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Tag: Montana Commissioner of Securities and Insurance

  • MONTANA: Former Zeek Pitchman Who Also Pushed TelexFree Now Required To Give State Notice Of MLM Activities

    recommendedreading1A former pitchman for the Zeek Rewards MLM Ponzi- and pyramid scheme also acknowledged he participated in TelexFree, the state of Montana said in a consent agreement and final order.

    James D. Helgeson was fined $5,000 by the office of Monica Lindeen, Montana’s Commissioner of Securities and Insurance (CSI) and state auditor.

    The case demonstrates that accountability for a “program” can apply to both the operators and individual promoters. It also demonstrates that promoters who may move from one dubious MLM scheme to another may encounter state-imposed restrictions.

    As part of the agreement, Helgeson must notify Montana for the next five years “prior to his participation in any multilevel distribution company.”

    From Helgeson’s agreement with Montana, which was finalized this month (italics/carriage returns added):

    This condition applies regardless of whether the MLM is registered with the State of Montana as required under §30-10-216.

    “Participation” includes selling any MLM product or service; directly or indirectly promoting, recommending, or referring a person to any MLM product, service, or compensation plan; participating in any MLM compensation structure wherein Respondent sponsors or is sponsored by another person in the structure, or receives a pecuniary or other benefit based upon the efforts of other persons within the structure; or paying a MLM or its representative, whether directly or through the purchase of a product or service, for the opportunity to participate in a compensation plan or structure.

    “Participation” does not include the purchase of a MLM product or service for personal consumption or use, so long as the MLM does not market or offer that product or service as a means for the purchaser to earn income.

    In April 2014, Montana issued a cease-and-desist order to TelexFree, saying it unsuccessfully had sought complete information from the MLM “program” for months and alleging that TelexFree continued to do business in the state after claiming it had pulled out.

    Alleged TelexFree co-owners James Merrill and Carlos Wanzeler were charged criminally by federal prosecutors in May 2014 with wire-fraud conspiracy. They also face serious allegations of fraud filed by the U.S. Securities and Exchange Commission, as well as at least four prospective class-action lawsuits.

    The SEC has sued four alleged individual promoters, saying they engaged in securities fraud. Helgeson, who neither admitted nor denied wrongdoing in Montana, is not among the federal defendants.

    During the Zeek-related action brought against him in Montana, Helgeson acknowledged to authorities that he also had been involved in TelexFree and an MLM “program” known as Apex Revenue, the state said in its order.

    The filing asserts that Helgeson, who was a registered securities salesperson and investment adviser while pushing Zeek, pushed Zeek’s unregistered securities.

    Helgeson supplied the state with a list of the names of his Zeek recruits and “has offered certain Montana resident-participants payment for monies lost through participation in the Program,” according to the order.

    “Respondent has further informed the CSI that he has terminated his Participation in the TelexFree and Apex Revenue MLM programs prior to the date of this Agreement,” the state said in the order, which was dated June 2.

    Zeek gathered $850 million in its scam, federal officials have said. TelexFree gathered more than $1.2 billion, according to the Massachusetts Securities Division.

  • URGENT >> BULLETIN >> MOVING: Montana Fines ‘Funky Shark,’ Purported Upstart ‘Penny Auction’ Program; Operator Agrees to Pay $834,000 After Issuance Of Order

    breakingnews72URGENT >> BULLETIN >> MOVING: (UPDATED AT 12:49 P.M. ET U.S.A. TO DELETE EARLIER REFERENCE TO ‘CEASE AND DESIST’ ORDER AND TO PROVIDE LINK TO CONSENT AGREEMENT AND FINAL ORDER.)

    An upstart “penny auction” company known as “Funky Shark” effectively has been shut down after the state of Montana named it in an order and its alleged operator agreed to pay a $40,000 fine and to repay $834,000 to investors, the office of the Montana Commissioner of Securities and Insurance Monica J. Lindeen said this morning.

    Montana authorities identified Scott Wacker of Bozeman as Funky Shark’s operator, alleging that he and Funky Shark sold investment opportunities illegally.

    In September — after the shutdown by the SEC of the purported Zeek “penny auction” program — “Wacker began recruiting investors for his penny-auction website, FunkyShark.com,” Lindeen’s office said. “By the end of October, Wacker had raised over $1 million from investors across the world.”

    In a claim apt to cause unease among HYIP operators, Lindeen’s office said Wacker’s bank filed a “suspicious activity report.” Such reports typically are filed when a bank begins to suspect something untoward is occurring in a customer’s account.

    “The flurry of transactions in Wacker’s personal and business accounts led his bank to file a suspicious activity report, which was referred to Lindeen’s office,” Montana authorities said. “After reviewing the report, investigators suspected Funky Shark was a pyramid scheme and requested a restraining order to prevent additional investors from getting involved.”

    Wacker cooperated with Montana authorities and “posted a notice on Funky Shark’s website explaining that its investment program ‘may violate certain securities laws in the United States,’” Lindeen’s office said.

    Authorities described Funky Shark as a program teetering on collapse shortly after its launch.

    “In the two months it operated, Funky Shark paid nearly $378,000 in commissions to participants who recruited new members,” Lindeen’s office said. “Those commission payments left Funky Shark unable to repay all of its participants in full, so Wacker agreed to pay $270,000 out-of-pocket to make investors whole.”

    Lindeen said Funky Shark investors were lucky.

    “Mr. Wacker stepped up to the plate and repaid his investors,” she said. “Often when we handle these types of cases, there’s simply no money left to repay participants. But for a number of reasons, this case is unique. Mr. Wacker didn’t understand what he was getting into, and he has expressed his commitment to setting things right.”

    Some HYIPs are selling “founder’s memberships” to fill the coffers with cash prior to the “launch” of a “program.” That was the case with Funky Shark, Lindeen’s office said.

    “According to the Funky Shark website, members who pay a $24.95 fee can join a ‘rewards program’ and earn ‘passive income’ from new members they recruit,” Lindeen’s office said on Nov. 2. “For a non-refundable, $1,000 investment, members become ‘founders’ and get a share of each day’s auction profits and a bonus for every new founder they recruit.”

    Authorities noted that “[n]either Wacker nor Funky Shark were licensed to offer securities in Montana.”

    Here is the consent order.

  • BULLETIN: Montana Declares ACN Inc. A ‘Pyramid Scheme’; Cease-And-Desist Order Issued Amid Allegations Deck Is Stacked Against MLM Participants

    BULLETIN: ACN Inc., a North Carolina-based multilevel-marketing company that bills itself “The World’s Largest Direct Seller of Telecommunication Services,” has been accused by the state of Montana of operating a pyramid scheme.

    Monica J. Lindeen, Montana’s Commissioner of Securities and Insurance, has issued a cease-and-desist order against ACN and a Notice of Proposed Agency Action.

    “Pyramid schemes are immensely profitable to a few individuals at the top and a complete loss for almost everyone else,” Lindeen said. “The actions against ACN and its officers seek to shut down the company’s alleged unlawful operation before more people lose their hard-earned money.”

    Also named in the actions were Gregory Provenzano, Robert Stevanovski, Anthony Cupisz and Michael Cupisz, all officers and founders of ACN, according to Lindeen’s office.

    “[A]n overwhelming portion of revenues earned by ACN representatives was derived from participants who must personally buy a telephone service that does not work in many parts of Montana to become managers or recruit new participants into the program,” Lindeen’s office said.

    Investigators said the odds of making any money in ACN were overwhelmingly against participants.

    “In 2008, ACN recruited 91 Montana participants who paid approximately $61,741.69 to be a part of the program,” Lindeen’s office said. “Only two of the participants made any money, with one participant making $696 and the other making $700.”

    In the whole of 2009, according to investigators, Montana-based reps paid ACN nearly $239,000 to be a part of the program. The money came from more than 300 participants.

    “ACN’s records indicate a mere $896.86 was paid out in compensation to these participants,” Lindeen’s office said.

  • BREAKING NEWS: Montana Forges Partial Settlement In Case That Alleged Ponzi Schemer Took $100,000 From Investment Client, Paid Earlier Client $50,000, Paid Lawyer $25,000 And Pocketed $25,000; Major State Investigation Remains Open

    Monica Lindeen, Montana Commissioner of Securities and Insurance
    Monica Lindeen, Montana Commissioner of Securities and Insurance

    UPDATED 9:28 P.M. EDT (U.S.A.) Donald Chouinard urged clients in Montana and Idaho to invest in what they thought was a “day-trading program,” authorities said.

    In one case, he allegedly persuaded a client to borrow a large sum to enter the program. The case is remarkable in the sense that one of its specific allegations provides a perfect illustration of how victims get suckered and how Ponzi schemes work.

    In a single transaction with an investor, all of the investor’s funds allegedly were consumed immediately, leaving the investor with nothing, authorities said.

    “Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in 30 days,” investigators said. “Instead of investing the $100,000 in the ‘day-trading’ program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.”

    Montana Commissioner of Securities and Insurance Monica Lindeen announced a partial settlement today that calls for LPL Financial Corp. to pay nearly $1.3 million in restitution and a fine of $150,000 for failing to supervise Chouinard.

    LPL formerly employed Chouinard, who also is associated with two other firms. The settlement with LPL, which neither admitted nor denied wrongdoing, applies only to LPL and does not affect separate actions involving Chouinard and the other firms, DC Wealth Management Inc. and DC Associates Inc.

    “Too many hard working Montanans lost their savings due to the actions of Mr. Chouinard, but today we started the process of recovering those losses,” said Lindeen. “This settlement is the result of both efficient and effective enforcement work by this agency and a willingness by LPL Financial Corporation to arrive at a solution that addresses the needs of its clients. We are very pleased with this result.”

    Among the assertions against Chouinard are that he operated a Ponzi scheme, engaged in securities fraud, traded in the investors’ accounts without authorization, forged signatures to authorize certain trades and failed to provide investors with statements or tax documents for their “day-trading” investments.

    At the same time, investigators assert that Chouinard “routinely informed the investors about the values of their investments orally or via email,” but misrepresented the values — “in one case by as much as 10,000 [percent].”