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Tag: John Morgan

  • Greater Dallas Firm Allegedly Sold Unregistered Securities, Pooh-Poohed Qualification Criteria — And Accepted Bitcoin Without Disclosing Risks

    “Far from verifying that purchasers of the company’s investments are accredited, [Balanced Energy President Kirk] Johnson, according to the order, said ‘we don’t do any verification’ and ‘we’re not the paperwork police,’” — Texas State Securities Board, March 11, 2014

    recommendedreading1Balanced Energy LLC, an oil-and-gas firm based in the Dallas-Fort Worth suburb of Southlake, is not an HYIP in the classic sense of the term. But the company’s experience could presage danger to HYIP scammers who seek to hitch their wagons to Bitcoin and cherry-pick Bitcoin users.

    In an emergency cease-and-desist order dated March 10, the Texas State Securities Board has accused Balanced Energy of accepting payment through Bitcoin without disclosing the risk of using the digital currency.

    “Balanced Energy will convert some or all of the payments it receives through Bitcoin to traditional currency and use the money to pay for its business operations,” the board said, referring to its order.

    “Balanced Energy has failed to disclose to investors the risks in using Bitcoin to purchase working interests in wells, according to the order,” the board continued. “The price of digital currency is subject to extreme swings, which could affect the amount of money available for business operations.”

    Regulators conceivably could attack HYIPs accepting Bitcoin under the same theory, adding another layer of risk to the already insidious “opportunities.”

    Balanced Energy also sold unregistered securities and solicited unaccredited investors, the board alleged.

    Again the experience of Balanced Energy could signal bad news for HYIP scammers.

    “Far from verifying that purchasers of the company’s investments are accredited, [Balanced Energy President Kirk] Johnson, according to the order, said ‘we don’t do any verification’ and ‘we’re not the paperwork police,’” the board alleged.

    From a statement by the board (italics added):

    The working interests are not registered with the State Securities Board and no permit has been granted for their sale in Texas. Rule 506 of Regulation D under the federal Securities Act of 1933 does allow an issuer to solicit and sell certain securities without first complying with state registration requires, but only to accredited investors. The Securities and Exchange Commission defines individual accredited investors as persons whose net worth is at least $1 million – excluding their primary residence – or who make at least $200,000 a year.

    The issuer of a such an offering must also take reasonable steps to verify an investor’s accredited status.

    HYIP schemes — always a den of criminality — increasingly may be trying to tie themselves to Bitcoin and appear even to be launching Bitcoin-themed reload scams targeting Bitcoin users who lost money at Mt. Gox. Soliciting investors regardless of their financial standing is one of the oldest tricks in the HYIP scammer’s playbook.

    Consumers could be left holding the bag if a scheme goes south.

    “Although digital currencies such as Bitcoin are often touted as a sophisticated, online alternative to traditional currencies, investors should realize these currencies are not tangible, they are not issued by a government, and are not currently subject to traditional regulation or monetary policy,” Texas Securities Commissioner John Morgan said last month.

    Here are just two of the points made in an Investor Warning by the Texas board last month (italics added)

    Digital currencies may provide promoters with a significant degree of anonymity.  Unscrupulous promoters may be able to exploit the anonymous nature of certain digital currencies to conceal their true identity and assist in the concealment and laundering of the proceeds of a fraudulent investment offering.

    Securities offerings that incorporate digital currencies may be highly dependent upon their growth and acceptance in retail and commercial marketplaces.  Also, any change in consumer confidence, user demographic or governmental regulation, or the introduction of new and competing forms of digital currencies, may negatively affect the liquidity or value of such securities offerings.

    Applied to the HYIP sphere, the message may be that you can get in with Bitcoin — but you might not be able to get out.

    And a scammer, of course, could simply relieve you of your Bitcoins by plying you with offers of dazzling returns — and then simply hightail it to the next scam to do it all over again.

  • Jury Convicts Florida Woman Who Ran Bizarre Ponzi And Fraud Scheme With Husband; Marian I. Morgan Guilty On All 22 Counts, Including Wire Fraud And Money-Laundering

    A 57-year-old Florida woman who ducked out of the United States with her husband after becoming implicated in a $28 million HYIP/prime-bank swindle has been found guilty of wire fraud, money-laundering, conspiracy, interstate/foreign transportation of stolen funds and tax crimes, U.S. Attorney Robert E. O’Neill of the Middle District of Florida announced.

    The investigation into the business affairs of John and Marian Morgan of Sarasota began as an SEC civil case and morphed into a 22-count criminal prosecution with bizarre international and domestic twists. The Morgans initially high-tailed it for Europe in a bid to duck the SEC and then ventured to the island nation of Sri Lanka, where they were jailed in 2009 for passing a “forged instrument,” expelled and returned to the United States.

    John Morgan pleaded guilty to criminal charges of wire fraud and conspiracy in June 2011. Marian Morgan, whom the Sarasota Herald Tribune reported two years ago had text-chatted with her gardener to make sure he was maintaining the couple’s Florida mansion while they were jailed in Sri Lanka, chose to go on trial.

    The Morgans were fraudsters at the helm of Morgan European Holdings, a Ponzi factory with a high-sounding name.

    “They promoted sham ‘high yield/ prime bank note’ investment programs through the company, promising investors that they would receive returns of 200-300% in three months and that their principal funds would be held safe in an escrow account in Denmark,” prosecutors said. “Evidence at trial, however, showed that the Morgans spent approximately $11 million of investor money on themselves soon after investors wired the funds to the escrow account. The Morgans purchased luxury automobiles, a waterfront mansion, and numerous luxury items with investor funds.”

    While jailed in Sri Lanka, Marian Morgan complained to a U.S. judge about “filthy” conditions and being housed alongside “murderers and heroin dealers,” according to court records.

    She told the same judge that the couple’s “biggest client”  in the United States hired them to lay the banking groundwork for $1.6 billion in infrastructure projects” in Sri Lanka and the Maldives and that the government of Sri Lanka had falsely accused them of presenting a “forged bank document.”

  • MYTH-SHATTERING CASE: Local Prosecutors Extradite Ronald Paul Shade From Thailand To Face Real-Estate Ponzi Charges; Shade Also Accused Of ‘Financial Elder Abuse’

    Ronald Paul Shade: Source: Interpol

    EDITOR’S NOTE: The PP Blog has covered a number of stories in which U.S. residents living overseas were extradited to the United States to face Ponzi charges. The case against Ronald Paul Shade is another one — and it’s one that demonstrates that an extradition can occur even if a defendant is not charged with a federal offense.

    Indeed, the warrant for Shade’s arrest was issued by a state-level Superior Court judge in California, according to Interpol. Shade’s case is instructive because it defeats some of the myths propagated on Ponzi boards such as MoneyMakerGroup, ASAMonitor, TalkGold and MyCashForums. Among the myths is that “offshore” equals “safe” for both investors and Ponzi perpetrators.

    Don’t tell that to Shade, now jailed in California after being extradited from Bangkok by local — as opposed to federal — prosecutors in California. His bail was set at $3.9 million.

    And don’t tell it to Jeffrey Lane Mowen, extradited from Panama to face federal Ponzi charges in Utah and later indicted in an alleged murder-for-hire plot. Here’s a quick side note on the Mowen case: If you like the recruitment fees paid by HYIP, autosurf and corrupt MLM or commission-based investment programs and make claims about the “due diligence” you’ve performed and try to impress prospects with your insider knowledge, your willful blindness may put you at great risk.

    Mowen had three prior convictions in Utah for securities fraud and two for theft, according to records. Despite Mowen’s criminal record and history as a fraudster, promoters still did business with him. Their faith drained millions of dollars from investors, the SEC said. Using language apt to cause unease in the Ponzi-promoting world, the SEC said at least one promoter “either knew or was reckless in not knowing that Mowen had multiple recent felony convictions involving crimes of dishonesty.”

    Indeed, the SEC said, the promoter learned in approximately late June 2007 that Mowen had been convicted of securities fraud . . . [but] “continued to solicit new investor funds for several months while failing to disclose Mowen’s criminal history to any of the Promoters or their investors.” Downstream promoters who entrusted the promoter “conducted virtually no due diligence in connection with [his] purported investment opportunities, but transferred investor money to [him] without any documentation or limitation on his use of the funds,” the SEC said.

    Perhaps the biggest myth exposed by the Ronald Paul Shade case is that going offshore takes state attorneys general and local prosecutors totally out of play. Longtime PP Blog readers will remember that the “offshore” pitch was pivotal in promotions for AdViewGlobal, AdGateWorld, MegaLido and other autosurfs that surfaced in the aftermath of the seizure of tens of millions of dollars by the U.S. Secret Service in the AdSurfDaily Ponzi scheme case. Some ads claimed that the “offshore” surfs neutralized state-level investigators.

    Shade, however, was brought back to the United States at the request of the San Bernardino County District Attorney’s Office in California to face state charges filed by local investigators.

    Still promoting investment-fraud schemes on the Ponzi boards and supplementing your pitches with myths about “safety” and how the overseas schemes are insulated from prosecution? Perhaps this story on the dramatic extradition of Colombian national David Murcia to the United States will help you snap out of your delusion that Ponzi and pyramid businesses cause no harm and represent “freedom” of choice. Perhaps this story on Robert Hodgins, who goes to bed at night knowing he’s wanted by Interpol, will help you shape your thinking.

    The cases of John and Marian Morgan, U.S. residents extradited from Sri Lanka, also are instructive.

    Finally, it’s worth noting that, after the United States charged Canadian national Nicholas Smirnow in May with operating an HYIP Ponzi scheme, a MyCashForums poster was quick to claim that “the USA has no extridition (sic) agreement ion (sic) place with the Phillipines (sic) . . . “

    The claim was false. Federal prosecutors said they are seeking Smirnow’s extradition. He was accused of operating a $70 million, international fraud known as Pathway to Prosperity (P2P).

    Here, now, the story of Ronald Paul Shade’s extradition . . .

    A California man living in Thailand was extradited to the United States to face charges he ripped off senior citizens in a real-estate Ponzi scheme, authorities said.

    Ronald Paul Shade, 39, formerly of Riverside, was arrested by local detectives Friday at Los Angeles International Airport. He was charged by investigators from the San Bernardino District Attorney’s Office with 29 felonies, including financial elder abuse, filing forged documents with the County Recorder’s Office and grand theft.

    San Bernardino County District Attorney Michael A. Ramos, who also is the president of the California District Attorneys’ Association, led the probe.

    Among the detectives involved in the Shade probe was Michael Leibrich, a senior investigator with the DA’s office.

    “From 2006 to 2008, Shade solicited money from numerous investors for his company, Orange Crest Realty,” investigators said. “Investors were promised a high rate of return for a short-term investment. Elderly victims later discovered that their life’s savings were being used to further a Ponzi scheme.”

    Shade had been living in Thailand for about two years, investigators said.

    In 2008, the California Department of Corporations issued a “desist and refrain” order against Shade and his company after alleging that they were selling unregistered securities and recruiting prospects  by urging them to “Get 18% APR Today” through the company’s “wonderful” investment.

    Shade and the company used a now-defunct website known as OCRFunding.com to pitch the purported program, authorities said.

    Among the misleading claims made to investors, according to authorities, were these:

    • That Orange Crest Realty was founded in 1993. (Authorities said Orange Crest Realty was not incorporated until June 2004.)
    • That Orange Crest Realty is a “registered investment advisor.” (Authorities said neither Shade nor the company and its associates were registered.)
    • That each investment was secured by actual title to specific existing real property. (Authorities said that “each investment was not secured by real property.”)
    • That a Deed of Trust And Assignment of Rents in the Property would be recorded with the Office of the County Assessor/Recorder and the investor would be provided with the recorded deed.  (Authorities said a deed promised an investor who sent in $50,000 was not recorded and the “investor never received a recorded deed.”)
    • That the investor would receive regular monthly interest payments. (Authorities said “payments ceased shortly after the investment was purchased.”)

    San Bernardino County investigators were assisted in the extradition by the Southwest Regional Fugitive Taskforce of the U.S. Marshals Service.

    The scheme, which allegedly gathered $14 million, also fleeced investors who responded to newspaper ads, investigators said.

  • EDITORIAL: Think ‘Offshore’ Means ‘Shelter’ From The SEC Or The FBI Or The IRS? Don’t Tell That To John And Marian Morgan — Or Jeffrey Lane Mowen

    You’ve seen the ads or heard the pitches trying to persuade you to put money in “offshore” ventures such as the AdViewGlobal, AdGateWorld and MegaLido autosurfs. You’ve been told they were safe. You’ve been told the people who run them are out of the reach of U.S. securities regulators and law-enforcement agencies.

    And you’ve been told your investment, which the surf purveyors call an “advertising” purchase, provides shelter from the FTC, the SEC and state attorneys general.

    Don’t tell John and Marian Morgan of Florida that “offshore” means “safe” and that “offshore” provides a blanket of protection from law enforcement.

    And don’t tell it to Jeffrey Lane Mowen, either.

    John and Marian Morgan were charged by the SEC in June with running a prime-bank scheme. They skipped the country rather than appear for a hearing in July, first going to Europe and later to Sri Lanka.

    Guess where they are now?

    John and Marian Morgan are in separate cells in a U.S. jail. In addition to the SEC’s civil charges, they now face criminal charges after being indicted by a federal grand jury. They did not outmaneuver the SEC. They did not outmaneuver the U.S. Marshals Service. They did not outmaneuver the FBI. They did not outmaneuver the IRS. They did not outmaneuver Interpol.

    Nor did John and Marian Morgan outmaneuver the government of Sri Lanka. They were arrested and jailed on the island, which is situated about 20 miles off the southern coast of India, in August. Sri Lanka deported them, and the United States brought them home earlier this month.

    morgansrilankaIt’s big news in Sarasota — and it should be big news among the autosurf or forex/HYIP schemers who are telling you the United States is powerless to act against “offshore” enterprises or people inclined to start a get-rich-quick program and then scurry offshore one step ahead of what surf promoters derisively describe as the “sheriff” or “Big Brother.”

    Do yourself a favor and read this story in the Sarasota Herald Tribune. Longtime opponents of the autosurf “industry” — in this upside-down world, the opponents are called “naysayers” and the Ponzi advocates are called “leaders” — will recognize the utter absurdity.

    Sadly, though, most of the “leaders” likely will be too busy “leading ” the troops to even bigger and better catastrophes to take the time to read it.

    Or they simply won’t care because leading people into catastrophes pays too well.

    If you missed it earlier, take the time to read this story on how the FBI brought home Jeffrey Lane Mowen from Panama to face charges in a Utah Ponzi case that now has morphed into murder-for-hire investigation.