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Tag: fraud creep

  • EDITORIAL: The ‘Zeek-Step,’ The Stepfordian Shuffle And The Stalinist HYIP

    On Jan. 22, 2011, nearly two years ago and long before the SEC brought the Zeek Ponzi scheme case in August 2012, the PP Blog proposed a new term in an effort to distill the economic and logistical nightmares of viral Internet crime to their essence: fraud creep. This followed our Dec. 12, 2010, post, which explained that America’s largest sports stadiums may not be large enough to accommodate all the victims of a single, web-based crime.

    Today the Blog is proposing another new term: Zeek-step, also known as “The Stepfordian Shuffle.” Zeek-step gets its name from the collapsed Zeek Rewards “program,” a 1.5.-percent-a-day ROI abomination (with accompanying recruitment commissions) boosted in part by serial MLM racketeers and Ponzi-forum criminals who pretended the 2008 AdSurfDaily Ponzi case never happened.

    To do the Zeek-step is to pretend the ASD Ponzi case brought by the U.S. Secret Service more than four years ago is meaningless. At the same time, the Zeek-step is characterized by post-complaint efforts to demonize the SEC and the receiver — and to paint Zeek as a noble enterprise, the sender of a high tide that would lift all MLM boats. The trouble with that claim is that the purported high tide appears to have sunk more than 80 percent of vessels that sought to navigate the Zeek waters.

    If you’re a Zeek victim — and if you’re unfamiliar with the ASD case — you should acquaint yourself with it right away. “Programs” such as ASD and Zeek were cancers on the global marketplace. The math of such schemes is approximately this: 86 percent of participants will become “losers” who subsidize enormous “profits” for a super-class consisting of about 14 percent — the “winners.”

    There may be 1 million or more victims of Zeek, according to court filings. Putting it another way, Zeek could fill the Rose Bowl to capacity with victims about 10 times over. The logistical challenges confronting the court-appointed receiver in the Zeek case may be unprecedented. So, yes, Zeek was an instance of fraud creep. The ASD case — large for its time four years ago with about 100,000 members — has been dwarfed by Zeek.

    Protecting The Super-Class

    Although the Zeeks of the world often are positioned as the byproduct of ingenious Democratic Capitalism even as critics incongruously are dismissed as Communists, Socialists, Nazis and enemies of the “free market,” the fact remains that “programs” such as Zeek are designed to channel huge sums to a super-class that largely is preordained. If Zeek were a political entity, this super-class would be seen as a Soviet-era Politburo. The rest of the field would consist of peasants who keep the uppermost Stalinists in fine liquor and cigars.

    One of the chief incongruities of “programs” such as Zeek is that “defenders” invariably position themselves as visionary Capitalists and rail against Statism — indeed, it’s axiomatic in HYIP schemes that a government agency that stops a scheme will be described as evil — and yet the “programs” being defended are all about keeping the Stalinists in their Chaikas and dachas.

    One way to view Zeek is as a for-profit enterprise that taxed 86 percent of its participants at 100 percent to create the “profits” for the elitist 14 percent. It is likely that some of the people among the 14 percent paid ZERO DOLLARS to Zeek. Zeek was particularly noxious because it planted the seed that MLMers without big lists still could profit by sending the company up to $10,000 and generating a profit over time from an abomination known as the Retail Points Pool.

    The SEC said Zeek manipulated the numbers to make that appear possible, to make it appear as though Zeek were a profitable enterprise capable of paying a return of 1.5 percent a day to potentially millions of people. The Secret Service said ASD did the same thing.

    Zeek was offensive at many levels, including the intellectual one. Most notable, in our view, is that purported Capitalists “defending” Zeek by railing against alleged Statism as practiced by the SEC don’t seem to make the connection that Zeek set things up to the maximum advantage of the Stalinists of the Electronic Age.

    A Ponzi-forum huckster with a big list and practiced in the art of turning blind eye to every HYIP fraud scheme that comes down the pike had a decided advantage over, say, an 85-year-old Florida widow who maxed out her credit card to join Zeek because the huckster caused her to believe she’d have more to leave to her children and grandchildren when God called her home.

    It is our hope that the SEC and the U.S. Department of Justice will act aggressively and quickly to oppose a motion filed Friday by certain members of the alleged Zeek Rewards Ponzi scheme to appoint an “examiner.”

    Jordan Maglich of PonziTracker has a fine story on Friday’s filing. Could it be true that some Zeekers actually want to further deplete the receivership estate of resources that should go to true victims?

    In the PP Blog’s view, embracing a story that Zeek was a legitimate Capitalist venture is to embrace a wicked myth. Hell, Stalin himself might have been the first in, seeing the beauty of how the profits could have propped up the Politburo. If the initial scheme that drove the vast majority of the profits to the elite Statists collapsed, he could simply have announced another five-year plan. PolitburoBids2.com?

     

  • ‘FRAUD CREEP’: The Two-Word Term That Explains How Crime Expands On The Internet To Affect Tens Of Thousands Of Victims At A Time

    EDITOR’S NOTE: Our definition of “fraud creep” — and suggestions on the context in which the term should be applied — appears lower in this story.

    First, some background . . .

    Investigators now are counting victims of massive, web-based fraud schemes tens of thousands at a time. Such scams pose both budgetary and logistical challenges to law enforcement, bankruptcy trustees and court-appointed receivers — and a single scam may take years to unravel. In recent court filings, federal prosecutors said they had amassed 500,000 pages of emails, 100,000 pages of banking records and 5,000 pages of other records as part of the AdSurfDaily Ponzi probe, which began in July 2008. The U.S. Secret Service raided ASD’s headquarters in August 2008.

    The ASD Ponzi scheme, which operated from Florida, may have defrauded 40,000 or more victims while gathering at least $110 million, prosecutors said.

    Meanwhile, in a civil case brought in Utah in October 2010, the SEC said Imperia Invest IBC defrauded more than 14,000 investors worldwide while gathering small sums that ultimately led to a haul of more than $7 million. Among the victims were thousands of deaf investors in the United States.

    Imperia claimed until late 2009 to be located in the Bahamas, but the Bahamian address was “fictitious,” the SEC said, adding that Imperia later claimed to be located in Vanuatu.

    But Imperia was “not registered to do business in Vanuatu and the address listed on its website appears also to be fictitious,” the SEC said.

    Despite the fact Imperia gathered money from thousands of Americans, “[n]either Imperia nor its securities are registered with the Securities and Exchange Commission,” the SEC said. “Imperia is not licensed or registered with the Commission, with any state, or with any Self Regulatory Organization.”

    In a separate civil case brought in Nevada last month, the FTC accused Utah resident Jeremy Johnson, I Works Inc. and other companies of orchestrating a massive, continuity-billing scheme that used 51 shell companies, maildrops and “straw-figures” as company officers “to keep the scam going.”

    The complaint names as defendants 10 individuals, 10 corporations and the 51 shell companies. Citing court documents, the Salt Lake Tribune reported that Johnson’s companies allegedly took in more than $350 million and ensnared 15,000 consumers a day at the height of the scheme.

    Customers were lured into purchasing “trial” memberships for “bogus government-grant and money-making schemes,” and then were “repeatedly” charged monthly fees “for these and other memberships that they never signed up for,” the FTC said.

    “[T]his scheme has caused hundreds of thousands of consumers to seek chargebacks — reversals of charges to their credit cards or debits to their banks accounts,” the FTC said.

    “The high number of chargebacks has landed the defendants in VISA’s and MasterCard’s chargeback monitoring programs, resulted in millions of dollars in fines for excessive chargebacks, and prevented the defendants from getting access to the credit card and debit card billing systems using their own names,” the FTC said.

    “To keep the scam going, the defendants tricked banks into giving them continued access to these billing systems by creating 51 shell companies with figurehead officers, and by providing the banks with phony ‘clean’ versions of their websites.”

    Like ASD’s Andy Bowdoin, Johnson denies wrongdoing.

    Making Sense Of It All

    Today the PP Blog offers a two-word term, contexts in which we believe the term applies and proposed definitions as a means of educating the public by describing a complex process of organized, international theft and reducing it to its essence. Understanding how online schemes proliferate — and the emotions they trade on and “scam signals” they send — may help consumers protect themselves from the fraudsters.

    fraud creep [frawd kreep]

    1. Principal definition: The tendency of a web-based financial crime undetected by law enforcement to expand across the Internet until it achieves critical mass, reaches the limits of a criminal organization’s ability to manage and forces investigators to respond. Such a crime may creep (advance slowly) to ultimately create thousands or even tens of thousands of victims globally.

    2. Associated definition: A criminal business model (fraud-creep enterprise) that includes a suggestion of exceptional earnings and generous recruiting commissions and the use of tailored messages that appeal to greed, envy, despair or anger. A fraud-creep enterprise also may be characterized by images of wholesome or enticing amenities designed to attract prospects to an illicit scheme whose purpose is hidden or undisclosed.

    3. Associated definition: A form of deceit (fraud-creep plan) employed by hucksters, particularly on the Internet, characterized by efforts to popularize an illicit pursuit by withholding critical information and demonizing market regulators. Profits are reaped by tapping into disillusionment and despair and creating a bogeyman or figure of blame to rationalize participation in a dubious or illegal enterprise. The bogeyman or figure of blame often may be the government, a branch of government, a law-enforcement or regulatory agency or government employee.

    4. Associated definition: A particular instance of such deceit in which an appeal is made to recruit holders of a particular political philosophy into a scam. Politicians and other public figures may be demonized in this form of fraud creep, which may include vicious name-calling or passive-aggressive slime. Images of success may be juxtaposed against images of people or entities cast as barriers to success. This form of fraud creep also may be accompanied by an effort to create marketplace sympathy and to sanitize and expand a fraud scheme by suggesting evil forces are seeking to prevent investors and eager entrepreneurs from creating wealth by erecting barriers or denying them access to the marketplace.

    5. Associated definition: One who practices fraud creep — i.e., a fraud creep.

    Usage example: As the economy struggles and mortgage foreclosures pile up, law-enforcement agencies nationwide are seeing more and more examples of fraud creep in which criminals succeeded in  making Internet scams go “viral” by luring thousands of prospects with images of amenities they’ll purportedly enjoy by registering for a program and sending money.

    Usage example: The ASD fraud-creep and Ponzi scheme gradually expanded to fleece more than 40,000 investors out of at least $110 million, investigators said, noting that participants were lured by the promise that they would be paid $5,000 if a family member or friend they recruited spent $50,000 on “advertising.”

    Usage example: Although Smith routinely bemoaned “Washington” while showing a video of himself behind the wheel of a Maserati parked outside a mansion in a driveway lined by exotic flowers as a groundskeeper toiled nearby, authorities say the investigation uncovered a classic case of fraud creep: Smith simply decided that registering with the SEC was for the “fools who don’t understand the Constitution.” The Maserati, authorities said, was a day rental — and Smith paid the groundskeeper $100 to let him film the driveway and mansion scenes on a Saturday morning when the owners were on the golf course.

    Usage example: The stage was set for fraud creep, authorities said, when the accused huckster — a recidivist who did not disclose his previous conviction for securities fraud in a $20 million scheme  — persuaded  unsophisticated investors that the FBI was forcing the best companies to move offshore and that the SEC and IRS were trying to destroy the middle class.

    Usage example: Authorities began to suspect fraud creep when Jones incongruously explained to investors that the United States was turning into both a “Nazi” and a “Socialist” state and making it impossible for honest “Main Street Capitalists to deliver the American Dream and do what the market does best: get poor people and illegals off Food Stamps and turn them into productive citizens.”  Although Jones, a U.S. resident, frequently talked about his “attorney” and the efforts he had undertaken to ensure his offshore company complied with all laws and regulations,  he refused to provide prospects the name of the attorney, claiming that a previous attorney had been hounded by callers who had sought to verify claims about the program.

    Usage example: Federal agents announced the arrest of yet-another alleged fraud creep today, saying the Florida man was either running or participating in multiple fraud-creep schemes, including autosurfs, HYIPs and penny-stock scams.

    Usage example: Fraud creeps on the fraud-creep forums were urging their marks not to file complaints with regulators or law enforcement — and not to contact the offshore payment processors that had processed all the Ponzi payments for the suddenly defunct HYIP. One forum fraud creep opined that the government would steal any remaining money. Another issued a dire warning that a receiver was sure to be appointed by the court and that the “greedy” receiver and “brain-dead” judge would conspire against the participants. Yet-another fraud creep ventured that the government would use the remaining fraud proceeds to help it finance its own Ponzi scheme: Social Security.

    Usage example: In court documents, federal authorities said fraud-creep forums such as TalkGold, MoneyMakerGroup and ASAMonitor were helping fraud creeps and fraud-creep schemes steal millions of dollars globally.