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Tag: Kenneth D. Bell

  • DEVELOPING STORY: Zeek Figure Robert Craddock Accused Of Trademark Infringement And Engaging In ‘Shake-Down’ Bid Against MLM Affiliates

    EDITOR’S NOTE: The story below focuses mostly on a lawsuit filed against Zeek Rewards figure Robert Craddock by a Nevada company known as BTG180. A lawsuit filed against Craddock by a Wyoming company known as OfferHubb.net Inc. makes similar claims against Craddock.

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    breakingnews72DEVELOPING STORY: (4th Update 10:12 a.m. EDT Oct. 14 U.S.A.) Zeek Rewards figure Robert Craddock has been accused in a private lawsuit filed in Nevada federal court of trademark infringement and using a “shell corporation” to engage in a “shake-down” bid against affiliates of at least three MLM networks: Zeek, OfferHubb and BTG180.

    The alleged shell corporation is known as Fun Club USA Inc., according to a complaint filed Feb. 5, 2014.  It has “no employees,” was  “never capitalized” and created a condition under which Craddock was able to use funds directed to the corporation by MLMers as his personal funds, the plaintiffs contend.

    The plaintiffs in the case are listed as BTG180 LLC and Randall Jeffers. A second complaint against Craddock was filed on the same day, also in Nevada. Plaintiffs in that case are OfferHubb.net Inc. and David Flynn, who allege that Craddock “immediately” embarked on a web-based disparagement campaign against them after OfferHubb chose in July 2013 not to renew a contract with Craddock and FunClub USA.

    OfferHubb.net Inc. further accused Craddock of misrepresenting the company, breaching the OfferHubb Terms of Service by inducing affiliates to make side deals and accept kickbacks from affiliates and cross-selling other MLM opportunities in contravention of his agreement with OfferHubb.

    BTG180 is associated with a “program” known as BidsThatGive, which positioned itself as an opportunity to fight child poverty and the exploitation trades. An apparent prelaunch for BidsThatGive was conducted in July 2012, the month before the SEC moved against Zeek.

    Fun Club and Craddock are referenced in a blistering memo filed in the Zeek Ponzi- and pyramid-scheme case by the SEC on Dec. 17, 2012. In the memo, the SEC accused Craddock of encouraging Zeek affiliates “not to cooperate” with Kenneth D. Bell, the court appointed receiver. The SEC further alleged that Craddock was spreading misinformation about how the agency viewed its own case against Zeek and that Fun Club appeared to have been formed 11 days after the SEC emergency action against Zeek on Aug. 17, 2012.

    Craddock has not been charged by the SEC with wrongdoing.

    Despite the SEC’s December 2012 assertions against Craddock and Fun Club, however, BTG180 appears to have entered into a contract with Craddock and Fun Club on Aug. 12, 2013, just five days shy of the one-year anniversary of the SEC’s complaint against Zeek. In the August 2012 action, the agency accused Zeek of engaging in securities fraud, selling unregistered securities and operating a combined Ponzi and pyramid scheme that had gathered hundreds of millions of dollars in just shy of 20 months.

    BTG180, according to its own lawsuit against Craddock and Fun Club filed in February 2014, paid Craddock and the shell company $50,000 in advance of work Craddock had agreed to perform for BTG180.

    BTG180 says it wants back the $50,000 because Craddock failed to deliver. It also contends other actions by Craddock caused it to suffer damages.

    Part of Craddock’s duties, according to the complaint, was to “market the BTG180 network marketing opportunity to former affiliates of the Zeek Rewards network, which had provided products similar to those provided by BTG180.”

    Craddock did not perform the agreed-to work, according to the lawsuit. Instead, he attempted to “induce BTG180 to promote and incorporate into its product line a so-called checking account draft processing system known as BTM. Craddock is the founder of a corporation  known as BTM Check Draft Inc.”

    Without authorization from BTG180’s Jeffers, according to the complaint, Craddock pitched his BTM check system to the members of BTG180, amid false claims that it “had been approved by BTG180” and was in the company’s product stable.

    Other “confrontations” between Craddock and “BTG180 executives” ensued, and Craddock tried to “induce” BTG180 to “market other products for him,” according to the complaint.

    When Craddock “continued to defy Plaintiffs requests to stop these actions,” according to the complaint, “BTG stopped paying Craddock and Fun Club.”

    Under the terms of the contract, according to an exhibit in the case, Craddock and Fun Club were to receive $20,000 a month through BTG180, plus approved expenses, from Sept. 1, 2013 through Sept. 1, 2014.

    Craddock also was required not to reveal BTG180’s trade secrets and proprietary information, according to the exhibit.

    But at some point during contractually required Craddock visits to BTG180’s operations in Nevada, according to the complaint, BTG180 came to believe that “Craddock used a computer or several computers at BTG180’s offices to access and download and/or retain contact information of BTG180’s affiliates.”

    Craddock, according to the complaint, then sought to harm BTG180 by “disrupting and ruining its relationships with its affiliates.”

    As part of his plan to ruin BTG180, according to the complaint, Craddock established a website styled BTGlegal.com and engaged in trademark infringement while doing so. As a further part of this scheme, according to the complaint, Craddock used the website to paint Jeffers as dishonest and unethical, saying Jeffers and “other principals” of BTG180 had criminal records and a history of defrauding people.

    At the same time, according to the complaint, Craddock claimed that BTG180 had been “classified” a Ponzi scheme, that the company was to be “investigated,” that “reports” about BTG180 had been filed with the North Carolina Attorney General, that a Zeek-like action against BTG180 was planned by investigators and that “BTG180 affiliates could face criminal or other legal charges for signing up new affiliates.”

    Craddock, according to the complaint, issued an “edict” that “all BTG180 affiliates were under a cease and desist order to stop doing business with BTG180.”

    By December 2013, according to the complaint, Craddock was soliciting monthly donations of $25 each from BTG180 affiliates, saying the money would help them get back sums they had paid to BTG180. At the same time, according to the complaint, Craddock was encouraging members to contact a reporter at ABC News by email and to use a subject line that read, “They Took My Money and Used Kids to Lure me In.”

    In 2012, according to the BTG180 complaint, Craddock had solicted donations from Zeek members amid assertions he was protecting their legal interests. He eventually did the same thing to BTG180 and OfferHub participants, a “shake-down” bid targeted at MLMers, according to the complaint filed by BTG180.

    Craddock is accused in the complaint of cybersquatting, trademark infringement, wrongful use of a computer, misappropriation of trade secrets, wrongful interference with economic relations, breach of contract, unjust enrichment, defamation and hiding behind a shell company.

    The trademark-infringement claim may be particularly concerning to the MLM trade, given that Craddock has asserted he works as a copyright and trademark agent on behalf of MLM “programs.”

    On July 22, 2012, while purportedly working as a “consultant” for Zeek, Craddock filed a copyright- and trademark-infringement complaint against a HubPages website operated by Zeek critic K. Chang. K. Chang, who also posts on publications such as the PP Blog and BehindMLM.com, ultimately prevailed in the action brought by Craddock.

    Less than a month later, the SEC brought the Ponzi- and pyramid action against Zeek.

    Earlier this year, a website known as Changes Worldwide identified Craddock as its copyright agent. Filings by the SEC in June 2014 alleged that Faith Sloan, accused in April 2014 of securities fraud by the agency in its Ponzi- and pyramid complaint against the TelexFree “program,” sent more than $15,000 to an entity known as Changes Worldwide LLC after an asset freeze was opposed against Sloan in the TelexFree case.

    Sloan also was a Zeek affiliate. Whether proceeds that originated in Zeek and/or TelexFree made their way into Changes Worldwide is unclear.

    BehindMLM.com, recently the subject of a DMCA takedown notice by Sloan but now back online, reported yesterday that Changes Worldwide and a companion entity known as Changes Trading are having payment problems. As the PP Blog reported on Oct. 2, the email address Sloan used to file the complaint against BehindMLM.com was associated with a 2×2 matrix “program” known as “Diamond Holiday Feeder” that was making the HYIP rounds in 2010.

    Despite the fact Sloan accused BehindMLM.com of using on its website copyrighted material she owned, one of her 2010 promos for Diamond Holiday feeder used nearly three minutes of a soundtrack recorded in 2009 by The Black Eyed Peas to celebrate the 24th season of the Oprah Winfrey Show.

    MPB Today, a collapsed matrix cycler that led to racketeering charges in Florida against the “program” operator, is an example of a 2×2. Another example is Regenesis 2×2, which led to a U.S. Secret Service probe in Washington state in 2009. Some Zeekers are known to have promoted Regenesis 2×2.

    News broke last week that Craddock is listed on Amazon.com as the author of a book on Zeek Rewards. Marketing copy for the book asserts that the U.S. government should have modeled a “stimulus program” after Zeek, rather than shutting it down.

    In the current infringement actions against Craddock, the dockets of the case suggest Craddock no longer has paid counsel and is seeking to litigate pro se against the plaintiffs, contending that the cases should have been handled through binding arbitration, not actions in federal court.

    Craddock’s wife is a co-defendant, amid claims she and her husband used Fun Club USA to dupe MLMers who provided money to protect their legal interests.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

  • SEC Declines To Comment On New Claims Attributed To Zeek Figure Robert Craddock

    ponziglareUPDATED 8:30 P.M. EDT U.S.A. The SEC this afternoon declined to comment on a confounding claim attributed to Zeek Rewards figure Robert Craddock that Zeek took in $1 billion in 12 months and that the U.S. government should have modeled a “stimulus program” after Zeek instead of shutting it down in 2012.

    News that Craddock apparently had authored a book on Zeek and was making new claims first appeared on BehindMLM.com early today. In 2012, the SEC described Zeek as a massive Ponzi- and pyramid scheme and described Craddock as an obstructionist who was encouraging victims not to cooperate with Kenneth D. Bell, the court-appointed receiver in the agency’s civil case. Craddock has not been been charged with wrongdoing.

    Titled “The Zeek Phenomenon: Zero to $1 Billion in 12 Months,” the book in which Craddock is listed as the author is advertised on Amazon.com as a paperback “Out of Print” and with “Limited Availability.” Sept. 29 of this year is the asserted publication date.

    The office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina did not respond immediately to a request for comment on the claims. Tompkins’ office brought successful criminal prosecutions against Zeek figures Dawn Wright-Olivares (investment-fraud conspiracy and tax-fraud conspiracy) and Daniel Olivares (investment-fraud conspiracy) in late 2013.

    Wright-Olivares, 45, and Olivares, 31, her stepson,  pleaded guilty to the respective criminal charges against them in February 2014. Earlier, in December 2013, they settled SEC civil charges against them by agreeing to pay millions of dollars each, “the entirety of their ill-gotten gains plus prejudgment interest,” the SEC said at the time.

    In July 2014, Bell said in court filings that Wright-Olivares, Olivares and alleged Zeek operator Paul Burks had agreed to a consent judgment of $600 million “to be satisfied with substantially all of their assets.”

    Other court filings by Bell say a criminal investigation into Burks remains open. Bell also is special master in the criminal case.

    The Confounding Claims

    Craddock’s apparent claim that Zeek took in $1 billion in a year appears to be at odds with court filings by federal prosecutors in December 2013 that claim Zeek gathered a maximum sum of $897 million before collapsing in August 2012. If, as the claim suggests, Zeek took in $1 billion, there may exist a discrepancy of at least $103 million between the claim attributed to Craddock and the government’s account.

    How Craddock apparently arrived at the $1 billion figure was not immediately clear. Such a discrepancy, though, potentially could cause both the SEC and federal prosecutors to revisit the Zeek numbers. The assertions attributed to Craddock suggest that Zeek’s haul could have been much larger and occurred in the narrower time frame of 12 months, not the nearly 20 months cited by the SEC.

    In short, could an undisclosed, unrecovered pile of Zeek cash exist elsewhere?

    According to marketing copy on Amazon.com for the book attributed to Craddock, the government messed up big time by taking down Zeek.

    Here’s a snippet (italics added):

    In 2012, if the present Administration wanted to build a successful stimulus program, it should have used Zeek Rewards as a guide. This pioneering venture went from zero to one billion dollars in just 12 months, paid over 400 million dollars to more than 20,000 people earning an average of $20,000, created 10 people who made over one million dollars, and caused several thousand people to earn incomes in excess of one hundred thousand dollars. This unparalleled example would have been a phenomenal feat for our US Government during a period when our very financial existence was threatened.

    The words “Ponzi” and “pyramid” appear nowhere in the marketing copy on Amazon.com. Whether Zeek “paid”  is immaterial in the context of Ponzi schemes. So is the issue of how much it paid. Bernard Madoff “paid.” All successful Ponzi schemes “pay.” Zeek launched after the collapse of Madoff’s epic fraud, leading to questions about whether Zeek, its insiders and key promoters simply divorced themselves from reality.

    Moreover, Zeek launched after the collapse of AdSurfDaily, a Zeek-like scam that promoted a return of 1 percent a day. Zeek’s purported daily payout averaged 1.5 percent, a percentage grossly superior to Madoff and significantly better than ASD.

    In 2012, less than a month prior to the SEC’s Zeek action, Craddock temporarily succeeded in taking down a HubPages site operated by Zeek critic “K. Chang” by accusing him of copyright and trademark infringement.

    K. Chang ultimately prevailed, but the site experienced downtime.

    As the PP Blog reported at the time, Zeek appeared not to own the trademarks Craddock complained about, purportedly with the authority of North Carolina-based Zeek operator Rex Venture Group. Rather, the trademarks were listed in the name of Ebon Research Systems LLC, a Florida business.

    A business known as Ebon Research Systems Publishing LLC is listed as Craddock’s publisher for the new book on Zeek, according to the Amazon.com listing.

    Florida records suggest that Ebon Research Systems Publishing is managed by Dr. Florence Alexander, the same person behind Ebon Research Systems LLC when the HubPages flap played out more than two years ago.

    The PP Blog spoke with Alexander in 2012. She said she “certainly” knew of Zeek, but said she had “no knowledge” of any trademark or copyright complaint filed at HubPages against K. Chang.

    Although Craddock claimed to be a Zeek “consultant” while filing the claim against K. Chang prior to the SEC action in 2012, Zeek itself did not list him as one after the action, according to court records maintained by the ASD Updates Blog. (See Zeek filing from September 2012 here.)

     

  • BULLETIN: Zeek Receiver Issues More Than 90,000 Checks

    breakingnews72BULLETIN: Kenneth D. Bell, the court-appointed receiver in the Zeek Rewards pyramid- and Ponzi-scheme case, says he has issued and mailed 90,297 checks “to Affiliates that hold Allowed Claims as their first interim, partial distribution.”

    The SEC has decribed Zeek as a fraud scheme that gathered hundreds of millions of dollars.

    The first round of checks are described as an “interim, partial distribution,” and total about $134.2 million, Bell said in a statement dated today on the receivership website.

    About $23 million of the $134.2 million is required by law to be withheld for tax purposes, Bell said.

    From the receiver’s statement (italics/bolding added by PP Blog):

    This first interim, partial distribution represents, with certain limited exceptions, an amount equal to 40% of the Allowed Claims of all Affiliates holding Allowed Claims as of August 15, 2014, using the “rising tide” method of calculation previously approved by the Court.

    Affiliates that are being mailed checks on account of the first interim, partial distribution have each filed a claim, had such claim determined by the Receivership Team, accepted that claim determination, and provided the required release and OFAC Certification to the Receivership team. These items are all required by the Court in order to have an Allowed Claim. If you met these criteria as of August 15, 2014, and your first interim, partial distribution is in excess of $100, you will receive a distribution check via mail.

    If, as of August 15, 2014, you had not received a claim determination, had not accepted a claim determination, or had not provided the required release and OFAC Certification to the Receivership team, you did not hold an Allowed Claim on August 15, 2014, and were not eligible to receive a first interim, partial distribution. Additionally, if you held an Allowed Claim, but you would have received a distribution of less than $100, no first interim, partial distribution will be paid to you. You will be paid on account of your Allowed Claim in the future.

    Additionally, approximately 70,000 Affiliates hold claims that will be allowed against the Receivership Estate if and when any of those Affiliates provide the required release and OFAC Certification to the Receivership team. All of these 70,000 Affiliates (or any additional Affiliates that receive and accept their claim determination prior to December 31, 2014) will be issued their first interim, partial distribution on January 30, 2015 if that Affiliate provides the required release and OFAC Certification to the Receivership Team by December 31, 2014. Affiliates whose claims become Allowed Claims after December 31, 2014 will receive their first interim, partial distribution on a subsequent distribution date.

    We have 7,000 more claims to review. If you have not received your claim determination, please be patient; it is coming shortly. If you have already received a claim determination, or when you do, I encourage you to respond as soon as you are able and provide all the required information so that we can mail you your first interim, partial distribution on the next distribution date on which you are eligible.

    If you have questions regarding whether your claim determination has been issued, the general status of your claim or to provide the required release and OFAC certification, please log into the following website: https://cert.gardencitygroup.com/zrwdet/fs/home.

  • URGENT >> BULLETIN >> MOVING: SEC Charges eAdGear, Alleging $129 Million Pyramid- And Ponzi Scheme

    breakingnews72URGENT >> BULLETIN >> MOVING: (12th Update 1:28 p.m. EDT U.S.A.) The SEC has gone to federal court in San Francisco, alleging that the eAdGear “program” was a pyramid- and Ponzi scheme that gathered $129 million. The action against eAdGear is the second major pyramid-scheme prosecution announced by the SEC this week.

    The SEC has identified eAdGear’s operators as Charles S. Wang, 52, and Qian Cathy Zhang, 52, of Warren, N.J., and Francis Y. Yuen, 53, of Dublin, Calif. They have been charged with fraud and an asset freeze has been imposed, the SEC said.

    Zhang is Wang’s wife, the SEC said, alleging the couple was part of a “ruse” that positioned Zhang as an ordinary “member” who “became hugely successful.”

    “During sworn testimony before the staff of the Commission in the investigation preceding the filing of this case, Zhang asserted her privilege against self-incrimination rather than answer questions about her role at eAdGear,” the SEC said in its complaint.

    The eAdGear “opportunity” itself, according to the SEC, was a “fiction.”

    “eAdGear and its operators falsely claimed that they were running a profitable Internet marketing company when in reality, they were operating a Ponzi and pyramid scheme that preyed on Chinese communities and caused investors to lose millions of dollars,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office.

    Though not named a defendant in the eAdGear complaint, Zeek Rewards figure and alleged Zeek “winner” T. LeMont Silver may find himself at the center of yet another Ponzi- and pyramid storm. That’s because eAdGear once tried to sue ZeekRewards.com, amid claims of cyberpiracy, unfair competition and benefiting from copyright infringement.

    And it’s also because Silver’s name surfaced in fraud lawsuits between and among eAdGear Inc., GoFunPlaces Inc., Randal Williams and JubiMax LLC.

    From an SEC statement on the eAdGear prosecution (italics added):

    . . . even though eAdGear claimed to be a successful Internet marketing company, nearly all of its revenue was generated by investors, not its products or services.

    The complaint alleges that eAdGear’s operators used money from new investors to pay earlier investors as well as to repay a personal loan and purchase million-dollar homes for themselves. It alleges the operators concealed and perpetuated the scheme by displaying sham websites on eAdGear’s own site to make it appear as if it had real, paying customers and manipulated revenue distributions to investors to appear profitable.

    eAdGear began operating in December 2010 and grew to include 66,000 accounts held by “tens of thousands of investors” mostly of Chinese descent, the SEC said.

    Corporate defendants include eAdGear Inc of Pleasanton, Calif., and eAdGear Holdings Limited of Hong Kong. The “program” sold “so-called ‘memberships’ or ‘business packages,’” the SEC said.

    From the SEC complaint (italics added):

    Defendants market eAdGear as a successful internet marketing and advertising company that uses search engine optimization (“SEO”) technology they claimed to have developed to help paying clients increase the page rankings of their websites on various search engines. Defendants claim to share 70% of the revenue generated daily by this business with investors.

    In reality, eAdGear’s purported business is a ruse. Instead, well over 99% of the funds eAdGear has received have come from its investors, and eAdGear simply uses new investor money to make payments to — or to credit the accounts of — existing members in classic Ponzi scheme fashion.

    Wang, Yuen, and Zhang have perpetrated this fraud by, among other things: installing Wang as chief executive officer, and Yuen as chief financial officer and chief operating officer of eAdGear, Inc., while portraying Wang’s wife, Zhang, as an ordinary “member” who became hugely successful; creating a fiction of a business that has paying customers when it does not; and manipulating daily revenue distributions to credit investors’ accounts, to make it appear as though eAdGear is operating profitably.

    Earlier this week, the SEC announced charges against a “program” known as Zhunrize, describing it as pyramid scheme that had gathered $105 million.

    Zhunrize presented itself as a “Plan B,” a core fraud signature in the HYIP world. T. LeMont Silver, among others, is a “Plan B” pitchman.

    Zeek receiver Kenneth D. Bell has said that MLM may have a problem with “serial” promoters of fraud schemes.

  • ANOTHER MLM PR DISASTER: Zhunrize, Alleged Worldwide Pyramid Scheme That Gathered $105 Million, Was Presented As A ‘Plan B’

    From a Zhunrize slide as viewed through Open Office. Red highlight by PP Blog.
    From a Zhunrize slide as viewed through Open Office. Red highlight by PP Blog.

    2ND UPDATE 5:25 P.M. EDT U.S.A. Purported “Plans B” are one of the core signatures of the the MLM HYIP sphere, which is known for incredibly toxic global frauds such as Zeek Rewards and AdSurfDaily. In 2009, an ASD reload scam known as AdViewGlobal was positioned as a “Plan B.”

    The individual schemes of Zeek and ASD took in a combined sum of at least $969 million. AdViewGlobal appears to have disappeared with millions of dollars — after targeting ASD victims for a second time.

    In 2012, Zeek and ASD figure Keith Laggos pushed the Lyoness “program” as a “Plan B.”

    Laggos’ listeners were told that, if things went south at Zeek, Lyoness would be an excellent hedge through which $10,000 directed at the scheme might return “a quarter-million dollars.”

    Lyoness is now under investigation in Australia, amid pyramid-scheme allegations.

    “Plan B” also is known as “Don’t put all your eggs in one basket.” HYIP prospects often are told to join more than one scheme or to quickly get in another if something goes wrong with the current scheme, sometimes known as “Plan A.”

    Plan B schemes typically are a means by which prospects are lured into a continuous cycle of MLM frauds. Zeek and OneX promoter T. LeMont Silver later went on to “Plan B” schemes such as GoFunPlaces/GoFunRewards and JubiMax/JubiRev. Those schemes cratered or encountered difficulties. Silver now is pushing the exceptionally murky BitClub Network “opportunity” as a Plan B.

    MLM HYIP schemes may switch forms. They may appear as straight-line investment-fraud schemes such as Legisi, which collapsed after an SEC intervention in 2008. ASD was an “autosurf advertising” scheme that collapsed in 2008 after an intervention by the U.S. Secret Service. Zeek, a purported “penny auction” company, collapsed in 2012 after an SEC intervention.

    WCM777, meanwhile, collapsed in March 2014 after interventions by the SEC and state-level securities regulators. WCM777 purportedly was a “cloud computing” company  that allegedly gathered more than $80 million. In April 2014, another MLM HYIP scheme — TelexFree — collapsed. The SEC and the Massachusetts Securities Division said it was conducting a billion-dollar, cross-border securities swindle. TelexFree positioned itself as a “VOIP” company that also was in the apps, cellphone and credit-repair businesses.

    The trend now appears to be to wrap traditional products such as cosmetics and diet shakes into murky and confusing schemes that pay recruitment commissions. No specific payout may be mentioned.

    The SEC yesterday announced fraud charges against the Zhunrize MLM scheme, accusing it of selling unregistered securities and operating a massive international pyramid scheme.

    The phrase “Plan B” even appears in promo material for Zhunrize. The material also references Plan A. Based on this information, it appears as though Zhunrize was touting itself as both a “Plan A” and “Plan B” scheme.

    “Do you know anyone who would like to develop a plan ‘A’ Or plan ‘B’?” the Zhunrize promo queries.

    In the promo, Zhunrize prospects are told they can earn “thousands each month by helping others to save time, gas, money and avoiding crowds.”

    One of the problems in this bizarre sphere of MLM is that tainted money from earlier scams may flow into emerging scams, in effect making banks and payment vendors warehouses for a continuous stream of fraud proceeds that flow between and among pyramid schemes and Ponzi schemes.

    Like Lyoness, Zhunrize is involved in the shopping-portal business. Like Zeek and other “programs,” Zhunrize also was positioned as a “profit-sharing” or “revenue-sharing” opportunity.

    In court filings, Zeek receiver Kenneth D. Bell has suggested that MLM may have a problem with “serial” participants in fraud schemes who tout purported “revenue-sharing” plans.

    Case files associated with various recent HYIP/revenue-sharing schemes put losses in the billions of dollars. Because some promoters simply move from one scam to another, they are eviscerating wealth on a global scale.

    If someone pitches you on an MLM “Plan B,” run like the wind.

  • DEVELOPING STORY: Zeek Receiver Seeks Temporary Restraining Order ‘Necessary To Prevent Further Dissipation And Waste Of The Assets At Issue’

    DEVELOPING STORY: (Updated 9:44 a.m. EDT Sept 3, U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case has asked a federal judge for a Temporary Restraining Order he says is necessary to prevent “further dissipation and waste” of certain assets.

    Receiver Kenneth D. Bell asked that the motion be filed under seal. The Zeek-related assets Bell believes could shrink were not specified in a public filing

    “The underlying motion and memorandum contain sensitive information regarding Receivership Property,” Bell advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina.

    Neither the SEC nor Zeek operator Paul R. Burks objected to the request for the motion to be filed under seal.

    From the public portion of a filing by the receiver today (italics added):

    The underlying motion and memorandum contain sensitive information regarding Receivership Property. As explained in detail in the memorandum, sealing the Receiver’s motion and memorandum is necessary to prevent further dissipation and waste of the assets at issue. The Receiver seeks to have the underlying motion sealed only temporarily until the Court can consider and rule on the motion.

    When Mullen would rule on the motion was not immediately clear. The public portion of Bell’s pleading today is styled, “Receiver’s Motion to Seal Ex Parte Motion for Temporary Restraining Order Enforcing the Court’s Asset Freeze.”

    The sealed information contains three exhibits, according to the docket of the case.

    Burks and Zeek figures Dawn Wright-Olivares and Daniel Olivares agreed to a $600 million consent judgment “to be satisfied with substantially all of their assets,” according to a filing by Bell in July.

    The receiver’s motion for the TRO and to file under seal appears on the docket of the SEC case originally filed against Zeek and Burks in August 2012. The agency sued Wright-Olivares and Olivares in a separate case in December 2013.

    Both Wright-Olivares and Olivares have pleaded guilty to criminal charges.

    NOTE: Our thanks to the ASD Updates Blog.

  • ZEEK RECEIVER: ‘No Comment’ On BitClub Network Story

    Zeek receiver Kenneth D. Bell had “no comment” this morning on an Aug. 30, PP Blog story that reported Zeek figure T. LeMont Silver now was pushing a murky “program” called “BitClub Network.”

    Bell has raised concerns that Silver is a serial promoter of Zeek-like schemes to defraud.

    As the PP Blog noted yesterday, Silver also has been linked to a “program” known as “Gold Crowdfunding” that has links to the OneX scam that put AdSurfDaily Ponzi schemer Andy Bowdoin in jail in 2012. Like Bowdoin, Silver pitched OneX.

    OneX used an image of a bomb in its logo.

    OneX logo.
    OneX logo.

    Bell is suing Silver for the return of his alleged gains in Zeek, saying they came from Zeek victims. The SEC and federal prosecutors in the Western District of North Carolina have described Zeek as a Ponzi- and pyramid scheme that collected hundreds of millions of dollars in less than two years of operation.

    The SEC shut down Zeek in August 2012.

    Zeek figure Dawn Wright-Olivares pleaded guilty to criminal charges of investment-fraud conspiracy and tax-fraud conspiracy in February 2014. Her stepson, former Zeek programmer Daniel Olivares, pleaded guilty to a charge of investment-fraud conspiracy.

    The Consumer Financial Protection Bureau (CFPB) issued a warning on Bitcoin-themed scams on Aug. 11, 2014. Silver’s promotions for BitClub Network began to appear on the Internet about three weeks later.

    CFPB did not immediately respond to a request for comment on BitClub Network, which Silver has described as a “mining” venture.

    BitClub Network purportedly pays out a daily dividend for 1,000 days and has three “mining pools” with tiered buy-in rates: $500, $1,000 and $2,000. Early birds — described as “Leaders” — are being encouraged to send in $3,599 to qualify for a “Founder’s” position.

    Much is murky about BitClub Network.

    Also see Sept. 1 report on “Gold Crowdfunding” by BehindMLM.com.

  • In Face Of Clawback Action And Warnings On Bitcoin Scams, Zeek Figure And Florida ‘ExPat’ T. LeMont Silver Offers ‘BitClubNetwork’ Mark Bonus Of More Than 3 Times What He Pays His Dominican Maid — And Uses Address In Money-Laundering Haven

    “The Florida Office of Financial Regulation (OFR) warns consumers of the potential risks associated with purchasing, investing in, and exchanging virtual currencies, such as bitcoin. Members of the U.S. Congress, federal and state regulatory authorities, are continuing to question a way forward with respect to these diverse and decentralized payment mechanisms. Mt. Gox, an international Bitcoin exchange, filed for bankruptcy that resulted in losses in excess of $400 million and put a spotlight on risks surrounding virtual currencies.” — Florida Office of Financial Regulation, March 18, 2014.

    “The Court may wish to take judicial notice of the many online videos in which one Defendant, T. Le Mont Silver, has appeared regarding his moving his family to the Dominican Republic . . . and promoting several ‘revenue sharing’ schemes in addition to Zeek.” — Kenneth D. Bell, Zeek Rewards receiver, July 30, 2014.

    “Today the Consumer Financial Protection Bureau (CFPB) issued a consumer advisory warning consumers about the risks of virtual currencies such as Bitcoin. The CFPB advises consumers to be aware of potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threat of hacking and scams, and that companies may not offer help or refunds for lost or stolen funds. The CFPB also announced that consumers who encounter a problem with a virtual currency product or service can now submit a complaint with the Bureau.” — Consumer Financial Protection Bureau, Aug. 11, 2014.

    Using a launching rocket in a promo, "BitClub Network" is set to launch Sept. 1, the 75th anniversary of the beginning of World War II.
    Using a rocket in a promo, “BitClub Network” is set to launch for “Founders” on Sept. 1, the 75th anniversary of the beginning of World War II. Will more financial terror rain down from the skies above HYIP Ponzi Land?

    4th UPDATE 3:27 P.M. EDT U.S.A. Florida “ExPat” T. LeMont Silver, a target of a huge clawback lawsuit flowing from the 2012 Zeek Rewards Ponzi- and pyramid case and a veteran HYIP “revenue-sharing” huckster, may be a bit slow on the uptake.

    Florida — his own state — issued a caution in March 2014, warning that there are risks associated with bitcoin and that virtual currencies have been known to have “[l]inks to criminal activity.”

    In July, the court-appointed receiver suing Silver for the return of his alleged winnings in the Zeek scam alleged that Silver was in a group of “serial” pitchmen of “revenue sharing” schemes — in this context, Zeek-like schemes to defraud.

    Receiver Kenneth D. Bell asked a federal judge to take “judicial notice” of certain Silver promotional videos.

    Silver’s Zeek gains tipped the scale toward $2 million and came from Zeek victims, Bell has alleged.

    On Aug. 11, the Consumer Financial Protection Bureau (CFPB) issued a warning on bitcoin-themed scams.

    “You may also have heard that some people buy them as speculative investments or that you can ‘mine’ them with your computer,” CFPB said in its warning.

    Sometime after 6 p.m. yesterday, Silver sent out an email promising recipients an “enormous opportunity in Bitcoin Mining” through a “program” known as “BitClub Network,” the PP Blog has learned.

    “BitClub Network” prospects are asked to invest in “mining pools,” BehindMLM.com is reporting. (Link below.)

    “There are already hundreds of companies that do a share of revenue with their traders in this space,” the Silver email read in part.

    So, another “revenue-sharing” scheme from Silver — this in the face of highly public warnings about bitcoin-themed scams, HYIP scams and even a de facto warning from the Zeek receiver that something untoward was occurring.

    “Even if you have no list or never have a recruit, you can leverage this system to earn EVERY DAY for a period of 1,000 days!” the Silver email bleats. “As you grow your units … each subsequent unit also earns for 1,000 days.”

    No part of the email touches on any of the warnings issued by regulators about the volatility of bitcoin values and scams that crop up that seek to attach themselves to bitcoin.

    Here is how the Florida OFR spelled out the risks just five months ago (italics added):

    • No insurance guarantee. Virtual currency is not guaranteed with protection, while funds held by U.S. banks and credit unions are insured.
    • Unpredictability. The value of virtual currencies can rise and fall in a short time, and these values are driven by the marketplace. Those who deal in virtual currencies should realize the risks, which can result in substantial losses.
    • Security. Some virtual currency exchanges that offer to store the consumers’ funds in virtual wallets have failed to protect them, resulting in consumer losses due to hacking of these virtual wallets.
    • Links to criminal activity. Criminals have taken advantage of the anonymity provided by virtual currencies, and have used them for money laundering and other crimes. If an exchange is shut down, consumers may not be able to access their funds.
    • Regulation. Oversight of virtual currencies has not been thoroughly developed, and thus, consumers lack many of the protections they have come to expect within the financial services industry.
    • Tax obligations. To view the Internal Revenue Service (IRS) guidance on the tax implications concerning virtual currencies, visit http://www.irs.gov/pub/irs-drop/n-14-21.pdf.

    Silver has been featured in videos bragging about how good his life has been in the Dominican Republic, which recently has been rocked by the alleged TelexFree Ponzi- and pyramid scheme that has affected hundreds of thousands of people across the globe.

    The veteran HYIP huckster appears to have relocated to the Dominican Republic from Florida after the collapse of the Zeek scheme and after at least two other “revenue-sharing programs” he promoted after the collapse of Zeek also cratered.

    One way to view these outrageous “programs” is as a war against people of limited means or people already living in poverty, dressed up as in invitation to escape their own misery. Like the rockets of war rain down on their human targets, HYIP offers fairly rain down from the skies of the Internet, putting vast numbers of people at risk.

    Whether Silver remains in the Dominican Republic is unclear. His email for the “BitClub Network” appears to have used an address in Seychelles, an Indian Ocean archipelago nation associated with money-laundering. Why a Florida man who apparently did at least a pass-through in the Dominican Republic would be using a Seychelles address was unclear.

    Agnes Jouaneau, a purported “director” of Inter Reef Ltd., a purported U.K. business associated with the Profitable Sunrise HYIP swindle last year, purportedly operated out of Seychelles. (Also see this disturbing 2010 story at Stuff.co.nz that references the name of Jouaneau before Profitable Sunrise emerged and raises questions about the laundering of money, perhaps even for terrorism.)

    Incredibly and disgustingly, Silver’s pitch for “BitClub Network” promises “[$]600 to one person that goes through this entire email” and puts into action “everything” he shares in a video pitch.

    Silver did not say whether he intended to pay his mark with proceeds from Zeek or any of his other scams.

    The $600 sum apparently earmarked for his “BitClub Network” mark is more than three times the monthly wage Silver said in a January video he paid his Dominican maid.

    Also see “BitClub Network” review at BehindMLM.com.

    A snippet from BehindMLM.com (italics added):

    At the very least, it’s a certainty that BitClub Network are accepting investments from affiliates on the expectation of a >100% ROI. Whether or not the scheme has registered itself with the SEC is unclear. Given the offshore domain registration with a Panama-based provider, I’d say it’s unlikely.

    BitClub Network is an offshore scheme seeking to fleece investors under the guise of “let us explain Bitcoin mining to you”, with the mining itself (if any actually exists) having little to nothing to do with the flow of funds within the scheme.

    Whilst the owner(s) of BitClub Network are for now are sticking to the shadows, there’s evidence that factions of the Zeek Rewards Ponzi scheme might be behind it.

    “Bitclub Network” and its companion rocket apparently are set to launch for “Founders” on Sept. 1.

    If it does, it will launch on the 75th anniversary of the beginning of World War II and all the hellfire that followed. On Sept. 1, 1939, Hitler invaded Poland.

    NOTE: Our thanks to the ASD Updates Blog for providing the July 30 filing by the Zeek receiver.

  • Illinois Issued Order Against Profitable Sunrise Figure Nanci Jo Frazer In March 2014

    From a Profitable Sunrise promo.
    From a Profitable Sunrise promo.

    Saying it had “credible evidence” of fraud, the state of Illinois issued a temporary prohibition order in March 2014 against Profitable Sunrise figure Nanci Jo Frazer. The order by the Securities Department of Secretary of State Jesse White also applied to purported Profitable Sunrise operator “Roman Novak,” as well as Profitable Sunrise itself and Inter Reef Ltd.

    Inter Reef was a U.K. entity through which Profitable Sunrise apparently was operating. It was not immediately clear whether the temporary order has become permanent or whether Frazer or “Novak” contested it.

    In an emergency action last year against Profitable Sunrise, the SEC described Profitable Sunrise as a ghost enterprise that “operates for the benefit of unknown individuals and/or organizations doing businesses through companies formed in the Czech Republic and using bank accounts in the Czech Republic, Hungary, Latvia, and China, among other places.”

    Unlike state-level Profitable Sunrise actions in 2013, the March 2014 Illinois action alleged that Profitable Sunrise engaged in wrongdoing through Dec. 31, 2013. Various state regulators filed enforcement actions against Profitable Sunrise in early 2013. A 2013 action in Illinois did not name “Roman Novak” and Frazer respondents.

    The March 2014 Illinois action accused Frazer and “Roman Novak” of fraud and selling unregistered securities while operating as unauthorized salespeople, dealers or brokers. In January 2013, according to the order, an Illinois resident in pursuit of a payout from Profitable Sunrise wired $15,000 to a “Bank in Czechoslovakia” in two separate transactions.

    Frazer was accused of fraud by the state of Ohio in July 2013.

    Her husband, David Frazer, is listed on the website of the court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case as a Zeek “winner” of a sum in excess of $1,000.  Zeek, the SEC said, was a fraud that gathered hundreds of millions of dollars.

    Zeek receiver Kenneth D. Bell has raised the prospect that the MLM HYIP sphere may have serial participants in fraud schemes.

    TelexFree promoter Faith Sloan — currently accused of securities fraud by the SEC — is a former Profitable Sunrise and Zeek promoter. Sloan was banned by Illinois from selling securities in June 2014.

    Zeek said it paid an average of 1.5 percent a day, according to the SEC. Profitable Sunrise purported to pay up to 2.7 percent a day.

     

  • PONZITRACKER.COM: New Ponzi Scheme Uncovered Every 118 Hours; Alleged TelexFree Fraud Heads 2014 List

    recommendedreading1If you’re a student or educator or employee or boss with a traditional M-F schedule, chances are you’ll be hearing about a new Ponzi scheme before the final bell rings or the final whistle blows on Friday.

    During the first six months of 2014, a Ponzi scheme was discovered every 4.9 days (or every 118 hours), according to an eye-popping report today by Jordan Maglich at PonziTracker.com.

    From PonziTracker (italics added):

    . . . Ponzi schemes remain rampant in the United States and worldwide despite mounting government and regulatory efforts. Indeed, the 37 schemes discovered during the first half of 2014 suggest that at least 74 schemes will be discovered in 2014 — approximately 10% more than the 67 schemes unearthed in 2013.

    The largest alleged scheme discovered in 2014 so far is TelexFree, PonziTracker reports.

    Read the report on PonziTracker, which also notes Ponzi prison sentences handed down this year are on pace to top last year’s cumulative sentencing total.

    The PP Blog’s research shows that MLM HYIP Ponzi schemes that spread through commission-based salespeople are the most insidious because they create victims in numbers America’s largest sports stadiums cannot accommodate.

    Both Zeek Rewards (2012) and TelexFree (2014) may have created hundreds of thousands of victims each. The combined schemes could fill the Rose Bowl to capacity with victims 15+ times over and have led to requests by prosecutors or receivers to ask courts to approve special victim-notification procedures because of the overwhelming numbers.

    Zeek receiver and special master Kenneth D. Bell has compared Zeek to Enron and the Bernard Madoff and Allen Stanford Ponzi schemes.

    Just this week, prosecutors in the TelexFree case have asked for special victim-notification procedures — while contending that travel to Brazil and potentially other countries might be required.

    WickedLocalHudson, which publishes news from the Hudson Sun and Metrowest Daily News, reported today that the Massachusetts Securities Division had received (to date) 8,847 complaint forms about TelexFree.

    MSD posted the complaint form in late April.

    The FBI and Homeland Security Investigations (HSI), an arm of the U.S. Department of Homeland Security, also are soliciting information from potential TelexFree victims.

  • URGENT >> BULLETIN >> MOVING: Court Grants Approval For Zeek Receiver To Sue International Winners

    breakingnews72URGENT >> BULLETIN >> MOVING: A U.S. federal judge has approved a motion by the receiver in the Zeek Rewards Ponzi- and pyramid-scheme case to sue alleged “net winners” who live outside the United States.

    Receiver Kenneth D. Bell sought the authority “to file one or more actions in this Court and in foreign courts to pursue claims for the return of fraudulently transferred money and disgorgement of net funds received against significant ‘net winners’ who reside outside the United States. The foreign ‘net winners’ to be pursued all won at least $1000, the threshold previously approved by this Court.”

    Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina authorized the receiver today to pursue the international clawback claims.

    Precise details about when Bell intends to bring the actions were not immediately known tonight.

    Bell is pursuing clawback claims against more than 9,000 U.S. residents.

    Note: Our thanks to the ASD Updates Blog.