ON THE LAM: This is a 2008 photo of Harold Rangel, now 22, who is wanted in a bribery case and is believed to have been involved in his father's HYIP and mortgage-fraud scam in the Los Angeles area. Harold Rangel may have ties to the region of Pachuca, Mexico, the FBI said. Source: FBI.
EDITOR’S NOTE:Although this story largely focuses on the sentencing of Juan Rangel, his son — Harold Rangel — is wanted by the FBI in a bribery case and is believed to have helped his father pull off a massive HYIP and Ponzi scheme.
Although federal prosecutors offered a plea bargain to Ponzi and HYIP operator Juan Rangel that would jail him for 15 years, U.S. District Judge S. James Otero said Rangel deserved more time behind bars and sentenced him to 22 years.
Otero upped the sentence by seven years after hearing from victims, including the mother of a U.S. Marine who was killed in Iraq. The grieving mother was persuaded to invest money she received after her son’s death with Rangel.
Rangel, 47, of Downey, Calif., maintained a $2.5 million mansion and bought a Lamborghini with victims’ money, according to records. Investigators said Rangel, a Mexican national, wired $1 million to Mexico when the Ponzi was collapsing and that the scheme generated up to $250,000 a day.
A former Rangel employee told the FBI that Rangel was involved in “multiple fraud schemes” and paid an “associate” to intimidate investors who complained about not getting their promised returns, according to records.
Prosecutors called Rangel’s actions “depraved.” Otero also used descriptive language when sentencing Rangel, saying that “taking investment money from the mother of a fallen soldier” was an example of the “callous disregard” he displayed for his fellow human beings.
Rangel originally was jailed in August 2008 after investigators discovered his $30 million Ponzi and HYIP scheme and a companion mortgage-fraud and equity-stripping scheme that caused borrowers to lose their homes and lenders to issue more than $10 million in fraudulent loans.
Rangel used “recruiters” and Spanish-speaking “street teams” to line up investors, prosecutors said.
The mortgage scheme largely was targeted at Latino homeowners facing foreclosure. Rangel “drained the equity out of the properties” instead of assisting the distressed borrowers, and then sold the properties out from under them to “straw buyers,” using bogus documents to trick lenders into approving loans, prosecutors said.
Rangel ran a company known as Financial Plus Investments that promised annual returns of up to 60 percent. He used infomercials and newspaper ads to promote his schemes and created more than 500 victims, according to records.
“The victim-investors were mostly working-class families, and nearly all of them invested money that they could not afford to lose,” prosecutors said. “[Rangel] encouraged them to invest as much as possible and advised people against putting their money in the bank.”
Otero is still determining the amount of restitution due victims and will conduct a hearing in May to determine the final sum.
Rangel was convicted in a separate case in May 2009 of bribing a bank employee to help him pull off a scam. Rangel’s son, Harold Rangel, 22, also was charged in the bribery case. Because Harold Rangel did not show up for a pretrial hearing, a warrant has been issued for his arrest and he has been placed on the FBI’s “Wanted” list.
Here is the “Wanted” poster for Harold Rangel, who purportedly has ties to Pachuca, Mexico. After failing to show for the hearing, Harold Rangel was charged with unlawful flight to avoid prosecution.
EDITOR’S NOTE: This developing story on the alleged actions of accused securities schemer Christopher Love Blackwell is apt to cause paranoia among HYIP and prime-bank fraudsters, including criminals who populate online forums such as TalkGold and MoneyMakerGroup.
It features the presence of a Department of Homeland Security (DHS) undercover operative who allegedly infiltrated Blackwell’s scheme and was so good at keeping his identity secret that Blackwell pitched him repeatedly over a period of months in a Hooters restaurant and bar as other agents worked to unmask the complex caper. The undercover agent eventually returned an “investment contract” prepared by Blackwell and plunked down $1,000 of government money as a down payment on a purported $500,000 investment. Blackwell allegedly later contacted the undercover agent repeatedly via email and telephone to collect the outstanding “balance” of $499,000. Blackwell even left a voicemail on the agent’s phone, according to court filings.
BULLETIN: The SEC has gone to federal court in Dallas and is seeking an emergency injunction to halt an alleged Ponzi scheme involving Christopher Love Blackwell of Euless, Texas, and Roswell, N.M., AV Bar Reg Inc. of Colleyville, Texas, and Millers A Game LLC of Chandler, Ariz.
Blackwell, 31, and his companies initially came on the Feds’ radar screens last year when the U.S. Department of Homeland Security (DHS) was alerted that he was wiring large sums of money and conducting cash transactions that raised terrorism concerns, according to court records.
In the end, the SEC dryly advised a federal judge, “it became clear to DHS that Blackwell was not a terrorist — just a thief.”
Regardless, the SEC said, the fraud was ongoing and Blackwell still appeared to be selling the scheme as recently as Jan. 19.
DHS operatives kept Blackwell under surveillance, assembled documents, conducted interviews and “made video and audio recordings of meetings during which Blackwell offered investments to undercover agents,” the SEC said in court filings.
Records show that Blackwell was on the receiving end of a default judgment of $24 million in a civil fraud case filed in July 2008 and sought Chapter 7 protection in U.S. Bankruptcy Court on Christmas Eve 2008.
Despite the lawsuit, judgment and bankruptcy filing, Blackwell continued to operate what he described as a “Fixed Income Trading Program” that offered returns of up to 30 percent a month, according to the SEC.
To pull off his Ponzi and fraud scheme, Blackwell bragged about his “academic pedigree,” falsely claiming to have Master’s and PhD degrees “from a prestigious university in Spain” and also falsely claiming once to have been employed by Goldman Sachs and the Bank of Madrid.
In 2007, with the scheme unknown to law enforcement, Blackwell stole $750,000 from an investor. In 2008, according to court filings, he swindled $200,000 from another investor, returning $9,926 in bogus “profits” to the investor. This investor was introduced to Blackwell by “an intermediary who claimed to run a faith-based business and investment development firm,” according to the SEC complaint.
The purported faith-based intermediary assured the investor that Blackwell’s program in “foreign bank instruments” was “totally safe,” the SEC alleged. Despite the assurance of the intermediary, Blackwell immediately began to distribute the $200,000 provided by the investor to other companies and people, including Blackwell’s former business partner and Blackwell’s father.
By late 2008, according to the SEC, Blackwell was engineering a scheme to rip off a former football player for the Dallas Cowboys. The player had been introduced to Blackwell by another player, according to the complaint.
Neither player was identified in the complaint. The former player, lured by the promise of safe returns from an experienced international trader, gave Blackwell $250,000 in the belief that he was purchasing an investment note from HSBC Bank, one of the largest financial firms in the world.
Blackwell “never” purchased an HSBC note. Instead, according to the SEC, he instructed an attorney exercising control over the escrow account to which the former Cowboy had wired the funds to transfer nearly all of the $250,00 to a Phoenix company controlled by a friend of Blackwell.
When confronted by the SEC, Blackwell allegedly told the agency that he had “earned” the money despite his assurances to the player that the sum would be used to purchase a safe bank note.
Although Blackwell showed the former football player a document on HSBC letterhead as purported proof he had purchased a bank note with the player’s money, “HSBC’s Security and Fraud Risk group has confirmed that the letter was fraudulent.
“In other words,” the SEC said, “it was a forgery.”
The former player appears to have been ripped off for the entire $250,000 investment, the SEC said.
UPDATED 2:25 P.M. ET (U.S.A.) Still pushing autosurf and HYIP frauds?
Last week, the PP Blog reported that the U.S. Secret Service and federal prosecutors had established a link between California-based E-Bullion and Florida-based AdSurfDaily. E-Bullion is a shuttered payment processor whose owner, James Fayed, is awaiting trial on charges of murdering his wife, Pamela Fayed, whom prosecutors said wished to cooperate in the E-Bullion probe.
It was the first public assertion by the government that ASD had a tie to E-Bullion.
The Blog further reported that E-Bullion had been linked to at least three alleged Ponzi or fraud schemes: ASD, Gold Quest International (GQI) and Flat Electronic Data Interchange (FEDI), whose convicted operator, Abdul Tawala Ibn Ali Alishtari, was associated with convicted Ponzi schemer Brian David Anderson.
Alishtari, also known as Michael Mixon, was convicted in 2009 of financing terrorism. Anderson, a FEDI pitchman, was sentenced to federal prison for his role in yet-another Ponzi scheme known as Frontier Assets. He also has been linked to a mysterious scheme known as the “Alpha Project.”
Like ASD’s Andy Bowdoin, Alishtari donated money to the National Republican Congressional Committee, according to the Federal Election Commission database. Documents reviewed by the PP Blog show that payments from the FEDI scheme were referred to as “rebates.” ASD also called its payments to participants “rebates.”
Today the PP Blog is reporting that federal investigators also have established a link between E-Bullion and Legisi, a company whose operator, Gregory N. McKnight, was accused by the SEC in May 2008 of operating a massive Ponzi and fraud scheme based in Michigan. During the same month, the SEC also accused GQI of operating a massive Ponzi and fraud scheme from Las Vegas. Investigators likewise established a GQI link to E-Bullion.
Documents reviewed by the PP Blog show that records maintained by E-Bullion were the subject of a subpoena issued on Aug. 6, 2008 — five days after tens of millions of dollars were seized by the U.S. Secret Service from bank accounts controlled by ASD’s Bowdoin. The subpoena was issued in the Legisi case.
As the PP Blog previously reported, the Secret Service, which used undercover operatives in the ASD case, also used an undercover operative in the Legisi case. In fact, the Blog reported, the Secret Service undercover operative and an undercover operative from the state of Michigan, had a face-to-face meeting with Legisi’s McKnight in his office.
Legisi later began to act in a fashion that only can be described as bizarre, allegedly morphing into a sort of super-secret enterprise that was exhibiting clear signs of paranoia. Investors, for example, were asked to submit to a loyalty oath and pledge that they weren’t government investigators or informants.
“This Association of members hereby declares that our main objective is to protect our rights to freedom of choice regarding our advertising and marketing information and conduct, through maintaining our Constitutional rights,” AVG announced on its website in February 2009.
ASD President Andy Bowdoin was indicted earlier this month on federal charges of wire fraud, securities fraud and selling unregistered securities. Prosecutors alleged he was operating a Ponzi scheme that had gathered at least $110 million. The indictment accused Bowdoin of making campaign donations to the National Republican Congressional Committee with proceeds from the ASD Ponzi scheme.
Six days ago, prosecutors alleged in a forfeiture complaint that ASD member Erma Seabaugh used E-Bullion in November 2007 to transfer $10,510 to ASD. The alleged transfer occurred about six months before E-Bullion’s name surfaced in the GQI and Legisi cases brought by the SEC.
When investigators later searched the home of James Fayed in the murder investigation, they found “approximately $60,000 in cash wrapped in plastic material; approximately $3,000,000 in gold; and approximately 31 firearms, including one with a long-range night vision scope, along with thousands of rounds of matching ammunition,” prosecutors alleged.
Pamela Fayed was stabbed to death in a California parking garage on July 28, 2008. The Secret Service, which had begun its investigation of Bowdoin less than a month earlier, seized his assets three days later, on Aug. 1, 2008.
The agents said Bowdoin was moving large sums of money outside the United States and had talked about buying a home in another country. In September 2008, the month after ASD’s assets were seized, an indictment was unsealed in Connecticut that accused Robert Hodgins of Virtual Money Inc. of helping a Colombia narcotics operation launder money at ATMs in Medellin.
Virtual Money Inc. once provided debit cards to ASD, according to an ASD downline group.
CLOSING NOTE: Read this chilling document from the case against Fayed in California. Also see this 2007 report from CBS News. CBS reported FEDI operator Alishtari claimed to be “[National Republican Congressional Committee] New York State Businessman of the Year. ASD members later would make similar claims about Bowdoin.)
EDITOR’S NOTE: The SEC complaint against Candice D. Campbell is yet-another case apt to cause unease in the incongruous worlds of online HYIP, autosurf and investment fraudsters. Among the allegations against Campbell, a purported day-trader and “CFO” of an unincorporated, Canton, Mich.-based company known as CJ’s Financial, is that she lied to investors and used a website to weave a false tale to prospects. When payments dried up earlier this year, the company allegedly emailed false information to investors in a bid to lull them. An evidence exhibit in the case shows that a free Yahoo email account was used, rather than an email account originating on the purported investment company’s servers.
The investment-fraud landscape is filled with incongruities. The use of free email services by purportedly successful investment companies to hawk programs and explain away problems is just one of them. Other incongruities that often signal fraud include claims that monthly returns of a preposterous percentage are “guaranteed” and that investors need not worry about paying taxes. Such claims are notable parts of the investment-fraud universe — and are elements in the SEC’s case against Campbell.
Here, now, the story on the Campbell allegations . . .
Investigators have whacked yet-another “small” Ponzi scheme — one in which Candice D. Campbell of Canton. Mich., is alleged to have used a number of claims typically associated with online HYIP and investment-fraud schemes.
The SEC has obtained an emergency asset freeze in U.S. District Court for the Eastern District of Michigan against Campbell and her unregistered company, CJ’s Financial (CJF). The scheme collected more than $1 million from 60 investors between May 2009 and June 2010, the agency said.
CJF’s website now appears to be offline. But the SEC said that, as recently as July 9, the firm portrayed itself on the website as an “independent investment firm dedicated to putting your money to work for you!”
Investors were told their funds were “guaranteed” to generate returns of at least 10 percent monthly. Claims of unusually high, “guaranteed” returns are one of the classic signatures of fraudsters, according to regulators.
Another classic hallmark of fraud is a claim lacking supporting details that a company or individual is “registered” or “licensed.” Among the SEC’s assertions against Campbell was that CJF used a vague claim that she was “licensed by the appropriate licensing agency for the financial planner/investment banker profession and that he/she is in good standing with such agency.â€
The SEC said Campbell was registered neither with the SEC nor the Michigan Office of Financial and Insurance Regulation. Campbell formerly worked in the “automobile industry,” according to the SEC.
Her role in the automobile industry was not immediately clear.
At the same time, in a claim that featured the use of capital letters for emphasis, CJF investors were told their “initial investment will NEVER go down in value” and that “there will be ‘NO PENALTIES OR TAXES to pay when you withdraw your money, because CJ’s Financial pays your Capital Gains taxes!’”
Frequent use of capital letters to stress sales points and an accompanying appeal to purported “tax” benefits often are associated with investment-fraud schemes.
When the CJF scheme began to collapse, the firm allegedly trotted out what regulators previously have described as a classic ruse to mask a Ponzi scheme in progress — fabricating a government action or events that had not occurred to explain why a business was not meeting its obligations to investors.
The SEC even used the word “ruse” in its complaint against Campbell and the company, highlighting the allegation under a subhead that reads, “Defendants Create A Phony SEC Asset Freeze As A Ruse To Prevent Investors From Withdrawing Their Money.
Meanwhile, the agency used strong verbs to paint a word picture of the scam (emphasis added by PP Blog):
“In 2010, as investors began requesting the return of their money, Defendants concocted a scheme to convince investors that, notwithstanding Defendants’ prior representations that investors would be able to withdraw their money ‘whenever they want,’ Defendants could not return investor funds. Defendants told investors that CJF’s bank accounts and other assets had been frozen by the Commission.”
In truth, the SEC said, the money had not been frozen. The agency then laid out an allegation that a CJF employee using a free yahoo email address to conduct business for CJF sent repeated emails to customers to update them on events that were not really happening.
The emails, which the SEC released in redacted form, paint a picture of CJF lulling investors with words and describing a purported meeting among the company, its “attorneys” and the agency that never occurred.
“[O]n May 26, 2010, Ramona Mangan, who is Campbell’s assistant, sent an e-mail to CJF’s clients updating them about the ongoing ‘government’ investigation of CJF,” the agency alleged. “Mangan acknowledged that CJF ‘knows and understands’ that ‘[m]any individuals are in need of money,’ and assured investors CJF was ‘doing everything we can do to get this issue corrected.’
“Nevertheless,” the agency continued, “Mangan claimed that ‘CJ’s Financial hands are tied in this matter.’ According to Mangan, ‘Since the Ponzi Scheme in 2009 government officials do not investigate lightly and perform detailed investigations to ensure the public is safe from fraudulent activity and trading.’”
On June 3, Mangan sent another email — this one claiming that CJF’s assets had been frozen and that company “attorneys” were working with the SEC and visited its offices June 1 to determine when the purported asset freeze would be lifted, according to the agency.
“According to Mangan,” the SEC said, “‘CJ’s Financial and attorneys [sic] went to the SEC (Security Exchange [sic] Commission) office on Tuesday June 1, 2010. The intentions of the meeting were to obtain a time frame as to when all assets, including CJ’s Financial accounts will be un-frozen and to find out what issues have been defined by the SEC as civil infractions.’”
“Later in the e-mail,” the SEC continued, “Mangan reiterated that ‘All assets, bank accounts and TD accounts are frozen UNTIL the SEC, which is a branch of the government is finished with their investigation.’ Mangan quoted the ‘SEC lead investigator’ as stating that ‘bank accounts, assets and trading accounts will become available when the investigation is over.’ Mangan assured investors that ‘Our main concern at CJ’s Financial is to complete the investigation as quickly as possible, so we can transfer all requested withdrawals and continue trading once again.’”
Campbell made similar claims to investors, the agency alleged.
Regardless, the agency said, “Contrary to the information Mangan and Campbell provided to investors, there was no meeting on June 1, 2010 between the Commission and CJF and its attorneys, and the Commission had not frozen Defendants’ bank accounts, trading accounts, or other assets. Defendants fabricated this story to keep investors from realizing Defendants had stolen their money.”
Mangan is not named a defendant in the complaint.
Investigators said Campbell used only a “small” percentage of the more than $1 million collected to make trades.
“Campbell diverted the money for personal uses, including paying for vacations, cars, jewelry, sporting goods, and furniture,” the SEC charged. “Classic” Ponzi payments were made to some investors, the agency added.
Here is how Campbell, who is accused of depositing client funds into her personal account and diverting “at least” $540,000 for her personal use, spent much of the money, according to the SEC:
Cash withdrawals ($138,000).
Purchases of airline tickets and travel, including travel to resorts in Florida and Arizona ($127,000).
Purchases from several jewelry retailers ($33,046).
Purchases from sporting-goods retailers ($28,350).
Purchases from furniture stores ($29,124).
Purchases from a laser-surgery center ($20,650).
Purchases at automobile dealerships (at least $100,000).
“In an apparent effort to keep the Ponzi scheme from collapsing, Campbell used more than $350,000 of investor money to pay other investors,” the SEC charged.
Read the SEC complaint. (Make sure you read the emails, which are included in the PDF file.)
The SEC claims this June email painted a false picture than CJF could not pay investors because the agency had frozen its assets. The SEC did not file a complaint against the company and gain an asset freeze until Aug. 4. NOTE: The entire email is not reproduced in this screen shot, and the PP Blog added the red lines.
A federal judge has extended the freeze on the assets of a website operator accused by the SEC of shilling for a Ponzi schemer and then trying to extort money from the schemer when the fraud was collapsing.
Severe restrictions placed on Mazu.com operator Matt Gagnon by U.S. District Judge George Caram Steeh of the Eastern District of Michigan illustrate the financial and legal dangers of using the Internet to promote murky businesses. At the same time, orders issued by Steeh destroy myths advanced on Ponzi forums that website operators are insulated from prosecution and that their business contacts and customers cannot be sucked into a Ponzi probe.
Demonstrating the life-altering nature of Ponzi schemes and the monumental legal entanglements and inconvenience that flow from such schemes, the judge also ordered Gagnon to submit a “sworn” statement “each Friday” to the SEC. The order requires Gagnon to account for “all funds received” during the week, including funds received “by others on his behalf.”
Steeh also ordered Gagnon and his “officers, agents, servants, employees, attorneys, nominees, banks, brokers, dealers, financial institutions, and those persons in active concert or participation with any one or more of them” not to destroy evidence.
Steeh’s order applies to “books, records, documents, correspondence, ledgers, accounts, statements, files, electronically stored information, and other property of or pertaining to the Defendant,” regardless of the location of the information.
At the same time, the judge ordered expedited discovery in the case and freed up $2,000 for Gagnon “to pay living expenses.”
Gagnon was accused in May of using his website to pitch the alleged Legisi HYIP Ponzi scheme, which the SEC described as a $72.6 million fraud. The judge’s orders followed on the heels of an awareness campaign by the Financial Industry Regulatory Authority (FINRA) to educate the public about HYIP schemes and the filing of criminal charges by the U.S. Postal Inspection Service against Nicholas Smirnow, accused of operating a $70 million Ponzi HYIP scheme known as Pathway to Prosperity (P2P).
FINRA issued its HYIP warning on July 15, calling the HYIP universe a “bizarre substratum of the Internet†and saying “HYIPs are old-fashioned Ponzi schemes dressed up for a Web 2.0 world.â€
In May, federal prosecutors declared in court filings in the P2P case that “[a] large percentage, if not all, HYIPs, are Ponzi schemes.†In its HYIP alert, FINRA built on that theme, declaring that “[v]irtually every HYIP we have seen bears hallmarks of fraud†and noting that schemers were using websites, forums and social-media sites such as Twitter and Facebook to spread Ponzi misery globally.
“From January 2006 through approximately August 2007, Gagnon helped orchestrate a massive Ponzi scheme conducted by Gregory N. McKnight . . . and his company, Legisi Holdings, LLC,†the SEC said.
“Gagnon promoted Legisi but in doing so misled investors by claiming, among other things, that he had thoroughly researched McKnight and Legisi and had determined Legisi to be a legitimate and safe investment,†the SEC said.
Among other things, the SEC alleged that Gagnon “had no basis for the claims he made about McKnight and Legisi.
“Gagnon also failed to disclose to investors that he was to receive 50% of Legisi’s purported ‘profits’ under his agreement with McKnight,†the SEC said. “Gagnon received a net of approximately $3.8 million in Legisi investor funds from McKnight for his participation in the scheme.â€
In its complaint against Gagnon, the SEC alleged he moved from one fraud scheme to the next and even had promoted a scheme operated by the late Bryan K. Foster, a convicted felon. Some of the money from the alleged Legisi Ponzi scheme ended up in the control of Foster, who was running a purported investment program of his own.
The allegation that proceeds from one fraud scheme ended up as proceeds of a second scheme demonstrates the interconnectivity of schemes in the age of the Internet.
“Gagnon has been unrelenting in his efforts to raise money from the public through fraudulent, unregistered offerings,†the SEC said in May. “He remains a danger to the investing public.â€
See earlier story titled “Requiem For The Forum Pimps . . .” The story discusses some of the history of the Legisi Ponzi case.
A man has been indicted in Las Vegas for stealing nearly $1 million from investors by telling them they were participating in a “sports arbitrage” betting program and could not lose, federal prosecutors said.
An arrest warrant has been issued for Yul Na. He was charged in a criminal indictment with 30 counts of wire fraud and 29 counts of money laundering. Na faces up to 890 years in prison if convicted on all counts.
Prosecutors said Na used investors’ funds to do his own personal gambling in Las Vegas.
Some of the claims Na allegedly made were similar to claims made by the now-defunct Gold Nugget Invest (GNI) HYIP, which also purported to offer sports arbitrage. GNI tanked earlier this year.
“Na allegedly began marketing an investment opportunity to individuals involving the technique of ‘sports arbitrage’ for placing and accepting sports wagers,” prosecutors said. “Na claimed that investors would not lose money if they invested in this technique.
“Na defined the sports arbitrage program to the investors as ‘middling,’ because it involved the combination of betting both sides of the same event, as well as the use of specific timing for the placement of the sports wagers,” prosecutors continued. “[He] represented that opposing bets were placed at different times to capitalize on the movement in wagering lines by the sports books. Na represented that this placing of bets at different lines or payout ratios created an opportunity for profit.”
Part of the scheme featured a claim from Na that he had “an exclusive and binding agreement with Mandalay Bay Resort and Casino to accept large lay-off wagers” at a reduced rate of 18 percent, prosecutors said.
A layoff wager is a wager one bookmaker makes with another to balance bets and reduce risk.
Na told investors that, in order to minimize their risk, he had “contracted with an off-shore sports book to bet the other side of the same events for which he had accepted wagers from Mandalay Bay,” prosecutors said.
Because the offshore bookmaker purportedly charged a 10 percent premium on all wagers, Na “claimed that regardless of the outcome of an event, his sports arbitrage program would always achieve an overall net gain of 8 percent on all lay-off wagers accepted from the Mandalay Bay sports book,” prosecutors said.
Na’s claims were false, prosecutors said.
“[He]Â knew that he did not have in place any system to place bets for the purpose of ‘middling’ sports events and did not have any exclusive agreement with Mandalay Bay to accept lay-off wagers at a discount rate of 18 percent,” prosecutors said.
In furtherance of the scheme, Na advised investors to transfer their money electronically to Mandalay Bay’s bank account, instructing them to add “notations for the funds to be applied to[his]Â personal casino account,” prosecutors said.
“Na told investors that the funds had to be wired to his personal account because the casino could not accept wagers from any entity other than an individual,” prosecutors said.
Investors wired $962,350 to Na through this process, and he “withdrew the funds and used them to gamble at Mandalay Bay instead of using them for the sports betting investment program,” prosecutors said.
Gold Nugget Invest collapsed in January. It told members on its website that sports arbitrage was a “market phenomenon based on pure mathematics.”
The government of Belize issued a warning on GNI in November.
GNI’s critics were accused of suffering from “mental illness.” Detractors also were told they did not understand that the program, which advertised a return of 7.5 percent a week and later reduced the purported payout to 20 percent a month with a “No Risk Wager,” was “real.â€
After the collapse, GNI explained that its problems were caused in part by “catastrophic script failure(s)” and “potentially catastrophic hackers.”
BULLETIN: Beau Diamond, the Florida man accused of fleecing investors out of millions of dollars in a Forex Ponzi scheme, has been found guilty of all 18 counts against him.
Diamond, 32, was the operator of Diamond Ventures LLC of Sarasota. He was arrested by the Pinellas County Sheriff’s Office in September 2009, after a probe by the FBI and Internal Revenue Service. The CFTC filed civil charges in the case.
In an unusual but not unprecedented approach, a sitting U.S. Attorney actually argued elements of the criminal case against Diamond in the courtroom instead of simply supervising the government’s case.
TIRN operator David Merrick pleaded guilty in May to money laundering and conspiracy to commit wire fraud and securities fraud in the TIRN Ponzi scheme.
In the Evolution Marketing Group/FinanzasForex case, prosecutors said investigators had tied some of the money collected in the alleged scheme to the international narcotics trade. Court filings in the case paint a picture of an incredibly elaborate maze of companies and bank accounts set up to confuse both investors and law enforcement. At least 59 bank accounts, 294 bars of gold and nine luxury vehicles have been seized in the case. One of the cars was a 2008 Lamborghini Murcielago valued at more than $430,000.
The EMG/Finanzas allegations are explosive because they showcase the now-undeniable fact that people who promote programs such as HYIPs and autosurfs because such programs may pay “commissions†to recruit new members may be operating as fronts or conduits for international drug dealers and money-launderers.
Albritton also is tackling the epidemic of mortgage fraud in Florida, which has one of the highest foreclosure rates in the United States and is experiencing a rash of bank failures.
As filed by prosecutors and the CFTC, some of the allegations against Diamond read like discussions commonly seen on HYIP Ponzi forums.
Among other things, the CFTC alleged that Diamond urged members not to call authorities when the scheme was going belly-up because involving the government only would make matters worse.
The Diamond Ventures enterprise quit paying in December 2008, telling some members they had not received checks because it took longer for the U.S. Postal Service to deliver mail near the holidays, CFTC said.
Other members were told Diamond had a problem with Bank of America and was transferring his accounts to JP Morgan Chase, CFTC said.
By Jan. 7, 2009, Diamond was explaining to customers that a “serious situation†had emerged. On Jan 9, he told customers that “the funds have been lost†due to a downturn in the world economy and unprecedented volatility, CFTC said.
What Diamond did not tell customers was that he had lost huge sums in forex trades, had sent customers bogus account statements showing they were money to the good — and blew a tremendous sum on gambling, air travel, jewelry and hotel accommodations, CFTC said.
By Jan 22, 2009, CFTC said, Diamond was urging customers not to “initiate a federal investigation†because such an event would lead to a situation in which “no one will see a penny, and I most likely will be behind bars,†CFTC said.
BULLETIN: Yet-another bizarre paperwork attack on U.S. law enforcement has occurred.
A California man has been charged with filing “false liens” in Nevada against federal officials and employees of the SEC, the Secret Service, the IRS, four federal judges and staff members of the U.S. Attorney’s Office for the Southern District of California, federal prosecutors said.
Thanh Viet Jeremy Cao was indicted by a federal grand jury in Las Vegas on charges of filing 22 false liens ranging from $25 million to $300 million against the officials, prosecutors said.
He also sought $20 billion in fraudulent tax refunds, prosecutors charged.
Cao resides in Orange County, Calif. If convicted on all counts, he faces up to 223 years in prison and a fine of up to $5.75 million.
“Cao corruptly obstructed the administration of the federal tax laws, by, among other things, filing retaliatory false liens against IRS employees, filing and attempting to file with the IRS false Forms 1099-OID (Original Issue Discount) that claimed fictitious income tax withholdings, filing and attempting to file false tax returns that claim fraudulent refunds totaling approximately $20 billion, and preparing at least five false tax returns for third parties that claimed fraudulent income tax refunds totaling in excess of $1.1 million based upon fictitious income tax withholdings,” prosecutors said.
In June, Ronald James Davenport of Deer Park, Wash., was charged with filing false liens against federal officials in Washington state.
Davenport sought the spectacular sum of nearly $5.2 billion from each of the officials, including U.S. Attorney James McDevitt of the Eastern District of Washington, an assistant U.S. attorney, a court clerk and an IRS agent, according to court records.
Prosecutors described Davenport as a “tax defier.†Davenport has described himself in court filings as a “sovereign.â€
Some members of the alleged AdSurfDaily autosurf Ponzi scheme and other HYIP schemes have been linked to tax-deniers and the so-called “sovereign” movement.
See earlier story that references the Davenport action. (The story also provides some background on court filings and other actions by ASD members.)
In a civil case that preceded the criminal indictment against Davenport, Senior U.S. District Judge Justin L. Quackenbush ruled in May that the liens “were filed to retaliate against the officers for their good-faith efforts to enforce the tax laws against Mr. Davenport.â€
Quackenbush struck the liens, which were filed in the form of UCC Financing Statements with the Washington State Department of Licensing, according to records. The liens not only were fraudulent, but also contained “sensitive personal information†that violated privacy laws, the judge ruled.
Davenport also filed instruments dubbed “Notice[s] of Claim of Maritime Lien†with the Spokane County Auditor’s Office, according to records. Those, too, were struck.
The act of filing false liens or sending “demand” letters to officials or litigation opponents in a bid to hamstring civil and criminal prosecutions has been referred to as “paper terrorism” and “mailbox arbitration.”
EDITOR’S NOTE: It has become increasingly clear that regulators and the law-enforcement community are rallying around a common theme that web-based promoters are using discussion forums and social-networking sites in bids to sanitize HYIP Ponzi schemes by positioning them as attractive investment opportunities and even a thrilling form of gambling that pays commissions.
Today the Financial Industry Regulatory Authority (FINRA) launched an awareness campaign aimed at taking the lipstick off financial pigs and exposing them for the economy-killing, filthy hogs they are. FINRA did not mince words, calling the HYIP universe a “bizarre substratum of the Internet.”
Here, now, the story . . .
The Financial Industry Regulatory Authority (FINRA) has launched a public-awareness campaign and issued an investor alert on HYIP schemes that use social-media sites such as YouTube, Twitter, Facebook and online forums and “rating” sites to spread Ponzi misery globally.
“HYIPs are old-fashioned Ponzi schemes dressed up for a Web 2.0 world,” said John Gannon, FINRA’s senior vice president. “Some of these schemes encourage people to bring in new victims, while others entice investors to ‘ride the Ponzi’ by attempting to get in and get out before the scheme collapses.”
FINRA is supplementing its educational campaign with an advertising campaign.
“By using Google AdWords, we are hoping to reach anyone searching the Internet for HYIPs before they fall into the hands of con artists,” Gannon said.
FINRA’s campaign occurs against the backdrop of remarkable law-enforcement actions against the alleged Legisi Ponzi scheme pushed by Matt Gagnon of Mazu.com, the alleged Pathway To Prosperity (P2P) Ponzi scheme pushed on forums such as ASA Monitor, MoneyMakerGroup, Talk Gold and MyCashForums, and the collapse of an HYIP known as Genius Funds.
It also occurs against the backdrop of “prelaunch” buzz surrounding a mysterious program known as WebsiteTester.biz, which is spreading virally on the Internet through electronic news releases, references on promoters’ websites and daily updates on Twitter.
Promoters’ advertising is heavy for WebsiteTesterBiz, despite the fact the company’s domain name is registered behind a proxy, its purported parent company’s domain name is registered behind a proxy and there is a paucity of any verifiable information about either firm.
FINRA specifically referenced the alleged P2P Ponzi in its educational materials. It also provided a link to information published about the collapsed Genius Funds HYIP by the British Columbia Securities Commission. Alarmingly, FINRA said the Genius Funds’ fraud costs investors a staggering $400 million.
Federal prosecutors who filed criminal charges against P2P operator Nicholas Smirnow declared in May that “[a] large percentage, if not all, HYIPs, are Ponzi schemes.â€
In its resource material, FINRA is building on that theme.
“[V]irtually every HYIP we have seen bears hallmarks of fraud,” FINRA said. “We are issuing this alert to warn investors worldwide to stay away from HYIPs.”
P2P gathered more than $70 million. Legisi also gathered more than $70 million, according to court records.
Separately, the alleged AdSurfDaily autosurf Ponzi scheme gathered at least $80 million and perhaps $100 million or more, according to records. Autosurfing is a form of HYIP fraud. The U.S. Secret Service acted against ASD in August 2008.
In February 2010, an autosurf known as INetGlobal also came under investigation by the Secret Service. The SEC has acted against autosurfs known as 12DailyPro, PhoenixSurf and CEP, which gathered tens of millions of dollars combined — fueled by online promotions.
Citing FBI statistics, FINRA said “the number of new HYIP investigations during fiscal year 2009 increased more than 100 percent over fiscal year 2008.”
The regulator specifically warned about websites that “Rank the latest programs and provide details of ‘payout options.’” At the same time, it warned about sites that “Allow web designers to buy ready-made HYIP templates and set up an ‘instant’ HYIP.” Meanwhile, it warned about sites that “Blog, chat and ‘teach’ about HYIPs.”
“Some HYIP ‘investors’ proffer strategies for maximizing profits and avoiding losses — everything from videos showing how to ‘make massive profits’ in HYIPs and ‘build a winning HYIP portfolio’ to an eBook on how to ‘ride the Ponzi’ and get in and out before a scheme collapses,” FINRA said.
“Other HYIP forums discuss how to enter ‘test spends,’ how to identify new HYIPs to maximize one’s chances of being an early stage payee and even how to check when a HYIP’s domain name expires so you can guess how long it might pay returns before shutting down,” FINRA noted.
One of the tips offered by FINRA was to be on the look out for “typos and poor grammar” in sales pitches.
“This is often a tip-off that scammers are at work,” FINRA said.
FINRA said HYIP scammers often don’t share critical information with investors.
“HYIP operators cloak themselves in secrecy regarding who manages investor money, where the company is located or where to go to get additional information,” FINRA said.
Claims about being “offshore” also are made, FINRA said.
“Be aware that generally persons or firms offering securities to U.S. residents must be licensed by FINRA and registered with the SEC,” FINRA said.
The sky often is positioned as the limit in the HYIP universe, which often relies on “online payment systems” — some of which “have been tied in recent years to criminal activity, including money laundering, identity theft and other scams,” FINRA warned.
“High-yield investment programs (HYIPs) are unregistered investments created and touted by unlicensed individuals,” FINRA said. “Typically offered through slick (and sometimes not-so-slick) websites, HYIPs dangle the contradictory promises of safety coupled with high, unsustainable rates of return — 20, 30, 100 or more percent per day—through vague or murky trading strategies.”
Still promoting HYIP frauds on the Ponzi boards and elsewhere?
A Canadian citizen was arrested in British Columbia June 3 and now has been indicted in the United States on charges of wire fraud, mail fraud and money-laundering, authorities said.
Randi A. Bochinski, 46, of Kelowna, B.C., potentially faces decades in prison and huge fines if convicted.
A company known as Carlant Holdings Ltd. was “among other schemes” Bochinski promoted, federal prosecutors said.
The case was investigated by the U.S. Postal Inspection Service and the IRS Criminal Investigations Division, and will be prosecuted by the Economic Crimes Unit of U.S. Attorney Carmen M. Ortiz in Boston.
Bochinski “promoted a series of high-yield investment programs, whereby he promised investors significant returns on their investments within a short amount of time,” prosecutors said.
“[A]mong other schemes, Bochinski solicited investors to invest in” Carlant by stating “they would receive returns of 8-10 times their investment within 90 days,” prosecutors said, adding that neither the purported returns nor the purported payout timeline ever materialized.
Investors were told their money would remain in an escrow account, but Bochinski “transferred the investments out of the escrow account without notifying the investors,” prosecutors said.
“To date, only small portions of the initial investment have been returned to the investors, none of it was returned within 90 days, and the promised returns have been non-existent,” prosecutors said.
Bochinski “also promoted several other fraudulent investments to investors throughout the country and used funds invested by newer investors to make payments to previous investors,” prosecutors said.
We have received a few inquiries about a new surfing program called AdPayDaily (APD). Our initial take is that the program is a dressed-up version of AdSurfDaily, AdViewGlobal, BizAdSplash and AdGateWorld and that the operators are persuaded they’ve found a word combination and legal structure that will neutralize critics and law enforcement should concerns about the sale of unregistered securities and a Ponzi and pyramid scheme be raised.
AVG, BAS and AGW were positioned by former ASD members as offshore “clones” of ASD. APD, like ASD, appears to be operating in the domestic United States.
In our view, APD’s presentation raises numerous red flags. At a minimum, it is starting out as an MLM absurdity, if not a potential monstrosity. To get a flavor of the absurdity, imagine that Walmart was clueless enough to start an autosurf and provide a corporate-approved greeter who says, “Welcome to Walmart Pay Daily. We count all the money out of sight in the back room at midnight to determine how much you get, and keep 50 percent of the cash for ourselves. Don’t worry. We have excellent lawyers, and we’ve instructed the money-counter not to rip you off.”
That’s effectively what APD is saying.
Another red flag is the fax number listed on a document APD refers to on its website as “Ad Pay Daily’s Conference Registration Form For July 30th and 31st 2010.” The fax number is listed online as a number used by a Kansas real-estate flipping company billed as National Flips. Like APD, the National Flips domain registration is hidden behind a proxy, although the website says this: “To learn how to become a Hard Money Lender and earn 30+% per annum, call [a telephone number] . . .”
Meanwhile, the invitation for the APD conference that uses the National Flips fax number says this — not once, but twice: “Any person who does not provide photographic proof of identity will not be permitted to attend this event, so don’t forget your photo ID.”
Why a photo ID would be required to attend a sales pitch for an advertising company is left to the imagination. Undercover Secret Service agents have been known to attend such functions, however.
Virtually every autosurf that has come along has used strange approaches or applied language tweaks designed to skirt securities laws, disarm critics and sanitize the “opportunities” for prospects. Serial autosurf promoters are infamous for telling prospects that a particular surf has found the magic pill that makes everything legal. Historically they rely on the surf operators to provide a legal cover. When things go south, they claim no one can blame them for promoting the schemes. After all, they relied on the assertions of the operators that everything was above-board and legal. They have been disingenuous in the same way that Alfred E. Neuman, Mad magazine’s fictional mascot, was disingenuous.
“What, me worry?”
Worry, however, appears to be front-and-center at APD, which is preemptively denying in multiple places that it is a Ponzi scheme. This strikes us as a big red flag. There are others.
ASD, Surf’s Up Members Become APD Players
During its early research into APD, the PP Blog has determined that a number of members of the alleged AdSurfDaily autosurf Ponzi scheme have high positions in the APD venture. Some of the former ASD members hold more than one position in the top 80 positions in APD, including a former Surf’s Up Mod who appears to hold positions 76 and 77. It is possible that another Surf’s Up Mod also is high up in the pecking order of APD affiliates at No. 56.
The Blog determined the names of APD promoters by researching the method by which APD creates affiliate links. At least one ASD member who made himself part of the ASD Ponzi litigation by submitting pro se pleadings holds positions 9 and 10 in APD, according to the affiliate links.
Surf promoters are not fond of pointing out the pain of previous prosecutions of autosurfs and the time-consuming and expensive litigation involving both the government and court-appointed receivers that may occur when a surf collapses. It is not uncommon for millions of dollars to go missing in a surf.
ASD’s Andy Bowdoin has told members that he has spent more than $1 million in his legal defense. Nothing (other than GIGO passed along by promoters) suggests Bowdoin was a man of means prior to the Secret Service raid on ASD’s headquarters in August 2008. His money for his defense appears to have come from ASD members. On a side note, Bowdoin tried to persuade members in September 2009 that the million dollars he dropped to keep himself out of prison was for their benefit. At the same time, he claimed his fight with the government was inspired by a former Miss America.
ASD gathered at least $65.8 million. When the sum seized in the Golden Panda Ad Builder action, which is part of the ASD litigation, is factored in, the number surges to more than $80 million. That’s a big number, of course — one that shows why others want to start surfs and just tweak and tweak and tweak in search of the elusive magic pill.
APD’s website was registered on Nov. 18, 2008. That’s just one day before U.S. District Judge Rosemary Collyer ruled that ASD had not demonstrated it was a lawful business and not a Ponzi scheme. APD’s domain-registration date also coincides with a string of registration dates by the so-called ASD clones:
Aug. 18, 2008: Domain name for AdGateWorld registered. (About two weeks after the ASD raid by the U.S. Secret Service, which is working in concert with the IRS and federal prosecutors.)
Sept. 22, 2008: Domain name for AdViewGlobal registered. (AVG had very close ties to ASD.)
Nov. 7, 2008: Domain name for BizAdSplash registered. (ASD and Golden Panda figure Clarence Busby purportedly was both the “chief consultant” and owner of BAS.)
APD’s domain was registered just 11 days after the BAS domain was registered and only a couple of weeks before ASD declared that the now-defunct Surf’s Up forum was its official organ for ASD news. Surf’s Up became infamous for shilling for Bowdoin, fracturing the facts of the ASD wire-fraud and money-laundering case and misinforming members.
Each of the surfs in the bullet points above failed spectacularly. Each of them blamed members for their problems. Each of them had promoters and members in common with ASD. Each of them also offered various “bonuses” to join — something APD is doing at the moment.
