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SPECIAL REPORT: Prior To Brazil’s TelexFree-Related ‘Operation Orion,’ United States Used Same Name In Sting; U.S. Department Of Homeland Security Has Office In Brasilia And History Of Cooperating With Brazilian Investigators

Only in MLM: In a head-scratching promo earlier this year, TelexFree cheerleaders used an image of the Pyramids of Giza during an active pyramid-scheme probe in Brazil. Red highlight by PP Blog.

If you’ve been following TelexFree developments, you’ve probably heard about “Operation Orion,” the code name for the investigation that led to raids against TelexFree’s Ympactus arm last week by the Brazilian federal police. The Orion name was chosen, police said, because it fit splendidly within the context of a pyramid-scheme case.

How so? The Pyramids of Giza in Egypt were aligned with the Orion constellation, police explained.

Our analysis of the “Operation Orion” name is that it shows heady messaging by Brazilian police. It is direct in the sense that TelexFree, after all, may be the world’s largest MLM HYIP pyramid scheme. And it’s subtle in the sense that so many pyramid-scheme participants have bright stars in their eyes that blind them to the realities of mathematics.

Here we’ll point out that, for whatever reason, someone within the TelexFree sphere got the head-scratching idea earlier this year to use an image of the Pyramids of Giza in a promo for TelexFree during an active pyramid-scheme probe in Brazil.

We believe it notable that Brazilian police also referenced the Pyramids of Giza, given their presence in a TelexFree promo.

For newer readers, we’ll also point out that the HYIP sphere is infamous for taunting the law-enforcement community. Like TelexFree, a “program” known as WCM777 also came under investigation in multiple countries earlier this year. Naturally someone within the WCM777 sphere shoved an image of a pyramid down the throat of law enforcement after word of the investigations became public.

Second Tour (At Least) For ‘Operation Orion’

Did you know that the code name “Operation Orion” chosen by Brazilian police previously had been used by the United States in a major law-enforcement action, albeit in a completely different context? (More on the 2012 U.S. action below.)

What’s your thinking? Are two Operation Orions in two years coincidence?

And did you know that the U.S. Department of Homeland Security (DHS), which has its own TelexFree probe, has an office in Brasilia and a history of cooperating with Brazil’s federal police — and that some criminal investigators from outside the United States receive training at the DHS Federal Law Enforcement Training Center in Glynco, Ga? (The U.S.-sponsored training also sometimes occurs in countries that host the United States. Some Brazilian investigators, for example, have received U.S. training in Peru. See photo below.)

U.S. prosecutors did not respond to a request for comment on whether there was any coordination between the United States and Brazil last week on TelexFree-related events: the indictment of TelexFree figures James Merrill and Carlos Wanzeler in the United States, and the public announcement of “Operation Orion” in Brazil.

What’s In A Code Name?

U.S.-based police, prosecutorial and regulatory agencies regularly conjure up operational names to distill the essence of the law-enforcement goal and to send a message that fraudsters never should be confident. Agencies also sometimes engage in something we’ll describe as reverse black comedy whose purpose is to accent the absurdities of scams and scammers. In New Jersey last year, for example, a law-enforcement action targeted at alleged booze diluters was memorably named “Operation Swill.”

It was an instant classic.

A long-running FBI operation targeted at dozens of penny-stock fraudsters a few years ago was dubbed “Operation Shore Shells,” in part because the probe occurred near the sea and in part because the fraud involved the use of shell companies, often a nemesis of legitimate commerce. The SEC, which regulates the U.S. securities markets, once dubbed an action directed at hundreds of companies ripe for pump-and-dump swindles “Operation Shell Expel.”

To out illegal gambling conduits reaching into the United States, DHS once set up a sting operation and “obtained a business address near Atlantic City, New Jersey” to bolster undercover operatives’ street cred. As part of the operation, the Feds created a bogus “payment processor” known as Linwood Payment Solutions to “negotiate contracts and terms of the processing, and to handle the intricate movement and processing of collection and payment data from the gambling organizations to the banks.”

These well-dressed greeters actually were part of a federal undercover operation dubbed “No Such Thing as a Free Lunch.” Source: U.S. Marshals Service. Red blocks by PP Blog.

The U.S. Marshals Service, in charge of rounding up fugitives, once famously conjured up a sting dubbed “No Such Thing as a Free Lunch” that operated as part of a larger sting dubbed FIST — for Fugitive Investigative Strike Teams.

As part of a six-year FIST operation in the 1980s, marshals created a fake business known as “Flagship International Sports Television Inc.,” obtained the last-known addresses of more than 3,000 wanted persons and sent brunch “invitations” that promised free food and free National Football League game tickets to those addresses. The marshals also offered a shot at free Super Bowl tickets.

The free-food sting netted 100 arrests. FIST overall netted more than 14,700.

Undercover TelexFree Probe

It is known that DHS conducted a TelexFree-related undercover operation that lasted for months. Whether the operation extended to foreign soil and had a formal name is unclear. Based on its research, the PP Blog believes that undercover stings (named and unnamed) operated by U.S. government agencies and aimed at HYIPs have been operating continuously in the United States since at least 2006.

One of the reasons is that the schemes put banks in the line of fire and often target disadvantaged populations. Beyond that, HYIP schemes have a history of trading on the names of the White House and U.S. government agencies, thus confusing people across the world. TelexFree promoters, for instance, traded on the names of President Obama, the cabinet-level office of the U.S. Attorney General, the SEC and Massachusetts Commonwealth Secretary William Galvin. Why? To cloak themselves in a veneer of legitimacy and to drive money to a scheme that purportedly returned $1,040 in a year to people who paid in $289, $5,200 to people who paid in $1,375 and $57,200 to people who paid in $15,125.

Even Bernard Madoff would gag at the thought.

Female police officials from multiple countries, including Brazil, received U.S. training in Peru in 2012. Photo source: DHS.

With the Internet emerging as the favored delivery vessel of both clever and unclever fictions aimed at transferring great sums of wealth and putting unwarranted financial power in the hands of criminals and criminal enterprises, the need has arisen to pursue cross-border frauds aggressively. The only way to minimize the mushroom effect of fraud schemes operating on the Internet is through international cooperation at the highest levels of government and law enforcement.

Put another way, your latest recruit could be a Fed. The person you instructed not to “call it an investment” (as part of a ham-handed cover-up bid) could be a Fed. The person sitting next to you at a hotel “extravaganza” of some sort could be a Fed. So could the person in the cabin next to you on the scammers’ cruise ship. So could the recruit who, at your direction, paid you personally while joining, instead of paying the company. That upline guy — the one who sponsored you and asked you to pay him personally — could have one or more Feds in his downline. Those Feds could be “placing ads” for the program and keeping notes on whether anybody signed up under them.

Channeling?

Could Brazilian authorities who selected the name “Operation Orion” and referenced the Pyramids of Giza perhaps been channeling their U.S. counterparts and engaging in some reverse black comedy to point out the absurdity of scams? Man, we hope so.

As noted above, someone within the TelexFree sphere showcased the Pyramids of Giza during a pyramid-scheme probe in Brazil. Apparently no one in TelexFree thought it prudent, say, to stop the scheme during the Brazilian probe.

Because the HYIP sphere is populated by the most disingenuous “businesses” and people you’ll ever encounter, it’s easy enough to read such an act as telling law enforcement to shove it. Fractured thinking and taunts at law enforcement are core signatures of HYIP frauds, perhaps characteristics every bit as defining as preposterous daily payout rates of between .50 and 2.75 percent.

Good fortune certainly did not shine down on TelexFree from Orion on July 23, the date of the U.S. indictments. Nor did it shine down on July 24, the date the “Operation Orion” pyramid probe was announced in Brazil.

In our view, the name “Operation Orion” selected by Brazilian police was practically perfect.

In addition to being a star constellation, Orion is the great hunter from Greek mythology. With Brazil’s “Operation Orion,” alleged pyramid schemers became the hunted.

Alleged child predators were the hunted in the U.S. version of “Operation Orion,” a 2012 sting engineered by DHS. Arrests were made in the United States, Spain, the Philippines, Argentina and the United Kingdom. The DHS agency that launched the 2012 version of “Operation Orion” is known as Immigration and Customs Enforcement — or ICE for short. Homeland Security Investigations (HSI) is an ICE directorate.

From ICE (italics/bolding added):

HSI investigates immigration crime, human rights violations and human smuggling, smuggling of narcotics, weapons and other types of contraband, financial crimes, cybercrime and export enforcement issues. ICE special agents conduct investigations aimed at protecting critical infrastructure industries that are vulnerable to sabotage, attack or exploitation.

In addition to ICE criminal investigations, HSI oversees the agency’s international affairs operations and intelligence functions. HSI consists of more than 10,000 employees, consisting of 6,700 special agents, who are assigned to more than 200 cities throughout the U.S. and 47 countries around the world.

U.S. court records show that HSI started the undercover investigation into TelexFree at least by October 2013. Other records show HSI has an attaché office in Brasilia, the capital of Brazil.

ICE and HSI have a history of cooperating with Brazil’s federal police. Recent examples include the May 2014 return to the government of Brazil of a smuggled painting linked to a bank fraud investigation. In April 2014, ICE agents returned to Brazil a man arrested in the United States and wanted on murder charges in Brazil.

In May 2014, ICE and HSI announced they had cooperated with federal police in Brazil in a sting known as “Operation Proteja Brasil,” described as aimed at protecting against child porn.

From ICE (italics/bolding added):

Some of the warrants executed during this operation were the direct result of leads provided by HSI Brasilia and the National Center for Missing & Exploited Children (NCMEC).

Jul 28, 2014
TelexFree Members Blame MLM Debacle On ‘Media Disinformation’; Judge Presiding Over SEC Case Receives Doodles

Some TelexFree members sent doodles to the federal judge presiding over the SEC’s fraud case. Redaction by PP Blog.

(UPDATED 9:24 am EDT MAY 14 U.S.A.) The PP Blog previously has reported on campaigns by members to petition judges to “bail out” TelexFree and consider the purported upside of the “program,” which may be the largest combined Ponzi- and pyramid scheme in MLM HYIP history. (Campaigns referenced in this May 10, 2014, PP Blog editorial.)

The docket of U.S. District Judge Nathaniel M. Gorton of the District of Massachusetts now shows that members have written letters to the court in support of TelexFree. Gorton is presiding over the SEC’s civil case against TelexFree. The complaint was brought on an emergency basis on April 15. Assets of TelexFree and alleged managers and certain promoters have been frozen.

At least one TelexFree supporter contended in a letter to Gorton that he can “assure” the judge that “media disinformation” is responsible for the problems at TelexFree and that the company “revolutionized” MLM in a manner that “put out of extreme poverty thousands and thousands of people around the world, if not millions.”

TelexFree, according to the sender, was like a drop of “heaven for poor families.”

Some of the letters appear to be in Spanish, sent to the judge via fax. Some are handwritten. Some are typewritten. A few of them include doodles.

There are letters from the United States. There are letters from the Dominican Republic. Some of the letters appear to have used a shared template, which likely means TelexFree upline/downline groups organized the campaign.

In the 2008 AdSurfDaily case, shared litigation templates were used by certain members who appeared to be more interested in advancing conspiracy theories than understanding the facts of the case. Some of the letters/emails of “support” submitted by ASD in 2008 were used by the government to undermine ASD’s assertion it was not selling securities and was not a Ponzi scheme.

At least one TelexFree member asserted in a letter to Gorton that the “program” gave him an opportunity to earn money from TelexFree by posting ads on the Internet.

On Friday, it became known that the U.S. Department of Homeland Security was involved in an undercover probe of TelexFree that began at least by October 2013.

In a criminal complaint and affidavit filed in support of wire-fraud conspiracy charges against TelexFree figures James Merrill and Carlos Wanzeler, a DHS agent involved in the probe alleged an intelligence research specialist within DHS placed more than 700 ads for TelexFree online.

“The ads have resulted in no retail sales of TelexFree’s VOIP product,” the agent alleged.

And, the agent asserted, “the sites on which these ads were posted contained page after page after page of hundreds of nearly identical ads placed by various TelexFree promoters for the identical VOIP service.”

Zeek Rewards, an $850 million Ponzi- and pyramid scheme shut down by the SEC in 2012, also had an “advertising” component. So did ASD, a $119 million Ponzi scheme shut down by the U.S. Secret Service in 2008.

MLM HYIP schemes have defrauded billions of dollars from participants in recent years. The combined hauls of TelexFree, Zeek and ASD alone may exceed $2.169 billion. That’s nearly double the size of the epic Scott Rothstein Ponzi and racketeering scheme in Florida in 2009.

MLM HYIP swindles typically are aimed at vulnerable populations, with MLMers who have big email lists and experience in one fraud scheme after another scoring tremendous windfalls.

Our thanks to the ASD Updates Blog.

May 12, 2014
BULLETIN: Merrill, Wanzeler Charged With Wire-Fraud Conspiracy; Wanzeler Labeled ‘Fugitive’; Scope Of TelexFree Fraud ‘Breathtaking,’ Top Federal Prosecutor Says; Undercover Probe Had Been Under Way For Months, With ‘Intelligence Research Specialist’ Placing ‘Ads’ And Undercover Agent Mixing With Promoters

Screen shot of part of criminal complaint filed today.

BULLETIN: (18th Update 8:15 a.m. EDT, May 10, U.S.A.) TelexFree figures James Merrill and Carlos Wanzeler have been charged criminally with conspiracy to commit wire fraud.

Merrill, 53, was arrested in Worcester, Mass. Wanzeler, 45, of Northborough, Mass., has been labeled a “fugitive.”

In similar prosecutions, U.S. authorities have notified INTERPOL about the subjects of U.S. arrest warrants in HYIP cases. How authorities intended to proceed against Wanzeler was not immediately clear.

“The scope of this alleged fraud is breathtaking,” U.S. Attorney Carmen Ortiz of the District of Massachusetts said. “As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard working people around the globe.”

From the criminal complaint and affidavit filed by Homeland Security Investigations (HSI), an arm of the U.S. Department of Homeland Security (italics added):

An analysis of the bank and credit card processing accounts behind TelexFree’s publicly-stated income and revenue figures shows that TelexFree was deriving less than 1% of its revenue from its VOIP products, about 99% from investments by new promoters, and that it could not meet its massive payment obligations to existing promoters without equally large infusions of cash from new promoters.

The complaint, among other things, reveals that an undercover probe into TelexFree was under way before the company and certain arms filed for bankruptcy protection in Nevada on April 13.

One undercover agent made a TelexFree purchase on April 9, four days prior to the bankruptcy filing. The complaint/affidavit describes the purchase bid as “cumbersome,” taking “over two hours, including unusual steps like setting up an electronic ‘eWallet’ and uploading to TelexFree copies of [the undercover agent’s] drivers license and credit card.”

Information in the affidavit/complaint shows that the undercover probe began at least by October 2013, months ago:

From the affidavit/complaint (italics/carriage returns/minor editing applied):

During the investigation, a law enforcement officer arranged to have him/herself recruited as a TelexFree promoter, to confirm how portions of the TelexFree system operated.

On October 15, 2013, an undercover HSI task force officer (“UC”) met with a TelexFree promoter (“Person A”). During the conversation, Person A told the UC that the UC could make $100 a week using an “AdCentral Family Package” to post online ads for TelexFree, and could earn additional money by recruiting other people to join TelexFree.

The UC met Person A again the next day, and successfully joined TelexFree as a new promoter. The UC bought the AdCentral Plan for $1,425 (a $50 membership fee plus $1,375 for the AdCentral package), using a check made payable to Person A.

Person B, an associate of Person A, helped the UC register and verify the UC’s new TelexFree “back office” account. This consisted of entering a name, date of birth, Social Security number, cellular telephone number, email address, and mailing/billing address. In order to access the back office, the UC created a unique log-in name and password.

Starting on October 21, 2013, using the UC’s access to the TelexFree system, an HSI Intelligence Research Specialist placed online advertisements as a promoter for TelexFree.

Following the system discussed above, the Specialist copied advertisements created by TelexFree and made available to the Specialist in the back office area of TelexFree’s site, and pasted them to another website TelexFree recommended. As required under the AdCentral Family plan, the Specialist did this five times a day. The entire process took about 25 minutes per day.

Between October 21, 2013, and the date of this affidavit, the Specialist posted more than 700 advertisements. The ads have resulted in no retail sales of TelexFree’s VOIP product. As described above, the sites on which these ads were posted contained page after page after page of hundreds of nearly identical ads placed by various TelexFree promoters for the identical VOIP service.

The document also asserts the government — once inside TelexFree — used an undercover bank account and tied it to a TelexFree “eWallet” — and began to receive payments from TelexFree.

One TelexFree huckster, according to the complaint/affidavit, told an undercover agent that “he [the huckster] had earned $1,600,000 as a TelexFree promoter, without selling a TelexFree product.”

“I am very proud of the tireless efforts of my special agents,” said Bruce Foucart, special agent in charge of HSI. “Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities. While pyramid schemes are nothing new, the potential scope of this case will hopefully serve as an educational lesson for all. The main point is clear; if it sounds too good to be true, it probably is.”

Undercover agents even attended a TelexFree rah-rah fest in Boston on March 9, the day TelexFree announced a new compensation plan. That plan, according to documents, led to an effective storming by affiliates of TelexFree headquarters in Marlborough on April 1.

See April 3, 2014, PP Blog editorial.

Bail information for Merrill was not immediately clear. Wire-fraud conspiracy is punishable by up to 20 years in federal prison.

The Massachusetts Securities Division has alleged TelexFree was a combined Ponzi- and pyramid scheme that gathered more than $1.2 billion. The SEC also has sued.

May 9, 2014
BULLETIN: U.S. Trustee Says ‘Compelling Evidence Of Fraud’ And ‘Reasonable Grounds’ To Believe ‘Criminal Conduct’ Occurred On Road To TelexFree Bankruptcy Filing
BULLETIN: (11th Update 2:35 p.m. EDT U.S.A.) The United States’ trustee who serves the region (Nevada) in which TelexFree’s bankruptcy case was filed on April 13 has alleged there are “reasonable grounds” to believe that “criminal conduct” occurred at TelexFree.

Trustee Tracy Hope Davis, who works for a division of the U.S. Department of Justice, says in Bankruptcy Court filings that the court should appoint a Chapter 11 trustee because “[t]here is compelling evidence of fraud, dishonesty and gross mismanagement of the affairs of the TelexFree debtor entities, TelexFree, LLC, TelexFree, Inc. and TelexFree Financial, Inc.

Davis was appointed trustee of the region by U.S. Attorney General Eric Holder in November 2013.

The motion by Davis cites separate fraud actions against TelexFree filed April 15 by the Massachusetts Securities Division (MSD) and the U.S. Securities and Exchange Commission (SEC). MSD is the state-level securities regulator in Massachusetts. The SEC is the top securities regulator in the United States.

“In response to subpoenas issued by the MSD in January and February, 2014, TelexFree changed its compensation plan so that promoters would now be required to sell its VoIP product in order to qualify for the payments that TelexFree had previously promised to pay them,” Davis alleged. “The rule change has generated a storm of protests from promoters who cannot recover their money. The change has also caused a precipitous decline in investor revenue which has pushed TelexFree into bankruptcy.”

Meanwhile, the Davis motion cites an SEC complaint and emergency motion in Massachusetts federal court on April 15 that successfully sought an asset freeze against alleged TelexFree co-owners James Merrill and Carlos Wanzeler and TelexFree CFO Joseph Craft (and others), along with a Temporary Restraining Order.

“Millions of additional investor funds received by TelexFree are presently unaccounted for,” Davis alleged. “Fortunately, the TRO was granted by the District Court for the District of Massachusetts and all of the Debtors’ accounts have been frozen pending a preliminary injunction.”

As a result of TelexFree, Davis alleged, “[t]wo companies controlled by Craft received more than $2,010,000.00 between November 19, 2013 and March 14, 2014.” Millions more allegedly went to Merrill and Wanzeler.

Among the assertions by Davis:
- The Debtors did not disclose that several banks and at least one payment processor stopped doing business with them, apparently due to concerns about the legality of its multi-level marketing program.
- It appears that part of the reason for the Debtors’ cash flow problems was the diversion of funds to insiders.
- Craft was caught “holding the bag” when the U.S. Department of Homeland Security was executing a search warrant at TelexFree headquarters in Massachusetts on April 15.
“When Craft was caught ‘holding the bag’ during the execution of the HSI search warrant on April 15, 2014, nine of the ten cashier’s checks that were confiscated were dated April 11, 2014 and were remitted to Merrill,” Davis asserted. “Of these checks, five were made out to TelexFree, LLC totaling $25,548,809.00, and one was made out to Katia B. Wanzeler (Wanzeler’s wife) in the amount of $2,000,635.00. The tenth check, dated April 3, 2014, was remitted to Wanzeler and was made out to TelexFree Dominicana SRL in the amount of $10,398,000.00.”

Davis also expressed concern about a TelexFree board meeting that occurred in the hours leading up to the bankruptcy filing. (See April 21 PP Blog story that references the same meeting.)

From the Davis motion to appoint a trustee (italics added):

The minutes of the special meeting of the Board of Managers of TelexFree, LLC held on April 13, 2014, indicate that Merrill and Wanzeler comprise the entire Board of Managers (the “Board”). . . At this meeting, Merrill and Wanzeler selected Craft and [Stuart] MacMillian as the Debtors’ “Authorized Persons,” empowered to execute and file pleadings on behalf of the Debtors, to employ counsel and other professionals (including Craft’s accounting firm), and to exercise signature authority over the Debtors’ accounts. Although the minutes include language revoking any prior signature authority of other individuals, there is no language stating that Merrill and Wanzeler are stepping down from the Board or that anyone else is stepping up to serve as their replacements. On information and belief, the new interim CFO and CEO still report to and take direction from the Board which is still comprised of 2 individuals – Merrill and Wanzeler.

And, Davis alleged, “Merrill, Wanzeler, Craft, and possibly others have engaged in securities fraud, withheld material information from investors, and improperly diverted millions of dollars of estate property to themselves or their entities, as set forth in the SEC Complaint and Memorandum.”

In the trustee’s view, according to the allegations, “[t]he modus operandi of Merrill and Wanzeler and their cohorts suggests that it is more likely than not that anyone handpicked by them to manage their wholly owned companies will be another cohort.”

Davis asserted “on information and belief” that there have been “no allegations to date regarding the involvement of MacMillan (the new CEO) or [William] Runge (the new CRA) in the Debtors’ Ponzi scheme, neither is there any indication that these interim officers are truly independent of the fraud of ‘former’ management.”

And, Davis continued, “[t]he only way to ensure honest and independent management of these Debtors going forward is for the Court to direct the United States Trustee to appoint a Chapter 11 trustee.”
Apr 23, 2014
UPDATE: In SEC’s TelexFree Case, Agency Says Department Of Homeland Security And Sheriff’s Deputy Stopped Nearly $38 Million From Leaving Firm’s Massachusetts Office During Execution Of Search Warrant; Money Is Now Frozen

This check for nearly $10.4 million is dated April 3, 2014, and is made out to TelexFree Dominicana SRL, according to an SEC exhibit. Redactions by PP Blog.

EDITOR’S NOTE: See story from earlier today on the SEC’s complaint and fraud allegations against the TelexFree “program,” executives and key promoters.

** ______________________________ **

A Bristol County Deputy Sheriff at the scene of a Tuesday raid by the Department of Homeland Security at TelexFree headquarters in Marlborough, Mass., stopped nearly $38 million in cashier’s checks from leaving the premises in a “bag,” the SEC says in court filings.

On Wednesday, a federal judge froze the money, securing “millions of dollars of funds” and preventing “the potential dissipation of investor assets,” the SEC said.

Joseph H. Craft, TelexFree’s chief financial officer, was at the scene Tuesday and attempted to grab “a laptop and bag,” asserting that he was a TelexFree “consultant” assisting with the firm’s bankruptcy and that the items were “personal items,” the SEC said in an affidavit.

Craft, 50, of Boonville, Ind., is a defendant in the SEC’s TelexFree action announced earlier today. He and several other defendants are accused of fraudulent or deceptive conduct in connection with the purchase or sale of securities, fraud in the offer or sale of securities and the offer or sale of unregistered securities.

He is a certified public accountant, has prepared financial statements for TelexFree and has worked for other MLM companies, the SEC said.

TelexFree, the SEC said, was a massive pyramid scheme that may have more than $1.1 billion in liabilities.

“The Deputy Sheriff told Craft he could not take the laptop and bag and that these items would be subject to the search,” the SEC said in the affidavit. “[Homeland Security Investigations] Agents searched the bag and identified ten Wells Fargo Bank, N.A. cashier’s checks totaling $37,948,296.”

Nine of the checks were dated April 11, 2014, just two days before TelexFree petitioned for bankruptcy in Nevada, according to the SEC affidavit and other court filings.

The nine checks were “remitted to” James M. Merrill, TelexFree’s co-owner and former president. Of the nine, five were made out to TelexFree LLC “totaling $25,548,809, and one was made out to Katia B. Wanzeler,” believed to be the wife of TelexFree co-owner and treasurer Carlos Wanzeler,” the SEC asserted in the affidavit.

The Katia Wanzeler check was for the sum of $2,000,635, the SEC alleged.

A check dated April 3 was “remitted to” Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000,” the SEC alleged in the affidavit.

TelexFree Dominicana SRL’s relationship to TelexFree was not immediately clear.

On April 15, two days after the TelexFree bankruptcy filing and apparently just hours before the raid, Merrill “submitted an unsolicited order to sell $1,150,000 of his mutual fund holdings” and to have the money transferred to a bank in Massachusetts, the SEC said in the affidavit.

“Bank statements show that two companies controlled by Craft received more than $2,010,000 between November 19, 2013 and March 14, 2014,” the SEC said in its complaint.

The SEC complaint also references American MLM attorney Gerald Nehra, though not as a defendant.

Nehra, the SEC said, said in a TelexFree video posted online in August 2013 that “[t]he special ingredient is that you have a real product.”

The product, the SEC said today, was a VOIP system used to mask a massive pyramid scheme that collapsed.

And the video appeared after a TelexFree-related probe in Brazil had begun, according to the SEC complaint.

Carlos Costa, another TelexFree figure not named a defendant in the SEC action, also was referenced in the SEC complaint. Costa is based in Brazil, where an arm of TelexFree has been under investigation amid pyramid-scheme allegations since at least June 2013.

In a video posted online weeks after the Brazilian pyramid probe began, “Costa stated that TelexFree ‘never was, never will be an illegal pyramid because of the sales of the VoiP service,’” the SEC said. “He asserted, ‘We do not depend on everyone coming in in order to pay the people who are already in.’”

The reality, the SEC said, “is quite different.”

NOTE: Our thanks to the ASD Updates Blog.

Apr 17, 2014
DEVELOPING STORY: Federal Agents Raid TelexFree, Massachusetts Newspaper Reports (And Publishes Photo)

(UPDATED 9:58 A.M. EDT U.S.A.) Agents from Homeland Security Investigations (HSI) have raided the TelexFree office in Marlborough, Mass., the MetroWest Daily News is reporting.

And the newspaper has published a photo showing federal agents and police officers inside the TelexFree office. The scene is similar to a scene at AdSurfDaily’s Florida headquarters in August 2008 in which the U.S. Secret Service and local sheriff’s deputies participated in a raid. ASD was a $119 million Ponzi scheme.

Here, in part, is how HSI describes itself (italics added):

HSI investigates immigration crime, human rights violations and human smuggling, smuggling of narcotics, weapons and other types of contraband, financial crimes, cybercrime and export enforcement issues. ICE special agents conduct investigations aimed at protecting critical infrastructure industries that are vulnerable to sabotage, attack or exploitation.

TelexFree’s website has been offline since yesterday.

The Massachusetts Securities Division alleged yesterday that TelexFree was a massive Ponzi and pyramid scheme that gathered more than $1 billion and targeted the Brazilian community.

Apr 16, 2014
URGENT >> BULLETIN >> MOVING: United States, 10 Foreign Law-Enforcement Agencies, Seize 706 Domain Names In Cyber Fraud Crackdown

URGENT >> BULLETIN >> MOVING: The United States and 10 law-enforcement agencies in Europe and Hong Kong have seized 706 domain names in a Cyber Monday fraud crackdown, U.S. Immigration and Customs Enforcement (ICE) said.

The photo above is from one of the domains: nfl-go.com, which has been linked to counterfeiting, according to a seizure message playing on the site. Variety.com first reported the seizure of domains linked to alleged counterfeiting sites that trade on the intellectual property of the National Football League.

At least some of the seized sites now display the emblems of at least 14 law-enforcement agencies in the United States, the United Kingdom (City of London Police), Belgium, Romania, Hong Kong, France, Spain, Hungary and Denmark. The EUROPOL emblem also is rolling across the seized sites.

“Working with our international partners on operations like this shows the true global impact of IP crime,” said ICE Acting Director John Sandweg. “Counterfeiters take advantage of the holiday season and sell cheap fakes to unsuspecting consumers everywhere. Consumers need to protect themselves, their families, and their personal financial information from the criminal networks operating these bogus sites.”

A top EUROPOL official said buyers may be assisting organized crime.

“Unfortunately the economic downturn has meant that disposable income has gone down, which may tempt more people to buy products for prices that are too good to be true. Consumers should realize that, by buying these products, they risk supporting organized crime,” said Rob Wainwright, director of Europol.

ICE dubbed the takedown “Operation In Our Sites, Project Cyber Monday IV,” saying it built on efforts that began in 2010 and continued through subsequent years. The European side of the probe was dubbed Project Transatlantic III.

ICE is a division of the U.S. Department of Homeland Security. Working with ICE on the U.S. side were Homeland Security Investigations (HSI), the U.S. Department of Justice and the National Intellectual Property Rights Coordination Center (IPR Center) in Washington, D.C.

HSI conducted undercover operations as part of the effort, ICE said.

“This is the fourth year that the IPR Center has targeted websites selling counterfeit products online in conjunction with Cyber Monday,” ICE said. “Due to the global nature of Internet crime, the IPR Center partnered with Europol who, through its member countries, seized 393 foreign-based top-level domains as part of Project Transatlantic III. Additionally, Hong Kong Customs coordinated the seizure of 16 foreign-based top-level domains hosted in Hong Kong, enlisting the assistance of the web-hosting companies to suspend the service of related websites.”

“During this operation, federal law enforcement officers made undercover purchases of a host of products including professional sports jerseys and equipment, DVD sets and a variety of clothing, jewelry and luxury goods from online retailers who were suspected of selling counterfeit products,” ICE said. “Upon confirmation by the trademark or copyright holders that the purchased products were counterfeit or otherwise illegal, law enforcement officers obtained seizure orders for the domain names of the websites that sold these goods.”

Dec 2, 2013
BULLETIN: Songkram Roy Shachaisere, Figure In AdSurfDaily Ponzi Story, Indicted With 8 Others In ‘One Of The Largest International Penny Stock Frauds In History’
BULLETIN: Songkram Roy Shachaisere, a sidebar figure in the AdSurfDaily Ponzi scheme story, has been indicted with several others in what federal prosecutors in the Eastern District of New York are calling “one of the largest international penny stock frauds in history.”

The probe “used wiretaps in the United States and undercover agents in foreign countries,” prosecutors said.

Chillingly, prosecutors said some of the scammers impersonated IRS employees. Others joined forces to scam victims a second time by creating a “fake law firm.” Some of the money allegedly ended up in “an account maintained in Beirut, Lebanon.”

Indeed, prosecutors said, some of the scammers branched off from the penny-story scheme to orchestrate a scheme “in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses,” the office of U.S. Attorney Loretta E. Lynch said. “In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed. To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.”

“The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment,” said James C. Spero, special agent in charge of Immigration and Customs Enforcement Homeland Security Investigations (HSI) in Buffalo.

All in all, the scams netted at least $140 million and defrauded victims in 35 countries, prosecutors said.

Fake news releases, bogus announcements about nonexistent ventures, bribes and fake posts on social-media sites were used to dupe the masses, prosecutors said.

Shachaisere allegedly was involved in a massive pump-and-dump scheme. In 2010, according to the SEC, Sahachaisere fraudulently touted the stock of Praebius Communications. That’s the company ASD once conveniently announced was providing it a $200 million revenue infusion. ASD made the claim while awaiting a key ruling by the federal judge presiding over the ASD Ponzi case brought by the U.S. Secret Service in 2008.

Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.

Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.

ASD’s name was not referenced in the SEC’s 2010 complaint against Shachaisere, and Praebius was not listed as a defendant in the case. Praebius was referenced in the case as a client that paid Sahachaisere and his company in stock “to provide investor relations services.”

All in all, seven defendants were arrested today, with nine indicted. Before the bust, one of the defendants bragged, “We know enough to be subtle,” prosecutors said.

Here is a list of the defendants:
- Sandy Winick
  Citizenship: Canada
  Age: 55
  Bangkok, Thailand
- Gregory Curry
  Citizenship: Canada
  Age: 63
  Bangkok, Thailand
- Kolt Curry
  Citizenship: Canada
  Age: 38
  Ontario, Canada
- Gregory Ellis
  Citizenship: Canada
  Age: 46
  Ontario, Canada
- Gary Kershner
  Citizenship: United States
  Age: 72
  Tucson, Arizona
- Joseph Manfredonia
  Citizenship: United States
  Age: 45
  Tom’s River, New Jersey
- Cort Poyner
  Citizenship: United States
  Age: 44
  Boca Raton, Florida
- Songkram Roy Shachaiser
  Citizenship: United States
  Age: 43
  Huntington Beach, California
- William Seals
  Citizenship: United States
  Age: 51
  Fallbrook, California
Here’s how prosecutors described the pump-and-dump scheme (italics added):

As alleged in the indictment, defendants Sandy Winick, Gary Kershner, Joseph Manfredonia, Cort Poyner, Songkram Roy Shachaisere and William Seals orchestrated one of the largest international penny stock frauds in history. First, the defendants gained controlling interests of huge quantities of worthless stock in 11 public companies known in the industry as ‘file cabinet businesses’ – thinly traded companies with minimal assets and non-existent business operations, which in many cases were mere shell companies. They then ‘pumped up’ the share prices of the companies’ stock by engaging in fraudulent and illegal sales campaigns, which included distributing false press releases, announcing non-existent business ventures and fake mergers, posting false information on social media sites and bribing stock promoters and brokers.

And here’s how prosecutors described the advance-fee component of the scam (italics/bolding added):

As the indictment alleges, defendants Winick, Gregory Curry, Kolt Curry and Gregory Ellis perpetrated a second scheme in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses. In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed. To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.

To facilitate the scheme, the defendants established boiler rooms or call centers from which members of the conspiracy would solicit advance fees from the unsuspecting penny stock victims. The call centers were located in various locales around the world, including Canada, Thailand and the United Kingdom. Recently, the defendants began planning to open a new call center in Brooklyn, New York. Some of the victims were told that they either needed to pay the advance fee to remove restrictions that were placed upon their penny stock, which prevented the victims from selling their stock in the market, or to join investors in a pending or anticipated lawsuit to recover losses that they incurred while owning the penny stock. Victims were then told that the advance fees were needed to convert the warrants of their stocks to a saleable security. In several instances, the advance fee defendants even pretended to be IRS employees collecting a bogus advance tax from victim investors before they could unload their penny stocks. The victims were directed to send payment of the advance fees to banks around the world, including bank accounts in New York City. The fraud proceeds were then transferred through a funds transfer network, located in Getzville, New York, to an account maintained in Beirut, Lebanon. Ultimately, these defendants generated more than $20 million in fraudulently obtained advance fees.

Defendant Kolt Curry described the Advance Fee Scheme in the following way over an intercepted wire communication: “I would say that 100 percent of these stocks are like uh pink uh… just dumps . . . . so … ya know they’re totally, they’re like, so a lot of these guys are dying . . . . to get rid of this crap. . . . The money is good, it’s easy. It’s easy money. Definitely easy money, and it’s good money.” In fact, while bragging about his prowess as a fraudster, defendant Kolt Curry further stated, “I had a guy send me a million dollars over one phone call . . . . He actually sent me almost two million dollars over the period of the hit . . . . I guess in the industry they coin it as a smash and grab.” As for the group’s recent plans to open a call center in Brooklyn, New York, defendant Kolt Curry said, “I tell you what man . . . hitting the Americans would be like taking money from a baby.”

Lynch’s office thanked various U.S. agencies for their worked on the probe. She also thanked the Royal Canadian Mounted Police, Financial Crime Intelligence Unit in Vancouver and the Integrated Market Enforcement Team in Toronto, and the Serious Organized Crime Agency in the United Kingdom. Meanwhile, prosecutors said that significant assistance was also provided by the United States Embassies in Ottawa, Toronto, London, Bangkok and Beijing.
Aug 13, 2013
International Scammer Pleads Guilty In United States To Swindling Retirees In ‘Jamaican Lottery Scheme’; O’Brain J. Lynch Potentially Faces Decades In Federal Prison

“Investigators from [the Social Security Administration] discovered that hundreds of victims throughout the United States were losing their social security benefits and their life savings either because they believed that they had won ‘The Jamaican Lottery’ or because, as part of another telemarketing scheme, they revealed enough information about themselves that allowed the thieves to fraudulently divert their money.” — Office of U.S. Attorney James L. Santelle, Eastern District of Wisconsin, June 7, 2013

For O’Brain J. Lynch, senior citizens receiving retirement benefits from the Social Security Administration and other sources were the perfect targets of a criminal organization operating an international mass-marketing fraud scheme from Jamaica.

The scheme duped people into believing they had won “The Jamaican Lottery.” In reality, authorities said, it was an advance-fee scam designed to drain retirement accounts and to recruit cashers in the United States.

Lynch, 28, of of Montego Bay, Jamaica, now faces up to 20 years in federal prison after pleading guilty to wire fraud, the office of U.S. Attorney James L. Santelle of the Eastern District of Wisconsin said last week. The case was investigated by SSA, the U.S. Postal Inspection Service and Homeland Security Investigations (HSI).

“Americans have lost millions of dollars to criminals from countries around the world in foreign lottery scams, said Pete Zegarac, inspector in charge of the Chicago Division of the U.S. Postal Inspection Service. “When one family member is harmed by a foreign lottery scam, the impact is felt by all. Losses can be monumental, sometimes entire life savings are wiped out. ”

From a statement by prosecutors (italics added):

A Jamaican Lottery Scheme is a form of mass-marketing fraud committed via the internet, telemarketing, or mass mailings. Jamaican criminal organizations contact victims and identify themselves as lawyers, government officials, law enforcement agents, or lottery company officials. The potential victims are led to believe they won an international multi-million dollar lottery. The fraudulent telemarketers then inform the victims that in order to receive their winnings the victim needs to pay an advance fee. This fee is usually described as a tax, insurance payment, or customs duty that must be paid to release the winnings. The victims are instructed to send the funds via mail or wire transfer.

The scammers routinely involve victims to help facilitate the laundering of financial transactions by receiving and withdrawing funds from prepaid cards and receiving and sending wire transfers. In an attempt to conceal and layer the proceeds from the lottery scams, the scammers direct victims to send funds, knowingly and unknowingly, to other victims and associates of the scammers within the United States. These victims and co-conspirators then transfer the proceeds of this fraud to the scammers in Jamaica by wire transfers. The Jamaican criminal organizations have modified the lottery scam into other variations of telemarketing schemes to include redirecting individuals Social Security Administration (SSA) benefits, direct deposit, automatic debit, re-routing schemes and other identity theft schemes.

According to documents filed in court, in March 2012, the SSA learned that a social security recipient, from Glendale, Wisconsin, was receiving social security benefits in the name of other recipients and cashing in these benefits. Special Agents from the SSA – Office of Inspector General (OIG) discovered the recipient was sending this money to Jamaica because he believed he had won “The Jamaican Lottery.” He said he was contacted by an official from Global International who informed him that he won $2.5 million and two (2) Mercedes Benz vehicles in a sweepstakes. He was then advised that in order for him to collect the money and the cars, he had to pay taxes, customs duty, and other fees. He initially sent his own money to Jamaica, and, once he had depleted his own assets, he was directed, by telephone, to accept checks, Direct Express cards, and other cash value cards in the names of other people (who were also victims), cash them out and then send the money to Jamaica. As a result, numerous victims did not receive their social security benefits, and instead they were mailed to Jamaica. Investigators from SSA discovered that hundreds of victims throughout the United States were losing their social security benefits and their life savings either because they believed that they had won “The Jamaican Lottery” or because, as part of another telemarketing scheme, they revealed enough information about themselves that allowed the thieves to fraudulently divert their money.

Prosecutors said they believed Lynch was the first Jamaican national charged in the United States with this type of fraud.

“We will continue to work with our partners in Jamaica and other law enforcement agencies to put these criminal enterprises out of business,” said Gary Hartwig, special-agent-in charge of HSI’s Chicago Division.

The Journal Sentinel newspaper (Milwaukee) reported last week that Lynch also is known as “Jake Dinero.”

International mass-marketing fraud takes many forms. In 2010, the U.S. Postal Inspection Service alleged that the Pathway To Prosperity HYIP scheme gathered about $70 million and affected 40,000 investors in 120 countries. P2P was a Ponzi-board “program” that in part gained a head of steam on the TalkGold and MoneyMakerGroup fraud forums.

The alleged $600 million Zeek Rewards Ponzi- and pyramid scheme followed P2P as a favored “program” on the Ponzi boards, as did the alleged Profitable Sunrise HYIP scheme. Profitable Sunrise may have collected tens of millions of dollars, the SEC said in April 2013, after bringing fraud charges against Zeek Rewards in August 2012.

Reload scams have been targeted at both Zeek and Profitable Sunrise victims, authorities said.

On May 9, the PP Blog reported that an emerging scam that is seeking to tie itself to the Catholic Church is engaging in a spam campaign and seeking to lure Profitable Sunrise victims into a new trap. The scam is using the name of “ALL SAINTS CATHOLIC CHURCH LOAN FIRM” and many other names, some of which are published in the Comments thread in the story linked in the first sentence of this paragraph.

Jun 11, 2013
URGENT >> BULLETIN >> MOVING: Liberty Reserve, Founder, Others Indicted In New York

URGENT >> BULLETIN >> MOVING: (15TH UPDATE 2:31 P.M. EDT U.S.A.) Liberty Reserve, its founder and several others have been indicted in U.S. District Court for the Southern District of New York (Manhattan).

The charges, which include conspiracy to commit money-laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business, were confirmed this morning by the office of U.S. Attorney Preet Bharara.

Liberty Reserve founder Arthur Budovsky was using the aliases “Eric Paltz” and “Arthur Belanchuk,” according to the indictment.

Co-conspirators, according to the indictment, include Vladimir Kats, also known as “Ragnar”; Ahmed Yassine Abdelghani, also known as “Alex”; Allan Esteban Hildago Jimenez, also known as “Allen Garcia”; Azzeddine El Amine; Mark Marmilev, also known as “Marko”; and Maxim Chukharev.

Marmilev also is known as “Mark Halls,” according to an affidavit that accompanies the indictment.

Budovsky and El Amine were arrested Friday in Spain, Bharara’s office said today. Kats and Marmilev were arrested Friday in Brooklyn. Chukharev was arrested Friday in Costa Rica. Hildago and Abdelghani are “at large” in Costa Rica.

“As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes — the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers, and traffickers,” Bharara said. “The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

Added Steven G. Hughes, special agent in charge of the U.S. Secret Service. “These arrests are an example of the Secret Service’s commitment to investigate and apprehend criminals engaged in the misuse of virtual currencies to conduct global monetary fraud. Cyber criminals should be reminded today that they are unable to hide behind the anonymity of the Internet to avoid regulated financial systems.”

The IRS and the U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI)) also are involved in the probe, as are multiple nations, Bharara’s office said.

Liberty Reserve and its co-conspirators “intentionally created, structured, and operated Liberty Reserve as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” according to the indictment.

The United States has seized the Liberty Reserve domain name along with several others, according to an affidavit that accompanies the indictment. The others include: ExchangeZone.com; SwiftExchanger.com; MoneyCentralMarket.com; and Asianagold.com. As part of the seizure process, a federal judge ordered the U.S. Secret Service to point the domain nameservers to a “sinkhole” URL at ShadowServer.org.

News about the seizures destroys various examples of wishful thinking advanced by online HYIP hucksters at forums such as TalkGold and MoneyMakerGroup since LibertyReserve’s domain went offline Friday. On Saturday, reports surfaced that Budovsky had been arrested in Spain and that Liberty Reserve was under investigation in Costa Rica and the United States.

Seizure notices are expected to appear on the domains, although the timing was not clear.

The indictment ties Liberty Reserve to the crimes of “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”

Among other things, the indictment alleges that “virtually all of Liberty Reserve’s business derived from suspected criminal activity” and that the scope of the fraud is “staggering.”

Between 2006 and May 2013, according to the indictment, Liberty Reserve processed an estimated 55 million transactions and is believed “to have laundered more than $6 billion in criminal proceeds.”

Supporting affidavits in the case show that the indictment was returned under seal on May 20 and that prosecutors applied for an injunction barring Amazon Web Services Inc. from providing services to Liberty Reserve. The affidavit also shows that the United States is seeking forfeiture of sums on deposit in at least 42 accounts in various countries

These banks are in countries such as Costa Rica, Cyprus, Russia, Hong Kong, China, Morocco, Spain, Latvia, Australia and the United States. Tens of millions of dollars are being sought in forfeiture actions, although the final sum is unclear.

Liberty Reserve, according to the indictment, used “exchangers” in countries with little oversight, including Malaysia, Russia, Nigeria and Vietnam. The process was part of a criminal scheme to bury evidence of fraud while providing anonymity for the fraudsters.

The enterprise, according to the indictment, functioned “in effect as the bank of choice for the criminal underworld.”

Link to documents posted by Bharara’s office. Read statement by Bharara’s office.

In a separate but related action, the U.S. Department of the Treasury announced it had identified Liberty Reserve as a “Financial Institution of Primary Money Laundering Concern.”

“Treasury is determined to protect the U.S. financial system from cyber criminals and other malicious actors in cyberspace, including overseas entities like Liberty Reserve that facilitate online crime and hope to evade regulatory scrutiny,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. “We are prepared to target and disrupt illicit financial activity wherever it occurs – domestically, at the far reaches of the globe or across the internet.”

May 28, 2013
KABOOM! Is It Real — Or Is It The Feds? Agents Created ‘Payment Processor’ As Part Of Undercover Sting Designed To Infiltrate Corrupt Companies; 11 Bank Accounts And 10 Domain Names Seized; 3 Individuals, 2 Firms Indicted
One of the domain name seizure notices in a federal sting operation in which agents created a "payment processor" to infiltrate operations alleged to be corrupt.

Kaboom! In a move that may send shockwaves across the fraudulent HYIP, autosurf, sports-betting and “arbitrage” universes domestically and offshore, Maryland’s top federal prosecutor has released details of a two-year long undercover sting in which federal agents created a “payment processor” to infiltrate illegal gambling operations.

Using methods straight out of the scammer’s playbook and turning the playbook back on the alleged scammers themselves, the federal operation resulted in the seizure of 11 bank accounts in the United States, Guam, Panama, Malta, Portugal and the Netherlands, prosecutors said.

Ten domain names associated with illegal gambling sites also were seized.

“It is illegal for internet gambling enterprises to do business in Maryland, regardless of where the website operator is located,” said U.S. Attorney Rod J. Rosenstein. “We cannot allow foreign website operators to flout the law simply because their headquarters are based outside the country.”

The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:

“Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.

“If you have questions regarding funds withdrawn from your bank account for gambling purposes contact the online gambling company you provided your banking information to.”

As part of the sting, the U.S. Department of Homeland Security (Homeland Security Investigations or HSI) “obtained a business address near Atlantic City, New Jersey,” according to court records.

HSI then created a website for the “payment processor,” opened bank accounts, set up a “payment processing plant” and staffed it until it could process “thousands” of transactions daily.

Undercover operatives then began to mix with “top managers of gambling organizations,” discussing fees and contracts. Having established ties to the alleged scammers, Linwood began to process payments — in excess of $33 million in all, involving more than 300,000 transactions, according to court records.

Seized domain names include:
- Bookmaker.com
- 2Betsdi.com
- Funtimebingo.com
- Goldenarchcasino.com
- Truepoker.com
- Betmaker.com
- Betgrandesports.com
- Doylesroom.com
- Betehorse.com
- Beted.com
Seizure notices now adorn the websites.

Indicted were ThrillX Systems Ltd., d/b/a BetEd; Darren Wright and David Parchomchuk of British Columbia, Canada; K23 Group Financial Services, d/b/a BMX Entertainment; and Ann Marie Puig, 35, of San Jose, Costa Rica.

“The proceeds from illegal Internet gambling are often used to fuel organized crime and support criminal activity,” said William Winter, special agent in charge of ICE’s HSI unit.
May 25, 2011