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Tag: Ming Xu

** CAUTION: Report Of Bogus TelexFree Site **

There is a report on social media this morning of a bogus TelexFree site that mirrors an old TelexFree site that existed when the company was actively soliciting business. The site creates the impression TelexFree has reopened.

TelexFree has not reopened.

It is Sunday. Federal prosecutors handing the TelexFree criminal case involving alleged fraudsters James Merrill and Carlos Wanzeler did not immediately respond to a request for comment.

The actual TelexFree site says the firm has suspended all business activity. The trustee in the TelexFree bankruptcy case has begun his investigation and announced in court filings that he is seeking court authority to issue subpoenas. (See documents 261-265 here. Link current as of today’s date.)

Because the report about the bogus site was made on social media and the intent of the poster is not known, extreme caution is warranted. Clicking on the link to the asserted hacking site through the social-media site potentially could have bad consequences. So could entering any information on forms at the site.

The social-media poster positioned the report as a warning hackers seeking to profit from the troubles at TelexFree could be at work. The site used the word “telexfree” as part of its URL.

Even if the social-media poster was being sincere in his warning and it proves true the site is bogus and designed for hacking, clicking on the link potentially could expose you to harm.

And if the site is not a hacking or phishing site, it leads to questions about why such a site that mirrors TelexFree’s “old” site exists to begin with. Could it be an old TelexFree affiliate’s site created with swiped code and designed to dupe prospects into believing they were dealing directly with the TelexFree corporate entity? Could it be an orphaned site of TelexFree itself?

The asserted hacking site uses the name of a male individual with an address in Chicago, according to a database search. The Registant Organization is listed as “telexfree.”

Some TelexFree affiliates are alleged to have accepted TelexFree payments directly, a circumstance the Massachusetts Securities Division said in April resulted in a condition in which “participants received uncontrolled cash deposits outside of the TelexFree system.”

The social-media poster who issued the warning appears to be pushing a “program” known as ViziNova that may be linked to the alleged $80 million WCM777 scam allegedly operated by Phil Ming Xu.

It is common for HYIP hucksters to be in multiple “programs” simultaneously. After “working” a “program” for months and cleaning up with it, the most disingenuous promoters then may turn on the “opportunity,” perhaps particularly if a regulatory action occurs or there is a sense one is imminent.

Such promoters then may try to port entire “teams” to a new scam.

Read a report on ViziNova at BehindMLM.com.

Jun 15, 2014
UPDATE: Federal Judge Orders Properties Linked To Alleged WCM777 MLM Scam Listed For Sale

UPDATE: A federal judge has ordered the receiver in the WCM777 case to list for sale three properties linked to the alleged MLM pyramid scheme.

U.S. District Judge Christina A. Snyder is presiding over the SEC’s civil case filed in March. Receiver Krista L. Freitag asked for the authority to sell the properties last month. Snyder granted the authority June 9. The properties are single-family residential homes in Lake Elsinore, Monrovia and Walnut, Calif.

Snyder also authorized Freitag to “close frozen bank accounts of the Receivership Entities and have the balances wired to receivership bank accounts.”

Since the filing of the original SEC pyramid action, the agency has upped the dollar volume of the alleged scam from about $65 million to about $80 million. In April, Freitag said she’d put an end to a nascent MLM scheme with ties to WCM777.

WCM777 purportedly was part of an entity known as World Capital Market.

In an amended complaint last month, the agency accused Vincent Messina, an attorney linked to alleged WCM operator Phil Ming Xu, of self-dealing and distributing millions of dollars in funds linked to WCM777 to other entities.

Certain money disbursed by Messina ended up with “persons in Canada, Abu Dhabi, and to an entity in Hong Kong,” the SEC alleged.

Snyder imposed an asset freeze on Messina last month.

Some promoters of TelexFree, an MLM “program” and alleged Ponzi- and pyramid fraud that gathered more than $1.2 billion, also promoted WCM777.

Like TelexFree, WCM777 was the subject of a state-level securities investigation in Massachusetts. Regulators said both programs targeted individuals who speak Spanish or Portuguese. WCM777 also targeted the Asian community.

Like other HYIP scams, WCM777 traded on the names of famous companies.

The WCM777 and TelexFree “programs” have led to questions about whether MLMers were getting sucked into companies that have cult-like qualities.

Ming Xu reportedly sent a love note to the people of Peru when police there acted against the “program.”

He further reportedly explained that the “program” aims would become clear when “4 blood moons” appeared in the sky in April.

Jun 11, 2014
BULLETIN: SEC Ups WCM777 Pyramid And Fraud Haul To More Than $80 Million; Agency Files Amended Complaint That Names ‘Inactive’ Attorney Relief Defendant And Alleged Distributor Of Fraud Proceeds

BULLETIN: (1st update 7:58 p.m. EDT U.S.A.) The SEC has filed an amended complaint in the alleged WCM777 pyramid- and Ponzi scheme. The complaint ups the WCM777 haul from roughly $65 million to more than $80 million and names an “inactive” Florida attorney a relief defendant as the alleged recipient and distributor of fraud proceeds.

Vincent Messina, the attorney, allegedly is associated with an entity known as International Market Ventures (IMV) “based in Washington, D.C.” with asserted offices in Los Angeles, Shanghai, Hong Kong, United Arab Emirates, Nigeria, Congo, Benin, and South Africa, the SEC says.

Messina also was the asserted “general counsel” of World Capital Market, a company associated with WCM777 and accused Ponzi schemer Ming Xu, the SEC said. An affidavit included with the SEC’s amended complaint includes a copy of an email allegedly sent by Ming Xu to Messina inquiring about how to get WCM777 money out of Brazil.

“Vincent,” the alleged Ming Xu email to Messina began. “We have lots of members for our social capital company, WCM777 in Brazil. They paid us in Brazil. How to move the money legally from Brazil to USA or Hong Kong?”

Whether Messina replied to the email was not immediately clear.

“In June 2013, Messina was named as in-house legal counsel of ‘World Capital Market,’” the SEC said in its complaint. “Messina is also the general counsel of Relief Defendant IMV. Messina holds himself out as duly licensed to practice law in the State of Florida; however, the Florida Bar Internet site lists Messina as ‘inactive’ and ‘Not eligible to practice in Florida.’ Messina has an office in Los Angeles, California.”

Messina appears also not to be licensed in California, the SEC said in the affidavit. WCM777 operated from California.

WCM777, the SEC said, “is the umbrella name that Defendants use for their multilevel marketing scheme.”

The SEC initially sued WCM777 in March 2014. The “program” is known to have promoters in common with TelexFree, which the SEC sued on April 15. Both complaints were filed on an emergency basis. Both “programs” allegedly targeted speakers of Portuguese and Spanish, with WCM777 also allegedly targeting speakers of Chinese.

Portuguese is the main language spoken in Brazil.

On April 10, the PP Blog reported that the court-appointed receiver in the WCM777 case advised a federal judge that she’d halted an apparent WCM777 reload scheme and that Ming Xu, also known as Phil Ming Xu, transferred $5 million to Messina as part of a “sham” designed to stash cash.

Messina, the SEC alleged in the May 7 amended complaint, “disbursed those funds to, among others, IMV and possibly entities affiliated with IMV.”

Certain money disbursed by Messina ended up with “persons in Canada, Abu Dhabi, and to an entity in Hong Kong,” the SEC alleged.

NOTE: Thanks to the ASD Updates Blog.

May 12, 2014
Judge Sets Hearing Date On WCM777 Receiver’s Claim That Attorney Linked To Phil Ming Xu Is Refusing To Return Millions And That ‘Xu Uses Nominees To Hold The Proceeds Of Fraud’

Screen shot of federal court file. Red redaction by PP Blog.

EDITOR’S NOTE: See related story from earlier today that outlines where about $2.133 million of the $5 million cited in the story below is being held for safe-keeping. The whereabouts of the balance is creating a mystery, according to court files.

U.S. District Judge Christina A. Snyder has scheduled a hearing April 24 in Los Angeles to address a court-appointed receiver’s claim that a $5 million transfer by accused WCM777 Ponzi scheme operator Phil Ming Xu to a lawyer a month before an asset freeze was a “sham” designed to stash cash.

The lawyer, Vincent Messina, now has retained a lawyer and is refusing to return most of the cash and explain what happened to more than $2.66 million that hasn’t been accounted for, insisting that the transaction was a “loan” for investment purposes and that he also was helping Xu set up a “political action committee,” according to receiver Krista L. Freitag.

Messina has retained Maranda Fritz, an attorney in New York, according to court filings.

Freitag, who wants the money returned and an accounting of how it was used, has asked Snyder to freeze Messina’s bank accounts.

“There is not only a strong likelihood that monies transferred to Mr. Messina will be dissipated, but evidence they already have been,” Freitag argued.

And, she continued, “[t]his poses a serious risk of irreparable injury to the receivership estate and investors. Once monies are disbursed by Mr. Messina, it will be difficult, if not impossible, to recover them for the benefit of investors.”

The SEC has described WCM777 as a $65 million Ponzi- and pyramid scheme. Freitag says her early analysis suggests that WCM777 may have more than 479,000 “member accounts.”

Moreover, Freitag argued, Messina refused to return the money even when asked by Xu in a March 20 letter.

Xu, according to the letter, described Messina as his attorney, not as a business partner, and wrote he wanted the $5 million returned so he could use it “to settle any outstanding SEC issues that I may have.” (See screen shot above.)

Other records show that the SEC had been investigating Xu since October 2013. Snyder granted an asset freeze on March 27, after the SEC appeared in federal court and alleged that WCM777 and related entities were conducting an ongoing fraud.

Xu allegedly transferred the $5 million to Messina a month prior to the March 27 freeze.

From the receiver’s motion to freeze Messina’s bank accounts (italics/carriage returns added):

Considering the large sum of money at issue, the compelling evidence of fraud and that Defendant Xu uses nominees to hold the proceeds of fraud, as well as the proximity of the transfer to the filing of the case, and the fact that Mr. Messina refuses to provide any information about the whereabouts of the remaining $2.668 million, it is critical that Mr. Messina’s bank accounts be immediately frozen to protect the Receivership Entities’ investors from further dissipation of the funds.

The temporary freeze should remain in place pending further investigation and a determination by the Court of the true nature of the $5 million transfer. To aid in this investigation and determination, Mr. Messina should be directed to provide an accounting of the funds, a relatively simple task considering he received them only about 40 days ago.

The accounting will also assist in determining the appropriate scope of the freeze, which should cover accounts containing funds received from Mr. Xu or the Receivership Entities.

Thanks to the ASD Updates Blog. View WCM777 case docs 29 through 29-2 here.

Apr 10, 2014
BULLETIN: WCM777 Receiver Puts End To ‘New Multi-Level Marketing Scheme Which Was Being Developed’ In California Warehouse And ‘Involved Numerous Of The Same Defendants And Personnel’; Receiver Also Seeks Freeze Of Attorney’s Bank Accounts — Plus, A Ponzi Fish Story

BULLETIN: (UPDATED 11:38 P.M. EDT U.S.A.) The court-appointed receiver in the WCM777 Ponzi- and pyramid case says in court filings that she has stopped a “new multi-level marketing scheme” that had been under development by WCM777 in a warehouse in El Monte, Calif.

WCM777, alleged by the SEC to have gathered about $65 million, purportedly was in the “cloud” computing business and may have more than 479,000 “member accounts.”

Receiver Krista L. Freitag says in a report that she has identified more than “100 domain names” associated with the alleged WCM777 fraudsters.

Meanwhile, Freitag says she is seeking an order to freeze the bank accounts of an attorney linked to accused WCM777 Ponzi schemer Phil Ming Xu.

The lawyer, according to the receiver, purportedly is “the beneficiary of a $5 million non-recourse loan, to be repaid in 2019 in a single balloon payment” and allegedly claimed he’d lost a cashier’s check for $200,000. The purported loan allegedly came from a Xu-owned entity.

At the same time, Freitag says her preliminary analysis suggests that Xu, who allegedly squired the purchase of two golf courses and at least six other properties for millions of dollars in cash, may have an association with at least 28 business entities. One is known as “12 Zodiacs Inc.” Another uses the words “Medical Group” when forming its name. Yet-another is described as “US Immigration Investment Assoc.” Still-another is called “WCM Art Inc.”

Perhaps like the Zeek Rewards MLM HYIP scheme before it, WCM777 could lead to an incredible paper chase that serves up intriguing but worrisome sidebars of black comedy. Another of the entities listed in the WCM777 receiver’s report, for example, potentially has an all-subsuming name: “Frequency Holdings Inc.”

The El Monte MLM scheme was being developed by “numerous of the same defendants and personnel” involved in WCM777, Freitag advised a federal judge.

U.S. District Judge Christina A. Snyder is presiding over the case. It was not immediately clear whether the alleged emerging scheme was “Global-Unity,” which once used a photograph of a golden pyramid on its website.

What is clear is that Freitag has been plenty busy since the SEC fraud case was filed March 27. In one instance, she advised the judge, the receivership observed a “third party” removing “furniture and art work” from a property linked to WCM777.

“The Receiver promptly contacted the Monrovia [Calif.] police department and made a report,” Freitag advised the judge. “The Receiver has investigated the removal of art and furniture and has identified the people who removed the personal property. The Receiver has demanded the return of the art and furniture.”

In another instance, Freitag said in the report to the judge, the receivership observed “live Koi” at a WCM777-linked property, this one in Walnut, Calif.

“Koi” are color-splotched, trainable, domesticated carp originally bred in Japan and reportedly known to recognize the persons feeding them and to eat out of the hands of their owners, according to the Wikipedia entry for the species.

Some websites sell Koi for thousands of dollars apiece.

“The Receiver has taken steps to maintain these fish in the event they have value to the receivership estate,” Freitag advised the judge.

On the money front, the receiver advised the judge that the receivership now has in its possession “$11.28 million” of WCM777-connected money that once had been in the trust account of a law firm, $1.5 million that had been in a bank account and designated to be part of a WCM777-connected real-estate acquisition and an “aggregate of approximately $2.54 million held in other accounts of the Receivership Entities or recovered from other entities.”

Freitag also has met with Xu and his lawyers, according to the receiver’s report to the judge.

“This interview lasted several hours, during which the Receiver primarily focused on identifying assets of the Receivership Entities that needed to be secured, as well as gaining understanding of any past or present operations that were being conducted by Receivership Entities,” Freitag advised the judge.”Among other things, these interviews yielded significant information concerning funds transferred to Vincent Messina as well as a myriad of investments, loans, and transfers that need to be addressed by the Receiver.”

Messina is a lawyer WCM777 billed as its “In-house Legal Counsel,” according to affiliate promos.

From the receiver’s report (italics/carriage returns added):

During her initial investigation, the Receiver learned that, approximately one month before this case was filed, $5 million was transferred from ToPacific, Inc., an entity owned by Defendant Phil Ming Xu and whose accounts are now frozen, to the IOLTA trust account of attorney Vincent Messina.

Mr. Messina has refused to turn over the funds and his counsel has stated that some of funds have already been disbursed, but the details of those disbursements have not been provided. The Receiver initially sought to recover the funds from Mr. Messina, which Mr. Messina refused. The Receiver then asked Mr. Messina to agree to escrow the undisbursed funds pending further order of the Court and provide an accounting of the funds he received. On April 4, 2014, Mr. Messina, the Receiver, and the Commission agreed that $2.332 million wired by Mr. Messina from various accounts he controls to the client trust account of Thompson Hine LLP, Mr. Messina’s attorneys, would be held in escrow by Thompson Hine pending further order of the Court. Mr. Messina still refuses, however, to provide any information about the remaining $2.668 million, stating only that it was disbursed for “business purposes.”

On April 8, 2014, Maranda Fritz of Thompson Hine confirmed that $2,133,214.62 has been received by Thompson Hine and is being held pursuant to the escrow agreement. The remaining $200,000 to be held pursuant to the escrow agreement has not yet been received.

The Receiver also learned Mr. Messina obtained a $200,000 cashier’s check from Bank of America, which he claims he lost. Mr. Messina is apparently putting in a claim with Bank of America that the funds be credited back to his account. Bank of America advises it may take as long as 91 days for such claim to be approved and the funds credited back to Mr. Messina’s account.

Mr. Messina’s position is that the $5 million transfer is a loan pursuant to a two-line loan agreement dated February 27, 2014, in which Mr. Messina is the beneficiary of a $5 million non-recourse loan, to be repaid in 2019 in a single balloon payment. The funds were wired to Mr. Messina’s IOLTA trust account . The purported loan agreement is virtually identical to purported non-recourse, unsecured loan agreements signed by Receivership Entity Manna Holding Group, Inc., an entity owned by Mr. Xu’s wife, in connection with large transfers from World Capital Market, Inc. and Kingdom Capital Market, LLC for the purchase of real property. Declaration of [lead SEC investigator] Peter Del Greco, Dkt. No. 6, Exhibits 32 and 33. No payments are due under the purported loan agreement until January 2019.

Moreover, Defendant Ming Xu subsequently asked for return of the “retainer” from Mr. Messina, which undermines a claim that this was a bona fide loan transaction for some legitimate purpose.

The Receiver is filing an ex parte application concurrently with this report requesting that Mr. Messina’s bank accounts be frozen and he be directed to provide an accounting of all funds received from the Receivership Entities, including ToPacific, Inc. Such immediate relief is necessary to protect investors from further dissipation of the funds pending further investigation and a determination by the Court of the true nature of the $5 million transfer.

Read the receiver’s report.

Apr 10, 2014
TelexFree’s Name Appears In Federal Court Filings In The SEC’s Pyramid And Ponzi Case Against WCM777

TelexFree’s name is referenced on Page 14 of Exhibit 3 in an SEC affidavit filed as part of the WCM777 pyramid- and Ponzi prosecution. Information in the exhibit was gleaned from the California Department of Business Oversight’s investigation into WCM777. Red highlights by PP Blog.

UPDATED 8:51 P.M. EDT (U.S.A.) Already under investigation in Massachusetts, is TelexFree destined to encounter trouble from state regulators in California and perhaps the U.S. Securities and Exchange Commission (SEC)?

At least by Nov. 14, 2013, the California Department of Business Oversight (DBO) was asking questions about the TelexFree MLM scheme, according to filings in federal court. The filings, which appeared in affidavit form and included exhibits, were docketed March 27 after being submitted by the lead investigator in the SEC’s case against WCM777, an alleged $65 million Ponzi- and pyramid fraud.

Some pitchmen in HYIP schemes promote multiple purported opportunities simultaneously and use money from one scheme to join another, a situation that may put banks and payment processors in possession of tainted proceeds from interconnected and ongoing frauds. A federal judge has frozen at least 54 bank or vendor accounts linked to WCM777 or accused operator Phil Ming Xu.

California investigators asked Stanley Stephan Huntsman, who identified himself as a “spokesman-ambassador” for WCM777 with Xu as his “employer,” whether he had any “relationship” with “TelexFree,” according to the SEC filings.

It may be the first reference to TelexFree in a federal court filing, albeit one that is not a charging document. At a minimum, however, it demonstrates that both the California DBO and the SEC are aware of TelexFree and believe that the Massachusetts-based “program” has promoters in common with WCM777.

“I have no relationship with TelexFree,” Huntsman responded.

The SEC announced the WCM777 prosecution on March 28, one day after its lead WCM777 investigator submitted the documents and exhibits from California’s WCM777 probe. Huntsman was not named a defendant in the SEC’s WCM777 action.

WCM777 was targeted at Asians and Latinos, the SEC alleged.

In addition to identifying himself as a “spokesman-ambassador” for WCM777, Huntsman told California investigators that he “was required to read power points prepared by WCM, which was also displayed on the WCM website,” according to an SEC affidavit.

TelexFree is creating tensions in Massachusetts which, like California, banned WCM777.

NOTE: Thanks to the ASD Updates Blog.

Apr 4, 2014
URGENT >> BULLETIN >> MOVING: SEC Takes Down WCM777; Says Purported Opportunity Is ‘Worldwide Pyramid Scheme,’ Ponzi And Offering Fraud; Federal Judge Signs Asset Freeze

URGENT >> BULLETIN >> MOVING: (16th update 5:42 p.m. EDT U.S.A.) The SEC has gone to federal court in Los Angeles, alleging that the WCM777 “program” is a “worldwide” pyramid scheme, a Ponzi scheme and an offering fraud that targeted Asian and Latino communities and gathered more than $65 million.

A federal judge has granted an asset freeze, the SEC said. The agency brought the case in an emergency complaint.

“[Phil Ming] Xu and his entities claimed they were using investor funds to build a strong cloud services company that would then ignite other high-tech companies and ultimately make their investors very wealthy,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “In reality, they were operating a pyramid scheme that preyed on investors in particular ethnic communities, leaving them with nothing left to show for their investment.”

Some MLM promoters have pitched WCM777 alongside the TelexFree “program.” TelexFree is not referenced in the SEC complaint. But the complaint does reference a Massachusetts probe into WCM777 last fall. TelexFree has been under investigation by the Massachusetts Securities Division since at least February 2014.

Charged in the SEC’s WCM777 case are WCM777 Inc. of Nevada, World Capital Market Inc. of Delaware, WCM777 Ltd.( dba as WCM777 Enterprises Inc.) of Hong Kong and Ming Xu, also known as Phil Ming Xu, of Temple City, Calif.

Several firms are listed as relief defendants, amid allegations they received ill-gotten gains. These include Kingdom Capital Market LLC of Delaware, Manna Holding Group LLC of California, Manna Source International Inc. of California, WCM Resources Inc. of Texas, Aeon Operating Inc. of Texas and PMX Jewels Ltd. of Hong Kong.

Even as WCM777 was under investigation by state regulators in the United States, the SEC said, the “program” raised “more than $37 million from investors which has been deposited into [the defendants’] Hong Kong bank account.”

During the state-level probes in Massachusetts and elsewhere, “Defendants stopped depositing investor funds into their United States bank accounts, although the WCM777 offering continued,” the SEC alleged.

Xu, the SEC charged, is “involved in all aspects of the fraud.”

From the SEC complaint (italics/bolding/carriage returns added):

The bulk of the investor funds have been used to pay cash for real property purchased in the United States, purchased in many cases with funds transferred through Defendant World Capital Market Inc. (“WCM”), and held in the names of Relief Defendants Manna Holding Group LLC and Kingdom Capital Market LLC, which are affiliated with Defendant Xu.

The properties include two golf courses, a warehouse, vacant land, and several single family homes. Defendants have also used investor funds to play the stock market and to make investments, through intermediary companies, in an oil and gas offering of Relief Defendant Aeon Operating, Inc.

Defendants have also sent investor funds to Relief Defendant PMX Jewels, Limited, which is a rough diamond jewel merchant in Hong Kong, and to Relief Defendant Manna Source International, Inc., which is affiliated with Defendant Xu.

The golf courses were identified as Glen Ivy Golf Club in Corona, Calif., and the Links at Summerly in Lake Elsinore, Calif. To acquire Glen Ivy, WCM777 plunked down $6.5 million in cash, with the money coming from “WCM777 accounts that held investor proceeds,” the SEC charged.

Meanwhile, the Links at Summerly was acquired for $1.65 million in cash. Again, the SEC charged, the money to acquire the course “originated from WCM777 accounts that held investor proceeds.”

Along the pyramid and Ponzi path, the SEC charged, WCM777 bought a single-family home in Walnut, Calif., for “$2.4 million in cash,” a single-family home in Monrovia, Calif. for “$980,000 in cash,” a single-family home in Lake Elsinore, Calif., for “$500,000 in cash,” vacant land in New Cuyama, Calif., for “$700,000 in cash,” a warehouse in El Monte, Calif, for “$1,051,750 in cash” and used “$1,456,041.56” to close on the purchase of a single-family home in Monrovia, Calif.

This Monrovia sale never closed, the SEC said.

And “Ming Xu opened an account at a major brokerage firm in June 2013 in the name of WCM,” the SEC charged. “Between June 2013 and January 2014, Defendants deposited a total of $2.155 million into this brokerage account. The cash originated from WCM777 accounts that held investor proceeds.”

Moreover, the SEC charged, WCM777 disbursed $200,000 in investors proceeds to ToPacific Inc., $210,000 to Agape Technology and $230,000 to Media for Christ.

All of these entities, the SEC charged, were “associated or otherwise affiliated” with Xu.

Media for Christ — apparently before Xu’s alleged involvement — found itself at the center of an international firestorm in 2012 over a film production known as “Innocence of Muslims.” (See PP Blog report dated Nov. 21, 2013.)

Among the alarming allegations is that WCM777 falsely planted the seed that it had partnerships “with more than 700 major companies such as Siemens, Denny’s, and Goldman Sachs,” the SEC said.

WCM777 also asserted a false association with Stouffer Hotels and Resorts, a company that “has not been in business since 1996 when it sold its real estate portfolio to another company, and that was then purchased by Marriott in 1997,” the SEC said. “Marriott does not have any relationship with Defendants.”

As the PP Blog reported in October 2013, affiliates of WCM777 helped spread the claims about ties with famous businesses across the web.

Commingling

The WCM777 enterprises “opened and used numerous accounts located at three different banks in the United States, to move and commingle most of the investor proceeds before they were disbursed to third parties,” the SEC said.

It is common for HYIP scams to use banks and payment processors to warehouse proceeds from fraud schemes, a practice that brings national-security concerns into play.

HYIP schemes often also purport to offer interest-earning “packages” while using a “points” system and touting future public offerings, things allegedly in play at WCM777.

From the SEC complaint (italics added):

Through publicly available websites and promotional materials, Defendants offer packages or membership units in “WCM777.” Defendants portray WCM777 as a profitable multi-level marketing venture that sells packages of “cloud media” or cloud services. In the WCM777 offering, Defendants promise investors that they will earn 100% or more returns in 100 days. Defendants represent that the “points” investors receive for their investments will be convertible into equity in initial public offerings (“IPOs”) of “high tech” companies Defendants are purportedly incubating. Defendants have facilitated a “secondary market” in the points they award to investors, and Defendants estimate that $890 million of the points have traded on this market.

But in reality, the SEC said, the WCM777 enterprises “do not realize any appreciable revenue other than from the sale of ‘packages’ of cloud services to investors. WCM777 is not profitable, and is a pyramid scheme. Defendants use some of the investor funds to make Ponzi payments of returns to investors.”

The SEC, which says WCM777 was selling unregistered securities as investment contracts, is seeking the appointment of a receiver, a request the judge has approved.

Like other HYIP schemes, WCM777 preemptively denied it was a “Ponzi scheme.”

“Is WCM777 a Ponzi Game?” WCM777 wrote on its website, before answering its own question, the SEC said. “In summary, we are not a Ponzi game company. We are creating a new business model.”

In reality, the SEC said, “The cash paid to investors were Ponzi payments made with funds received from other investors, and were not paid from net income or profits of the WCM777 enterprise.”

At a 2013 business event in California, Xu was photographed alongside luminaries such as former U.S. Vice President Al Gore and Apple co-founder Steve Wozniak. It is somewhat common for Ponzi schemers to trade on the names and reputations of prominent individuals.

Zhi Liu, another WCM777 executive identified in state-level filings, is not directly referenced in the SEC complaint. There may be an oblique reference, however.

“On January 27, 2014, WCM777 Ltd. filed a lawsuit against a former employee in the Superior Court for the State of California, County of Los Angeles,” the SEC said.

Liu is known as “Tiger.”

A Twitter site under the name of “Dr. Phil Ming Xu” has a March 14 entry that claims, “Tiger created the system and took $30M worth of unauthorized ecash from WCM777. WCM777 sued him.”

As noted above, however, the SEC has alleged that Xu was involved in all aspects of the fraud. And also as noted above, the SEC further alleged that “more than $37 million from investors” had been deposited in a Hong Kong bank account.

Whether Liu had a role in the Hong Kong deposits is unclear. Also unclear is whether Liu remains in the United States or has relocated elsewhere.

In its emergency filing, the SEC said the WCM777 enterprise constituted an “ongoing” fraud.

Read the SEC’s statement and complaint.

Mar 28, 2014
TelexFree, WCM777 (Etc.) — In Pictures

California-based WCM777, an MLM “program,” got booted out of Massachusetts in November 2013, amid allegations of securities fraud and affinity fraud targeted at the Brazilian community through hotel pitchfests. WCM777, purportedly operated by Ming Xu and recruiting affiliates to conduct business over the Internet, later got booted out of California. In addition to the Brazilian community, WCM777 targeted people who speak Spanish and people who speak Chinese, perhaps Christians in particular.

Massachusetts launched a probe into TelexFree, another MLM “program” associated with hotel pitchfests and affiliate recruitment over the Internet, at least by Feb. 28 of this year — probably sooner, given the nature of WCM777. TelexFree largely is targeting speakers of Portuguese and Spanish, perhaps Christians in particular. It also has an affiliate presence in India and Africa (at least).

Although the schemes do not appear to have common ownership, both WCM777 and TelexFree offered plans that encouraged recruits to buy in at higher levels to get higher “earnings.” Affiliates of each scheme appear to have engineered subschemes in which their recruits could buy in at higher levels than the “programs” themselves advertised, potentially introducing a second layer of fraud.

What this means, in essence, is that neither TelexFree nor WCM777 may know their real bottom lines and that the firms created an environment that encouraged back-alley, illegal sales of securities and secret deal-making among individual promoters. Individuals ostensibly acting as brokers for TelexFree and WCM777 could be cherry-picking cash and not even sending it to the “program” operators. In short, certain people could be creating personal and organizational underground economies and fleecing TelexFree and WCM777 even as they fleece their own marks and recruits.

Hidden members of both “programs” may be getting paid in cash by their upline sponsors or ostensible brokers, with no record of their participation — even if they supplied cash or an equivalent to join the “programs.”

The only safe assumption in HYIP Ponzi Land is that any system that can be abused will be abused. That’s why these “programs” necessarily must be viewed through the lens of national security.

Presented below are some screen shots that demonstrate promotional ties between TelexFree and WCM777. In certain instances, the websites pictured below are promoting not only TelexFree and WCM777, but also other “programs.” One of them, for instance, is promoting the almost indescribably insidious and bizarre Banners Broker “program.”

As always is the case in HYIP investigations, the concern is that banks locally, regionally, nationally and internationally are being used by corporate scammers first as warehouses to store illicit proceeds — and later, by individual promoters at potentially thousands and thousands of locations, as virtual ATMs that provide the service of offloading the “earnings” of the promoters.

The interconnectivity of these schemes endangers local, regional, state, provincial and national economies. In many cases, promoters engage in willful blindness and simply move to another MLM HYIP scam when the current “hot” one encounters regulatory intervention or craters on its own.

It’s often the case that promoters plant the seed that a scheme has been endorsed by a government or that a corporate registration is surefire “proof” that no scam exists. Social media invariably is used to help a scheme proliferate or achieve Internet virality.

One of the shots below is from a YouTube video in which a TelexFree promoter seeks to plant the seed that TelexFree is backed by the Better Business Bureau. The narrator’s words in the video suggest he sought to plant the same seed about WCM777 but had to backtrack when he discovered a BBB listing that referred to WCM777 as a Ponzi scheme.

“Today we’re going to compare two of the most dynamic companies out there taking over right now,” the narrator said.

After recording a search of the BBB site for a TelexFree listing and finding one, the narrator suggested that the listing alone was proof that TelexFree was not a scam. He thereafter performed a search for WCM777 and found a Ponzi reference, thus triggering what appeared to be backtracking from his earlier claims that TelexFree and WCM777 were “dynamic companies.”

It also could be the case, we suppose, that he already knew about the WCM777 Ponzi listing before performing the search and that the design all along was to get people to go with TelexFree because WCM777 was a scam. Even under that interpretation, however, the video still demonstrates the underhandedness within the HYIP sphere.

The HYIP sphere always screams incongruity. Keeping that in mind, we’ll point out that one of the screen shots below shows TelexFree executive James Merrill in the same affiliate-manufactured frame as Massachusetts Commonwealth Secretary William Galvin. It was a clear bid to suggest that because TelexFree was registered as a corporation in Massachusetts, the “program” couldn’t possibly be a scam.

That is hogwash, of course. Galvin did not endorse TelexFree when his office approved a corporate registration. Besides, Galvin — as Commonwealth Secretary — oversees both the Massachusetts Corporations Division and the Securities Division. The Securities Division is probing TelexFree and possibly can rely on various documents in the Corporations Division to help investigators connect dots.

Beyond that, the website from which the screen shot promoting TelexFree by marrying images of Merrill and Galvin was taken also is promoting WCM777. Also shown below is an image from the same site in which Merrill is shown posing beside a giant SUV. Contrast that image against the image of Merrill posing in front of a large Massachusetts building as though TelexFree were its only occupant. TelexFree promoters have used the same approach, planting that seed that TelexFree owns the building and has a large physical presence in the United States.

That’s hogwash, too. TelexFree was an occupant of Suite 200 at a Regus center in Marlborough, along with dozens of other companies.

Finally, before observing the shots below, recognize that MLM itself — never a stranger to scandal — may be on the verge of experiencing a PR and legal crisis of unprecedented proportions.

People have harshly criticized hedge-fund manager Bill Ackman for attacking Herbalife. Among his contentions is that Herbalife is a pyramid scheme that targets vulnerable populations. Say what you will about Ackman’s Herbalife claims, but it is crystal clear that affinity fraud and the viral looting of impoverished/disadvantaged people have existed in the MLM realm for a long time and continues to be seen. One might even be inclined to say a market-making fraud blueprint exists within MLM: mow down one affinity cluster or population group and then move to another.

At a minimum, “programs” such as TelexFree and WCM777, which clearly have positioned themselves as wealth recipes for immigrants and vulnerable populations, can help Ackman shape and inform his Herbalife hypothesis.

James Merrill is TelexFree’s president and thus an MLM executive. TelexFree and Merrill, to date, have played into virtually every MLM stereotype that exists — everything from private jets, monster SUVs and stretch limos to business registrations and mail drops in Nevada.

Most disturbingly, though, Merrill represents an American MLM company that has been banned in Rwanda, an African nation that is trying to reverse poverty and receives aid from the World Bank. It’s hard to conceive that MLM — particularly American MLM — could card a worse PR disaster. Regardless, one could be in the offing.

Picture Story

1.

A TelexFree promoter who also promoted WCM777 extends the myth that TelexFree has a large physical presence in the United States and plants the seed that Massachusetts Commonwealth Secretary William Galvin endorsed TelexFree. Galvin’s office is investigating TelexFree after previously booting WCM777 from the state.

2.

A promoter simultaneously pitches TelexFree and WCM777. This shot is from the same site described in the photo above. The site may be based in Ecuador.

3.

This shot is from the same two sites described in the captions above — and features TelexFree President James Merrill posing with a giant SUV.

4.

This shot was taken on the same site described in the three preceding captions above. In this fourth shot, a person promoting both TelexFree and WCM777 claims that the purported parent company of WCM777 provided a loan of $20 million to a restaurant chain that sells Mexican food. The PP Blog has deleted an image of the chain’s logo that appears in the WCM777 promo. The same site plants the seed that WCM has provided hundreds of millions of dollars in loans to jewels of American business.

5.

This site features promos for various purported “opportunities,” including TelexFree and WCM777. Though not shown in the photo, the site also is promoting the uber-bizarre Banners Broker “program.” The site may be based in Italy.

6.

This site also is simultaneously promoting TelexFree and WCM777.

7.

This YouTube site describes TelexFree and WCM777 as “dynamic companies” and plants the seed that TelexFree is endorsed by the Better Business Bureau.

Mar 22, 2014
Quebec Issues Investor Alert On WCM777

This image of a golden pyramid appeared on the Global-Unity website last month.

UPDATED 6:42 P.M. EDT (U.S.A.) The Autorité des marchés financiers (AMF) has issued an Investor Alert on the WCM777 MLM “program.”

Quebec’s securities regulator now joins at least nine other jurisdictions issuing Investor Alerts or filing actions against WCM777, also known as World Capital Market, Kingdom777 and Global-Unity. Global-Unity recently used a photo of a golden pyramid on its website, a possible taunt at regulators.

Some WCM777 pitchmen claimed that $14,000 sent to the “program” returned $500,000 in a year.

“World Capital Market, Inc., WCM777, Inc. and WCM777 Limited and their officers and representatives, Ming Xu, Zhi Liu and Harold Zapata, are not registered with the AMF and did not obtain a receipt for a prospectus from the AMF,” AMF said. “Consequently, any solicitation of Québec investors by these firms and individuals could violate the Québec Securities Act.”

AMF said the “scheme originated in California and is offered mainly as part of hotel presentations and through Internet ads and webinars.”

Quebec’s move brings the unofficial total of jurisdictions or regulatory agencies filing actions or issuing Investor Alerts against WCM777 to 10. The others are the country of Peru, the country of Colombia, the state of Massachusetts, the state of California, the state of Colorado, the state of Louisiana, the state of New Hampshire, the state of Alaska, the province of New Brunswick.

There are many mysterious things about WCM777.

From AMF (italics added):

If you have responded to solicitations related to WCM777 or any similar scheme, please contact an officer at our Information Centre.

Read the Quebec Investor Alert.

Mar 11, 2014
Why California’s WCM777 Action May Spell Trouble For HYIP Promoters On You Tube

As a reporter interviews a Peruvian official at the scene of a police raid against a WCM777 outlet in Lima, an image of American pitchman Harold Zapata (left) flashes on the screen. Source: YouTube.

Still using social-media sites to promote massive fraud schemes — even after the AdSurfDaily, Zeek Rewards and Profitable Sunrise debacles?

Thanks to his presence on social media, Harold Zapata, a WCM777 YouTube pitchman named a respondent in a Desist and Refrain order announced last month by California’s Department of Business Oversight, may be trapped between a rock and a hard place.

Zapata is a California resident. Not only does the state know about his YouTube presence — indeed, his promos are referenced in the D&R — so do authorities in Peru. Whether Zapata ever has ventured to Peru is unclear. What is clear is that Peruvian media have used snippets of his U.S.-based promo as a backdrop to video reports about a police raid against a local WCM777 outlet in Lima.

Whether he likes it or not, Zapata has become one of the American faces for WCM777. In one video, Zapata identified himself as a WCM777 “director . . . working directly with our founder, CEO, chairmans [sic], leaders in our WCM777 organization.”

WCM777 executives include Ming Xu and Zhi Liu, California said. Both men are named in the D&R. Zapata also is named.

California’s action against WCM777, its executives and Zapata may signal trouble for other YouTube pitchmen for highly questionable MLM “programs” or outright scams. For starters, YouTube commercials for HYIPs sometimes are copied and used by promoters of the same purported “opportunity,” thus saving fellow pitchmen the time and trouble of making their own videos. This can happen with or without permission, perhaps with an eager recruit using the video of another sponsor but inserting a URL to the recruit’s page in a companion text pitch below the actual video.

Beyond that, some fraud-scheme pitchmen openly share their YouTube promos with downline recruits as a means of driving more business to a scam. Such approaches typically are portrayed as the acts of a helpful sponsor who wants to see his or her recruits thrive by providing them the “tools” they need to succeed.

At least one YouTube pitchman for WCM777 appears to be using Zapata’s video to drive traffic to WCM777 and possibly other “opportunities.”

Zapata appears to have noticed this at least two months ago and placed warnings in Spanish and English on the YouTube site of the fellow WCM777 pitchman.

Here’s how the warnings read (italics added):

Por favor quite este video inmediatamente o me veo obligado a reportarte por infracción de copyright, de este video.

Please remove this video immediately or I will be forced to report this video for copyright infringement.

The video nevertheless remains. It shows Zapata pitching WCM777 in English, even after the California action and the raid in Peru. The title of the video on the fellow WCM777 pitchman’s site is “WCM777. FULL PRESENTATION IN ENGLISH.”

It is unclear from Zapata’s warnings whether he was upset that the video was being used without his permission or whether he was concerned that the fellow WCM777 pitchman was using the video to cherry-pick Zapata’s earnings.

Regardless of Zapata’s specific concerns, however, the continued appearance of the video shows the vulnerability of MLM pitchmen who promote “programs” on YouTube. Such promoters not only may lose control over their own content, they literally may lose control over their own faces.

Even if Zapata has stopped promoting WCM777, the video published by the fellow WCM777 pitchman makes it appear as though Zapata still is promoting the purported opportunity, which California publicly declared a scam last month. Last week, the state asked residents who invested in WCM777 to contact the DBO immediately.

At least 5,500 Californians plowed money into the WCM777 scam, the state said.

“The California Department of Business Oversight has seen a surge of high-yield investment schemes that take advantage of social networks to market illegal investments,” said Jan Lynn Owen, commissioner of the Department of Business Oversight. (Bolding added by PP Blog.)

In 2010, FINRA called the HYIP sphere a “bizarre substratum of the Internet” and issued a warning that such schemes were spreading on social-media sites such as YouTube, Facebook and Twitter. Zapata’s experience demonstrates that some HYIP pitchmen either missed the warning or chose to ignore it.

BehindMLM.com is reporting that WCM777 — now operating as Kingdom777 — appears now to be engaging in ham-handed wordplay to continue its duping of the masses. The “program,” BehindMLM reports, now is using the word “members” and trying to steer clear of the word “investors.”

Such wordplay bids foreshadowed doom at both AdSurfDaily, a $120 million Ponzi scheme, and Zeek Rewards, which allegedly gathered at least $850 million.

As the PP Blog reported in June 2012, here is part of what the U.S. Secret Service said in a filing in the ASD Ponzi-scheme case in February 2009 (italics’bolding added):

[ASD operator Andy] Bowdoin and his sponsor knew that it was illegal to sell investment opportunities to thousands of individuals; thus, they were careful not to call participants “investors” but rather referred to them as “members.” Moreover, there were careful not to call payments to “members” “return on investments”; rather, they referred to the income program as a “rebate” program . . .

The document cited above is available at the top this PPBlog story about the then-active Zeek Rewards Ponzi scheme: EDITORIAL: A Friday Evening In MLM Radio La-La Land. (Document courtesy of the ASD Updates Blog.)

For whatever reason, HYIPs and their pitchmen apparently continue to believe they can duck or circumvent securities regulations and laws against the sale of unregistered securities by calling an investment something else.

Prosecutors made short work of the Zeek and ASD wordplay, saying both “programs” engaged in linguistic games to describe an investment as something else.

WCM777 even may dialing up the HYIP wordplay madness. From BehindMLM.com (italics added):

A “dividend” [at WCM777/Kingdom777] is now a “bonus”… cuz well, a bonus could be anything… including an investment “return”, which is now also just a “bonus”.

Feb 16, 2014
BULLETIN: California Asks Residents Who Bought Into WCM777 To Contact Department Of Business Oversight ‘Immediately’; State Says Thousands Of Locals Bought Into Scam

BULLETIN: (UPDATED 6:38 P.M. ET U.S.A.) The state of California, which last month issued a Desist and Refrain order against the WCM777 MLM “program” and called it an “investment scam,” now is asking residents who invested in WCM777 to contact the Department of Business Oversight “immediately.”

At least 5,500 Californians plowed money into the scheme, the DBO said.

The state has ordered WCM777 to halt is operations in California.

“The California Department of Business Oversight has seen a surge of high-yield investment schemes that take advantage of social networks to market illegal investments,” said Jan Lynn Owen, commissioner of the DBO. “We encourage anyone who dealt with WCM777 to immediately contact the Department.”

Affinity fraud is part of the WCM777 mix, the state said.

“Relying on Biblical themes to lure investors, the WCM777 scheme offers securities in the form of memberships that allegedly provide purchasers with up to a 60 percent profit in 100 days,” the state said.

WCM777 now is operating as Kingdom777.

From a DBO statement (italics added):

All California investors in WCM777 are strongly encouraged to contact the Department of Business Oversight to file a formal complaint at (866) 275-2677 or online at: www.dbo.ca.gov/Consumers/consumer_services.asp. The January 8 order is available on the Department’s website at http://www.dbo.ca.gov/ENF/pdf/2014/WorldCapitalMarketInc_dr.pdf.

Named in California’s order are executives Ming Xu and Zhi Liu, and YouTube pitchman Harold Zapata, all with addresses in California Also named are World Capital Market Inc., WCM777 Inc. and WCM777 Limited.

Police raided a WCM777 outlet in Peru last month. At least one Peruvian TV station showed snippets of Zapata’s YouTube pitch as part of its coverage of the raid. The development signals that HYIP pitchmen operating from the United States or other countries and using YouTube to help a fraud scheme go viral now may find their faces plastered on TV both locally and in faraway lands.

FINRA issued a warning on HYIP schemes that use social-media sites in 2010.

Feb 14, 2014