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Tag: Legisi Holdings LLC

  • REQUIEM FOR THE FORUM PIMPS? Court Documents In Legisi Case Reference Secret Service, MoneyMakerGroup Ponzi Forum; SEC Has Postings From Legisi’s ‘Private’ Forum, Too

    This grainy likeness of Legisi President Gregory McKnight is part of a PDF exhibit of evidence in the SEC's Ponzi case against the firm. This particular exhibit was gleaned on May 7, 2007, about 10 days prior to the entries in the case of undercover agents from the U.S. Secret Service and the Michigan Office of Financial and Insurance Regulation, according to court filings.

    HYIP or autosurf Ponzi promoter? Player? Forum “expert?” Moderator? Cheerleader?

    Get ready for a surprise: Your downline perhaps already has identified you as a pimp or even one of the masterminds.

    If your plan is to continue to promote the programs on the Ponzi forums and though emails, you should know that things could be occurring behind the scenes that could put you four-square at the center of investigations. Not all HYIP and autosurf players are crooked. Not all of them understand the wink-nod nature of the HYIP and autosurf trades. In other words, they aren’t a crook or pimp like you and can’t be relied upon not to implicate you. They aren’t playing your game.

    You, on the other hand, are a veteran pusher of Ponzi poison and perhaps a tax schemer who recommended yet another pig and painted it yet again with lipstick. Your victims very well may come to see themselves as your marks, as their knowledge of this shadowy and insidious business grows. Some of them will talk. Some of them have talked.

    It’s now clear from court filings that some of them even are making handwritten notes and/or printing out emails and forum conversations — even if the forums purportedly are “private.”

    And, speaking of “private,” how crazy are you going to look — and how vulnerable to prosecution are you going to be — if you happen to be pitching a purported “offshore” program that requires a loyalty oath and forces members to swear they aren’t government informants or agents?

    Just agreeing to such bizarre terms potentially makes you a co-conspirator.

    Here’s how silly you could end up looking later as you try to impress forum mates today with your “insider” knowledge and claims of due diligence. The reality you cannot deny is that an undercover investigation already could be under way into the program you’re pushing.

    While you’re singing the praises of a company and talking about its purported expert management,  you could be revealing yourself as just another willfully blind pimp while demonstrating your actual lack of knowledge about the programs you’re pushing.

    Have you connected the dots yet? If not, here they are — in a nutshell: Your lack of knowledge can be construed as evidence of your guilt. You’re pushing programs you know virtually nothing about except what you’ve been told by people who rely on you to be the human equivalent of a trained seal who performs for a treat. You are not registered to sell securities, and you very likely are implicating yourself in a criminal wire-fraud, money-laundering and tax-evasion scheme.

    There you are, pitching a program, professing your knowledge while perhaps even dissing the doubters, and you don’t even know the program you’re cheering already is the subject of an undercover investigation.

    There’s a good chance the boss knows, though. He perhaps is in a secret panic. If word of the depths of the investigation leaks or the names of the agencies leak, well, the money stops streaming in. Maybe he didn’t tell you because he was too busy trying to figure out how to make it all go away when money was being seized in other investigations — and those seizures were leading to the choking of cash conduits for the programs you are pushing while purporting to be an expert.

    Paperwork later could reveal you weren’t an insider at all (or at least not enough of one actually to have the ear of the boss), that you were just another commission-grubbing or “earnings”-hungry liar in a sea of commission-grubbing and earnings-hungry liars. You’d say anything for a commission, which is why you’re now the potential target of a criminal prosecution and an accompanying lawsuit filed by victims. You have criminal and civil exposure. At the very least, you could become an unindicted co-conspirator, which means the government holds the hammer and sees you as a potentially useful witness.

    You never imagined yourself singing for your supper, of course. You were too busy picking the pockets of friends, neighbors and people you didn’t even know. If you get a break and become an unindicted co-conspirator, here’s what the jury will think as you’re singing for your supper: trained seal. Performed on cue for the schemers. Now batting the government’s ball to stay out of prison.

    Jurors contemplating how you got yourself in this box actually will be willing to give an actual trained seal more credit. Seals perform for treats because they don’t know any better; you performed for money and did know better — and you likely knew the money was stolen to begin with.

    Indeed, the marks who relied on your misrepresentations and claims of “due diligence” and other purported research could be maintaining a substantial paper trail. After all, it’s their money, and they want to make sure it’s safe. They’ve relied on your assertions. They’ll hold your feet to the fire when things start to go south, they’ll hold you to your claims and perhaps share your name, forum username and phone number with law enforcement.

    What Willfully Blind Promoters Can Learn From The Legisi Case

    Did you know that the U.S. Secret Service and the Michigan Office of Financial and Insurance Regulation (OFIR) sent undercover agents to interview Gregory McKnight, operator of the alleged Legisi Ponzi scheme, in May 2007, a full year before knowledge about the depths of an SEC investigation became public? Some Legisi members later learned the SEC was asking questions, but the inquiry was dismissed as routine. The SEC says Legisi continued to collect money up to November 2007, months after McKnight got the surprise of his life when he realized that two men with whom he had conversed actually were undercover agents.

    It is likely that very few Legisi members knew that the Secret Service and OFIR had infiltrated Legisi in May 2007. Undercover agents walked right through the front door, according to court filings.

    And did you know that the undercover agents were backed up by a Michigan state trooper who was only a short distance away — outside in the parking lot?

    How silly do you think your forum posts, your cheerleading look now? You were championing a program that already was under investigation by at least three agencies that were in the process of sharing information and assembling a time-consuming case that crossed international borders. The public filings were 12 months away.

    These are among many details about the probe, the paperwork for which originally was filed under seal by the SEC in May 2008. The Secret Service and OFIR agents posed as investors who wanted information on the Legisi program, which the SEC said was a massive Ponzi scheme. They recorded their discussion with McKnight, which took place in Legisi’s office in Flint, Mich. The Secret Service prepared a transcript of the conversation, which the SEC presented to a federal judge as part of 267 pages of exhibits used to gain an asset freeze.

    After the undercover agents met with McKnight, they left the building and met with the trooper in the parking lot. A short time later, the agents — this time accompanied by the trooper — went back inside and presented their identification to McKnight, according to court documents.

    Here’s what happened next, according to the SEC:

    “Within hours of the interview, an announcement appeared on the Legisi website stating that the Legisi program was closed to new investors, effective immediately, and representing that Legisi had to close that afternoon because of a ‘massive influx’ of new investors.

    “McKnight also cut off access to the Legisi website by the public by requiring a login and password to enter the site,” the SEC said.

    After McKnight found out he had been talking to undercover agents, he told them that Legisi did not accept checks for the program. Even as the interview was taking place, an unnamed individual approached the office with a check made out to Legisi Marketing Inc., according to court filings.

    This section of the Legisi Terms of Service purports that members must avow they are not an "informant, nor associated with any informant" of the IRS, FBI, CIA and the SEC, among others. The others included "Her Majesty's Police," the Intelligence Services of Great Britain, the Serious Fraud Office, Interpol and others.

    It has become clear that law enforcement is using multiple tools, including undercover operatives, infiltrations, Internet archives and notes kept by victims, to investigate and then prosecute HYIPs and autosurfs. Records viewed by the PP Blog show that the law-enforcement community is making one tie after another between and among various illegal investment businesses and their participants.

    The common signatures of the promoters of these illegal enterprises are greed and wanton lawlessness — all so the scammers can enjoy the proceeds of theft. This work has not generated headlines; it mostly has gone about quietly, but there simply no longer is any doubt that multiple state and federal agencies have pooled resources and talents to destroy these insidious enterprises and a day of reckoning is at hand for the purveyors.

    As the screen shot on the left shows, Legisi participants even were asked to certify that they weren’t “informants” or representatives of agencies such as the SEC, FBI, and IRS.

    Last week the PP Blog wrote about the fraud case filed by the SEC against Mazu.com operator Matt Gagnon, Gagnon was accused of helping Legisi pull off a $72 million Ponzi scheme affecting more than 3,000 investors by using Mazu to shill for Legisi while not disclosing that “he was to receive 50% of Legisi’s purported ‘profits’ under his agreement” with McKnight.

    Gagnon allegedly netted about $3.8 million in the scheme.

    The filing of the complaint against Gagnon prompted the Blog to perform some more research into Legisi. Among the documents we obtained was the 267-page exhibit of evidence originally filed under seal by the SEC in the case against Legisi on May 5, 2008.

    Prior to reading the document, we had wondered just how effective companies that purported to offer “private” HYIP and autosurf programs could be. For example, could these so-called “private” programs keep out what some investors describe as the prying eyes of government and the tax man?

    If such purportedly programs offered a “private,” members’-only forum, could those forums have any expectation that the prying eyes of government and the tax man could be kept out?

    “Private” is one of the big selling points of some HYIPs and autosurfs. We’ve always viewed the claims as dubious. After all, the schemes operate on the Internet. They involve people. People talk. It’s one thing to say you offer a “private” forum; it’s quite another to contain discussion to a single forum, perhaps especially when participants begin to smell a rat.

    We learned this in a big way when we were covering events surrounding the collapse of the AdViewGlobal (AVG) autosurf last year. When some members finally removed their blinders, AVG had no way to contain discussion to its purportedly “private” forum — not that it should have had any expectation that it could contain discussion even if things were going swimmingly.

    When AVG started to tank, some of its members couldn’t wait to share details about events that occurred in the “private” forum. Threats against them for purported copyright violations and to ban IPs and kick members out of the program for sharing information outside “association” walls did not work. In fact, they became the signatures of a scam in progress and the relentless efforts to hide it.

    But getting back to Legisi and the issue of whether a “private” forum provided any protection for members and any insulation from the prosecution  of Legisi . . .

    It turns out that the government did not even have to “break in” to Legisi’s “private” forum, so to speak, to gain information on the program. Legisi members concerned about losing their money were keeping notes, including handwritten notes, and printing out page after page of posts from the “private” forum and Legisi’s own website.

    Included in evidence exhibits are page after page of posts from Legisi's "private" forum and other communications such as emails to customer service and printouts Legisi members made while visiting the company's website and keeping notes about the program.

    Legisi members bothered by the company’s explanations and efforts to maintain secrecy when dealing with investors’ money turned over the information to the SEC.

    Yep. Avatars, pictures, user names, real names and all.

    In this evidence exhibit given to a federal judge prior to the Legisi asset freeze, a Legisi prospect writes the name "Money Maker Group.com" in longhand. The prospect also wrote the name "Matt Gagnon" in longhand and a telephone number for Gagnon.

    Prior to filing its case against Legisi, the SEC also had other hard-copy printouts from members, including emails and information from Legisi members’ back offices. At least one of the exhibits included the handwritten notes of a Legisi member.

    The words “Money Maker Group.com” are spelled out in longhand on one of the exhibits, as are telephone numbers of individuals associated with the program. One of the numbers has the name “Matt Gagnon” spelled out in longhand above it.

    Still promoting HYIPs and autosurfs? Still shilling in forums public and “private?”

    Your day of reckoning could be drawing near.

  • ONLINE PONZI FORUM BOMBSHELL: Matt Gagnon A ‘Danger To The Investing Public,’ SEC Says; Federal Judge Freezes Assets Of Mazu.com Pitchman Who Promoted Legisi, Other Alleged Scams

    Matt Gagnon of Mazu.com

    Ponzi forum operator or moderator? Online HYIP aficionado? Think you’re safe pitching fraud schemes because you’re “only” a promoter or forum “expert” and not the operator of the programs?

    Have a secret partnership deal with an HYIP fraudster? Using fancy, professional-sounding terms such as “due diligence” in your forum posts? Claiming you’ve done thorough research before recommending an “opportunity.”

    Pitching programs that advertise unusually large returns — while at once showcasing your knowledge about investment scams and steering people away from certain programs because they sound too good to be true?

    In an action that may send shockwaves across the Web world and Ponzi forums such as ASA Monitor, TalkGold and MoneyMakerGroup, the SEC has gone to federal court and filed an emergency action to halt “a series of fraudulent, unregistered securities offerings” made through Mazu.com.

    U.S. District Judge George Caram Steeh of the the Eastern District of Michigan has frozen the assets of Matthew J. Gagnon, 41, of Weslaco, Texas, and Portland, Ore. Gagnon is Mazu.com’s operator.

    “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.

    The Legisi scheme raised about $72.6 million from more than 3,000 investors “by promising returns of upwards of 15% a month,” 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.”

    Then, beginning in August 2007, “Gagnon fraudulently offered and sold securities representing interests in a new company that purportedly was to develop resort properties,” the SEC said.

    In this scheme, Gagnon “falsely claimed that the investment was risk-free and ‘SEC compliant,’ and guaranteed a 200% return in 14 months. In reality, however, Gagnon sent the money to a twice-convicted felon, did not register the investment with the SEC, and knew such an outlandish return was impossible,” the SEC said.

    Gagnon took in at least $361,865 from 21 investors, the SEC said.

    Still unfinished, Gagnon — in April 2009 — began promoting “a fraudulent offering of interests in a purported Forex trading venture,” the SEC said. “Gagnon guaranteed that the venture would generate returns of 2% a month or 30% a year for his investors. Gagnon’s claims were false, and Gagnon had no basis for making the claims.”

    Gagnon next turned to another Forex sceme, the SEC said.

    From October 2009 to November 2009, Gagnon “offered another purported Forex trading venture in which he claimed to have a trader in Europe who would trade foreign currencies for investors in exchange for 40% of any profits he generated,” the SEC said. “Gagnon removed this offer from his website in November 2009 when he received notice that the SEC had subpoenaed his bank records.”

    Despite his knowledge about Ponzi and fraud schemes, Gagnon repeatedly pitched such schemes, the SEC said.

    “Gagnon has been unrelenting in his efforts to raise money from the public through
    fraudulent, unregistered offerings,” the SEC said. “He remains a danger to the investing public.”

    Despite his sales pitches, “Gagnon has never been associated with a registered broker-dealer and has never been registered with the Commission as a broker or dealer or in any other capacity,” the SEC said.

    Among the people to whom Gagnon directed money was the late Bryan K. Foster, who was convicted in 1997 of five felony counts of wire fraud and sentenced to 41 months in prison. These convictions were recorded in U.S. District Court in Montana, according to records.

    In 2000, Foster was convicted in Colorado of one felony count of wire fraud and sentenced to five years in prison, according to records.

    Between July 13, 2007 and September 17, 2007, Gagnon sent at least $800,000 to accounts in the name of Trails Home LLC, which was controlled Foster, the SEC said. Money from the illegal Legisi program was included in the sum transferred to Foster for his purported investment program, the SEC said.

    The Legisi Program

    In 2005, McKnight was an underemployed General Motors worker living outside Flint, Mich., the SEC said, adding that he had financial problems.

    “In December 2005, McKnight began offering and selling interests in a pooled investment program variously called Legisi.com or Legisi,” the SEC said. “McKnight promoted the offering around the globe through an Internet website at www.legisi.com,” promising monthly returns of up to 15 percent.

    By February 2006, “McKnight incorporated a shell company called Legisi Holdings, LLC in the bank-secrecy haven of Nevis in the West Indies,” the SEC said.

    “McKnight asserted on the Legisi website that the Legisi program was merely a ‘loan program’ through which investors would ‘loan’ money to Legisi and, in return, Legisi would pay investors high rates of interest.

    But Legisi actually was “a classic pooled investment vehicle, in which investors invested money into a common venture with the expectation that the money would be used to generate profits, for McKnight and the investors, solely through the efforts of McKnight or others working on his behalf. The Legisi program was a security in the form of an investment contract,” the SEC said.

    “The Legisi program was also a massive Ponzi scheme,” the SEC said.

    In January 2006, McKnight and Gagnon discussed a deal by which Gagnon would promote Legisi on the Mazu.com website, the SEC said.

    “McKnight and Gagnon had known each other for several years after Gagnon recruited McKnight into a multilevel marketing business called ‘Mannatech,’” the SEC said. “McKnight became part of Gagnon’s ‘down line,’ meaning that a portion of McKnight’s commissions from selling Mannatech products went to Gagnon.”

    McKnight paid Gagnon “a total of approximately $4,532,512 between January 29, 2006 and April 14, 2008,” the SEC said. “All of the money Gagnon received from McKnight consisted of investor funds. There were no ‘profits’ generated by Legisi.”

    Gagnon netted about $3.8 million in the scheme, the SEC said.

    “On behalf of McKnight, Gagnon solicited investors around the world through the publicly available Mazu.com website,” the SEC said. “Gagnon wrote and/or reviewed and approved the content of the Mazu website. No valid registration statement was filed or was in effect with the Commission in connection with Gagnon’s offer and sale of Legisi program investment contracts.”

    SEC: Forum Moderators Helped Push Ponzi Scheme

    “Between approximately January 2006 and August 2007, Mazu employees working on Gagnon’s behalf and at his direction promoted the Legisi program in emails, in Mazu Business Packs and DVDs they sent to investors, and on the Legisi Forum,” the SEC charged.

    “The Legisi Forum was an on-line chat room accessible through the Legisi.com website. Several Mazu employees served as ‘moderators’ on the Legisi Forum. Mazu’s support services also included answering questions over the telephone and email,” the SEC said.

    Forum shills performed services for Legisi and deflected concerns when CNN carried a negative report on the company, the SEC said.

    “The Mazu employees acting as moderators encouraged readers to invest in Legisi, assisted them in transferring money to Legisi, encouraged investors to bring in new investors, and offered investors personal assistance in bringing in referrals,” the SEC said. “They also encouraged investors to keep their monthly earnings with Legisi, rather than withdrawing them, in order to achieve purportedly higher returns. They made sure transfers of money between investors and Legisi went smoothly. The moderators updated investors on changes to the Legisi program like new minimum investment amounts and referral fee rules.

    “The moderators made posts on the Legisi Forum to prevent and diffuse investor rumors and concerns,” the SEC continued. “After an article questioning Legisi’s legitimacy appeared on the CNN Money website on May 8, 2007, one moderator wrote, ‘I think it is worth mentioning that the Forum is probably being read by people who are not Legisi members. So let’s not raise red flags to any bulls out there shall we. . .. Of course so far as any discussion on the [CNN Money] article is concerned I’m sure that everyone is aware that Greg went into Legisi knowing the law and planning for this eventuality. So keep a cool head and stop worrying about what you should do.”

    No Due Diligence

    McKnight was operating a classic Ponzi scheme fueled in part by Gagnon’s cheerleading on Mazu.com, the SEC said.

    Despite the relentless hype, Gagnon performed no due diligence and simply fabricated information or passed along claims as though they were factual, the SEC said.

    “Gagnon did not obtain or review any of McKnight’s trading records, bank and brokerage account statements, or e-currency account records at any point prior to, or during, Gagnon’s promotion of Legisi,” the SEC charged.

    SEC: Gagnon ‘Recklessly Disregarded’ Scam Warning Signs

    “Throughout the time that Gagnon promoted Legisi, he simultaneously warned readers about a type of fraud referred to as a high yield investment program. High yield investment programs, commonly called ‘HYIPs,’ typically involve off-shore companies promising very high rates of interest generated by investment in foreign currencies and a variety of other vehicles, along with repeated hyping of the legitimacy of the program,” the SEC said.

    Gagnon understood the HYIP fraud universe, but nevertheless pitched Legisi, which had promoted an unusually high rate of return and had other markers of the exact kind of scam Mazu.com warned about on its website, the SEC said.

    “From at least April 2006 through at least May 2007 Gagnon provided on the Mazu website an accurate description of a HYIP by stating that they (emphasis added by PP Blog):

    collect funds from lenders as investment capital or deposits and promise a return that is usually extremely high in exchange for ‘borrowing your money.’ The result? Generally after a period of time you are free to withdraw your capital and or your profits, or you can ‘reinvest’ them to earn additional profits. In theory, the compounding can create a crazy return on investment given time . . .

    * * * * * *

    Sadly, most HYIPs are offshore fronts that don’t lie within U.S. jurisdiction and you have no recourse when they steal your money. Most HYIPs realize this and they bank on it! They’ve got you right where they want you. Most also allude to making their profit in legitimate investment vehicles when in reality, you have no idea where they’re making their profit.

    And Gagnon also warned readers about Ponzi schemes.

    “On the Mazu website between at least April 2006 and May 2007, Gagnon accurately described a Ponzi scheme as an ‘investment program touting huge returns in a short period of time. Any returns someone sees are paid out of monies gathered from the investors. No real product, investment, or business takes place,’” the SEC said.

    The Legisi Ponzi began to unravel by September 2007, its decay brought about in part by “the federal seizure of an e-currency provider that was holding $1.8 million for McKnight,” the SEC said.

    Gagnon then “attempted to extort money from McKnight,” the SEC said.

    “On September 9, 2007, Gagnon informed McKnight that he was ending the partnership between Legisi and Mazu,” the SEC said. “Gagnon offered McKnight a choice: send Gagnon and several of Gagnon’s associates approximately $2.5 million, tell the Legisi members that Gagnon was starting a real estate fund, and that Mazu and Legisi were parting amicably, or Gagnon would email the entire Legisi membership and tell them ‘the truth’ about McKnight’s fraud.”

    Read the SEC complaint.