Matthew J. Gagnon, an alleged web-based pitchman of Ponzi schemes and Forex frauds, has been hit with judgments totaling more than $2.5 million by the receiver in the Legisi Ponzi and fraud case. Gagnon also was charged separately by the SEC.
A web-based pitchman for the alleged Legisi Ponzi scheme has been hit with separate court judgments of $1.69 million and $810,000. Meanwhile, the court-appointed receiver in the Legisi case has hired local counsel in Oregon to pursue the judgments against Matthew J. Gagnon and Mazu Publishing Inc.
Legisi was alleged by the SEC in 2008 to have operated an international Ponzi and fraud scheme that gathered about $72 million from more than 3,000 investors. The scam was promoted on TalkGold, MoneyMakerGroup and other websites, including Gagnon’s Mazu.com.
MoneyMakerGroup’s name is referenced in federal court filings in the Legisi case — and records show that shills on TalkGold and MoneyMakerGroup sought to sanitize the scheme even as the U.S. Secret Service and the Michigan Office of Financial and Insurance Regulation were using undercover agents to gather evidence about the fraud.
The judgments against Gagnon and Mazu illustrate the legal and financial nightmares to which forums such as TalkGold and MoneyMakerGroup contribute. Meanwhile, the fact that Legisi was promoted at the forums even as it was under investigation exposes a myth advanced on such forums that investors would know in advance that a government probe of an “opportunity” was under way.
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.
At the same time, the judgments against Gagnon destroy the myths that online promoters of securities schemes have no legal exposure and that offers positioned as “private” insulate promoters from prosecution.
Indeed, the judgments against Gagnon resulted from litigation brought by Robert D. Gordon, the court-appointed receiver in the Legisi case, in October 2009. The SEC sued Gagnon in May 2010, seven months after Gordon brought his actions.
Among the SEC’s allegations against Gagnon was that he continued to promote fraud schemes online — even after the Legisi scheme was exposed.
“Gagnon has been unrelenting in his efforts to raise money from the public through fraudulent, unregistered offerings,” the SEC said in May 2010. “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.
After the Legisi HYIP fraud, Gagnon transitioned to pushing Forex frauds, the SEC said.
Gagnon was hit with an asset freeze after the SEC brought its action.
Records show that Legisi was among a number of “opportunities” that used E-Bullion, which was operated by James Fayed.
A jury in Los Angeles last week recommended the death penalty for Fayed for arranging the slaying of his estranged wife, Pamela Fayed.
Federal prosecutors said in December that AdSurfDaily, yet another alleged Ponzi scheme, had an E-Bullion tie. Records show that Gold Quest International, still another Ponzi scheme, also used E-Bullion.
EDITOR’S NOTE: The SEC complaint against Candice D. Campbell is yet-another case apt to cause unease in the incongruous worlds of online HYIP, autosurf and investment fraudsters. Among the allegations against Campbell, a purported day-trader and “CFO” of an unincorporated, Canton, Mich.-based company known as CJ’s Financial, is that she lied to investors and used a website to weave a false tale to prospects. When payments dried up earlier this year, the company allegedly emailed false information to investors in a bid to lull them. An evidence exhibit in the case shows that a free Yahoo email account was used, rather than an email account originating on the purported investment company’s servers.
The investment-fraud landscape is filled with incongruities. The use of free email services by purportedly successful investment companies to hawk programs and explain away problems is just one of them. Other incongruities that often signal fraud include claims that monthly returns of a preposterous percentage are “guaranteed” and that investors need not worry about paying taxes. Such claims are notable parts of the investment-fraud universe — and are elements in the SEC’s case against Campbell.
Here, now, the story on the Campbell allegations . . .
Investigators have whacked yet-another “small” Ponzi scheme — one in which Candice D. Campbell of Canton. Mich., is alleged to have used a number of claims typically associated with online HYIP and investment-fraud schemes.
The SEC has obtained an emergency asset freeze in U.S. District Court for the Eastern District of Michigan against Campbell and her unregistered company, CJ’s Financial (CJF). The scheme collected more than $1 million from 60 investors between May 2009 and June 2010, the agency said.
CJF’s website now appears to be offline. But the SEC said that, as recently as July 9, the firm portrayed itself on the website as an “independent investment firm dedicated to putting your money to work for you!”
Investors were told their funds were “guaranteed” to generate returns of at least 10 percent monthly. Claims of unusually high, “guaranteed” returns are one of the classic signatures of fraudsters, according to regulators.
Another classic hallmark of fraud is a claim lacking supporting details that a company or individual is “registered” or “licensed.” Among the SEC’s assertions against Campbell was that CJF used a vague claim that she was “licensed by the appropriate licensing agency for the financial planner/investment banker profession and that he/she is in good standing with such agency.â€
The SEC said Campbell was registered neither with the SEC nor the Michigan Office of Financial and Insurance Regulation. Campbell formerly worked in the “automobile industry,” according to the SEC.
Her role in the automobile industry was not immediately clear.
At the same time, in a claim that featured the use of capital letters for emphasis, CJF investors were told their “initial investment will NEVER go down in value” and that “there will be ‘NO PENALTIES OR TAXES to pay when you withdraw your money, because CJ’s Financial pays your Capital Gains taxes!’”
Frequent use of capital letters to stress sales points and an accompanying appeal to purported “tax” benefits often are associated with investment-fraud schemes.
When the CJF scheme began to collapse, the firm allegedly trotted out what regulators previously have described as a classic ruse to mask a Ponzi scheme in progress — fabricating a government action or events that had not occurred to explain why a business was not meeting its obligations to investors.
The SEC even used the word “ruse” in its complaint against Campbell and the company, highlighting the allegation under a subhead that reads, “Defendants Create A Phony SEC Asset Freeze As A Ruse To Prevent Investors From Withdrawing Their Money.
Meanwhile, the agency used strong verbs to paint a word picture of the scam (emphasis added by PP Blog):
“In 2010, as investors began requesting the return of their money, Defendants concocted a scheme to convince investors that, notwithstanding Defendants’ prior representations that investors would be able to withdraw their money ‘whenever they want,’ Defendants could not return investor funds. Defendants told investors that CJF’s bank accounts and other assets had been frozen by the Commission.”
In truth, the SEC said, the money had not been frozen. The agency then laid out an allegation that a CJF employee using a free yahoo email address to conduct business for CJF sent repeated emails to customers to update them on events that were not really happening.
The emails, which the SEC released in redacted form, paint a picture of CJF lulling investors with words and describing a purported meeting among the company, its “attorneys” and the agency that never occurred.
“[O]n May 26, 2010, Ramona Mangan, who is Campbell’s assistant, sent an e-mail to CJF’s clients updating them about the ongoing ‘government’ investigation of CJF,” the agency alleged. “Mangan acknowledged that CJF ‘knows and understands’ that ‘[m]any individuals are in need of money,’ and assured investors CJF was ‘doing everything we can do to get this issue corrected.’
“Nevertheless,” the agency continued, “Mangan claimed that ‘CJ’s Financial hands are tied in this matter.’ According to Mangan, ‘Since the Ponzi Scheme in 2009 government officials do not investigate lightly and perform detailed investigations to ensure the public is safe from fraudulent activity and trading.’”
On June 3, Mangan sent another email — this one claiming that CJF’s assets had been frozen and that company “attorneys” were working with the SEC and visited its offices June 1 to determine when the purported asset freeze would be lifted, according to the agency.
“According to Mangan,” the SEC said, “‘CJ’s Financial and attorneys [sic] went to the SEC (Security Exchange [sic] Commission) office on Tuesday June 1, 2010. The intentions of the meeting were to obtain a time frame as to when all assets, including CJ’s Financial accounts will be un-frozen and to find out what issues have been defined by the SEC as civil infractions.’”
“Later in the e-mail,” the SEC continued, “Mangan reiterated that ‘All assets, bank accounts and TD accounts are frozen UNTIL the SEC, which is a branch of the government is finished with their investigation.’ Mangan quoted the ‘SEC lead investigator’ as stating that ‘bank accounts, assets and trading accounts will become available when the investigation is over.’ Mangan assured investors that ‘Our main concern at CJ’s Financial is to complete the investigation as quickly as possible, so we can transfer all requested withdrawals and continue trading once again.’”
Campbell made similar claims to investors, the agency alleged.
Regardless, the agency said, “Contrary to the information Mangan and Campbell provided to investors, there was no meeting on June 1, 2010 between the Commission and CJF and its attorneys, and the Commission had not frozen Defendants’ bank accounts, trading accounts, or other assets. Defendants fabricated this story to keep investors from realizing Defendants had stolen their money.”
Mangan is not named a defendant in the complaint.
Investigators said Campbell used only a “small” percentage of the more than $1 million collected to make trades.
“Campbell diverted the money for personal uses, including paying for vacations, cars, jewelry, sporting goods, and furniture,” the SEC charged. “Classic” Ponzi payments were made to some investors, the agency added.
Here is how Campbell, who is accused of depositing client funds into her personal account and diverting “at least” $540,000 for her personal use, spent much of the money, according to the SEC:
Cash withdrawals ($138,000).
Purchases of airline tickets and travel, including travel to resorts in Florida and Arizona ($127,000).
Purchases from several jewelry retailers ($33,046).
Purchases from sporting-goods retailers ($28,350).
Purchases from furniture stores ($29,124).
Purchases from a laser-surgery center ($20,650).
Purchases at automobile dealerships (at least $100,000).
“In an apparent effort to keep the Ponzi scheme from collapsing, Campbell used more than $350,000 of investor money to pay other investors,” the SEC charged.
Read the SEC complaint. (Make sure you read the emails, which are included in the PDF file.)
The SEC claims this June email painted a false picture than CJF could not pay investors because the agency had frozen its assets. The SEC did not file a complaint against the company and gain an asset freeze until Aug. 4. NOTE: The entire email is not reproduced in this screen shot, and the PP Blog added the red lines.
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?”
