Will it be the shot heard ’round the HYIP world — or will serial Ponzi-board and social-media fraudsters continue to pretend it is meaningless?
Matthew John Gagnon, a 45-year-old pitchmen for the $72 million Legisi HYIP Ponzi scheme and other online fraud schemes, is listed as an inmate at Federal Correctional Institution (FCI) in Sheridan, Ore.
In July, Gagnon was sentenced to 60 months in prison, ordered to pay $4.4 million in restitution and further ordered to serve three years’ supervised probation after his prison release. He was permitted to self-report to prison. That appears to have occurred yesterday.
Gagnon colleague and Legisi operator Gregory N. McKnight was sentenced to a prison term of more than 15 years. McKnight’s age is listed as 53. He was sentenced last month and was ordered taken into custody immediately. He is listed as an inmate at the FCI in Milan, Mich. McKnight was ordered to pay more than $48.9 million in restitution and further ordered to serve three years’ supervised probation after his prison release.
Legisi was promoted on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup. In 2007, Legisi became the subject of an undercover investigation by state regulators in Michigan and the U.S. Secret Service. Both criminal and civil charges followed.
In court filings on June 6, Legisi receiver Robert D. Gordon said more than 85 percent of the $72.6 million directed at Legisi had flowed through e-Bullion.
e-Bullion is a now-defunct processor. One-time e-Bullion operator James Fayed is on California’s death row after being convicted of ordering the brutal contract slaying of Pamela Fayed, his wife and a potential witness against him.
AdSurfDaily, a $119 million Ponzi scheme also promoted on the Ponzi forums, also accepted money from e-Bullion, according to court filings.
Legisi’s Terms of Service read like an invitation to join an international financial conspiracy. Members had to affirm they were not associated with the SEC, the IRS, the FBI and the CIA — along with “Her Majesty’s Police,” the Intelligence Services of Great Britain and the Serious Fraud Office.
EDITOR’S NOTE: As the PP Blog reported on Aug. 6, Legisi HYIP Ponzi-scheme operator Gregory N. McKnight was sentenced to 188 months in federal prison. McKnight is 53. He was ordered taken into custody immediately after sentencing last week and is listed as “in transit” to an unspecified detention facility. Legisi was promoted in part on Ponzi forums such as TalkGold and MoneyMakerGroup.
The SEC today released the statement reproduced below . . .
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22776 / August 13, 2013
Securities and Exchange Commission v. Gregory N. McKnight, et al., Civil Action No. 08-cv-11887 (E.D. Mich.)
15 Year Prison Term for Gregory Mc[K]night, Orchestrator of $72 Million Ponzi Scheme
The Securities and Exchange Commission announced that on August 6, 2013, the Honorable Mark A. Goldsmith of the United States District Court for the Eastern District of Michigan sentenced Gregory N. McKnight to 188 months (15 years and 8 months) in prison, followed by supervised release of 3 years, and ordered McKnight to pay $48,969,560 in restitution to his victims. McKnight, 53, of Swartz Creek, Michigan, had previously pled guilty to one count of wire fraud for his role in orchestrating a $72 million Ponzi scheme involving at least 3,000 investors. The U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against McKnight on February 14, 2012. McKnight was taken into custody immediately after the sentencing hearing.
The criminal charges arose out of the same facts that were the subject of an emergency action that the Commission filed against McKnight and others on May 5, 2008. On that same day, the Court issued orders freezing McKnight’s assets and those of several companies he controlled, and appointed a Receiver. The Commission’s complaint alleged that, from December 2005 through November 2007, McKnight, through his company Legisi Holdings, conducted a fraudulent, unregistered offering of securities in which he raised approximately $72 million from more than 3,000 investors in all 50 states and several foreign countries. According to the Commission’s complaint, McKnight represented that he would invest the offering proceeds in various investment vehicles and pay interest of as much as 15 percent per month from the resulting profits. The complaint charged that McKnight invested less than half of the offering proceeds and that these investments resulted in millions of dollars in losses. The Commission’s complaint further charged that McKnight used investor funds to make Ponzi payments to investors and for his own use. The Commission’s complaint charged McKnight with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.
On July 6, 2011, the Court entered a final judgment against McKnight in the Commission’s action, and ordered McKnight to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties totaling approximately $6.5 million. The court also issued orders permanently enjoining McKnight from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. On July 9, 2013, McKnight’s associate Matthew J. Gagnon was sentenced to five years in prison for his role in promoting Legisi.
For additional information, see Litigation Release No. 20563 (May 8, 2008), No. 20588 (May 20, 2008), No. 22269 (Feb. 24, 2012) and No. 22749 (July 11, 2013).
URGENT >> BULLETIN >> MOVING: Gregory N. McKnight, the operator of the $72 million Legisi HYIP Ponzi scheme popularized in part on the TalkGold and MoneyMakerGroup forums, has been sentenced to 188 months in federal prison for wire fraud and ordered to pay more than $48.9 million in restitution.
McKnight also was ordered to serve three years’ probation following his prison release. Legisi collapsed in 2008.
Legisi pitchman Matthew John Gagnon was sentenced last month to serve five years in federal prison and to pay $4.4 million in restitution.
The criminal cases against Gagnon and McKnight were prosecuted by the office of U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan. The civil cases were prosecuted by the SEC.
Legisi bizarrely made members affirm they were not associated with the SEC, the IRS, the FBI and the CIA — along with “Her Majesty’s Police,” the Intelligence Services of Great Britain and the Serious Fraud Office.
Among Legisi’s payment processors was e-Bullion. The Legisi receiver is pursuing claims tied up after the 2008 arrest of James Fayed, the operator of e-Bullion.
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.
The Legisi investigations were led by the SEC, the U.S. Secret Service and state regulators in Michigan.
URGENT >> BULLETIN >> MOVING: Legisi HYIP Ponzi-scheme pitchman Matthew John Gagnon has been sentenced to 60 months in federal prison, ordered to pay $4.4 million in restitution and further ordered to serve three years’ supervised probation after his prison release, the office of U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan said.
Legisi, a $72 million Ponzi scheme pushed on fraud forums such as TalkGold and MoneyMakerGroup, was operated by Gregory N. McKnight, who faces sentencing in August. Gagnon’s five-year sentence was the maximum under a plea agreement with prosecutors, who’ve recommended McKnight serve 15 years.
Gagnon pushed Legisi and other fraud schemes through Mazu.com, the SEC said in 2010. The name of MoneyMakerGroup appears in evidence exhibits in the Legisi Ponzi case.
Gagnon will be permitted to self-report to prison, prosecutors said.
The Legisi case — perhaps particularly events involving Gagnon — has been closely watched because it shows that MLM-style HYIP pitchmen can be held accountable criminally for pushing scams. The SEC called Gagnon a threat to the investing public, describing him as a serial fraud pitchman who lacked licenses to sell securities and pushed the unregistered securities of multiple fraud schemes.
In civil charges announced yesterday in Ohio, prosecutors effectively made the same claims against promoters of the alleged Profitable Sunrise pyramid scheme. Included among them was Nanci Jo Frazer, who allegedly also promoted the $119 million AdSurfDaily Ponzi scheme and the $600 million Zeek Rewards Ponzi- and pyramid scheme.
The Legisi case began as an undercover probe by state securities regulators in Michigan and the U.S. Secret Service.
Legisi’s Terms of Service sought to make members affirm they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among other agencies, according to documents filed in federal court.
Current scams such as Profit Clicking have published similar terms, which read like an invitation to join an international financial conspiracy. Ohio prosecutors said they believed Frazer also pushed ProfitClicking, in addition to Zeek, ASD and Profitable Sunrise.
McKnight, prosecutors have said, tried to sanitize Legisi by calling it a “loan” program and engaging in semantic obfuscation. Any number of HYIP scams have employed similar linguistic sleight-of-hand, with ProfitClicking bizarrely arguing that neither itself nor affiliates can be held accountable.
Gagnon argued in court that he’d been duped by McKnight, but a federal judge didn’t buy it.
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.
Sentencing for Legisi HYIP Ponzi scheme pitchman Matthew John Gagnon has been rescheduled for June 18. Gagnon initially was scheduled to be sentenced yesterday, federal prosecutors said earlier this month.
Gagnon pleaded guilty to not disclosing he’d been paid more than $1 million by Legisi and operator Gregory N. McKnight to tout the “program” online. McKnight is scheduled to be sentenced Aug. 6, federal prosecutors said.
Legisi, a Ponzi-forum darling, collapsed in 2008. It triggered a civil probe by the SEC and a criminal investigation by the U.S. Secret Service. Michigan securities regulators also were involved in the probe.
Other recent Ponzi-board “programs” that became the subjects of major investigations include Pathway To Prosperity, Imperia Invest IBC, AdSurfDaily, Zeek Rewards and Profitable Sunrise. All of the “programs” claimed absurd rates of return.
The name of MoneyMakerGroup, a forum listed in U.S. court filings as a place from which Ponzi schemes are promoted, appears in an evidence exhibit in the Legisi case. Also included in the exhibit is Legisi’s bizarre Terms of Service, which required investors to avow 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.
Like McKnight, Gagnon also faces millions of dollars in civil judgments for hawking the Legisi scheme.
In a plea agreement in the criminal case, Gagnon admitted he’d caused more than $7 million in losses to more than 50 Legisi investors.
Delays in sentencing dates may be due in part to the difficulty the court-appointed receiver in the Legisi case has encountered in deposing a potential Legisi witness jailed in Alabama in a second scam.
Sentencing for Legisi HYIP Ponzi scheme purveyor Gregory N. McKnight has been delayed again — this time until Aug. 6 at 1:30 p.m. McKnight had been scheduled to be sentenced today in the Eastern District of Michigan. The postponement marks at least the fifth in the case.
Legisi, which had a presence on infamous Ponzi forums such as TalkGold and MoneyMakerGroup and became the subject of both civil (SEC) and criminal (U.S. Secret Service) probes prior to its 2008 collapse, was a fraud that gathered about $72 million. McKnight pleaded guilty to wire fraud in February 2012. Prosecutors have asked for a sentence of 15 years, describing McKnight’s wordplay when trying to sanitize his HYIP scheme as “semantic obfuscation.”
Meanwhile, sentencing for Legisi pitchman Matthew John Gagnon has been moved from today until May 21 at 1:30 p.m. Gagnon pleaded guilty to not disclosing he’d been paid more than $1 million by Legisi and McKnight to tout the “program” online. Gagnon pushed the “program” on Mazu.com.
The name of MoneyMakerGroup appears in an evidence exhibit in the Legisi case. Also included in the exhibit is Legisi’s bizarre Terms of Service, which required investors to avow 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.
Other recent Ponzi-board “programs” that became the subjects of major investigations include Pathway To Prosperity, Imperia Invest IBC, AdSurfDaily, Zeek Rewards and Profitable Sunrise. All of the “programs” claimed absurd rates of return.
The SEC said last month that Profitable Sunrise was operating from a “mail drop” in England and that pitchmen may not even have known for whom they were working when touting the “opportunity,” which may have gathered tens of millions of dollars.
ASD was a $119 million Ponzi scheme. Zeek, according to the SEC, was a $600 million Ponzi- and pyramid fraud. Imperia targeted thousands of deaf investors and consumed more than $7 million. Pathway to Prosperity gathered about $70 million, according to court filings.
ASD’s Andy Bowdoin — now serving a prison term of 78 months — also engaged in semantic obfuscation, prosecutors said. ASD, a massive Ponzi scheme, purported to pay 1 percent a day. That’s about a third of the purported payout of the Profitable Sunrise “Long Haul” plan, which promoters said paid 2.7 percent a day.
Like Legisi, Profitable Sunrise claimed to be in the “loan” business.
Legisi HYIP Ponzi-scheme pitchman Matthew John Gagnon has pleaded guilty in the Eastern District of Michigan to a criminal charge of not disclosing he’d been paid more than $1 million by Legisi and its operator Gregory N. McKnight to tout the “program” online.
In a plea agreement now public after being fashioned in October and November, Gagnon admitted he’d caused more than $7 million in losses to more than 50 Legisi investors. Legisi gathered about $72 million and collapsed in 2008, according to court filings.
Legisi was promoted on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup. Gagnon, who was accused of willful blindness and potentially faces up to five years in federal prison when sentenced in May, pitched the “program” through Mazu.com. The MoneyMakerGroup forum is specifically referenced in an evidence exhibit in the Legisi case.
In the agreement, Gagnon admitted he touted Legisi as a “winner” and “not a scam.” On any given day, any number of hucksters make the same claims about any number of “programs” on the Ponzi boards. Willful blindness — in no small measure — drives the scams.
Legisi’s Terms of Service sought to make members affirm they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among other agencies, according to documents filed in federal court. McKnight, like Gagnon, faces sentencing in May. Prosecutors have sought a 15-year term for McKnight.
Both McKnight and Gagnon also face millions of dollars in civil judgments that flowed from a case brought by the SEC in 2008. The U.S. Secret Service and state authorities in Michigan also investigated Legisi.
Prosecutors recommended a three-level sentencing reduction for Gagnon, noting he has accepted responsibility for his role in the scam and has assisted authorities.
U.S. District District Judge Mark A. Goldsmith is scheduled to sentence Gagnon on May 7.
Zeek Rewards, an alleged $600 million Ponzi- and pyramid fraud, also was touted on the MoneyMakerGroup and TalkGold forums. The SEC brought the Zeek case in August 2012.
Sentencing for Gregory N. McKnight, the operator of the Legisi HYIP Ponzi scheme, has been postponed until May 7. McKnight had been scheduled to be sentenced today. The postponement marks at least the fourth in the case.
McKnight pleaded guilty to wire fraud a year ago this month. The docket of the case in federal court in the Eastern District of Michigan notes that today’s sentencing was postponed because McKnight is participating in depositions. Although federal prosecutors have asked for a 15-year sentence for McKnight, filings suggest that McKnight hopes to earn a sentencing reduction for assisting the court-appointed receiver in the case recover money for victims of the $72 million fraud.
On Jan. 31, U.S. District Judge Mark A. Goldsmith denied a motion by McKnight to be removed from a tether. Although details were not immediately clear, tethering is a form of electronic monitoring.
Legisi was promoted on Ponzi scheme forums such as TalkGold and MoneyMakerGroup. The SEC charged McKnight and Legisi in May 2008. A criminal charge followed.
The U.S. Secret Service and state authorities in Michigan also were involved in the Legisi probe.
This grainy likeness of Legisi HYIP operator Gregory N. McKnight appears in U.S. court files.
Sentencing for a Michigan man federal prosecutors accused of “semantic obfuscation” for the manner in which his “program” was promoted has been rescheduled for Feb. 5, according to the docket of U.S. District Judge Mark A. Goldsmith of the Eastern District of Michigan.
The sentencing delay for Gregory N. McKnight, who conducted the Legisi HYIP Ponzi swindle, is at least the third. McKnight originally was scheduled to be sentenced Sept. 11. That date was delayed until Nov. 19 — and now has been delayed until Feb. 5.
Prosecutors did not return a call seeking comment on the Legisi case, McKnight and the reason for the sentencing delay.
But it is known that the court-appointed receiver in the Legisi case has moved for a contempt of court order against Paul Harary. Harary, 48, is a purported one-time FBI informant now in federal prison in Alabama for his role in a Boca Raton, Fla., investment fraud that occurred in 2004 and 2005.
Receiver Robert B. D. Gordon (Corrected Aug. 22, 2013) alleges that Harary informed individuals who were researching McKnight for the purposes of selling him investments prior to the filing of the SEC’s Ponzi case in May 2008 that McKnight likely was operating a Ponzi scheme and offering impossible returns.
Harary also allegedly consulted with at least one of the individuals about Legisi’s bizarre Terms of Service, including a provision that required investors to affirm they were not with the government, namely the IRS, the FBI, the CIA and the SEC. Harary, the receiver alleged, told the individual “that if Legisi was not doing anything wrong why would Legisi want these representations from their customers[?]”
Despite Harary’s alleged misgivings about McKnight and Legisi and an acknowledgment by at least one of the individuals that McKnight likely was running a scam, the individuals allegedly decided to solicit money from McKnight for the purpose of investing in penny stocks and a real-estate limited partnership.
McKnight allegedly turned over more than $20 million, beginning about a year prior to the collapse of his Ponzi, according to the receiver.
But now Harary is ducking a deposition aimed at getting to the heart of the alleged fraudulent transfer, according to the receiver.
HYIPs are infamous for using wordplay to try to duck securities regulators. An evidence exhibit in the Legisi case includes a transcript of McKnight interacting with undercover agents who’d infiltrated the purported “opportunity.”
McKnight, according to the transcript, informed the agents that he was presiding over a “loan” program, not an investment program.
The MoneyMakerGroup Ponzi forum also is referenced in court documents in the Legisi case.
Zeek Rewards, another alleged Ponzi scheme, also was pushed on MoneyMakerGroup. Zeek, too, insisted it was not offering investments.
McKnight pleaded guilty in February to wire fraud. Prosecutors have asked for a prison sentence of 15 years.
A woman who described herself as a Zeek victim filed copies of postal receipts in federal court today. Source: Screen shot of federal court files. Redaction by PP Blog.
UPDATED 8:26 A.M. EDT (OCT. 31, U.S.A.) Saying it would save money, the court-appointed receiver in the Zeek Rewards Ponzi scheme case has asked a federal judge to treat the receiver’s Oct. 8 preliminary liquidation plan as a status report. (See Oct. 9 PP Blog story.)
Separately, yet another Zeek member has declared herself a victim of the alleged $600 million Zeek fraud scheme operated by Paul R. Burks and Rex Venture Group LLC. Two other Zeek members effectively did the same thing earlier this month. On Aug. 17, the SEC alleged that Zeek was a massive Ponzi- and pyramid scheme that potentially fleeced more than 1 million people.
In August, Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina ordered receiver Kenneth D. Bell to file the first status report in the case by Oct. 30. Among other things, status reports inform judges about the efforts under way to recover proceeds linked to alleged fraud schemes and return them to victims.
In the Zeek case, status reports are due within 30 days of the end of a quarter — for example, the third quarter of the calendar year ended Sept. 30, making the first Zeek status report due Oct. 30. The second is due Jan. 31, 2013, a month after the end of the fourth quarter of the calendar year on Dec. 31, 2012.
Bell said in court filings today that the information in the Oct. 8 report included “the same information” due today.
“Given that a separate Quarterly Status Report would be redundant, and in the interest of preserving Receivership assets, the Receiver respectfully requests that the Court order that the Preliminary Liquidation Plan be treated as the Receiver’s First Quarterly Status Report,” Bell petitioned Mullen.
Mullen had not acted on the request by late this afternoon, according to the docket of the case.
How Zeek enthusiasts on Ponzi-scheme boards such as TalkGold and MoneyMakerGroup will react to Bell’s request was not immediately clear. One-percent-a-day (or more) schemes such as Zeek gain a head of steam in part because willfully blind scammers who populate the Ponzi cesspits position the “programs” as legitimate.
The demonization of Bell on the Ponzi boards and elsewhere began shortly after the SEC brought the Zeek case. As was the case in the AdSurfDaily prosecution brought by the U.S. Secret Service in 2008, some Zeek members have claimed that the government is manufacturing victims where none exist. The ASD and Zeek Ponzi schemes fetched a combined sum of at least $719 million, nearly three-quarters of a billion dollars, according to court filings.
Both frauds operated as classic Ponzi schemes that recycled money from members to create the illusion of sustainability and profitability, according to investigators.
Both Zeek and ASD were promoted on forums listed in federal court filings as places from which Ponzi schemes are promoted. Earlier schemes promoted on the forums include Legisi and Pathway To Prosperity, which gathered a combined sum of more than $140 million and affected tens of thousands of people, according to court filings.
Legisi operator Gregory McKnight faces sentencing next month in his Ponzi scheme case. Alleged Pathway To Prosperity operator Nicholas Smirnow, meanwhile, is listed by INTERPOL as a wanted fugitive. As was the case with Zeek, the SEC and Secret Service led the Legisi probe. The U.S. Postal Inspection Service brought the Smirnow/Pathway to prosperity case, saying the scam affected individuals in 120 countries.
ASD operator Thomas A. “Andy” Bowdoin is serving a 78-month prison sentence. He was sentenced in August 2012.
Despite claims that Zeek created no victims, at least three individuals already have claimed in court filings to have been scammed by Zeek.
In a filing docketed today, Maria Aide Gomez claimed she sent North Carolina-based Zeek parent Rex Venture Group five postal money orders for $1,000 each in May and paid an additional $300 to maintain her Zeek membership.
Gomez described herself as a “Victim of fraud and deception” on the part of Zeek, Rex Venture Group and Paul R. Burks, the operator of Zeek and Rex Venture. The money orders Gomez sent to Zeek were purchased at a post office in Washington state, according to exhibits that accompanied the filing.
Bell, the receiver, is experienced as both a defense attorney and a prosecutor. The U.S. Department of Justice lauded Bell a decade ago for his successful prosecution of a Hezbollah terrorist cell operating in the United States.
