of dollars for the Receivership Estate, funds which ultimately could be distributed to victims pursuant to a Court-approved formula.”
Under Gordon’s plan, the SEC said, Legisi’s “winning investors” would be provided a process to dispute claims for the e-Bullion money.
“As a result,” the SEC said, “any investors who assert that they are entitled to money claimed by the Receiver would have an opportunity to have their arguments heard and decided by the Court. No moneys would be disbursed until after the Court hears and decides such disputed claims.”
The agency also said that Gordon earlier had successfully claimed $1.7 million from e-Gold, an e-Bullion rival charged in a 2007 money-laundering case. In May 2013, federal prosecutors in New York charged Liberty Reserve — yet another payment processor linked to online fraud schemes and other crime — in an alleged $6 billion money-laundering conspiracy.
With a take of $72 million, Legisi was a “program” pitched on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup — forums from which “programs” such as AdSurfDaily ($119 million), Zeek Rewards ($600 million), Pathway To Prosperity ($70 million) and Profitable Sunrise also were pitched. The combined scams gathered at least $861 million, according to federal court records. The number could be significantly higher because the final take of Profitable Sunrise — estimated in the tens of millions of dollars — is unknown. If Profitable Sunrise gathered $140 million, it would mean that the take of the five scams combined exceeded $1 billion.
Similar scams continue to be promoted on the Ponzi boards by commission-based hucksters. The condition is comparable to “whack-a-mole” in the sense that one scam rises to replace another. The “offers” frequently are targeted at victims of previous schemes and positioned as a means investors can “earn” back funds lost in the earlier scams.
Federal court records show that prosecutors asserted an AdSurfDaily pitchwoman funded her ASD account through e-Bullion, which also has been tied to mysterious scams such as Gold Quest International, the “Alpha Project” and Flat Electronic Data Interchange, known as FEDI. FEDI’s operator, Abdul Tawala Ibn Ali Alishtari, also known as “Michael Mixon,” was convicted in September 2009 of financing terror and fleecing investors in the FEDI scheme.
Cash associated with the ASD Ponzi scheme was seized on Aug. 1, 2008, about four days after Pamela Fayed was murdered in Los Angeles. Erma Seabaugh, the ASD promoter who funded her account with e-Bullion, also pitched a scam known as StreamlineGold, according to federal records.
In November 2007, a MoneyMakerGroup poster claimed this about StreamLineGold (italics added):
StreamLine Gold is literally what it says. [I]t can provide you with an unlimited income through the combination of Precious Metals and Cash with a business model whose time has come PLUS the most advanced and lucrative pay plan ever devised.
Seabaugh, according to records, was promoting ASD through an entity known as Carpe Diem, a purported “religious” nonprofit firm in Oregon.
Separately, the receiver in the Zeek Rewards Ponzi case has said that he has “obtained information indicating that large sums of Receivership Assets may have been transferred by net winners to other entities in order to hide or shelter those assets.”
An evidence exhibit in the Legisi case shows that investors had to affirm they were not an “informant” for government agencies such as the CIA, FBI, SEC, “Her Majesty’s Police,” the Intelligence Services of Great Britain and the Serious Fraud Office, among others.
This Legisi “Quick Start Manual” showed investors how to open payment accounts at e-Bullion and e-Gold, both of which provided services to HYIP scams and both of which were implicated in international fraud schemes. e-Bullion operator James Fayed was convicted in 2011 of arranging the grisly murder of his wife, a potential witness against him. (Source: federal court files.)
UPDATED 5:08 P.M. EDT (U.S.A.) How dangerous and bereft is HYIP Ponzi Land? More than 85 percent of the $72.6 million directed at the Legisi HYIP Ponzi scheme before its May 2008 collapse flowed through the now-shuttered e-Bullion payment processor operated by convicted murderer James Michael Fayed, according to the court-appointed receiver in the Legisi case.
Receiver Robert D. Gordon — noting he has consulted with federal prosecutors — now is asking a federal judge in Michigan for an order that would authorize him “to receive and collect any remission or restoration of funds recoverable or payable to Legisi investors pursuant to forfeiture actions brought by the United States” in federal court in Los Angeles.
Fayed is sitting on California’s Death Row after his May 2011 conviction for ordering the brutal contract slaying of Pamela Fayed, his wife and a potential witness against him. Pamela Fayed was stabbed 13 times in a Greater Los Angeles parking garage on July 28, 2008. The Los Angeles Times reported her husband was seated on a nearby park bench “texting” on his cell phone while his alleged accomplices carried out the slaying.
Gordon asked Judge George Caram Steeh of the Eastern District of Michigan for the order on June 6. About two weeks earlier, federal prosecutors in New York brought criminal charges against the Liberty Reserve payment processor, alleging that it had orchestrated a $6 billion money-laundering conspiracy. Both Liberty Reserve and E-Bullion were popular with HYIP scammers and other criminals.
Legisi was a “program” promoted on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup. The “program” resulted in both criminal and civil charges being filed against operator Gregory N. McKnight and online pitchman Matthew John Gagnon of Mazu.com. In 2010, the SEC described Gagnon as a serial pithman for fraud schemes and a “danger to the investing public.”
Sentencing for Gagnon had been scheduled for yesterday. It now has been moved to July 9. McKnight, whom prosecutors said engaged in “semantic obfuscation” to raise millions of dollars in his HYIP fraud scheme, is scheduled to be sentenced Aug. 6.
In his June 6 filing, Gordon alleged that McKnight “used e-Bullion as the vehicle to hold, receive and distribute funds from and to Legisi investors” and that McKnight used investor funds to invest in “various High-Yield Investment Programs.” He further alleged that Gagnon was a “prolific” user of e-Bullion and that “Mazu and Gagnon published on the mazu.com website how-to instructions for prospective Legisi investors to fund their accounts by opening an e-Bullion account.”
From the receiver’s June 6 filing (italics added):
The Department of Justice has established a remission process in the Central District of California to administer claims of former accountholders of e-Bullion a/k/a “Goldfinger Coin & Bullion.” McKnight, Legisi, and the majority of Legisi investors held accounts with e-Bullion. Mr. Gordon has made claims against the seized funds for the benefit of the Estates. In addition to direct claims on behalf of the Legisi-related entities, Mr. Gordon seeks to recover funds relative to Legisi investor accounts. To authorize such claims, officials at the Department of Justice have suggested an order from the Receivership Court stating: “Receiver is authorized to receive and collect any remission or restoration of forfeited funds recoverable by or payable to [Legisi Investors] pursuant to any civil or criminal forfeiture action brought by the United States in any federal jurisdiction.” Such an order would assist Mr. Gordon in recovering funds owed bynet winner investors and in compensating victims of the Legisi scheme.
E-bullion has been linked to multiple Ponzi schemes, including AdSurfDaily, Legisi, Gold Quest International and FEDI. The FEDI scheme has been linked to Abdul Tawala Ibn Ali Alishtari, also known as Michael Mixon. Ali Alishtari pleaded guilty in 2009 to financing terrorism and fleecing investors in the FEDI scheme.
When a jury sentenced Fayed to death in 2011, Los Angeles Superior Court Judge Kathleen Kennedy described him as “one cold, calculating human being.”
Here is how the U.S. Department of Justice is describing e-Bullion. (Note: this is reproduced verbatim from Gordon’s June 6 filing — with italics/bolding added):
e-Bullion was a web-based money transmitting business operated by James Michael Fayed. e-Bullion allowed individuals to depositmoney and purchase virtual “e-currency” that was purportedly backed by precious metal reserves maintained by Fayed’scompanies in the United States and Australia. Accountholders could use e-currency to trade in goods and services with other accountholders. Federal investigators determined that many operators of fraudulent investment schemes used e-Bullion to collect millions of dollars from victims, much of which was wired to overseas accounts.
In May 2011, Fayed was convicted of murdering his wife and is currently awaiting execution on California’s death row. On July 30, 2012, the United States Attorney’s Office for the Central District of California obtained a judgment in federal district court that resulted in the forfeiture of approximately $3.6 million in bank funds and $5.4 million worth of gold, silver, and platinum seizedfrom two entities formerly controlled by Fayed – Goldfinger Coin and Bullion (GCB) and Goldfinger Bullion Reserve Corp (GBRC).In a related matter, the Australian Federal Police obtained a judgment resulting in the forfeiture of approximately $13 millionin precious metals that were purchased and stored by Fayed in the Perth Mint in Australia. The funds forfeited in the Australia matterare also expected to be distributed to qualified e-Bullion accountholders through this remission process.
This grainy likeness of Legisi HYIP operator Gregory N. McKnight appears in U.S. court files.
BULLETIN: Yesterday’s scheduled sentencing of convicted Legisi HYIP swindler Gregory N. McKnight has been delayed until Nov. 19, but federal prosecutors in the Eastern District of Michigan have asked U.S. District Judge Mark A. Goldsmith to sentence McKnight to 15 years in prison.
McKnight and Legisi relied on “semantic obfuscation” in which investors were told they were joining a “loan program,” not making an “investment,” prosecutors said.
A 15-year sentence is at “the top of the sentencing guidelines of 151-188 months” and “may serve to discourage others who are inclined to involve themselves in similar criminal conduct,” prosecutors argued to the judge.
In February, McKnight, 52, pleaded guilty to wire fraud in the Legisi Ponzi caper. The scam, which planted the seed a return of between .25 percent a day and 12 percent a month was possible, was popularized in part on Ponzi boards such as MoneyMakerGroup and Talk Gold.
Court filings show that Legisi used some of the same payment processors used by the AdSurfDaily Ponzi scheme, including e-Gold and e-Bullion. ASD operator Andy Bowdoin was sentenced in August to 78 months in federal prison.
“The principle mechanism by which investor funds would be funneled to defendant was through the utilization of the internet via digital currency, particularly e-gold and e-bullion,” prosecutors said in the McKnight sentencing memo. “The use of these non-traditional funding methods provided McKnight with the opportunity (at least for a while) to conduct the scheme below the radar of regulators.”
And, prosecutors pointed out, “[i]n 2007, the United States government seized the property in approximately 58 e-gold accounts due to various criminal violations, including McKnight’s account . . . Moreover, in 2008, e-gold and its operators were convicted of money laundering and conspiracy to defraud the United States . . . And in 2006, the United States government commenced a forfeiture suit against e-bullion for operating an unlicensed money transmitting business, wire fraud, and money laundering . . . James Fayed, the owner and operator of e-bullion, was later convicted in the State of California of having his wife murdered and sentenced to death row.”
Legisi gathered about $72 million. The SEC and the U.S. Secret Service led the probe, which resulted in civil charges against McKnight by the SEC and a criminal charge of wire fraud against him by the Secret Service.
Legisi pitchman Matthew John Gagnon also was charged civilly and criminally in the Legisi case.
From the prosecution’s sentencing memo on McKnight (italics added/bolding in original):
As if the exorbitantly high interest rates were not enough to induce investors into defendant’s scam, Legisi also offered a referral program whereby investors could earn a 5% to 7% commission on the amount of new funds that a referred investor placed in the program. As McKnight explained, “[a]s an Active Member of Legisi.com, you are encouraged to refer friends, colleagues, and your own website visitors to us and benefit from an additional source of income — a 5% – 7% incentive bonus for each new account opened by your referrals and on any and all future deposits from them!”
Legisi was an acronymn that stood for “Lucrative Electronic Gold Income Services International,” prosecutors said. HYIP schemes spread in part because unlicensed/unregistered brokers (such as Gagnon) push them online to earn “commissions.”
The MoneyMakerGroup Ponzi forum — one of the outlets from which Legisi was pushed — is specifically referenced in court filings in the Legisi case.
Zeek Rewards, which the SEC described last month as a $600 million Ponzi- and pyramid scheme selling unregistered securities, also was heavily pushed on the Ponzi forums. Zeek used both domestic and offshore financial vendors, including AlertPay and SolidTrustPay in Canada.
Zeek planted the seed it could provide a return of between 1 percent and 2 percent a day, far higher than Legisi’s maximum suggested payout of 12 percent a month. Like Zeek, ASD suggested a payout on the order of 1 percent a day. The ASD scheme gathered at least $119 million, federal prosecutors in the District of Columbia said.
ASD relied on wordplay to dupe investors. So did Legisi, prosecutors said in the McKnight sentencing memo (italics added):
In addition to operating a Ponzi scheme, McKnight committed various securities violations. While McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.
From a footnote in the prosecution’s McKnight sentencing memo (italics added):
[Legisi] Investors originated from all 50 states and approximately 33 foreign countries (Australia, Bahamas, Belgium, Canada, Cyprus, Demark, England, France, Finland, Germany, Greece, Iceland, India, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Malaysia, Mexico, Nigeria, Philippines, Saudi Arabia, Singapore, Slovenia, South Africa, South Korea, Sweden, Spain, Thailand, Trinidad West Indies).
From a post Friday at the Payza Blog at the close of U.S. business hours in the East. Companies sometimes make announcements late on Fridays to minimize PR fallout. Payza's announcement may put it at odds with customers who populate well-known forums whose members push HYIP and other scams that help fraud spread globally on the Internet
EDITOR’S NOTE: Payza seems to have taken an important step Friday in the battle against online fraud. The payment-processing company perhaps deserves an accolade for that. But it’s too soon to heap praise on Payza. We are particularly concerned about the phrasing of a specific line in Payza’s altered User Agreement. More on that below . . .
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UPDATED 7:29 A.M. EDT (JULY 17, U.S.A.) Is Payza, the payment processor operating in Canada that recently changed its name from AlertPay, finally doing the right thing?
Or is it just lip service?
Payza has announced on its Blog that it is banning programs that show “[a]ny indication or demonstration of a literal rate of return on a contribution, payment or investment, while not being licensed to sell or solicit.”
Notice the phrasing (emphasis added): “any indication of a literal rate of return . . .”
What, precisely, does Payza mean? That expressing a literal return rate no longer is OK, but all can be cured if Payza’s current HYIP purveyors and Ponzi-board hucksters hide veiled or direct references to the return (perhaps in the back offices of HYIP affiliates or someplace else out of view of the public and search engines) or somehow find a word combination that avoids a literal expression of a return and instead relies on a deeply couched expression?
This is an important question because the HYIP “industry” cannot exist without the financial vendors that enable it, either by turning a blind eye or choosing not to peel back a single layer of the onion because choosing to see is bad for profits.
The last thing the “industry” needs is an invitation to become even more clandestine in its dealings, even more clever in its use of linguistic deception, information suppression or outright misinformation. The threat to individuals and the world’s financial infrastructure posed by con men and teams of accomplices in the thousands or hundreds of thousands already is untenable.
Payza needs to reassess its use of the phrase “literal rate of return.” Left untouched, that phrase easily could turn what’s already a dangerous, wink-nod “industry” into even more of one, thus providing scammers a new back door and actually making the problem of international financial chicanery on the Internet even worse.
Because AlertPay basically chose for years to gorge itself on HYIP fees and not to take the clues offered by the prosecution of e-Gold in the United States (by members of the same team that prosecuted the AdSurfDaily autosurf HYIP, BTW) and the disintegration of e-Bullion (while its operator stood accused of arranging the brutal contract slaying of his wife, a potential witness to e-Bullion’s Ponzi-sustaining fraud), we cannot yet offer Payza three cheers.
Owing to AlertPay’s history of choosing in e-Gold and e-Bullion-like fashion to see no evil, we question whether use of the word “literal” is just a means of signaling the scammers to do a better job of using language to disguise an investment program as something else or to hide and/or otherwise bury language that speaks to the investment elements. In the past few weeks, for example, the Payza-dependent JSS Tripler/JustBeenPaid “program” suddenly changed the language on its home page to say it offers a “LEGALLY COMPLIANT & PATENTED SYSTEM.”
Let’s pause for a moment to state the obvious, something that somehow often gets overlooked by HYIP apologists: Real people — living, breathing human beings — are being sucked into these utterly contemptible “programs” that are being enabled by processors such as Payza and SolidTrustPay.
And suddenly — out of the blue — JSS/JBP announced it was using a “WORLD RENOWNED LAW FIRM” to assure compliance. These things bizarrely clashed with recent claims by Frederick Mann, the purported operator of JSS/JBP, that attorneys could not be trusted, that government employees weren’t welcome in the “program,” that registering with securities regulators was a sign “you’ve signed up to be a slave, part of the slave system, and then they have jurisdiction over you and can shut you down” and that JSS/JBP members had nothing to fear because the “program” had no presence in the United States.
Now, all of a sudden, JSS/JBP has found the religion of compliance — or at least the language of the religion of compliance.
The New Religion Of Compliance
The Payza-dependent Zeek Rewards MLM “program” also is preaching the religion of compliance, even as it plants the seed that it can provide a JSS/JBP-like annual return of between 365 percent and 730 percent without being the Bernard L. Madoff Investment Securities LLC of multilevel marketing.
Part of what Zeek appears to be doing falls along the lines of not expressly stating a literal return. Welcome to the world of vomitous MLM in the year 2012. The players are eager to tell you what they’re not, less eager or completely unwilling to tell you what they are, and can bring a virtually unlimited supply of Stepfordians to the fore to help them cloud the issues.
Zeek has told the public it is not a “pyramid scheme.” It now says it will ban members who describe the “opportunity” as an investment program, despite the seed Zeek plants that participants can earn a return of between 1 percent and 2 percent a day. Some Zeek affiliates are practically tripping over themselves these days in what strikes us as a bizarre race to see how many times they can fit the words “attorneys” and “compliance” in their forum “defenses” for Zeek.
This Blog has not seen one instance in which a Zeek attorney has described the “program” as legal. Even so, we’ve seen plenty of examples in which Zeek affiliates implied that attorneys had given Zeek the all-clear and at least a few examples in which affiliates implied that agencies such as the SEC and FTC had scrubbed Zeek for compliance and found it in fine fettle. There have been hugely disingenuous claims from Zeek affiliates in this area — everything from describing the lack of any action against Zeek by the SEC or FTC as evidence that the agencies had examined Zeek and found nothing lacking to planting the seed that the lack of any action by the agencies is proof that Zeek is operating lawfully.
Zeek itself played this miserable game. In June, a North Carolina television station carried a report that suggested Zeek had been found to be operating lawfully by the office of North Carolina Attorney General Roy Cooper. Zeek linked to the TV station’s video report on its news Blog and certain Zeek promoters pointed to the report as proof of Zeek’s legitimacy.
But Cooper’s office said it never said Zeek was operating lawfully. After the TV station was contacted by Cooper’s office, which was concerned about the clarity and accuracy of the video report, the station removed the report. The incident produced one of those awkward moments that too often accompany the MLM trade: Zeek plainly liked the TV report because it construed Zeek as operating lawfully. The report then became a tool in Zeek’s PR arsenal — and Zeek wanted to make sure its affiliates had the same tool. It used its Blog to point affiliates to the video, and some of them predictably used it as evidence the Zeek critics were wrong and to plant the seed that Zeek had passed muster in North Carolina.
By linking to the report, Zeek tried to maximize its PR hand. When the report was removed, Zeek had nothing to say. The post on Zeek’s news Blog in which the company originally crowed that “Zeek Makes the Channel 2 News” now has been removed. Although the precise date and time in which Zeek removed the post are unclear, a Zeek affiliate with his own Blog sought to capitalize on the TV station’s report in a post that still remains.
That post featured a three-tiered headline that screamed, “Zeek Reward [sic] featured on Chanel [sic] 2 News[.] Zeek Reward [sic] featured on Chanel [sic] 2 News[.] Zeek Reward [sic] makes it on TV. Get In On the Action!”
This post on the "Empower Network" Blog of a Zeek affiliate included a three-tiered headline and a link that pointed readers to a TV station's report about Zeek. Like Zeek itself, the "Empower Network" is an MLM "opportunity."
The affiliate’s post included a graphic that described Zeek as a “Passive Income!” opportunity. One link on the site pointed to the now-removed TV station video. Another link, however, pointed to post that included a YouTube version of the TV station’s report. That YouTube report included a headline and “crawler” in a language other than English.
Like the post that included the three-tiered headline about Zeek’s TV appearance, the second post included the graphic that described Zeek as a “Passive Income!” program. The claim about passive income speaks to the heart of the issue of whether Zeek is selling unregistered securities as investment contracts and trying to disclaim its way out of an encounter with regulators.
Although a TV station took down its link to a video report on Zeek, a YouTube version apparently existed.
The Culture Of Willful Blindness
Confusing messages appeared repeatedly when the AdSurfDaily Ponzi case was playing out. All of it was monumentally embarrassing to MLM. In one instance — while it was awaiting a key ruling from a federal judge in October 2008 on whether it had demonstrated it had sufficient income and was not a Ponzi scheme at a hearing it requested and the judge granted in the interests of justice — ASD insiders leaked a story that ASD expected a revenue infusion of $200 million from a penny-stock company.
The ASD Stepfordians immediately raced to forums to spread the good news. But skeptics immediately questioned the claim, pointing out that Praebius Communications — the penny-stock firm that supposedly was going to provide ASD a $200 million injection — did not even publish audited financials. SEC records later showed that, in October 2008, the same month ASD was awaiting the court decision and claiming a new $200 million was coming on board, Praebius stock was being pumped in a fraudulent-touting scheme.
Over time, serious questions were raised about whether certain MLMers within ASD were engaging in bids to obstruct justice. Rumors were planted that federal prosecutors had secretly admitted ASD was not a Ponzi scheme but were clinging to the case as part of a bid to save face. In 2008, ASD members who did not even question the bizarre claims coming from ASD or ASD insiders raced to forums and spread a false report that Ponzi charges had been dropped against ASD in Florida. That development prompted the attorney general of Florida to issue a statement that, not only had Ponzi charges not been dropped against ASD in the state, they’d never been brought to begin with. Indeed, Florida charged ASD with operating a pyramid scheme.
The names of both AlertPay and SolidTrustPay appear in court filings in the ASD Ponzi case. It is hardly coincidental that both Zeek and JSS Tripler/JustBeenPaid also have ties to the same processors, which are offshore from a U.S. perspective. These processors are the e-Golds and e-Bullions of Canada. They also are referenced in the Pathway to Prosperity Ponzi case, which the U.S. Postal Inspection Service called a global fraud affecting 40,000 people from 120 countries. In December 2010, the federal prosecutors handling the ASD case made the first public filing that referenced e-Bullion in the context of ASD.
In 2011, e-Bullion operator James Fayed was convicted of arranging the contact slaying of Pamela Fayed, his estranged wife who was found slashed to death in a Los Angeles-area parking garage. There is absolutely no doubt — zero — that e-Bullion was enabling Ponzi schemes. James Fayed has been sentenced to death for arranging the brutal killing of his wife, a potential witness against him.
It is beyond the pale — and almost beyond belief — that certain MLMers continue to insist there is something noble about these miserable money games, that they somehow represent the best of the free market and the entrepreneurial spirit, that they’ve somehow succeeded where other MLMs have failed.
What they are are recipes for financial and personal destruction that operate as slow-motion Ponzi schemes. They need to be destroyed, not duplicated. Far from being exciting, new niches — as some MLMers tell the story — they are form-shifting monsters that spread the greatest financial cancers devised in the history of mankind. They are so dangerous that external fraudsters target them as a means of unloosing secondary frauds — everything from the issuance and passing of bogus checks to organized credit-card fraud. Some of them have been linked to narcotics-trafficking or money-laundering operations. Some of the investigators who assisted in the ASD Ponzi case also developed this case.
From our May 16, 2010 report on the EMG/Finanzas Forex case (italics added):
Research by the PP Blog suggests the purported investment program was so sordid that promoters even claimed some of the funds were being used for the “humanitarian” purpose of assisting kidnapping victims in Colombia. In a sickening display of marketing theatrics, a claim was made that investors could “adopt” kidnapping victims for a payment of $1,000 and that the company would set aside $500 in corporate funds for each victim so that their families could have bright futures if the victims ultimately were released by their captors . . .
The HYIP scheme allegedly was associated with an entity known as Evolution Market Group (EMG), which purportedly had a Forex component known as FinanzasForex. Investigators alleged in January that there were schemes within schemes in a tangled web of domestic and international deception that featured dozens of bank accounts, shell companies and various fronts for money-laundering enterprises, including companies purportedly in businesses such as real estate and car washes.
The scheme was so corrupt, according to court filings, that some investors were told that, in order to leave the program whole, they had to recruit new investors, have the new investors pay them directly — and use the proceeds from the new investors to “recover” their initial outlays . . .
A Glimmer Of Hope
We do find a glimmer of hope in Payza’s announcement because Payza’s use of the phrase “any indication” implies it actually intends to exit the fraud-enabling business and intends to protect its reputation moving forward and make it harder for viral scammers who use its service to rob people without the aid of a gun.
A return — plainly stated or implied — would seem to fall under the “any indication” umbrella. Another indication is the presence of a “program” on the Ponzi boards. (Like ASD and EMG/Finanzas Forex, Zeek and JSS/JBP have a presence of the Ponzi boards.)
Yet another indicator of fraud is disclaimer language that seeks to cloud regulatory issues by planting the seeds that payouts are not guaranteed and that joining a “program” with a plainly stated or implied return does not constitute making an investment.
Much of the HYIP fraud “industry” exists because of the wink-nod deal and the willful blindness of the purveyors, including serial scammers with global reach and payment processors that gorge themselves on fees while serving what effectively are criminal combines consisting of like-minded individuals and “teams.”
Also banned, according to the Payza Blog post, is the the “[s]elling of Unregistered/Unlicensed Stocks, bonds, securities, options, futures, or investments in any entity or property, including (but not limited to) corporations and partnerships or sole proprietorship . . .”
Meanwhile, Payza says this (italics added):
“Solicitation, marketing campaign, direct selling or any other comparative effort will be considered a violation of the User Agreement. If you are registered or licensed to take such action, you may be requested to present documentation demonstrating authority to do so from a Securities Exchange Commission, Commodities Futures Trading Commission or other equal and comparative agency.”
Language in the full, six-paragraph announcement is exceptionally formal, bordering on the florid. But if the aim is for Payza to say no to fees and wrest itself from the wretched, pain-producing universes of HYIPs, autosurfs, cycler matrices and other “programs” that reach across national borders and fleece people on a global scale, the ornate language will become only a tiny footnote.
What’s far more important is that Payza will have said no to the scammers and a subculture of eager, greedy pitchmen who help financial crime spread globally and line their pockets on the current (or pending misery) of their marks.
It is possible these days for a scammer hiding in the darkest corners of the Internet to pick the pocket of a “customer” and contribute to a mortgage foreclosure or even the failure of a bank a continent away. Such “programs” often are pushed in the purported name of freedom itself, as a purported means of helping a neglected Everyman escape the shackles of poverty and become a free man who’s escaped his tyrannical captors.
But because the scammers’ schemes constantly evolve and because they often rely on overblown prose to disguise the fraudulent nature of their “programs,” it is going to take more than just words from Payza to incorporate any real change.
For example, could an “opportunity” that simply comes up with different naming conventions and avoids the traditional language of investments fool the checkers at Payza? Or could an “opportunity” that shields Payza from information perhaps by publishing it only in the back offices of the “opportunity’s” members escape scrutiny?
And because HYIPs and their willfully blind, serially disingenuous promoters already are infamous for wink-nod presentations, the use of disclaimers and even outright denials that an investment program of any sort is being offered, will the criminal minds who dominate this cancerous space go into overdrive to come up with new and more clever ways to disguise fraud schemes?
What To Watch For
Will panic engulf the HYIP sphere because of the Payza annoucement? Here are some things to look for:
Masked investment “programs” — perhaps aware they are under scrutiny — taking once-public forums offline and engaging in bids to further compartmentalize information and scrub negative information.
Management and affiliates of such “programs” making veiled or direct references to “attorneys” and “compliance” as a means of suggesting they are wholly lawful and embrace responsible corporate citizenship.
Increased lead times between “program” payment cycles, perhaps initially explained away as “growing pains.”
Payment bottlenecks to develop as “programs” horde cash or cash equivalents and become fearful that once-reliable enablers are hopping off the wink-nod fraud train because they realize the real world no longer is going to tolerate international lawlessness so a scammer on the TalkGold or MoneyMakerGroup forums can get rich by picking the pockets of senior citizens, deaf people, the unemployed and the struggling. (Also known as the AdSurfDaily problem.)
An uptick by scammers in the use of floridspeak as a means of talking around serious legal issues and masking the investment elements of a “program.”
The creation of bogus “regulatory agencies” and “trade groups” to create the appearance that a responsible party with legal authority is monitoring the store. (Note: A bogus regulator was an element of the George Theodule Ponzi scheme in Florida.)
The sale of purported memberships in these purported “regulatory agencies” and “trade groups.”
Read the Payza post, which was made Friday at the close of traditional business hours in the Eastern United States.
URGENT >> BULLETIN >> MOVING: Matthew J. Gagnon, an alleged online pitchman for the Legisi HYIP Ponzi scheme, has been named in a criminal complaint filed by the U.S. Secret Service.
Gagnon, 42, of Portland Ore., and Weslaco, Texas, was accused civilly by the SEC in 2010 of being “a danger to the investing public,” amid allegations he promoted multiple fraud schemes — including Legisi — on his Mazu.com website.
He is accused in a Secret Service affidavit filed Nov. 28 in the Eastern District of Michigan of not disclosing $1.7 million in payments from Legisi while he was touting it to “the investing public” between January 2006 and May 2007.
Legisi, the Secret Service said in the affidavit, was a “massive Ponzi scheme” that gathered about $72 million from more than 3,000 investors before the fraud was exposed.
Among the allegations against Gagnon is that he promoted Legisi’s unregistered offering as exempt from registration requirements and “literally the greatest” program he had “ever seen. ” (The complaint includes several specific allegations about how Gagnon promoted Legisi. One promo attributed to Gagnon by the Secret Service shows that Gagnon used six exclamation points in a single paragraph consisting of about 66 words.)
Like Florida-based AdSurfDaily, Legisi has been linked to E-Bullion, the shuttered California payment processor operated by James Fayed. Fayed, 48, was formally sentenced to the death penalty last month for arranging the brutal contract slaying of Pamela Fayed, his estranged wife and a potential witness against him before she was slashed 13 times in a greater Los Angeles parking garage in July 2008.
Legisi also was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup. The Legisi Terms of Service, according to federal court filings, included language that made members avow they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among others.
President Bush observes the 2006 swearing-in ceremony of incoming Transportation Secretary Mary Peters. Peters held the cabinet post between October 2006 and January 2009. Source: Wikipedia: White House photo by Paul Morse.
UPDATED 5:42 P.M. ET (U.S.A.) Public officials involved in the AdSurfDaily Ponzi case were not the only targets of bogus liens filed by Kenneth Wayne Leaming, according to federal prosecutors in Seattle.
Leaming, 55, also filed a lien against Mary Peters, the U.S. Secretary of Transportation under President George W. Bush during his second White House term, prosecutors said.
In addition, prosecutors said Leaming filed liens against U.S. District Judge Rosemary Collyer; former U.S. Attorney Jeffrey A. Taylor; former assistant U.S. Attorney William Cowden; current assistant U.S. Attorney Vasu B. Muthyala; and Roy Dotson, a special agent of the U.S. Secret Service.
Collyer is presiding over both the civil and criminal prosecutions connected to the ASD Ponzi case in the District of Columbia. The civil case, which led to the successful forfeiture of tens of millions of dollars in the personal bank accounts of ASD President Andy Bowdoin, was brought by Taylor’s office in August 2008.
Cowden and Muthyala assisted in the prosecution against ASD-related assets, including more than $65.8 million in Bowdoin’s 10 bank accounts and more than $14 million in other bank accounts linked to Golden Panda Ad Builder, a companion autosurf.
Dotson was a key investigator in the case, which was brought in part through the efforts of a Florida-based Task Force. Bowdoin was arrested in December 2010. He is free awaiting trial in the District of Columbia.
Taylor was succeeded as U.S. Attorney by Ronald C. Machen Jr. Machen’s office was sued pro se earlier this month by ASD members Todd Disner and Dwight Owen Schweitzer of Miami. Disner, a cofounder of the Quiznos sandwich franchise, and Schweitzer, a former attorney whose license was suspended in Connecticut, asserted that prosecutors engaged in “character assassination” against Bowdoin and that the forfeiture case consisted of a “tissue of lies.” They also claimed Dotson’s affidavit that led to the seizure of Bowdoin’s assets was flawed and that 4th Amendment violations had occurred.
Disner and Schweitzer also named Rust Consulting Inc., the government-approved claims administrator in the Ponzi case, a pro se lawsuit defendant. In September, Machen joined Assistant Attorney General Lanny Breuer in announcing that the government had returned $55 million to victims of the ASD Ponzi.
Collyer ordered the forfeiture of Bowdoin’s assets in January 2010. Her rulings were upheld by the U.S. Court of Appeals. Bowdoin, 77, is using Facebook and a website known as “Andy’s Fundraising Army” to raise money for his criminal defense on charges of wire fraud, securities fraud and selling unregistered securities.
Why Peters allegedly was targeted by Leaming was not immediately clear. But court records suggest the FBI is investigating Leaming ties to a Washington state group of “sovereign citizens” known as the “County Rangers.”
Leaming was arrested on Tuesday. On Wednesday, he appeared before U.S. Magistrate Judge J. Richard Creatura in Tacoma. Creatura ordered Leaming’s detention to continue. The date of Leaming’s next court appearance was not immediately clear.
Leaming, according to prosecutors, was found Tuesday with two federal fugitives from Arkansas who were indicted in February on federal charges related to an alleged envelope-stuffing scheme. Prosecutors identified the fugitives as Timothy Shawn Donavan and Sharon Jeannette Henningsen.
Donavan and Henningsen have court histories that include declaring themselves “living breathing free” people to whom laws do not apply, according to records. Like Leaming, they are being held at the Sea Tac Federal Detention Center near Seattle.
Leaming has been charged with retaliating against a Federal judge or Federal law enforcement officer by false claim or slander of title, an obstruction of justice statute.
Among the government’s allegations against Bowdoin is that he falsely claimed to have received an important award for business acumen from President Bush in 2008. ASD members used Bush’s name in online promos, according to records.
In July 2008 — as the Secret Service and the Task Force were investigating ASD — Bowdoin threatened to sue critics, according to court filings. After the seizure of his assets, he claimed the government’s action was the work of “Satan” and compared the seizure to the 9/11 terrorist attacks, which killed nearly 3,000 people in New York, Washington and Pennsylvania.
Cowden, whose name was repeatedly misspelled as “Crowden” by pro se litigants in the forfeiture case, was derided as “Gomer Pyle” on the now-defunct, pro-ASD “Surf’s Up” forum. One ASD member opined that Cowden should be placed in a torture rack. Another said a “militia” should storm Washington. Still another issued a “prayer” that called for prosecutors to be struck dead.
ASD critics were derided as “rats,” “maggots” and “cockroaches.”
In December 2010, prosecutors linked ASD to E-Bullion, a defunct California payment processor operated by James Fayed. E-Bullion has been linked to several Ponzi schemes.
Earlier this month, Fayed was formally sentenced to death for arranging the contract slaying of his estranged wife, Pamela Fayed.
Pamela Fayed was slashed 13 times in a Greater Los Angeles parking garage in July 2008 while James Fayed sat on a bench within earshot of Pamela’s screams, according to records.
At least one ASD member used E-Bullion to send money to ASD, according to federal court records. That member — former ASD “trainer” Erma Seabaugh of Missouri — was operating a purported “religious” nonprofit in Oregon and using ASD to promote a pyramid scheme, according to records.
BULLETIN: The Los Angeles Times is reporting (link below) that James Fayed has been formally sentenced to the death penalty for arranging the brutal slashing death of Pamela Fayed, his estranged wife and a potential witness against him.
James Fayed, 48, is an emerging figure in the AdSurfDaily Ponzi case. Federal prosecutors in the District of Columbia said in December 2010 that E-Bullion was used to forward money to ASD, which the U.S. Secret Service described as a massive international Ponzi scheme that used multiple payment venues to amass at least $110 million.
Erma Seabaugh, an ASD member who used E-Bullion, was an ASD trainer, according to the government. Records in Oregon show that Seabaugh, whose assets were seized in the ASD case, was operating a purported “religious” nonprofit firm from Missouri. The purported religious entity was known as Carpe Diem.
Seabaugh’s assets were seized in February 2009, during a period of time in which the AdViewGlobal (AVG) autosurf was launching and ASD President Andy Bowdoin was morphing into a pro-se litigant and trying to undo his January 2009 decision to submit to the forfeiture of $65.8 million seized by the Secret Service from 10 Bowdoin bank accounts in August 2008. AVG had close ASD ties, according to members.
E-Bullion has been linked to multiple Ponzi schemes, including Legisi, Gold Quest International and FEDI. The FEDI scheme has been linked to Abdul Tawala Ibn Ali Alishtari, also known as Michael Mixon. Ali Alishtari pleaded guilty in 2009 to financing terrorism and fleecing investors in the FEDI scheme.
FEDI participants could expect to receive payouts deemed “rebates,” according to documents obtained by the Ontario Securities Commission from a FEDI promoter who simultaneously was promoting a mysterious business known as the “Alpha Project.” ASD also used the word “rebates” to describe its payouts, according to court filings.
Ali Alishtari, like ASD’s Bowdoin, contributed money to Republican causes and heralded a purported GOP award for his business acumen, according to documents.
Seabaugh used ASD’s advertising “rotator” to promote an apparent “pyramid scheme” known as StreamlineGold.net, according to federal court filings. Like ASD, Legisi and GoldQuest International, StreamlineGold.net was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.
Pamela Fayed was stabbed 13 times in a Greater Los Angeles parking garage on July 28, 2008. The Times reported today that James Fayed was seated on a nearby park bench “texting” on his cell phone while his alleged accomplices carried out the slaying.
Los Angeles Superior Court Judge Kathleen Kennedy described James Fayed as “one cold, calculating human being,” according to the Times. Kennedy formally imposed the death sentence yesterday. The jury that convicted James Fayed in May recommended the sentence.
From the Times (italics added):
The only person within earshot who didn’t react was the victim’s estranged husband who was sitting on a nearby bench “texting on his cellphone, like he doesn’t have a care in the world,” Los Angeles County Superior Court Judge Kathleen Kennedy said Thursday, moments before sentencing James Fayed to death for the contract killing.
A few weeks prior to the Aug. 1, 2008, seizure of tens of millions of dollars in the personal bank accounts of AdSurfDaily President Andy Bowdoin, Bowdoin apparently believed it prudent to plant the seed that the ASD autosurf had amassed a giant pot of cash and would use it to “hammer” critics. His willfully blind followers helped spread the word on forums that ASD detractors soon would feel the sting of being sued back to the Stone Age.
Here, according to federal court filings, is what Bowdoin told ASD members at a company rally in Miami on July 12, 2008:
“These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit. Now, we’re ready to do battle with anybody. We have a legal fund set up. Right now we have about $750,000 in that legal fund. So we’re ready to get everything started and get the ball rolling.” (Emphasis added.)
Bowdoin thuggishly suggested that ASD had hired a law firm and that the firm was experienced at “bringing the hammer down on people that need it.” It is worth noting that federal prosecutors included the remarks attributed to Bowdoin in a document labeled “Government Exhibit 5.”
Meanwhile, it’s also worth noting that “Government Exhibit 1” consisted of the 2006 SEC complaint against 12DailyPro that accused the firm of operating an autosurf Ponzi scheme. It was the government’s way of showing that autosurfs such as ASD rely on willfully blind promoters to proliferate. “Government Exhibit 2,” meanwhile, was the SEC’s 2007 complaint against the PhoenixSurf autosurf. The inclusion of this exhibit was another way to show willful blindness.
One of the interesting things about the PhoenixSurf complaint was that it referenced Virtual Money Inc., which federal prosecutors in Connecticut later linked to alleged money-laundering by a narcotics cartel in Medellin, Colombia.
Robert Hodgins, the operator of Virtual Money, is an international fugitive wanted by INTERPOL. ASD also used Virtual Money, according to promos for the firm. In December 2010, federal prosecutors said ASD also had a tie to E-Bullion, a shuttered California payment processor whose operator was accused (and convicted) of arranging the brutal slashing murder of his wife in a Greater Los Angeles parking garage. ASD also had a link to E-Gold, a processor convicted in a money-laundering conspiracy case. So did PhoenixSurf.
“Government Exhibit 4” in the August 2008 ASD Ponzi case consists of surveillance photos taken in ASD’s hometown of Quincy, Fla. The date upon which the photos were taken is unclear, but it is known that the U.S. Secret Service began to investigate ASD on July 3, 2008, a little more than a week before the Miami rally.
The entry of the Secret Service in the ASD case fundamentally sent two signals: The U.S. government believed its financial infrastructure might be under attack by an organization — ASD — that was trading on the name of the President of the United States. The SEC has said nothing about the ASD case — at least not in public. Bowdoin was indicted on criminal charges in December 2010. If he is convicted on all counts, the man who once claimed to have a giant pot from which he could draw to “hammer” critics could face up to 125 years in federal prison, fines in the millions of dollars and forfeiture orders totaling at last $110 million.
In the earliest days of the ASD probe, at least three media outlets — including a local newspaper, a Blog and a regional publication — were threatened with lawsuits. Bowdoin ended up suing no one. In fact, within months he was consumed by litigation directed at him from virtually all fronts. Multiple civil-forfeiture complaints were filed, as was a racketeering lawsuit. These things occurred as a criminal investigation was unfolding slowly.
For all these reasons and more, Bogdan Fiedur — and members of the AdLandPro online “community” — should perform a sober assessment of Fiedur’s recent threat to sue RealScam.com, an antifraud forum.
Threats to sue journalists, media outlets, forums, Blogs and other websites that publish information about online schemes are bids to chill speech. These bids are occurring as an epidemic of white-collar crime and securities fraud is sweeping the globe during a period in which government budgets are strained and literally thousands of fraud investigations are under way that reach into all corners of the world.
It is clear that online fraud is responsible for billions of dollars in global losses. These worlds are exceptionally murky. No one knows for certain where the money goes when fraud schemes disappear — as they so often do. It is equally clear that criminal puppeteers behind the schemes are taunting investigative agencies. From the standpoint of the U.S. government, the government and financial institutions are facing attacks of thousands of tiny cuts.
Lanny Breuer, the head of the U.S. Department of Justice’s Criminal Division, testified on Capitol Hill yesterday that the “convergence of threats” posed by transnational organized crime is “significant and growing. ”
“Transnational organized crime is increasing its subversion of legitimate financial and commercial markets, threatening U.S. economic interests and raising the risk of significant damage to the world financial system,” Breuer told the Senate Judiciary Subcommittee on Crime and Terrorism.
Despite worldwide headlines of one massive fraud scheme after another — and despite the fact that the financial lives of real human beings in all corners of the world are being reduced to rubble by serial Ponzi schemers and scammers — Bogdan Fiedur is threatening to sue RealScam.com.
At a minimum, it is a PR blunder of the highest magnitude. Bowdoin made the same mistake. So did Data Network Affiliates (DNA), a purported business “opportunity” associated with serial huckster Phil Piccolo, who once planted the seed that, if lawsuits didn’t work, he knew the type of people willing to break legs to silence critics. One apologist for Piccolo and DNA planted the seed that a former federal prosecutor, federal judge and director of the U.S. Department of Homeland Security was a suspect in the 9/11 terrorist attacks.
It doesn’t get much more bizarre than that — unless one is willing to consider that Bowdoin now is trying to raise funds for his criminal defense on Facebook and claiming that God established a program known as OneX to help him do just that.
OneX is among the “programs” promoted by members of the AdLandPro “community” — as were ASD and Finanzas Forex (and many others) before it.
And yet Fiedur apparently believes he can chill RealScam.com into stop doing what it does by registering a domain titled “RealScamClassActionSuit.com.”
Inverting reality, the purported class-action site ventures that “RealScam encourages cyber-bullying and cyber-stalking by allowing the creation of anonymous accounts and by allowing the users to present of (sic) unproven accusations towards individuals of their targeted organization. The RealScam.com turns out to be just a harassment and bashing site with no verification of facts and indiscriminate attacks at anyone who looks like an easy target.”
It’s easy to imagine Andy Bowdoin or Phil Piccolo saying the same thing — while doling out accolades to the AdLandPro “community” for its excellent judgment about the types of “programs” the world’s masses should be joining.
“The wealth generated by today’s drug cartels and other international criminal networks enables some of the worst criminal elements to operate with impunity while wreaking havoc on individuals and institutions around the world,” Breuer of the Justice Department observed yesterday. “Generating proceeds often is only the first step — criminals then launder their proceeds, often using our financial system to move or hide their assets and often with the help of third parties located in the United States. Indeed, international criminal organizations increasingly rely on these third parties and on the use of domestic shell corporations to mask crimes and launder proceeds under the guise of a seemingly legitimate corporate structure.”
And then Breuer asked the Senate panel to enact legislation that would strengthen money-laundering and asset-forfeiture laws and broaden the federal RICO statute.
Whether the Senate — and the Congress as a whole — will listen is unclear. What is clear is that, at least in the context of online fraud schemes, victims are piling up in numbers that America’s largest sports stadiums cannot accommodate. Losses are in the billions. Vast sums of wealth have been taken from rightful owners and placed in the hands of criminals.
It is simply beyond the pale that Fiedur asserts that RealScam.com is a menace, when it is one of the few sites in the world that tasks itself with exposing the menace of international mass-marketing fraud that occurs over the Internet.
One final thing worth mentioning: A few weeks before Breuer ventured to Capitol Hill to testify before the Senate panel, he carried out another important public duty.
On Sept. 26, Lanny Breuer joined U.S. Attorney Ronald C. Machen Jr. in announcing that ASD victims who filed successful remissions claims in the civil Ponzi case were getting $55 million back.
“We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes,” Breuer said.
Missouri-based Erma Seabaugh, known among members of Florida-based AdSurfDaily as a company trainer and the "Web Room Lady," was the president of Carpe Diem, a purported "religious" entity in Oregon.
On Jan. 16, 2008, the state of Oregon recorded the business registration of an entity known as “Carpe Diem,” a purported “religious” nonprofit firm. AdSurfDaily figure Erma Seabaugh of Cape Girardeau, Mo., was listed as Carpe Diem’s president and secretary. ASD members described Seabaugh as a “trainer” for the Florida-based autosurf firm whose operator, Thomas A. “Andy” Bowdoin, 76, is under federal indictment for wire fraud, securities fraud and selling unregistered securities.
The Oregon registration of Carpe Diem coincides with a period in which ASD allegedly was ratcheting up the criminality to drive more business to its $110 million Ponzi scheme — first by introducing a companion “Spanish” autosurf known as LaFuenteDinero and later by launching a “Chinese” surf known as Golden Panda Ad Builder and producing a video in which an attorney who appeared with Bowdoin preemptively denied ASD was operating a Ponzi scheme, according to federal court filings.
As an ASD trainer and a person with “privileges within the ASD computer database system to post and remove ‘ad packages’ from individuals’ accounts,” Seabaugh was positioned to benefit from ASD’s crimes and engage in crimes of her own, according to federal court filings.
The filings raise the possibility that Seabaugh was seeking to disguise personal income as the proceeds of a purported religious entity and use ASD itself to launder money or hide income.
Prosecutors said in December that it appeared as though Seabaugh “was selling her own investment ‘ad packs’ to clients and representing herself as ASD.” The Cape Girardeau, Mo., address for Carpe Diem in Oregon records is associated with a firm that provides mailbox and parcel services.
Oregon dissolved Carpe Diem’s registration in March 2010, about 26 months after the entity was registered in the state.
Just weeks prior to the January 2008 creation of Carpe Diem — on Nov. 11, 2007, Dec. 9, 2007 and Dec. 19, 2007 — Seabaugh opened three separate ASD accounts. Each of the accounts used a variation of the Carpe Diem name: Carpe Diem, Carpe Diem2 and Carpe Diem3, according to federal prosecutors in the District of Columbia.
The presence of a form of the Carpe Diem name in three ASD accounts leads to a question about whether Seabaugh or others were seeking to structure transactions to avoid tax-reporting requirements or to minimize the risk that a bank might begin to ask uncomfortable questions.
Seabaugh used the Carpe Diem account to sponsor “48 additional investors into the ASD investment scheme,” federal prosecutors said in a forfeiture complaint filed on Dec. 17, 2010, about 16 days after Bowdoin was arrested in Florida.
Known as ASD’s “Web Room Lady,” Seabaugh withdrew $107,997 from the Carpe Diem account “through checks that issued from ASD,” according to the complaint. The account was funded with “ad packs” that “originated” at LaFuenteDinero, the “Spanish” version of ASD.
It also was funded with $10,510 that originated at e-Bullion, which prosecutors described as an online digital currency.
Two of Seabaugh’s Carpe Diem accounts — Carpe Diem2 and Carpe Diem3 — were used to promote an apparent “pyramid scheme” known as StreamlineGold.net, according to the forfeiture complaint. Although Seabaugh appears not to have made a withdrawal from the Carpe Diem3 account, she withdrew $83,994 from the Carpe Diem2 account, which also had been opened with a transfer of “ad packs” from LaFuenteDinero, according to the forfeiture complaint.
LaFuenteDinero means the “fountain of money.” Different email addresses were used to open each of the Carpe Diem accounts, according to the forfeiture complaint.
In addition, Seabaugh used an address with the letters “ASD” and the word “admin” included among the characters comprising a free gmail address, according to the forfeiture complaint.
E-bullion operator James Fayed was convicted in May of arranging the contract murder of his estranged wife, Pamela Fayed, a potential witness against him on matters pertaining to fraud. James Fayed faces the death penalty for the slaying.
Investigators have linked e-Bullion to multiple Ponzi schemes.
At least $10,510 flowed from E-Bullion to ASD through Seabaugh’s Carpe Diem account prior to the gruesome slashing murder of Pamela Fayed in a California parking garage on July 28, 2008.
About four days later — on Aug. 1, 2008 — the U.S. Secret Service seized tens of millions of dollars in the personal bank accounts of ASD’s Bowdoin. Seabaugh has not been charged with a crime, but agents seized at least $153,087 from bank accounts linked to Carpe Diem and Seabaugh, according to court filings.
