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Tag: Massachusetts Securities Division

SPECIAL REPORT: We’re Like ‘A Ride At Disney World,’ Achieve Community Cycler Bizarrely Claims
From a YouTube promo for “The Achieve Community.”

UPDATED 11:39 A.M. ET DEC. 12 U.S.A. In its latest effort to expand its reality-distortion field, “The Achieve Community” money-cycling “program” that tells prospects a $50 “position” increases by a factor of eight and turns into $400 in a few months (or even in as few as 55 days) has compared itself to The Walt Disney Co.

Achieve represents both a “micro” and a “macro” scheme. Although participants can buy a single “position” for $50, they also can buy multiple “positions” for hundreds or even thousands of dollars, according to promos. At least one promo contends that 200 “positions” can be purchased 100 at a time in two separate transactions of $5,000 each. If this proves to be the case either in the past or in the future, the crime of structuring transactions to evade bank-reporting requirements could be on the table.

Structuring is an element in the prosecution of figures associated with the eAdGear network-marketing “program” shut down by the SEC in September. Allegations of structuring also appear in civil filings by the Massachusetts Securities Division against TelexFree network-marketing figures in April. TelexFree now is in bankruptcy court, with prosecutors calling it a massive Ponzi- and pyramid scheme.

The specific Achieve Community analogy noted in the headline and lede above is to Walt Disney World Resort in Lake Buena Vista, Fla. Even more specifically, it is to the rides at Disney World and the purported “hours” it takes to board one of them.

From a Dec. 8 “Monday Night Update” post on the Achieve Community Blog credited to co-founder Kristi Johnson (italics added):

I want to explain a bit more about how we work for the benefit of those new members . . . and thanks goes to Sheila once again for this wonderful analogy.

Think of Achieve as a ride at Disney World. You get in line for the ride and it can takes [sic] hours! But it’s always moving, just like our matrix. And finally you get to the ride (the matrix) and it’s over in a few minutes! It may take a few months to hit our matrix, and once you get there you’ll be paid within days on all three levels. Then you can take the ride again!

Here’s our initial take on the claims:
- From a YouTube promo for Achieve Community.
  
  If you submit to this bollocks and think of Achieve as a ride at Disney World, you’re as out of touch as the Achieve organizers and some of their professional hucksters want you to be. Wake. Up. Now.
- If you choose to remain in a network-marketing-induced Stepfordian trance, expect that a sudden desire to embrace every conspiracy theory under the sun will come next. If that happens, you’d better hope the BBC’s “Sunday Politics” program hosted by Andrew Neil never gives you the Alex Jones treatment.
- You also might starting hearing, “Kenneth, what is the frequency?”
- Lines indeed can be long at Disney World. (But there’s a free app for that.)
- Disney doesn’t sell $50 cycler tickets and tell parents and starry-eyed kids that those tickets pay not only for the ride, but also will convert to $400 cash before fall takes over from summer. And Disney also doesn’t encourage parents and kids waiting in lines to plunk down another $50 (or more) as a means of fetching another $400 (or more) before winter takes over from fall. Moreover, unlike Achieve, Disney does not operate a cycler. The New York Stock Exchange would go apoplectic if Disney or its fans took to the web to claim purchases and repurchases of “positions” set the stage for $50 to morph into more than $1.6 million.
- If Disney did what Achieve is doing, its operating revenue of nearly $49 billion in 2014 would translate into a liability of nearly $392 billion, creeping up on a hole of almost half-a-trillion dollars.
- As a great American company, Disney wouldn’t dare do what Achieve Community is doing — for the same reasons Google wouldn’t do what the AdSurfDaily “advertising” scam was doing in 2008 and eBay wouldn’t do what the Zeek Rewards “auction” scam was doing in 2012.
Cyclers such as the one operated by Achieve Community are among the Internet’s oldest forms of the Ponzi scheme. Because the fraud is so old — and because cycler carcasses litter cyberspace — cyclers have sought new and better ways to dupe the public. Internal mechanics and entry points may vary from $10 to hundreds of dollars. Recruiting may or may not be required, and there may be talk of “algorithms” or “secret algorithms.” Achieve purportedly has a proprietary “triple algorithm.”

Ever hear of the Regenesis 2×2 matrix-cycler scam in 2009? The U.S. Secret Service did — and kept a Dumpster under surveillance to gather evidence. Material seized in the case, according to court records, included envelopes containing credit cards, debit cards and financial statements; 13 Priority Mail envelopes and 10 First Class Mail envelopes; and various computers, computer equipment and business records.

Federal agents investigating now-shuttered Regenesis said they found the personal financial records of customers in the Dumpster, plus complaint faxes sent by customers and a letter from a law firm complaining about false, misleading and deceptive advertising.

As is the case now with Achieve Community, Regenesis promoters took to the web with reports of getting paid. Getting paid, however, is not proof that no scam exists. In 2010, promoters of the MPB Today cycler scam took to the web with “payment proofs” that were even crisper than the Regenesis “proofs.”

MPB Today operator Gary Calhoun later was sentenced to a term in a Florida state prison.

Despite “payment proofs” that appeared online, the MPB Today cycler was a scam that put its operator in prison.

From an Achieve Community promo for a purported “repurchase” plan that turns $50 into “ANY amount you wish!”

In HYIP Cycler Land, the much ballyhooed matrices move only when new money flows to a scheme, assuming the matrices even exist and further assuming an early entrant (or even a later one) doesn’t try to blackmail an operator by mixing a threat to go to the police with a demand for hush money or a selective payout.

Is it any wonder that Vimeo has banned “videos pertaining to multi-level marketing (MLM), affiliate programs, get-rich-quick schemes, cash gifting, work-from-home gigs, or similar ventures?” Also not permitted on Vimeo are “rips of movies, music, television, or any other third party copyrighted material.”

Members of WCM777, a network-marketing “program” taken down by the SEC earlier this year after money was channeled to all kinds of secret businesses, found ways to work images of Sylvester Stallone and the music and imagery of the “Rocky” franchise into their scam. In 2010, promoters of the MPB Today “program” wrapped the music of Heart into their sales appeals. “Guaranteed No Scam,” one promo read in part.

This could in part explain why Vimeo appears to return no search results for “The Achieve Community.” It’s heartening, but the great MLM/network-marketing ripoffs on YouTube continue — from pitches for obvious scams to piracy of music and video content. At least one promo for Achieve Community appropriates virtually the entire soundtrack of a recording of “You Raise Me Up” by Celtic Woman.

And, hell, why not make a commercial for Achieve Community at an ATM provided by an FDIC-insured bank to sanitize your scam?

In 2011, a now-missing cycler known as AutoXTen came out of the gate with a message of “Turn $10 into $199,240.” The purported opportunity was appropriate for “churches,” according to a sales pitch. AutoXTen debuted even as the state of Oregon was investigating a cycler and ordering sanctions totaling $345,000 against a pitchman. That “program” was known as “InC,” for “I need cash.”

Is Traditional MLM Fighting Back?

Though he doesn’t reference Achieve Community in a video posted Nov. 29 on YouTube, network-marketing veteran Eric Worre of NetworkMarketingPro.com laments all the “lazy . . . MLM online idiots in the marketplace.”

“There’s too many, and it’s causing too much damage,” Worre says, noting the MLM ban at Vimeo and “boorish stuff” from MLMers “on any of the [social media] platforms.”

“It’s out of control. It doesn’t work, and it’s causing tremendous damage,” Worre says.

Nine days later came the preposterous Achieve Community analogy to Disney — this after Achieve reportedly had lost its original payment processor but went scouting for new ones, plus an offshore company to process credit cards. Purchasing and repurchasing of “positions” reportedly opened back up last week with a new card processor at the helm, but payouts to participants reportedly have not resumed.

Not to worry, Achieve Community says.

“When our Payout Processor is added next week,” the enterprise said Dec. 5 in a Blog post titled Friday Update, “we will be paying members who joined September 12th and will start paying out nearly $500,000.00 to our members.”

If those payouts materialize, they will come after a payout halt of more than a month and after Achieve Community apparently found an offshore company to provide a merchant account that permitted it to take credit cards for the acquisition of matrix “positions.” In other words, Achieve started collecting “new” money and now publicly announces a plan to pay “old” members who were due to be paid in early November for “positions” taken out on Sept. 12.

That, friends, is what Ponzi schemes do. More than that, it’s an indicator that Achieve was racking up a liability of $400 for every $50 it took in and was at least technically insolvent when Payoneer — its previous payment processor — reportedly pulled out weeks ago. Solving an insolvency condition by lining up new vendors to rekindle cashflow is one of the oldest tricks in the HYIP Ponzi books.

The Achieve Community Disney analogy makes no sense at all — except perhaps in that uber-bizarre, network-marketing way.

That the Disney comparison came on a Monday night is particularly rich. That’s because ESPN, part of the Disney Media Group, was getting ready to televise Monday Night Football. Even as ESPN was doing that, other Disney brands such as ABC (and ABC News) were broadcasting to the world. At the same time, the Walt Disney Studios was engaged in movie production, and Disney Consumer Products and Disney Interactive were doing what they do.

With Achieve, it’s only the upstart cycler and the hidden matrix positioned to be miraculous. What a racket!

Disney stock closed yesterday at $93.80, up a humble 4 cents. The iconic brand is a Dow and S&P 500 component, but it’s easy enough to imagine the Achievers saying, “Four cents! Only 4 cents! Better join Achieve!”

Did we mention the app for those Disney World lines?
Dec 9, 2014
RECOMMENDED READING: Two Stories/Threads At BehindMLM.com On ‘The Achieve Community’

We recommend these two stories/Comments threads at BehindMLM.com on “The Achieve Community.” Access the first here. Access the second here.

BehindMLM.com covers emerging MLM fraud schemes. Naturally the site separates some MLMers from their senses because it so neatly debunks cover stories and magical constructions that have helped MLM scams trading on the Internet thrive for years.

We’d point out that, like other apparent “supporters” of other “programs,” an apparent “supporter” of Achieve Community “defending” the “program” at BehindMLM.com is arguing that “The Achieve Community is not a scam [because] I GOT PAID . . .”

Such arguments tend to reflect the coaching of willfully blind promoters and typically are seen on well-known Ponzi boards such as MoneyMakerGroup and TalkGold.

All successful Ponzi/pyramid schemes “pay.” Those payments are used as “social proof” no scam exists and help to drive new dollars to scams. HYIP-flavored scams are among the most dangerous in the world. They pollute banks and payment processors with illicit proceeds, turning them into warehouses for fraud schemes. And because bad money follows bad money in the HYIP fraud sphere, the proceeds affect the commerce stream at multiple points of contact.

Money purportedly “earned” in one “program” is used to join another. The banks and processors, in effect, end up warehousing radioactive financial waste. If that’s not bad enough, many of the schemes are exceptionally dark and murky. Money disappears down ratholes or ends up in the hands of ghosts. Such was the case at “Profitable Sunrise” and “Secure Investment” and many more.

There are “I got paid” posts for both of those “programs” on the Ponzi boards.

At Achieve Community, $50 somehow miraculously turns into $400, purportedly in 55 days or so. Our research shows that promos claim people can buy multiple “positions.” There also is a claim that, at some point in the future — a point at which Achieve Community lines up another payment processor — recruits will be able to buy 200 “positions” with two separate transactions of $5,000 each.

This could be construed as an attempt to evade reporting requirements under the Bank Secrecy Act and to “structure” transactions to evade those reporting requirements. The Massachusetts Securities Division has raised the issue of structuring in its action against the TelexFree “program.”

Structuring is dangerous because it accommodates both “micro” and “macro” scams. Some people may buy in at the “micro” level of $50, sometimes known in HYIP Ponzi Land as a “test spend.” Enough “I got paid” posts from cheerleaders at “micro” levels could cause others to buy in at “macro” levels of thousands of dollars.

Some people in TelexFree appear to have made a series of purchases, effectively turning “micro” transactions into “macro” positions. The same thing likely also occurred with the Zeek Rewards and WCM777 MLM “programs.” Like TelexFree, Zeek and WCM777 cratered.

MLMers should reject any contention that no scam exists because a program “pays” or that a member getting “paid” is proof that nothing untoward is occurring. HYIP schemes are infamous for fuzzy if not nonsensical math and for hiding scams behind green curtains.

Beyond that, all successful Ponzi/pyramid schemes “pay.” Ever hear of Bernard Madoff? He “paid.”

At the moment, 9,000 or so alleged winners are confronting clawback lawsuits to recover alleged fraudulent transfers from the c. $850 million Zeek Rewards scheme.

Put another way, Zeek “paid.” After that, Zeek caused people it “paid” to have to hire lawyers and respond to subpoenas and prepare to sit for depositions — all at their own expense.

Imagine Bernard Madoff, who “paid” far less than Zeek on an annualized percentage basis, strolling into court and addressing the judge at sentencing:

“But . . . but, Your Honor,” he begins. “You don’t understand. I paid. This is so unfair! I’ll tell you what this is! It’s a [freaking] conspiracy by the government against people just trying to help their fellow man!”

Next imagine the judge, after repairing from the bench to the restroom to projectile-vomit, returning to the courtroom and ordering the bailiff to escort Mr. Madoff through the side door to begin his 150-year tour of the prison system.

Finally, imagine Madoff sitting in his cell and having the following conversation with himself.

“If only the Achieve Community cycler had been around at the time. I could have rolled in all my clients’ money and, for each $50, I’d get paid $400 — in just two months or so, no less!”

If you can imagine these things, you can imagine the insidious world of the HYIP universe. Madoff, no stranger to chicanery, might actually be mortified at the goings-on in certain MLM circles. Even so, he never would have insulted a judge by insisting no Ponzi scheme existed because he “paid.”

Put another way, the greatest Ponzi schemer in U.S. history was more honest than the average HYIP purveyor and willfully blind promoter hoping to carve off profits from the mass production of scams on the Internet.

Nov 17, 2014
BULLETIN: Zeek-Like Situation Surfaces In TelexFree Case — Dishonored Cashier’s Checks; Trustee Seeks Authority To Subpoena Banks, Including Bank In Puerto Rico

BULLETIN: The court-appointed trustee in the TelexFree bankruptcy case is seeking authority to issue subpoenas and obtain information from eight financial institutions, including Puerto Rico-based Oriental Bank.

The other seven are Digital Federal Credit Union, based in TelexFree’s headquarters city of Marlborough, Mass., Bank of America, JPMorgan Chase, Citizens Bank, Santander, TD Bank and Wells Fargo.

All of the banks ended up in the TelexFree stream of commerce, but precise details of the relationships are not known publicly. What is known is that some TelexFree bank accounts were seized in criminal or civil forfeiture actions and that a cascading avalanche of litigation continues to roar down the mountain.

Why MLM firms continually tempt this ruinous fate is one of the great business mysteries of current times.

In the instances of Bank of America and TD Bank, it is known that TelexFree affiliates were given instructions to make walk-in deposits at the banks, some in the name of TelexFree Inc., others in the name of TelexFree LLC. Those instructions were highly similar to instructions given to members of the $119 million AdSurfDaily MLM Ponzi scheme in 2008.

Court filings by Trustee Stephen B. Darr say he is trying to get to the heart of TelexFree-related money flow and communications involving the banks. Notably, one of the concerns is that all eight of the banks allegedly issued TelexFree-related cashier’s checks prior to the firm’s April 2014 bankruptcy filing, and later dishonored some of the checks.

Cashier’s checks also were an issue in the ASD case. At the time of the ASD related actions in 2008, the enterprise was the largest known MLM HYIP Ponzi scheme. It since has been surpassed by Zeek Rewards, TelexFree and others.

Dishonored cashier’s checks became one of the earliest issues in the $850 million Zeek Rewards MLM scheme in 2012. Citing the Uniform Commercial Code, Zeek’s receiver and lawyers have been been pursuing remedies from the banks for more than two years — at a cost of money and time.

Kenneth D. Bell, the Zeek receiver, has said that “[i]f a bank refuses to pay a cashier’s check or teller’s check presented by the Receiver, it may be required to pay for the Receiver’s expenses and loss of interest resulting from the nonpayment, as well as consequential damages.”

In the Zeek case, the Virginia Bankers Association provided guidance to member institutions that “the court’s order relied on the Uniform Commercial Code to establish that the uncashed cashier’s checks in the receiver’s possession were receivership assets, and that the receiver was required to present those cashier’s checks for payment and had no discretion not to.”

Now, the TelexFree trustee appears to be wading into the same or highly similar MLM waters. Among the information Darr is seeking is “information respecting the remitters of the cashiers’ checks and the reasons for the dishonor of such checks.”

Because MLM Ponzi- and pyramid schemes spread virally, have common promoters and often rely on cashier’s checks, it is conceivable that some promoters might have bought their way into both “programs” with cashier’s checks, possibly even with cashier’s checks recruits paid to their upline sponsors, rather than to the “programs” themselves.

In the case of Zeek, tens of millions of dollars in checks allegedly had backed up at Zeek’s office in North Carolina in the weeks prior to the SEC’s August 2012 Ponzi- and pyramid action.

The TelexFree case may add a new wrinkle. Indeed, nearly $38 million in cashier’s checks from Wells Fargo allegedly were found in TelexFree’s Marborough office in the possession of Joseph Craft two days after TelexFree’s April 13 bankruptcy filing. Craft, who has denied wrongdoing, was a TelexFree executive. He has been charged civilly with securities fraud.

In April, the SEC said that a check dated April 3 in Craft’s possession was “remitted to” TelexFree principal Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000.”

One check for more than $2 million in Craft’s possession was made out to Katia B. Wanzeler, Wanzeler’s wife. She later was arrested at JFK Airport in New York and detained for more than a week as a material witness.

The SEC alleged that Carlos Wanzeler was amassing a small-real estate empire in Massachusetts and Florida. He is alleged to have ducked out of the United States via Canada in April, ultimately flying to his native country of Brazil. The United States describes him as an international fugitive.

Darr now is seeking not only information about the cashier’s checks, but also information on communications between the banks and TelexFree or its principals James Merrill and Carlos Wanzeler, and information on any TelexFree-related investigations conducted by the banks, including “information related to ‘Know Your Customer’” rules and regulations.

In addtion, Darr is seeking bank statements, canceled checks, deposit slips, wire-transfer communications and remittances, documentation concerning fees and contracts, minutes from bank board meetings at which TelexFree matters were discussed, documentation on why the banks ended relationships with TelexFree, documentation on communications the banks had with the SEC and state regulatory bodies, documentation the banks may have on the Massachusetts Securities Division TelexFree investigation and documentation “concerning whether the remitters have been refunded any amounts advanced to purchase” the dishonored checks.

Nov 5, 2014
Nevada Isssues Warning On Wings Network MLM ‘Program’; Says It Is Being Sold ‘Door-To-Door’ And Is Targeting Spanish And Portuguese

As the PP Blog reported on May 15, Massachusetts Commonwealth Secretary William Galvin sued the Wings Network MLM “program” and some of its promoters, alleging securities violations and a “thinly veiled pyramid scheme” targeting minority communities.

Now, Nevada Secretary of State Ross Miller has published a warning on Wings Network, saying the online “program” even is being sold “door-to-door” and is targeting Spanish and Portuguese prospects.

Miller is encouraging residents of Nevada who have information on Wings Network to contact his Securities Division here or by calling 702-486-2440.

“It is vital that every investor conduct the most thorough due diligence possible when making an investment,” Miller said in a statement. “Investing is a complicated and risky process. Even the initial receipt of interest payments or distributions paid to some investors, or an investment sold by someone you know, doesn’t guarantee that an investment is legitimate. A Ponzi scheme may have similar attributes. Potential investors just can’t be careful enough. And always remember that if it sounds too good to be true, it probably is.”

From an Oct. 23 statement by Miller’s office (italics added):

Secretary of State Ross Miller warns Nevadans to beware of a possibly fraudulent investment scheme targeting minority communities, specifically Spanish and Portuguese. Wings Network is a multi-level marketing program that is advertising online, and being sold door-to-door or through friends and relatives.

Wings Network offers investors various packages ranging from $49 to $1,499. The “Elite” package purportedly requires an investor to purchase the package for $1,499, pay an activation fee of $49, and recruit two additional people to buy the package. The seller then allegedly promises that the investor is guaranteed to receive a minimum of $750 per month for one year afterward.

Investors may be told that Wings Network is associated with smartphone applications compatible with Google Play and Apple. Individuals who purchase the “Elite” package gain access to the Wings Network website, which provides them with information related to their purchase. Wings Network is allegedly associated with Tropikgadget FZE located in the United Arab Emirates.

The Secretary of State’s Securities Division believes Wings Network’s proposed business opportunity is an investment contract and a security that should be, but isn’t, registered with the State of Nevada. Some multi-level marketing programs may be structured in such a way that they constitute a security and should be registered as such. Miller cautions individuals not to buy or sell packages from Wings Network without conducting thorough research and seeking independent legal advice.

Although the dotcom landing page for WingsNetwork appears not to be loading properly at least in the United States, other pages on the site continue to be accessible from the United States. The PP Blog today observed the flags of the United States, Spain, Portugal, Italy, France, Germany and Russia on the site. WingsNetwork subdomains with Wings Network affiliate pitches that point prospects to YouTube promos and lead-capture pages also were observed.

In addition, the Blog observed a specific domain named a respondent in the Massachusetts action — WingsNetworkGlobal.com — that appears to have been repurposed by a onetime Wings Network affiliate to drive traffic to a video pitch for something called “The Millionaire’s Brain.”

“Listen,” a male narrator intones. “You’re skeptical. You’ve heard big claims before and they didn’t pan out. I get it.”

Opportunity-hopping is a frequent occurrence in MLM or direct-sales programs. Some affiliates of such programs proceed from fraud scheme to fraud scheme to fraud scheme.

Research suggests that the WingsNetworkGlobal domain previously was used to promote alleged scams such as TelexFree and WCM777, both of which were sued by the SEC and became the subjects of regulatory actions by the Massachusetts Securities Division.

Oct 29, 2014
URGENT >> BULLETIN >> MOVING: Massachusetts Charges 4 Alleged Promoters Of EmGoldEx Scheme, Saying ‘Program’ Was Fraud And That Hucksters Stacked Children In Downlines

URGENT >> BULLETIN >> MOVING: (14th Update 4:33 p.m. EDT U.S.A.) Massachusetts has charged promoters of the EmGoldEx MLM “program” with securities fraud and selling unregistered securities, alleging they “created a complex web entangling investors throughout the Commonwealth” in a “pyramid scheme” that offered “guaranteed returns of up to 1,105% for recruiting more individuals.”

The civil prosecution was brought by Commonwealth Secretary William Galvin and the Massachusetts Securities Division, which alleged that photos of children “getting paid” by the “program” were used as lures to drive dollars to the scam.

Children also were used to stack downlines so promoters could “reach the Pay Spot faster,” the state alleged.

And, the state alleged, “Investors in the EmGoldex Marketing Program are also able to purchase investment positions directly from other investors, rather than through EmGoldex, creating even greater risks for potential new investors.”

Similar allegations that members could bypass the “program” itself to purchase positions were made in the TelexFree case earlier this year, a circumstance that suggests multilayered criminality in MLM HYIP “programs.”

Named respondents are EmGoldEx Team USA Inc. of Andover, Mass.; Matthew Michael D’ Agati of Methuen, Mass.; Joseph Zingales of Methuen; James Vincent Piemonte of Methuen; and Jonathan Herman Seigler, formerly of Boston and now of New Hampshire.

D’ Agati, Zingales, Piemonte and Seigler are accused of recruiting “hundreds of investors into the scheme,” according to the 41 page complaint. MSD is asking for disgorgement and financial sanctions.

“Using multiple pooled bank accounts, Respondents have collected over $473,000 in Massachusetts for the EmGoldex Marketing Program,” the state alleged, further alleging that “over $282,659 has been wired to EmGoldex financial institutions overseas.”

The Massachusetts entity was a recruiting arm for EMGX FS Ltd., “an entity purportedly registered in the Seychelles, with a principal place of business located at Suite I, Second Floor, Sound and Vision House Francis Rachel Str. Victoria, Mahe Seychelles[.] EmGoldex maintains an internet website at www.emgoldex.com,” the state alleged.

Seychelles is a nation associated with money-laundering.

News that Massachusetts was investigating EmGoldEx broke on Aug. 8.

Like other HYIP schemes, EmGoldEx was positioned as a “Plan B.”

“Respondents even use the Team USA Homepage to pitch the EmGoldex Marketing Program as a retirement vehicle, noting that EmGoldex can create a “[p]Ian B to care for you and your family in the later years,” the state alleged. “Respondents further add that membership in the EmGoldex Marketing Program is a fully transferrable asset upon death, providing perpetual residual income for an investor’s family.”

Facebook and Twitter “at least” were used to drive recruiting, Massachusetts alleged.

One of the key prongs of the Massachusetts-based pitch was that even “children” could earn through EmGoldEx, the state alleged.

From the complaint (italics added):

148. The Team USA Homepage advertises the EmGoldex Marketing Program as a simple and relatively quick way to earn significant residual income.

149. Respondents also advertise on the Team USA Homepage that through the EmGoldex Marketing Program, even children are able to make significant profits, with little to no effort of their own.

150. In a section on the Team USA Homepage titled “Local Success Stories,” Respondents feature at least three photos of children, with one caption reading, “Paid $4000 in only 13 weeks! Yes, even your children can get paid!!”

151. The Team USA Homepage “Local Success Stories” section also includes photos of a number of other EmGoldex investors who are members of Team USA. Each photo is emblazoned on an American flag background, with the title “GOLDEN $4000 CLUB.”

152. The “successful” investors received their payouts by recruiting new investors into the EmGoldex Marketing Program, not through the sale of any purported product.”

Like earlier MLM scams such as TelexFree and WCM777, EmGoldEx picked up a local head of steam when the Massachusetts promoters hosted hotel pitchfests, Massachusetts alleged.

Some local events for EmGoldEx charged admission fees of $10 and $25, and a purported “boot camp” for EmGoldEx held on Saturdays and Sundays charged an admission fee of $79 and $99, the state alleged.

“According to marketing materials Team USA provided to the Division, Team USA represented EmGoldex as a ‘life changing opportunity’ for new investors. These advertising and marketing materials from Team USA are also adorned with pictures of gold bars, bags of cash and phrases such as ‘NOW YOU GET PAID,’” the state alleged.

The scheme also took advantage of the popular culture, Massachusetts alleged.

“For their part, according to documents that Team USA produced to the Division, D’ Agati and Zingales adopted speeches from popular movies, such as ‘Rocky’ and ‘Any Given Sunday.’”

Moreover, the state alleged, attendees of a launch event were told “the speakers . . . were ‘not bottom feeders,’ and included lawyers, millionaires, and other very successful business people.’”

Read the complaint.

Oct 22, 2014
Email Address In Faith Sloan’s DMCA Complaint Against BehindMLM.com Appears In 2010 Promo About Purported $10,000 Payout From Matrix Cycler; ‘You Can Do That Over And Over Again,’ Veteran HYIP Huckster Claims

More than two minutes and 40 seconds of a special version of “I Gotta Feeling” recorded by the Black Eyed Peas to honor Oprah Winfrey plays in this “team” promo for a matrix-cycler “program” known as “Diamond Holiday Feeder.” Neither the group nor Winfrey is credited. Source: screen shot from DailyMotion.com.

The Gmail address used by TelexFree figure Faith Sloan in a Sept. 23 DMCA takedown notice filed against BehindMLM.com appears below a 2010 video promo for a “program” known as “Diamond Holiday Feeder,” part of a larger “program” purportedly engaged in the travel business while also operating a matrix cycler.

Matrix cyclers sometimes are known as 2x2s or “get two who get two.” 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.

In a 3:44 video whose publication date is listed as April 8, 2010, Sloan claims to have made $10,000 in the Diamond Holiday Feeder program and further claims “you can do that over and over again.” The headline of the video is, “Ten Thousand Dollars Proof – Diamond Holiday Feeder – BYC.”

Another Sloan video for a “team” build of the Diamond Holiday “program” uses nearly three full minutes of a special version of “I Gotta Feeling” recorded by The Black Eyed Peas to honor Oprah Winfrey and the 24th year of The Oprah Winfrey Show in September 2009. Neither Winfrey nor the group is credited in the “team” promo. The “team” build video is dated March 21, 2010.

Ironically, Sloan has accused BehindMLM.com of copyright infringement, amid allegations it used photos to which she owned the copyright on its website.

BehindMLM.com says Sloan’s claims are bogus.

Though TelexFree would come later — after the apparent collapse of Diamond Holiday Feeder, with Sloan blaming events on management — an image of Sloan posing in front of a TelexFree logo appears on the Diamond Holiday Feeder video site. The site appears now to be driving traffic to a “program” known as “RE247365.” (BehindMLM.com is back online after being offline for all or parts of three days. Read its “RE247365” review.)

In the current TelexFree case in which she is accused of securities fraud, Sloan likewise is blaming management.

Sloan’s narration in the April 2010 video shows her Diamond Holiday Feeder back office and suggests she did not withdraw her purported earnings of $10,000 all at once to her bank account, but rather in smaller increments. Such a practice may lead to questions about whether she was engaged in structuring transactions to avoid bank-reporting requirements. In a civil action against TelexFree in April, the Massachusetts Securities Division raised the issue of structuring.

Other information suggests Sloan gravitated to Diamond Holiday Feeder after the collapse of the Noobing MLM scam in 2009. Noobing, in part, was targeted at people with hearing impairments, including a California woman the PP Blog interviewed in 2010 through her interpreter.

On a website deemed “The Official Web Blog” of Noobing, the program was described as a “hit” among deaf people. Noobing, according to the Blog, was promoted at Deaf Expos in Kansas, Missouri, New Jersey and Texas in 2008 “to connect with the often overlooked hearing impaired business community.”

Noobing was under the umbrella of an enterprise known as Affiliate Strategies Inc. that was running a government-grants swindle and was sued by the FTC and three state-level attorneys general for fraud. ASI went into receivership, taking Noobing with it. The enterprise had offshore conduits in Belize and Nevis.

On one August day in 2009, attorneys assisting the ASI receivership “received thirty two US Mail crates” filled with complaints from scam victims, receiver Larry Cook said at the time.

“The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24, 2009] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,” Cook said at the time.

Oct 2, 2014
URGENT >> BULLETIN >> MOVING: Massachusetts Issues Warning On ‘IFreeX’ Scheme; ‘iFreex Appears To Be Nothing More Than A Rebranded TelexFREE Fraud For Mobile Phones’

Massachusetts Commonwealth Secretary William Galvin.

URGENT >> BULLETIN >> MOVING: Massachusetts Commonwealth Secretary William Galvin has issued a warning on an emerging scheme known as “IFreeX.”

Like TelexFree before it, IFreeX is being pitched by two-time SEC pyramid-scheme defendant Sann Rodrigues and is being targeted at the Brazilian community.

Rodrigues also is known as Sanderley Rodrigues de Vasconcelos, and individuals already have filed complaints about his promotion of IFreeX, Galvin’s office said. The headline on a state news release is, “SECRETARY GALVIN WARNS OF NEW PHONE SCAM TARGETING BRAZILIAN COMMUNITY.”

This is the entire statement issued by the Massachusetts Securities Division a short time ago (italics/logo graphic added by PP Blog):

Secretary of the Commonwealth William F. Galvin today warned investors, especially persons in the Brazilian community, about iFreex, a phone service app promising lucrative returns with minimal effort. It appears to be much like TelexFREE, a scam that targeted the Brazilian and other minority communities.

According to complaints made to the Securities Division, Sanderley Rodrigues de Vasconcelos, also known as Sann Rodrigues, who was once a top TelexFREE promoter, is now promoting iFreex, enticing investors to pre-register with promises of a new iPhone.

On his Facebook page, Rodrigues, a former Revere resident, even claimed that iFreex would be the new TelexFREE. TelexFREE was charged by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission earlier this year with fraud in operating a pyramid scheme. It is now in bankruptcy.

“iFreex appears to be nothing more than a rebranded TelexFREE fraud for mobile phones,” Secretary Galvin said. “Everyone, but especially those in the Brazilian and other immigrant communities that are the target of these pitches, need to be skeptical of any scheme that offers guaranteed returns with little or no effort. Unfortunately, we have seen an increase in these pyramid schemes in the past year.”

Rodrigues, who was charged by the SEC in the TelexFREE case, was charged in 2006 with a similar telecommunications scheme . . . and barred from securities dealings in Massachusetts. That scheme, too, targeted the Brazilian community.

iFreex appears to have many of the same characteristics as other pyramid schemes the Securities Division has recently brought actions against, including Wings, TelexFREE and WCM777.

While there is little information available about the iFreex operations, management, and headquarters, it is scheduled to go live in early November and is currently accepting preregistrations with the promise to investors of a new iPhone.

Those who have information about iFreex are encouraged to call the Securities Division at the toll-free 1-800-269-5428.

Sep 30, 2014
TelexFree Website Will Not Load

The website of TelexFree will not load this afternoon. Whether this signals a development in the TelexFree Ponzi, pyramid and bankruptcy cases was not immediately clear.

EDITOR’S NOTE ADDED 1:32 P.M. EDT SEPT. 28 U.S.A. TelexFree.com appears to be back online. At this time, why the landing page wouldn’t load remains a mystery. Our earlier story is below . . .

The website of TelexFree, alleged in April by the SEC and the Massachusetts Securities Division to have operated a billion-dollar pyramid and Ponzi scheme across state and national borders, will not load. Nor will the domain return a ping.

This condition appears to have surfaced in recent hours. The site previously included TelexFree-authored words written in April or May that suggested TelexFree somehow could emerge from bankruptcy. Stephen B. Darr, a court-appointed trustee, is now administering TelexFree. He has said he has no intention of reorganizing or reactivating the company.

Websites involved in Ponzi schemes sometimes are seized by court order or voluntarily surrendered by the operators. Receivers and trustees later sometimes use the URLs for the domains to publish news that concerns investors.

Why TelexFree.com won’t load is unclear. The office of U.S. Attorney Carmen Ortiz, which is leading the criminal prosecutions of TelexFree figures James Merrill and Carlos Wanzeler, did not immediately respond to a request for comment.

Merrill and Wanzeler have been charged with wire fraud and wire-fraud conspiracy. U.S. prosecutors have called Wanzeler a fugitive who ducked out of the United States through Canada under cover of darkness — and later flew to Brazil.

Like their U.S. counterparts in April, Brazilian federal police conducted TelexFree-related raids in July.

The SEC yesterday filed a pyramid-scheme action against a “program” known as Zhunrize that also allegedly operated across state and national borders.

Sep 24, 2014
URGENT >> BULLETIN >> MOVING: SEC Calls Zhunrize MLM Company Worldwide ‘Pyramid Scheme’ That Gathered More Than $100 Million

URGENT >> BULLETIN >> MOVING: (8th Update 6:56 p.m. EDT U.S.A.) The SEC has gone to federal court in the Northern District of Georgia, alleging that the Atlanta-based “Zhunrize” MLM program is a pyramid scheme that operates globally and has gathered $105 million from 77,000 investors.

The Zhunrize “program” has been charged with fraud. It is at least the third MLM targeted by the SEC since March. The agency filed charges against WCM777 in March. In April, it filed charges against TelexFree.

Zhunrize CEO Jeff Pan, 52, of Suwanee, Ga., also has been charged with fraud, the SEC said. A federal judge has issued an asset-freeze order.

All three of the MLM schemes operated online and allegedly affected tens and tens of thousands of people.

Zhunrize has been operating since 2012, the same year the SEC took down the Zeek Rewards MLM scheme, alleging a fraud that had gathered hundreds of millions of dollars.

From a statement by the SEC on the Zhunrize case (italics added):

According to the Commission’s complaint, Zhunrize purports to be a legitimate multi-level marketing business by which members purchase online stores and then sell merchandise through them, while earning commissions on products purchased by their customers and through store sales to other members and hosting fees paid by those members. In fact, the company is operating as a pyramid scheme because its commission structure is based on the continual recruitment of new members, with the most lucrative returns dependent on the downline recruitment of other members through store sales irrespective of any product sales. To date, the company has taken in approximately $105 million from approximately 77,000 investors since 2012.

The Commission’s complaint further alleges that in its promotional materials, Zhunrize touts the ability to earn commissions from the sale of products, both through the owner’s store and through downstream owners’ stores. For example, a Zhunrize promotional video differentiates Zhunrize from other on-line multi-level marketing plans, claiming that Zhunrize has “sustainability.” According to the video, the Zhunrize “model will sustain itself because we will have millions more customers than distributors.” Later, the narrator in the video claims “we have the Vendor Relationships, the Logistics, the Payment Gateways to reach millions of new customers each month.”

The Commission’s complaint also alleges that Zhunrize does not disclose, however, that to date substantially all of its revenue has comes from the sale of memberships (referred to as stores) and the corresponding monthly internet hosting fees associated with operating those stores, rather than the sale of products. Indeed, both Pan and a Zhunrize vice-president testified that the company currently derives 80-90% of its revenue from selling online stores and the monthly internet hosting fees for them, as opposed to actual products from these stores. Thus, contrary to the representations to potential investors, Zhunrize is actually a fraudulent pyramid scheme.

Like other MLM schemes before it, Zhunrize appears to have traded on the names of famous companies outside the MLM realm. The PP Blog today, for instance, observed a promo for Zhunrize in Spanish that referenced an “online store” known as “ZHunCity” and dropped the names of Ebay, Amazon, Wal-Mart, Target and Best Buy.

It is common for fraud schemes to drop the names of famous companies as a means of sanitizing the purported MLM ‘opportunities.” Offering materials for WCM 777, which allegedly gathered tens of millions of dollars, dropped the names of hundreds of famous brands while also dropping the names of famous businesspeople and famous politicians.

WCM appears to have taken in on the order of $80 million, according to court records in the case. The Massachusetts Securities Division has alleged that TelexFree may have gathered more than $1.2 billion in a little better than two years. WCM77 made its $80 million haul in about one year.

TelexFree and WCM both engaged in affinity fraud by targeting specific population groups, according to court filings. There may be promos for Zhunrize in languages other than Spanish and English. The PP Blog observed a Zhunrize promo today that was simply labeled “Brazil,” which may mean Portuguese-speaking populations were targeted.

That was the case with both WCM777 and TelexFree.

Sep 23, 2014
BULLETIN: Massachusetts Bank For TelexFree Settles With Securities Division For $3.5 Million; All Settlement Proceeds Will Go To Victims In The State; Bank Will Establish ‘Massachusetts Victim Relief Fund’

BULLETIN: (3rd Update 1:34 p.m. EDT U.S.A.) A Massachusetts bank that established accounts for TelexFree and whose president is the brother of alleged TelexFree Ponzi- and pyramid-schemer James Merrill has settled with the Massachusetts Securities Division for $3.5 million.

The settlement between MSD and Fidelity Co-operative of Fitchburg means that an escrow account consisting of the $3.5 million and whatever interest it draws will be set up for TelexFree victims who reside in the state. With MSD helping shepherd the process and maintaining veto power to protect the interest of victims, the bank will retain an independent claims administrator at its own expense to manage claims and disbursements.

The escrow account will be called the “Massachusetts Victim Relief Fund.”

At some point at least 120 days in the future, the administrator shall “determine an independent plan of Distribution.” TelexFree victims in Massachusetts will be able to file claims. Those with approved claims will be compensated under a formula established by the claims administrator.

Precisely when the claim-filing period will begin was not immediately clear. Also unclear is precisely how many TelexFree victims reside in Massachusetts. What is clear is that MSD — with the consent of Fidelity Co-operative — has arranged a means by which TelexFree victims residing in the state will receive money some of them may need desperately.

Using a series of banks and payment vendors, TelexFree might have scammed as much as $90 million in Massachusetts alone. Its overall scam may have gathered more than $1.2 billion across the world.

MSD brought alarming allegations of fraud against TelexFree in a civil action on April 15. By April 30, it had opened an investigation into Fidelity Co-operative’s role in the TelexFree case.

As part of the settlement, the bank neither admitted nor denied the state’s allegations that it did not perform adequate due diligence on TelexFree before permitting the company to open three accounts in August and September of 2013.

Only after receiving millions of dollars in TelexFree deposits for a period of between two and three months did Fidelity Co-operative conduct any legitimate due diligence on TelexFree, MSD alleged. On Nov. 27, 2013, according to MSD, bank president John Merrill asked Fidelity’s compliance and Bank Secrecy Act officer to review TelexFree’s banking activivity.

Merrill is the brother of TelexFree figure James Merrill, later to be indicted with fellow TelexFree figure Carlos Wanzeler on charges of wire fraud and wire-fraud conspiracy.

The bank’s compliance officer — by performing simple Internet searches — soon came to realize that TelexFree’s operations in Brazil had been shuttered amid pyramid-scheme allegations, according to MSD. The officer notified John Merrill of his findings and also relayed his concerns to an outside consultant the bank used for compliance and BSA issues.

By Dec. 3, the bank advised TelexFree that it was closing its accounts by Dec. 31, MSD alleged.

And, MSD alleged, Fidelity Co-operative also had opened personal accounts for James Merrill and Carlos Wanzeler. After the bank began conducting due diligence on TelexFree in earnest on Nov. 27 and during a period in which TelexFree accounts were pending closure, MSD alleged, Wanzeler transferred $3.5 million from his personal account at Fidelity Bank “to an overseas bank account held in Singapore at the Oversea-Chinese Banking Corporation.”

Citing evidence listed by prosecutors in the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts, MSD alleged that James Merrill and Wanzeler transferred more than “$10.4 million out of Fidelity Bank, in multiple transactions using personal accounts, to various other financial institutions after November 27, 2013.”

Through both business and personal accounts at Fidelity Co-operative, “TelexFREE and its principals caused further harm to Massachusetts victims of the TelexFREE scheme,” MSD alleged.

Massachusetts Commonwealth Secretary William Galvin oversees MSD, which has been squaring off against multiple cross-border pyramid schemes.

Read the consent order between MSD and Fidelity Co-operative.

Sep 22, 2014
BULLETIN: MLM Attorney Jeffrey Babener Told TelexFree It Was Operating Pyramid Scheme Months Before Collapse, But MLM ‘Program’ Continued To Collect Money, Bankruptcy Trustee Says

BULLETIN: (2nd Update 5:26 p.m. EDT Sept. 16 U.S.A.) The court-appointed trustee in the TelexFree bankruptcy case says in court filings that MLM attorney Jeffrey Babener advised TelexFree in August 2013 that it was operating a pyramid scheme.

TelexFree nevertheless continued to collect money, Trustee Stephen B. Darr said.

Just two months earlier — in June 2013 — TelexFree’s Brazilian arm (Ympactus) “was seized by the Brazilian authorities and its operations shut down based upon the allegations that its operations constituted a pyramid scheme,” Darr said.

Between early February 2014 and mid-March 2014 alone, Darr said, TelexFree “took approximately $50,000,000 from new and existing Promoters.”

This occurred while both the SEC and the Massachusetts Securities Division were investigating TelexFree, Darr said.

And, he noted, it also occurred after TelexFree — in the late summer or early fall of 2013 — had retained Robert Weaver, “an attorney with extensive white collar crime expertise, and the firm of Garvey, Schubert, Barer based in Seattle to, upon information and belief, provide legal advice respecting potential and/or ongoing violations of federal and state law.”

“Despite the shutdown of Ympactus on the basis that its business was a pyramid scheme, and being advised in August of 2013 that the Debtors’ business plan was a pyramid scheme, the Principals continued to operate their business in accordance with that scheme throughout 2013 and into March 2014,” Darr said.

Babener not only told TelexFree it was operating a pyramid scheme, he also told the law firm Greenberg Traurig that TelexFree was a pyramid scheme, Darr said.

Greenberg Traurig, Darr said, initially had been retained by TelexFree in early February 2014 to represent the company “in connection with the MSD investigation.”

The law firm then represented TelexFree in its Chapter 11 bankruptcy case. That case was filed in Nevada on April 13, two days before the SEC and MSD brought actions and the FBI and the U.S. Department of Homeland Security raided TelexFree’s office in Massachusetts.

With TelexFree members complaining about high billings from TelexFree’s bankruptcy lawyers and other professionals involved in the bankruptcy case, Darr said that he “has reached an agreement in principle with Greenberg [Traurig] that should resolve the objections of the Trustee and the SEC to the Greenberg fee application.”

(See BehindMLM.com for story on clashes with the Gordon Silver law firm over fees.)

Overall, Darr said, TelexFree had racked up more than $5 billion in liabilities.

If it proves true Babener advised TelexFree it was operating a pyramid scheme, his concerns would appear to be in stark contrast to words MLM attorney Gerald Nehra delivered at a TelexFree convention in California in July 2013.

In May 2014, some TelexFree members accused Nehra of racketeering and turning a blind eye to fraud at TelexFree, alleging he misrepresented TelexFree as a legitimate business and encouraged TelexFree members “unknowingly” to “participate in the evasion of federal and state securities laws.”

Moreover, the plaintiffs alleged, Nehra’s “opinions were packaged and promoted as part of TelexFree’s total ‘post Brazilian shut down package’ to the members of the putative class,” according to the complaint.

Nehra was not merely providing zealous representation to TelexFree, the plaintiffs alleged. Rather, he counseled “TelexFree on methods to evade United States securities laws that were intended to offer, in part, protection from pyramid Ponzi schemes; all to enrich himself financially and serve his own selfish interests.”

Nehra was billed as a “special guest” at a TelexFree rah-rah session in Spain in early March of this year, but appears not to have shown.

Sep 16, 2014