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Tag: FBI

  • URGENT >> BULLETIN >> MOVING: Prosecutors, FBI, U.S. Marshals Move Against ‘Coreflood’ Botnet; Seize 29 Domains, Execute Search And Seizure Warrants Amid Allegations Of Theft, Wire Fraud; Defense Contractor Allegedly Targeted By International Criminal Network

    BULLETIN: A federal judge in Connecticut has authorized the seizure of 29 domain names tied to the alleged “Coreflood” botnet and malware network and ordered registrars and DNS providers to neutralize what prosecutors have described as a threat to U.S. national and economic security.

    The judge ordered the network architecture to be nulled after reviewing allegations that large sums of money had gone missing from corporate bank accounts in at least four states. One of the targets of the cybercriminals was a U.S. defense contractor, according to the complaint.

    In an extraordinary move, the judge ordered the U.S. Marshals Service to set up two “substitute server[s]” to intercept traffic and cripple the botnet’s ability to communicate with infected computers. The FBI was ordered to assist the marshals, if needed.

    Coreflood is believed to have infected more than 2.3 million computers by installing keylogging software that opened doorways for criminals to steal passwords and remove money from bank accounts. Among the victims cited in court filings were the Tennessee-based defense contractor, a real-estate firm in Michigan, a law firm in South Carolina and an investment company in North Carolina.

    In the case of the defense contractor, prosecutors said, the botnet was responsible for “fraudulent wire transfers” that attempted to siphon $934,528 and successfully stole $241,866. The real-estate firm was hit for $115,771 in fraudulent wire transfers. Meanwhile, the law firm was hit for $78,421, and the investment firm was hit for $151,201.

    “The full extent of the financial loss caused by the Coreflood Botnet is not known, due in part to the large number of infected computers and the quantity of stolen data,” prosecutors said.

    Thirteen “John Doe” defendants have been charged civilly, and criminal seizure warrants and search warrants have been executed, prosecutors said. The defendants are believed to be located “outside the United States,” according to court filings.

    “Botnets and the cyber criminals who deploy them jeopardize the economic security of the United States and the dependability of the nation’s information infrastructure,” said Shawn Henry, executive assistant director of the FBI’s Criminal, Cyber, Response and Services Branch.

  • A PONZI QUANDARY: Convicted And Jailed, 61-Year-Old Schemer May Have Enough Life Insurance To Make Victims Whole. Case May Pose Unique Challenges To Court-Appointed Receiver And Victims Of William Huber’s Massive Fraud

    EDITOR’S NOTE: The Ponzi world is infamous for serving up long-term, dark skies and odd stories. Here is a new weather report and entry for the Ponzi Strange-O-Meter.

    By some accounts, the best definition of financial success is written by CPAs on the Last Great Day of a client’s life. When the final beans are counted, if the bean-counters determine  that the newly deceased had more cash and cash-convertibles than the sum of his debts and insurance holdings, it means that the departed was worth more money alive than dead.

    This will not be the case for convicted swindler William Huber — not that catastrophic insolvency that engulfs both perpetrators and many of their individual victims is news in Ponzi Land.

    What is news is that Huber, who fleeced 300 investors out of $15 million in a multistate scheme known as Hubadex, potentially has enough life insurance to make victims largely whole and perhaps even pay the costs of unraveling the litigation mess he created in 2009.

    But the money is not available now and Huber is still a relatively young man. Although the victims’ group as a whole possibly could gain the highest number of restitution dollars by waiting years for him to die and then recovering their losses by splitting pro rata shares of an insurance cashout, waiting may not be the best option from the standpoint of both fairness to individual victims and judicial economy.

    What to do in the here and now — and how best to wrap up Huber’s bizarre Ponzi affair — are questions to which the court-appointed receiver in the case has been seeking answers since the fall of 2009. So far, receiver Kevin Duff has rounded up more than $6.5 million by selling Ponzi properties in California and Florida, filing clawback actions and marshaling other assets while working on a victims’ distribution plan.

    Huber, 61, of La Jolla, Calif., pleaded guilty in Illinois last year and was sentenced to 20 years in federal prison. The SEC also filed an action against Huber, and the case is being unraveled by Duff, who has made clawback demands against 39 individuals and sued six winners.

    Duff, according to court filings, advised a federal judge that Huber had life-insurance policies that potentially would pay $19.25 million upon the fraudster’s death, depending on variables. The receivership estate has been paying the premiums on the polices while it seeks guidance and comes up with a final plan on how best to proceed. With the cooperation of Huber’s family, Duff has arranged to make the receivership estate and Huber’s former company the beneficiaries of the policies.

    The problem, however, is that paying the costly premiums indefinitely may create a drain on the receivership estate while providing no near-term benefit and keeping the case on the taxpayer-funded court docket for years. And what would happen if future litigation created an even greater strain on the estate?

    Indeed, according to court filings, the still-intact insurance policies come with premiums that currently cost the estate nearly $92,000 a year. Huber had four polices: one for $12 million, one for $5 million, one for $1.25 million and one for $1 million. Some or all of them may have to go.

    There also is no guarantee that the premiums will not increase. Hikes could create an even-greater strain on the receivership estate. And arranging a life-settlement offer beneficial to the estate has proven difficult, according to court filings.

    As things stand — assuming the premiums remain the same, the receivership remains intact, no beneficial life-settlement offer is made, no challenges are filed by the insurance carriers and Huber lives for another 20 years — the cost of paying for the insurance could exceed $1.84 million. An initial distribution to the victims could be lower because the $6.5 million estate potentially would have to set aside a large sum just to pay the premiums — and the estate would have to remain intact under court supervision indefinitely

    In a report to a federal judge in February 2010, Duff noted the presence of the policies and their costs. In May 2010, Duff noted that no life-settlement offers had been forthcoming. An October 2010 report noted largely the same thing. So did a report Duff filed with the court in February 2011.

    When the scheme was collapsing, according to the SEC, Huber advised his investors that he was no Bernard Madoff. But an accounting showed that he was a mini-Madoff who claimed to have $40 million under management when he had only $3 million, according to court records.

    Huber later blamed the SEC for his inability to honor redemption requests, but the real reason investors were denied access to their money was that Huber had systematically defrauded them while showing them fictitious paper profits, according to court filings.

    At least $1.7 million went to pay for Huber’s personal expenses, including the acquisition and maintenance of Ponzi properties. In fact, the SEC said, he’d spent more than $800,000 on his California Ponzi palace, nearly $100,000 to keep his Florida condo in Naples in fine fettle and $331,000 on life-insurance premiums.

    “Huber recently sent letters and e-mail messages to certain investors telling them that they cannot add or withdraw funds from their accounts (even though the private placement memoranda allow them to do so at the end of each quarter), because Hubadex is undergoing an ‘audit and review by the SEC,’” the SEC said in September 2009. “In reality, Huber and Hubadex cannot meet all of the possible redemption requests from investors because the actual Fund balances are less than 10% of what Huber and Hubadex have represented to investors in their detailed monthly account statements.”

    Huber bought the Ponzi properties in the name of Hubadex, the SEC said, noting that he had been sanctioned and fined $50,000 by the state of Illinois in 2005 for his business practices.

    “On December 17, 2008, one week after Bernard Madoff was arrested for perpetrating a massive Ponzi scheme, Huber sent an e-mail message to investors reassuring them that the Funds had nothing in common with Madoffs scheme,” the SEC said in September 2009. “In the message, Huber misled investors about the Symmetry Fund’s non-existent hedge fund investments, claiming ‘[w]e just received the last of the assurances from Symmetry’s sub-funds which confirms the Symmetry Fund, L.P. has no exposure whatsoever to Bernard Madoffs firm or investment funds.’”

    “Huber also lied to investors about the amounts of liquid assets in the Quarter Funds and Trimester Fund, telling them that the total assets in each Fund were ‘equal to the value of the Funds’ limited partnership interests less any incentive management fee,’ when in reality the Funds held far less money than Huber and Hubadex claimed. Huber further lied about the success of the Funds and his own honesty, claiming that the enormity of Madoffs crime also damages the credibility of ‘honest operators of successful alternative investment funds, such as ours, in the process and without foundation … We wonder if our funds were down 30 to 50% this year, would we be subject to the same Madoff cloud of misgiving?’”

    Huber no longer has to wonder about the Madoff cloud. Indeed, he created his own cloud — and the receivership estate now is trying to find the best way to make the dark Ponzi skies that enveloped his victims at least partly sunny.

  • BULLETIN: OLINT’S David A. Smith Pleads Guilty In $220 Million Ponzi Scheme; International Forex Caper Laundered $128 Million, Feds Say

    David A. Smith. Source: Orange County Jail

    BULLETIN: David A. Smith, who presided over a $220 million Forex fraud known as OLINT, has pleaded guilty in U.S. District Court for the Middle District of Florida.

    Smith, 41, is a citizen of Jamaica. He “executed a Ponzi scheme to defraud over 6,000 investors located in the Middle District of Florida and elsewhere out of more than $220 million,” prosecutors said. “Smith led investors to believe that he was investing their money in foreign currency trading, earning 10 percent per month on average. In fact, he was not trading their funds.”

    The case included a conspiracy with unnamed others to launder $128 million, prosecutors said.

    “Considerable investigative support”  was provided by the Financial Crimes Unit with the Royal Turks and Caicos Police Force, the Financial Services Commission in Jamaica, the Special Investigation and Prosecution Team in Turks and Caicos, and the governments of the United Kingdom, Turks and Caicos, and Jamaica, the FBI said today.

    Lead agencies in the United States included U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the FBI and the IRS. Also assisting in the probe were the CFTC and the NFA.

    Smith pleaded guilty to four counts of wire fraud, one count of conspiracy to commit money laundering and 18 counts of money laundering. He was the majority owner in a Lake Mary, Fla., firm known as I-Trade FX LLC, prosecutors said last year.

  • FDA Chemist Cheng Yi Liang’s Very Bad Day: Busted By The Feds, Sued By The SEC For Trading On Information Lifted From Confidential Government Database

    A chemist who works for the U.S. Food and Drug Administration has been charged criminally by federal prosecutors, arrested by federal agents in Maryland, sued by the SEC — and will go to bed tonight knowing his son has been arrested in the same case.

    Cheng Yi Liang, 56, of Gaithersburg, was accused of abusing his position of trust at the FDA by mining the agency’s database for information on drug approvals or denials — and then trading on the information he gleaned to “generate more than $3.6 million in illicit profits and avoided losses,” the SEC said.

    Liang’s son, Andrew Liang, 25, also of Gaithersburg, was arrested, too.

    And high-ranking public officials minced no words when announcing the charges against the men, which included a stunning allegation that the senior Liang sought to conceal the scheme in part by trading in the account of his elderly mother in China.

    “Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens,” said Assistant U.S. Attorney General Lanny Breuer. “According to the [criminal] complaint, he and his son repeatedly violated that trust to line their own pockets.”

    Breuer is the head of the Justice Department’s Criminal Division.

    “Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami.

    Khuzami is director of the SEC’s Division of Enforcement.

    Another high-ranking official summarized today’s events by saying Liang’s actions made government workers look bad.

    “Profiting based on sensitive, insider information — as Liang is charged with today — is not only illegal, but taints the image of thousands of hard-working government employees,” sighed Elton Malone, special agent in charge of the office of special investigations for the U.S. Department of Health and Human Services, Office of the Inspector General.

    Liang, an FDA employee since 1996, began snatching information as early as July 2006, the SEC charged.

    He “illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies,” the agency charged.

    In a bid to cover his tracks, Liang “traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China,” the SEC charged.

    “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives,” said Daniel M. Hawke, chief of the SEC’s Market Abuse Unit.

    Father and son were charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud. Federal prosecutors said investigators caught Liang after special software was installed on the work computer he was using.

    See this SEC exhibit that outlines the trades.

     

  • BULLETIN: SEC Alleges ‘Payday Loan’ Ponzi Scheme In Utah; Second Major Ponzi Case Brought In State In Two Days; Schemes Attracted Almost $75 Million

    BULLETIN: The SEC has gone to federal court in Utah to halt what it described as a $47 million “payday loan” Ponzi scheme and offering fraud in which investors were lured by the prospect of “extraordinary returns” while the alleged operator diverted large sums of cash to himself and other business interests.

    The payday-loan Ponzi case against John Scott Clark, Impact Cash LLC and Impact Payment Systems LLC was the second major Ponzi case brought by the SEC in Utah in a matter of days. On March 23, the SEC charged Mike Watson Capital LLC of Provo, Michael P. Watson of Mapleton and Joshua F. Escobedo of Spanish Fork in an alleged real-estate and promissory-notes Ponzi scheme that gathered more than $27.5 million from more than 120 investors.

    Clark and his companies were charged on March 25. Utah has been plagued by Ponzi schemes and other forms of fraud, many of them directed at people of faith. The FBI said last year that thousands of residents of the state had been victimized in investment-fraud schemes.

    Now, Clark’s alleged payday-loan fraud has been added to Utah’s Ponzi mix by the SEC. If the alleged Clark total is added to the total gathered in the alleged Watson/Escobedo fraud, a figure of at least $74.5 million emerges from the two schemes.

    “Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”

    Clark also bought “multiple expensive cars and snowmobiles” and “stole investor funds to purchase a home theater, bronze statues and other art for himself,” the SEC charged.

    In October, the SEC’s Salt Lake office also filed charges against Imperia Invest IBC, a mysterious offshore firm alleged to have stolen millions of dollars from thousands of deaf investors. The Imperia scheme was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.

    In the Clark case, the SEC said “at least” 120 investors were affected. The scheme operated between March 2006 and September 2010.

    Investors were recruited to fund payday loans, the SEC said. One recruiter was paid more than $500,000 to help drive business to the unregistered offering, according to the complaint.

    Clark 58, of Hyde Park, “has never been registered with the Commission or any other regulatory agency in any capacity,” the SEC charged.

    Investors were offered their own companies with an LLC designation and lured by suggestions that Clark and his Impact companies could generate returns “averaging at least 80% per year,” the SEC said.

    “Clark explained to investors that Impact would create a unique LLC for each investor or investor group for the purpose of investing with Impact,” the SEC said. “The investor LLC would then enter into a Joint Operating Agreement with Impact to provide money to Impact to fund payday loans.”

    And Clark’s “early investors” — impressed by their returns — helped the Ponzi gain a head of steam, the SEC said.

    “Many of Clark’s early investors mentioned their astronomical returns to their families or
    business associates, who then invested with Clark,” the SEC said. “Clark paid one salesperson between $500,000 and $600,000 over a four or five year period to locate potential investors and attend payday loan conferences and trade shows. Clark also paid certain individuals commissions ranging from 2% to 4% for bringing in investors to Impact.”

    Neither firm that used the word “Impact” in its name was registered, the SEC said.

    Although investors believed they were funding payday loans, Clark diverted cash to “to make unauthorized investments, including a real estate investment company, a diabetes research company and an online products store,” the SEC said.

    The assets of Clark and his companies have been frozen. Read the SEC complaint against Clark.

    Read the SEC’s statement on the alleged Ponzi scheme involving Watson and Escobedo, who have settled without acknowledging wrongdoing.

  • BULLETIN: Feds Charge Minneapolis Man Amid Suspicions He Used Loot From Trevor Cook Ponzi Scheme To Party And Gamble With Strippers While Victims Suffered

    BULLETIN: Five days after Ponzi swindler Trevor Cook pleaded guilty to defrauding victims in an elaborate international scam that reduced investors to ruin, a Minneapolis man hid proceeds from the caper from law enforcement and the court-appointed receiver, federal prosecutors said.

    Victims of the Cook scheme — many of whom were people of faith — were defrauded of tens of millions of dollars. Court records strongly suggest that some of the recoverable money was spent on booze, exotic dancers and gambling — after the scheme was exposed by the SEC and CFTC in November 2009 and Cook’s assets were frozen.

    Jon Jason Greco, 40, now has been charged with making false statements to federal agents. The case was filed under seal Tuesday, and the seal was lifted yesterday.

    Cook, 38, pleaded guilty on April 13, 2010, and is serving a term of 25 years in federal prison. His plea agreement in the $190 million swindle required him to disclose the whereabouts of assets and cooperate with investigators. Investors immediately expressed fears that money that could be used to help them recover from the devastating scam had been hidden and that Cook could not be trusted in any context.

    Some of the hidden loot was found months after the plea and cooperation agreement. Part of it had been concealed behind a toilet-paper dispenser and in air ducts in an apartment occupied by Cook’s brother, Graham Cook. Loot also was found in a storage locker at the Mall of America.

    Although the recovered loot made up only a tiny percentage of the $190 million scam, victims said every dime was needed and that justice demanded that no third party should be permitted to profit from Cook’s colossal fraud.

    Prosecutors now say that Greco came into possession of some of the loot on April 18, 2010 — five days after the Cook guilty plea. Greco helped hide the loot and lied about it when questioned by investigators, according to prosecutors.

    Court records suggest investigators established links among Cook, Graham Cook and Greco, who once worked briefly for Trevor Cook as a purported security guard at the Van Dusen mansion in Minneapolis. The big break in the case appears to have occurred in July 2010, when Greco’s roommate told federal agents that Greco was “holding assets” for the Cook brothers and impeding a federal investigation.

    Investigators had believed since at least June 2010 that Greco had stashed money from the caper, according to court filings.

    The case against Greco was bolstered when an exotic dancer told an IRS criminal investigator who was following leads that Greco, believed to have been unemployed for months, suddenly began to spend generously at a Minneapolis strip club and to plow $100 bills into slot machines at a gambling emporium.

    “Greco placed some of the assets in his possession in a locker at the Mall of America,” prosecutors charged. “On July 24, 2010, law enforcement seized the assets, valued at approximately $150,000. Subsequently, Greco allegedly claimed to investigators that the seized assets belonged to him.”

    But the assets were from the Ponzi caper, prosecutors charged.

    Greco faces up to 10 years in federal prison if convicted on two counts of making false statements.

    When interviewed last summer, Greco told agents that he had no knowledge of concealed assets belonging to Cook, when, in fact, he did,” prosecutors said.

  • BULLETIN: ‘Sovereign Citizen’ Accused In ‘Two For One’ Plot To Murder Judges, State Troopers In Alaska; ‘Militia’ Had Acquired Grenades, Grenade Launcher, Machine Guns; Another Man Charged Separately In Plot To Kill Federal Judge

    Francis "Schaeffer" Cox

    BULLETIN: (UPDATED 7:04 P.M. EDT (MARCH 14, U.S.A.) Five residents of Alaska with ties to the so-called “sovereign” citizen and “militia” movements have been charged under state law in an alleged plot to kidnap or murder Alaska state troopers and a state judge in Fairbanks.

    One of the suspects was charged separately under federal law with threatening to kill U.S. District Judge Ralph R. Beistline and a member of Beistline’s family. Beistline was presiding over a civil tax case involving one of the state-level defendants, and was targeted “in retaliation for and on account of the performance of his official duties,” according to the indictment.

    Charged federally was Lonnie G. Vernon, 55, of Salcha.

    Vernon also was charged under state law. Also charged in the state case were Francis “Schaeffer” Cox, 27, of Fairbanks;  Karen Vernon, 64, of Salcha; Coleman Barney, 36, of North Pole;  and Michael O. Anderson, 35, of Fairbanks. Karen Vernon is Vernon’s wife.

    Anderson was charged with conspiracy to commit murder, conspiracy to commit kidnapping and tampering with evidence. Charges against the other defendants include conspiracy to commit murder, conspiracy to commit kidnapping, conspiracy to commit arson and misconduct involving weapons.

    Cox and “others” had acquired hand grenades, a grenade launcher, a .50-caliber machine gun, a .30-caliber machine gun, “dozens” of assault rifles and pistols and “thousands of rounds of ammunition,” according to the state complaint.

    Cox filed “nonsensical” pleadings while awaiting trial in a March 2010 case in which he was charged with not announcing he was concealing a handgun when he approached a police officer, according to the state complaint.

    In a YouTube video of a court hearing dated Dec. 14, 2010, Cox declared himself a sovereign being and said he did not recognize the authority of the court. Perhaps to amplify his disrespect for the court, he wore a hat when addressing the judge.

    “Wait, wait, wait, wait. No, no,” he told the judge. “If I get an invitation [for] next week, I’m going to treat it like an invitation to a Tupperware party.”

    “I won’t be here,” he declared.

    In October 2010 — with his trial date approaching in February 2011 — Cox began “amassing multiple caches of assault rifles and prohibited explosive devices,” including the grenades and machine guns, according to the charges.

    Just prior to his Feb. 14 trial date, Cox informed authorities he would not show up for trial. When he did not appear, a bench warrant was issued.

    The FBI had infiltrated the militia group at least by Feb. 12 and “lawfully recorded” conversations that occurred as the probe moved forward, according to the charges.

    Cox, according to the complaint, discussed a “241” program, which was shorthand for “two for one.”

    The plan “called for his militia to respond to attempts to arrest or kill him by responding against state court or law enforcement targets with twice the force and consequences as happened to him or his family,” according to the state complaint.

    Cox ventured that his arrest would constitute a “kidnapping” that, under the “241”plan,  called for two state targets to be arrested, meaning “kidnapped,”  according to the complaint.

    “If he was killed, two state targets would be killed,” according to the complaint. “If his house was taken, two state target houses would be burned.”

    And Cox talked about drilling a state judge “in his forehead,” according to the complaint.

    A Twitter account referenced in the state charging document includes this Jan. 26 post:

    “The DA made a motion to bar me from talking about the constitution in court! LOL He’ll be work’n as Chip N’ Dale dancer if he keeps this up.”

    In December 2010, according to the state complaint, Cox told a state judicial officer that “we know where all the Troopers live, we have you outmanned and outgunned and could probably have  you all dead in one night.”

    At a Cox-related hearing in December, Cox advised a  a state judge that “you’re now being treated as a criminal engaged in criminal activity and you’re being served in that manner.”

    Also present at the hearing was person described only as “Ken.” “Ken” declared himself a militia member speaking on behalf of Cox, saying he was Cox’s representative and “counsel before God,” according to the state complaint.

    The complaint also alleged that Cox or “others” acting “on his behalf — in the days leading up to the trial date — filed “multiple pleadings” that made no sense. The pleadings demanded the charges against Cox be dismissed and made “other claims,” according to the state complaint.

    Prosecutors did not describe the nature of the claims. “Sovereigns” have been known to threaten judges and members of law enforcement with criminal and civil prosecution and file claims for alleged damages. In some cases, “sovereigns” have placed liens for astronomical sums against public servants.

    Meanwhile, the complaint alleges that surveillance was being conducted on potential targets of the militia and that Cox was able to pinpoint on a map the residences of state troopers and judges.

    One state trooper reported being photographed at a gas station, possibly by Michael Anderson, one of the defendants in the state case.

    On Feb. 14, the date Cox was supposed to be in court for his trial, he met with the Vernons at their home, according to the state complaint.

    When the discussion turned to what would happen if authorities arrived to arrest Cox, Lonnie Vernon allegedly said, “I’ll take all the sons of bitches I can with me. They’ll die a miserable death too.”

    Later in February, Cox said that women and children could become casualties of the “241” plan, according to the complaint.

    One militia member told Cox that he was not “into killing women and children.” Cox, according to the complaint, responded by saying that he “would not target a woman or child, but if their kids get killed in the process, so be it.”

    Cox went on to say that, to make a point, “I’m not against sending somebody’s head in a box.”

    Later, Cox declared it his duty to oppose “the tyrant judge . . . who does not follow the constitution.”

    On Feb. 26, according to the complaint, Cox discussed the publication of “wanted dead or alive posters” that would include the faces of police officers, an assistant district attorney, a court clerk and a state judge.

    Lonnie Vernon allegedly claimed there is going to be a “bunch of dead mother-fuckers before all this is over,” according to the complaint.

    And Karen Vernon said the Vernon home would go “up in smoke” before law enforcement could take the couple’s property.

    Cox is the head of the “Alaska Peacemaker’s Militia,” according to the state complaint.

    After he determined the offered price for six hand grenades was reasonable, he speculated about leaving his hiding place in the home of Coleman Barney after the militia had acquired more weapons, including a handgun with a silencer, according to the complaint.

    Cox talked going to Montana to assure the safety of his family, and returning to Alaska to engage in “guerilla warfare,” according to the complaint.

  • Report By Small-Town Newspaper In Colorado Leads To Forex Ponzi Scheme Arrest In Chicago; FBI Nabs Mark Akins After Durango Herald Readers Provide Tips

    A fugitive suspected of helping organize a Forex Ponzi scheme that traded on a claim that a special “algorithm” led to hefty profits has been arrested in Chicago after a small-town Colorado newspaper 1,350 miles away reported he was wanted.

    The Durango Herald, which has a circulation of 9,400 and has received awards from the Associated Press, the Society of Professional Journalists and the Colorado Press Association over the years, reported earlier this month that Mark Akins was wanted for a scheme that allegedly had operated in Durango.

    Akins was accused of being the “gatekeeper” for the scheme, which netted at least $1.2 million and affected 70 investors.

    Also charged in the case was Frederick H.K. Baker of Utah. Baker already has made an initial court appearance in Utah. Akins is scheduled to make an appearance in Illinois next week, the Herald reported.

    After reading the Herald report that Akins was wanted, a woman contacted the newspaper to say she believed Akins was living in Chicago. The newspaper referred her to law enforcement.

    A reader in Chicago, meanwhile, said he contacted the FBI after reading the story, the Herald reported.

    The reader then emailed the paper to report that Akins had been arrested in the Windy City.

    “We saw your article and notified the FBI and he was arrested on Thursday night,” the reader told the newspaper.

    Read the Herald’s first story.

    Read the Herald’s follow-up story about the arrest of Akins.

    Claims of miraculous trading algorithms and fool-proof software are common in the universe of Forex hucksters.

    Robert Mihailovich Sr., a convicted felon, was charged by the CFTC last year with presiding over a Forex fraud that purportedly used a “mass sub-algorithm.” Mihailovich allegedly started the new scam after his release from prison in 2007.

    Enrique F. Villalba was charged last year with presiding over a futures fraud that allegedly used a unique “momentum filter.”

    Earlier this month, Jacob Juma Omukwe was charged in a Forex caper in which it was alleged he used software to trick customers into believing their money was segregated for safety.

    Anthony Eugene Linton was charged in January in a case that alleged he told customers that his miraculous software system let them “profit every time.”

  • URGENT >> BULLETIN >> MOVING: Feds, SEC Say Connecticut Ponzi Scheme With International Reach Involved ‘Hundreds Of Millions Of Dollars’; 2 Arrests Made By FBI In Florida

    BULLETIN: A Connecticut hedge-fund operator not registered with the SEC “in any capacity” and two other men — both Venezuelan nationals — have been charged in a spectacular Ponzi caper that allegedly involved hundreds of millions of dollars and a derailed plot to thwart an SEC investigation.

    FBI agents have arrested Juan Carlos Guillen Zerpa, and Juan Carlos Horna Napolitano in Florida. They are charged with conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

    Guillen Zerpa, 43, is an accountant and a citizen of Venezuela. Horna Napolitano is a Venezuelan citizen living in Pembroke Pines, Fla. Pembroke Pines is a city in Broward County.

    The principal defendant in the case — Francisco Illarramendi, 42, of New Canaan, Conn. — already has pleaded guilty to criminal charges, according to U.S. Attorney David B. Fein of the District of Connecticut. He was accused by the SEC in its civil case of misappropriating at least $53 million in investor assets.

    “As a result of the scheme, the investors and creditors of Illarramendi’s funds face potential losses of hundreds of millions of dollars,” the FBI said in a statement.

    The SEC today upgraded civil charges filed against Illarramendi in January, saying he “attempted to hide the fact that his hedge funds were missing assets by providing the SEC staff with a false letter from an accountant in Venezuela that purported to verify the existence of approximately $275 million in assets held by one of the funds.

    “Those assets do not exist,” the agency alleged.

    “Illarramendi knew that the SEC was onto his scheme and compounded his fraud by attempting to mislead the Commission’s staff,” said David P. Bergers, director of the SEC’s regional office in Boston.

    Fein said the scheme may prove to be the largest in Connecticut’s history.

    “This investigation has revealed that Francisco Illarramendi operated a massive Ponzi scheme that has defrauded foreign investors of hundreds of millions of dollars,” Fein said. “While the precise dollar losses will not be known for some time, based on this fast-moving investigation, we believe this case represents the largest white-collar prosecution ever brought by this office.”

    Both the FBI and the SEC pursued the case forcefully, Fein said. The agencies are part of the newly formed Connecticut Securities, Commodities and Investor Fraud Task Force, which Fein said was “actively investigating this and other financial fraud schemes.”

    A veteran FBI agent said criminals domestic and “overseas” should expect to get caught.

    “This investigation should serve as fair warning to those, whether in Connecticut, elsewhere in the United States, or overseas, who would attempt to victimize an increasing number of American and foreign investors,” said Kimberly K. Mertz, special agent in charge.

    “The Connecticut Securities, Commodities, and Investor Fraud Task Force will continue to aggressively investigate these criminals and protect the rights of the investing public,” Mertz said.

    Charging documents in the case allege a spectacular fraud that relied on self-dealing and an elaborate maze of deceit.

    Illarramendi pleaded guilty to two counts of wire fraud, one count of securities fraud, one count of investment adviser fraud and one count of conspiracy to obstruct justice, to obstruct an official proceeding and to defraud the SEC.

    He faces up to 70 years in federal prison.

    “Illarramendi has admitted that he agreed to pay Guillen [Zerpa] and Horna [Napolitano] more than $3 million for fabricating” a letter and creating false support for $275 million in loans, the FBI said.

    Read the statement from the FBI and Fein.

    Read the SEC complaint.

  • KABOOM! SEC, Feds Target Alleged Money-Laundering Operation In Costa Rica; 6 People From Various Countries Charged Criminally; 7 Charged Civilly In Coordinated Probe Of ‘Pump And Dump’ Schemes

    BULLETIN: Two days after Southern Florida’s top federal prosecutor warned that offshore fraudsters who targeted Americans had no safe haven, six people from various parts of the world who allegedly ran or contributed to a pump-and-dump scheme that used the services of a  money-laundering operation in Costa Rica have been charged criminally, authorities said.

    The SEC, meanwhile, charged seven people civilly. An attorney has been charged both criminally and civilly, the SEC said. The cases were brought in the Southern District of Florida, which has been a hotbed of financial crime.

    Defendants in the cases hail from Costa Rica, Great Britain, Canada, Israel and the United States, according to the SEC. The criminal charges include conspiracy to commit securities, mail and wire fraud; wire fraud; mail fraud; violating the securities regulation laws and obstruction of justice.

    Jonathan R. Curshen, a convicted felon awaiting sentencing in an earlier securities and bribery scheme, has been charged both criminally and civilly in the new case. Curshen, 46, a dual U.S. and British citizen and the one-time “honorary counsel” of St. Kitts-Nevis to Costa Rica, presided over a Costa Rican company known as Red Sea Management Ltd.

    Red Sea “effected fraudulent pump-and-dump schemes on behalf of its clients and laundered millions of dollars in illegal trading proceeds out of the United States to its clients overseas,” the SEC charged.

    Also charged criminally and civilly were attorney Michael S. Krome, 49, of Lake Grove, N.Y; Ariav “Eric” Weinbaum, 37, of an unspecified city in Israel; Yitzchak Zigdon, 47, of Tel Aviv; Ronny Morales Salazar, 39, of San Jose, Costa Rica; and Robert L. Weidenbaum, 44, of Coral Gables, Fla.

    Krome and Weidenbaum (as distinct from Weinbaum) are Americans.

    Weinbaum, according to records, has dual U.S. and Israeli citizenship. He previously lived in Boca Raton, Fla., but now is living in Israel, the SEC said. The SEC alleged that Weinbaum has a “network of operatives he uses to perpetrate pump-and-dump stock manipulations.”

    Zigdon is an “Israeli accountant and the business partner of Weinbaum,” the SEC said.

    David C. Ricci of San Jose, Costa Rica, was charged civilly, and already has settled with the SEC. Ricci is a citizen of Canada who was living in Costa Rica, according to the SEC charging documents.

    “This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, associate director in the SEC’s Division of Enforcement.

    On Feb. 16, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida warned offshore scammers and criminals that the United States would not tolerate crime aimed from abroad at its citizens.

    “International law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas,” Ferrer said.

    “Curshen directed Red Sea to open numerous nominee brokerage accounts with U.S. and Canadian broker-dealers to enable the firm to engage in coordinated manipulative trading and conceal its illegal activity,” the SEC charged, alleging that Ricci and Salazar had trading authority over the nominee accounts.

    The scheme for which the charges were brought centered on a “sham” company known as CO2 Tech Ltd., which purported to be in the business of reversing global warming, the SEC said.

    Purportedly based in London, the company claimed to have a relationship with Boeing, the aircraft-maker, and traded on the Pink Sheets.

    “There were no communications, correspondence or understandings between CO2 Tech and Boeing,” the SEC said flatly, alleging that CO2 Tech was a “sham” that had no “significant assets or operations.”

    Krome, the lawyer, “issued a fraudulent opinion letter” to enable Weinbaum and Zigdon to advance the scheme, and “Weinbaum hired Weidenbaum” to distribute false information through websites, spam e-mails and fax blasts, the SEC charged.

    “Weidenbaum enlisted a group of stock promoters who then executed illegal ‘matched orders’ with Red Sea’s nominee brokerage accounts in order to ‘jump-start’ the market and increase the price of the stock,” the SEC charged. “As a result of the false media campaign and the illegal matched orders, the market price of CO2 Tech stock increased 81 percent increase in one day and trading volume increased 1,573 percent.”

    Ricci and Salazar sold the stock through Red Sea, and the “coordinated misconduct enabled stock sales at artificially inflated prices for profits of more than $7 million at the expense of unsuspecting investors,” the SEC charged.

    Cooperating in the case were the U.S. Department of Justice, the FBI, and the U.S. Postal Inspection Service, FINRA, the Costa Rican Police, the British Columbia Securities Commission, the Israel Securities Authority, the United Kingdom Financial Services Authority and The City of London Police Department, the SEC said.

    In recent days, federal prosecutors also have filed charges against more than 100 people associated with Armenian Power, an international organized-crime group with ties to Russia and Armenia.

  • MIND-BOGGLER: Forex Scammer Who Never Traded Forex Charged In $35 Million Ponzi Scheme; CFTC’s Real-Life Complaint Against Keith F. Simmons And Co-Defendants Reads Like Bizarre Fiction

    And people actually are questioning President Obama’s November 2009 decision to create the interagency Financial Fraud Enforcement Task Force when things such as this are going on?

    An unregistered North Carolina company that churned tens of millions of dollars in a long-running shell game and described itself as a Forex dealer was operated by a now-convicted felon who worked with another now-convicted felon and told the FBI he never actually traded Forex, the Commodity Futures Trading Commission has alleged in court filings that only can be described as alarming.

    Black Diamond Capital Solutions LLC, operated by convicted felon Keith F. Simmons of West Jefferson, N.C., became a cancer on the legitimate Forex landscape, the CFTC charged. The firm and associated companies combined to create a sales force consisting of scammers who ultimately stole from investors and each other, pocketing huge sums to fund businesses not disclosed to investors and to pay for things such as luxury cars, real estate, maid service and sky-diving vacations.

    One of the alleged scammers — Deanna Salazar, a purported alternative-investments specialist and the owner of Life Plus Group LLC of Yucca Valley, Calif. — herself is a now-convicted felon. She has been linked to multiple fraud schemes, including a local one in California in which investors allegedly were told they were financing B-movies, and now has been linked by the CFTC to Simmons’ spectacular Forex Ponzi scheme.

    Salazar, according to the CFTC, never conducted “any due diligence” on Simmons or his Black Diamond companies. Instead, she simply passed along his bogus claims, including a claim that Simmons used an “exclusive” computerized trading system that had led to an “actual result” of $5,000 turning into $194,340 in three years.

    In 2008 alone, according to the bogus “actual” trading results, an account-holder purportedly enjoyed monthly Forex returns that ranged between 4.765 percent and 13.357 percent, according to the CFTC.

    Two other alleged Simmons’ associates — Bryan Coats of Clayton, N.C., and Jonathan Davey, a CPA from Newark, Ohio — also blindly followed Simmons and helped him orchestrate the massive Ponzi scheme, the CFTC alleged.

    Davey, according to records, organized a Belize company known as Divine Circulation Services Ltd. that assisted Simmons in pulling off the scam, which the CFTC alleged traded on religion. Davey also was at the helm of a Belize firm known as Sovereign Grace Inc., a firm that benefited from the scam, the CFTC said.

    Coats, meanwhile, was at the head of companies known as Genesis Wealth Management LLC and Genesis Wealth Partners LP, both of Delaware.

    Multiple companies with high-sounding names were created by the defendants and either assisted in pulling off the scam or benefited from the scam, the CFTC said. Among the names of the companies were Safe Harbor Ventures Inc., owned by Shari Davey, Davey’s wife, and Safe Harbor Wealth Inc.

    Salazar’s husband — Lawrence Salazar — also benefited from the scheme, the CFTC alleged.

    All in all, the CFTC charged, the scheme netted at least $35 million from at least 240 investors. It is believed that most if not “all” of the customers were not even eligible to become investors in the purportedly private program because they lacked assets totaling at least $5 million and thus were not “eligible contract participants.”

    Adding yet-another layer of the bizarre, Simmons allegedly told the FBI and the CFTC that Black Diamond did not engage in Forex — despite the fact it had gathered tens of millions of dollars by holding itself out as a Forex company and customers received statements showing their purported gains, the CFTC charged.

    When the Ponzi began to collapse in early 2009 — and with Black Diamond never having done any actual Forex trading — Salazar, Coats and Davey continued either to work for the firm or to steer business to it, the CFTC alleged.

    On March 19, 2009 Simmons sent an email to Salazar and Coats, instructing them that the company “would be shutting down for restructuring” and that all accounts would be liquidated with investors profits paid out, the CFTC alleged.

    Incredibly, the CFTC alleged, Simmons claimed a month later — in April 2009 — that Black Diamond’s trading was only hypothetical, despite the fact customers had sent in tens of millions of dollars to conduct real trading and received statements showing their gains.

    A months-long round of excuse-making about why customers weren’t getting paid then began, starting with Simmons’ assertion that a restructuring was under way. Coinciding with the restructuring claim were bank statements showing  that Black Diamond had “less than $200,000” in its accounts, the CFTC alleged.

    The CFTC, alleging that Simmons had purported to be an active Forex dealer who’d turned $5,000 from one investor into more than $194,000 and then insisted he had not executed a single trade despite issuing account statements showing gains of more than 13 percent a month, then defaulted to a strategy of claiming multiple “accounting reviews” were under way.

    He then claimed “excessive withdrawal requests by customers were causing delays in the return of funds.”

    Simmons also claimed a “non-existent German liquidity provider by the name of Klaus was attempting to provide $120 million to Black Diamond to payout customers and replace Black Diamond on the purported platform, but his alleged transfer of funds was frozen by bank or regulatory procedures,” the CFTC charged.

    At the same time, Simmons said “interventions” by the Federal Reserve, the U.S. Department of the Treasury and the CFTC had led to a situation that made it impossible for Black Diamond to pay customers, the CFTC alleged.

    Simmons made excuses from March 2009 through Dec. 17, 2009, the date he was arrested on criminal charges to which he already has pleaded guilty.

    Salazar, Coats and Davey strung customers along while Simmons was piling on excuses that were becoming increasingly “complex and outrageous,” the CFTC alleged.

    By passing on the excuses after earlier having performed no due diligence — and by continuing to forward the excuses to investors — Salazar, Coats and Davey “recklessly failed to ascertain the cause of the funding problem at Black Diamond” and helped perpetuate lies, the CFTC alleged.

    Salazar even helped Simmons shape the lies, according to the CFTC.

    In July 2009, Salazar worked with Simmons “to draft the excuse” about why Black Diamond wasn’t making payments, the CFTC charged.

    Coats, meanwhile, also worked with Simmons on creating an excuse that payments were not immediately forthcoming because of “stricter capital requirements imposed on our banking system,” the CFTC charged.

    Davey informed customers that payouts could not be made because the Federal Reserve had forced Simmons to fill out “anti-money laundering” forms and had frozen $16 million until he completed the task.

    In an approach often employed on Ponzi scheme and criminals’ forums such as TalkGold and MoneyMakerGroup, Simmons and Coats warned investors not to contact regulators or attempt to interfere with payment facilitators.

    “Simmons threatened certain customers that if they contacted the alleged paymaster, Black Diamond would lose access to the paymaster services and the payout to customers would be jeopardized,” the CFTC alleged.

    The agency did not identify the alleged paymasters in the complaint.

    And in an act reminiscent of some of developments in the AdSurfDaily Ponzi scheme case, Coats allegedly warned investors that the CFTC was “randomly calling all Forex . . . clients across the America to try and identify possible Madoff scams,” the CFTC alleged.

    It was Coats’ “suggestion,” the CFTC alleged, that “members not have any discussions with the Commission.” The suggestion occurred while Black Diamond was refusing to return clients’ money.

    In the ASD case, members were urged not to cooperate with the U.S. Secret Service and not to fill out forms that would identify them as victims of a scam.

    Salazar, Coats and Davey continued to solicit funds for Black Diamond even though the company was not paying out and was engaged in chronic excuse-making, the CFTC alleged.

    Despite assertions that Black Diamond had a miraculous trading platform and expert software developers, “the so-called system developers and the Black Diamond trading platform never existed, the CFTC charged.

    Although Salazar’s customers plowed more than $7 million into the scheme — including more than $2 million paid directly to Salazar that was supposed to go to Black Diamond — she “failed to send Black Diamond approximately $1.5 million,” the CFTC charged.

    Black Diamond transmitted more than $1.9 million to Salazar, but she returned only $600,000 of that sum to customers and kept $1.3 million for herself, the CFTC alleged.

    Of the $2.8 million Salazar cherry-picked in the scam, the CFTC alleged, she used more than $400,000 to purchase cars and took “expensive personal trips.”

    Coats’ customers plowed more than $27 million into the scam, and Coats took purported management fees or owner gains of more than $400,000, including about $200,000 after Black Diamond quit paying customers, the CFTC alleged.

    Customer funds were used by Coats to acquire an “expensive car,” maid service, home improvements and “a sky diving trip,” the CFTC said.

    Davey used customer funds to make $1.3 million in “loans” to his “Sovereign Grace” firm and other companies he controlled. He also bought 47 acres of land and built a “lavish home,” the CFTC charged.