A New York man sued by the CFTC last month for registration violations has been arrested on criminal charges of threatening to kill 47 current or former market regulators, federal prosecutors said.
Vincent P. McCrudden, 49, who recently had been living in Singapore, was arrested yesterday by the FBI at Newark Liberty International Airport after returning to the United States.
The arrest occurred just five days after a gunman opened fire at an Arizona constituent event hosted by U.S. Rep. Gabrielle Giffords. Giffords was critically wounded in the attack. U.S. District Judge John Roll and five others were shot and killed.
McCrudden was denied bail this afternoon in the alleged threats against regulators, some details of which U.S. Attorney Loretta E. Lynch of the Eastern District of New York released today.
“In this day and age, there is no such thing as an idle threat,” said Lynch. “Those who threaten injury or worse to the lives of others will be promptly investigated and vigorously prosecuted.”
On Sept. 30, prosecutors said, McCrudden sent an email to an employee of the National Futures Association (NFA) that made a death threat.
“[I]t wasn’t ever a question of ‘if’ I was going to kill you, it was just a question of when,” the email read, prosecutors said. “And now, that question has been answered. You are going to die a painful death.”
McCrudden also published an “Execution List” on his website. The list included the names of 47 current and former officials of the SEC, FINRA, NFA, and CFTC. Included on the list were the names of the “the Chairperson of the SEC, the Chairman of the CFTC, a former Acting Chairman and Commissioner of the CFTC, the Chairman and CEO of FINRA, the former chief of Enforcement at FINRA, and other employees of the NFA and CFTC,” prosecutors said.
“[T]hese people have got to go,” McCrudden wrote, prosecutors said. “And I need your help, there are just too many for me alone.”
And McCrudden “posted a $100,000 reward on his website for personal information of several government officials and proof that those officials were punished,” prosecutors charged.
On Dec. 16, according to the complaint, McCrudden sent a CFTC official an email with a subject line of, “You corrupt mother[*!&$$%]!”
The email went on to inform the official that he was “first on my list.”
McCrudden used the website to encourage others to “[g]o buy a gun” and take back the country. On the website, McCrudden wrote that he would lead by example, prosecutors said.
A top FBI official said the threats were “especially troubling.”
“Overt threats of the sort made by this defendant must be dealt with to the fullest extent of the law,” said Janice K. Fedarcyk, assistant director-in-charge of the FBI’s New York field office.
“The threats were direct, extreme, and specific, vowing to kill securities regulators and encouraging others to do the same,” Fedarcyk said. “The allegations, coming as they do during a period of national mourning in the wake of horrific violence done to public officials and others, are especially troubling.”
BULLETIN: Ponzi schemer Trevor Cook has been sentenced to 25 years in federal prison for his role in an international Forex Ponzi scheme that gathered more than $190 million and fleeced victims out of more than $158 million.
In ordering the prison term, U.S. District Judge James Rosenbaum sided with the prosecution’s recommendation of a quarter of a century. It is believed to be the longest prison term ever imposed in a Minnesota financial-fraud case in which the defendant pleaded guilty.
“Such a sentence fairly, adequately, and justly punishes the defendant for his offense, reflecting the seriousness of the offense, his willingness to plead guilty and provide information to law enforcement, and the need to protect the public,” prosecutors said last week in a sentencing recommendation to Rosenbaum.
“Over the course of a few years, the defendant executed an investment fraud, victimizing approximately 923 victims and defrauding them of over $158 million,” prosecutors said. “As is all too common, the defendant often used victims’ religious beliefs as a means of enticing them to give him their money.”
Cook, 38, is not out of legal harm’s way — even with the sentence of 25 years. Prosecutors disclosed last week that he has signed a waiver that would subject him to further punishment if the ongoing investigation shows he has “somehow secreted undisclosed assets.”
Victims have expressed concerns that Cook could have stashed money from the scheme anywhere on earth. Cook failed a lie-detector last month about the whereabouts of assets.
FBI and IRS agents later found more than $400,000 in undisclosed assets under the control of Graham Cook, Trevor Cook’s brother.
Despite Cook’s lack of disclosure, prosecutors contended that it made no sense to delay Cook’s sentencing any longer as the asset search by the government and R.J. Zayed, the court-appointed receiver in a civil case filed against Cook and former Christian radio host Pat Kiley last year by the SEC and the CFTC, continued.
Cook had been scheduled to be sentenced last month. Kiley, who called his radio listeners “truth seekers,” has not been charged criminally in the case.
“The government has worked closely with the court-appointed receiver to assist its efforts in finding and identifying assets,” prosecutors said of Cook. “The government and the receiver now agree that any additional time prior to sentencing will not result in any additional information or assistance to the receiver’s efforts.”
It is possible that Cook could prove to be a valuable source of information for the government — in the same sense that disbarred attorney, convicted racketeer and Ponzi schemer Scott Rothstein has become an information source.
Rothstein, who presided over a $1.2 billion Ponzi scheme in Florida, was sentenced to 50 years in federal prison earlier this year. It is known that Rothstein has provided information helpful to the government.
Cook “has been repeatedly debriefed by law enforcement in an effort to identify assets and to provide information regarding other individuals,” prosecutors said. “He has done so. The information has been of assistance to law enforcement in its ongoing investigation.”
Ponzi schemes are toxic — and frequently are incredibly elaborate. Court documents in case after case show that the schemes frequently feature schemes within schemes and elaborate money-laundering networks. Criminals often go to fantastic lengths to disguise the conduits of the schemes, using shell companies and multiple bank accounts to funnel money and make the schemes difficult to reverse-engineer.
FBI Director Robert Mueller has warned Congress at least twice this year about a “shadow” banking system criminals employ and an increasing reliance on “shell corporations†to commit crimes and hide from investigators.
Cook’s scheme featured companies with confusingly similar names.
Records show that Cook had a tie to a company the AdViewGlobal (AVG) autosurf claimed to be its facilitator of offshore wires.
KINGZ Capital Management, AVG’s purported facilitator, denied any affiliation with AVG, which has close ties to the AdSurfDaily autosurf. ASD is implicated in a Ponzi scheme alleged to involve tens of millions of dollars.
AVG collapsed in June 2009, after running a virtually nonstop promotion that advertised matching bonuses of 200 percent for both recruits and their sponsors.
The National Futures Association said last year that Cook was managing money for KINGZ. AVG made the claim KINGZ was its wire facilitator on May 4, 2008 — the same day the Obama administration announced a crackdown on offshore fraud.
One of the Trevor Cook homes. From court filings in the SEC/CFTC case.
Some of the investors in the Trevor Cook/Pat Kiley Ponzi scheme are none too pleased with Cook’s plea deal, which may place a ceiling of 25 years on any prison sentence he receives while tens of millions of dollars remain missing.
One investor has told the PP Blog that a group of investors is seeking a meeting with prosecutors either to overturn the plea deal or delay Cook’s sentencing until more information becomes known. Cook, 38, is scheduled to be sentenced in Minneapolis July 26, one month from today.
Cook pleaded guilty in April to mail fraud and tax evasion. Under the terms of the agreement, he is required to cooperate with authorities and R.J. Zayed, the court-appointed receiver, to unravel the scheme. Although Cook has met with both the government and Zayed, investors are concerned that he is incapable of telling the entire truth. Their concerns are based on his history of telling spectacular lies and thumbing his nose at both investors and the court by spending investors’ funds even after his assets were frozen in November 2009.
Records from the National Futures Association (NFA) show that Cook has a history of scamming. In 2006, NFA fined Cook $25,000, saying he had committed a “very serious violation†in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents. Read more about Cook’s NFA encounter here. Read more on yet-another case in which Cook’s name was referenced by NFA here.
Before we get into the details of some of recent events in the Cook case, we’d like to provide a short capsule based on court filings. It has become clear that the Cook Ponzi scheme has caused financial pain for hundreds of people, including loved ones, and also has resulted in frustration — some of it of the needless and senseless variety.
Such frustration surfaces in virtually all Ponzi cases, in part because the crimes can be extraordinarily elaborate even though the basic concept of a Ponzi is simple: tricking people into believing everything is on the up-and-up by using cash from new investors to pay earlier investors or duping people into rolling over their investments instead of taking distributions to keep the cash from drying up — all while the Ponzi schemer siphons funds and glad-hands and back-slaps with investors, politicians, bankers and others to create the illusion of success.
At the end of the day, however, Ponzis are about people. They cause pain and frustration for every person and institution they touch.
Cook’s in-laws, Clifford and Ellen Berg of Apple Valley, Minn., received $948,848.36 from the scheme. Zayed recovered $726,650.38 of that sum, and then effectively sued the Bergs by seeking a court order for the balance of $222,197.98. The SEC, which had named the Bergs relief defendants in the case for receiving ill-gotten gains, backed Zayed in his efforts to recover the balance. Records show that the Bergs raised $194,000 to pay the receivership estate through the sale of two cars, the tapping of an IRA account and by taking out a mortgage on their cabin. They were given credit by the receivership for $13,500 from the sale of another vehicle, but still came up nearly $15,000 short of the sum needed to retire the receivership balance. If the shortage is not paid by Sept. 15, a judgment will be entered against the Bergs, who have retained the right to be treated as victims of their son-in-law and to file a claim for the principal they invested with Cook.
Zayed effectively had to sue Wells Fargo by seeking a court order to force it to turn over the relatively small sum of $9,275.22 from Cook’s bank accounts. This document is worth reading because it paints a picture of a receiver — Zayed — encountering frustrating resistance in his bid to round up assets for victims. Although the Cook/Kiley Ponzi is extremely serious business that has altered the lives of more than 1,000 people, the document linked to above is almost dolefully comedic. Zayed eventually had to file a 12-page legal document to force the return of the sum. Just 13 days after Zayed asked a federal judge to order Wells Fargo to return the money, he filed a three-page document advising the judge that the bank finally had turned over the sum — something he’d been trying to get it to do for months.
If you’re a victim of a Ponzi scheme or a loved one of a Ponzi schemer — such as Gina Cook, Trevor Cook’s wife — this document shows that your life may start to revolve around attorneys. No matter how you slice it, the result is conflict — legal, emotional or otherwise.
Can Cook Be Trusted In Any Context?
As noted above, some investors fear that Cook is incapable of telling the full truth. There is fear that he has stashed money and covered his tracks so well that he could emerge from prison and benefit from his crime — or perhaps permit insiders or unknown criminal colleagues to benefit from the fraud while he is jailed.
International litigation can be an extremely complex thing. The Cook case, according to Zayed, has required the notarization of documents “under the Hague Convention standards.”
UPDATED 5:18 P.M. ET (U.S.A.) A Florida company and four individuals have been charged with securities fraud by the SEC, amid allegations they fleeced investors in a children’s book company known as “Winning Kids.”
Charged in the case were Winning Kids Inc. of Palm Beach Gardens, Fla; Christian Hainsworth, Winning Kids’ chief executive officer and founder; and sales agents Robert Comiskey, Edward Tamimi and Victor Selenow. The SEC alleged the defendants sold unregistered securities to as many as 190 investors, raising $1.9 million in the scheme.
The litigation is centered in Palm Beach County, an area U.S. Attorney General Eric Holder visited three weeks ago to discuss the Obama administration’s Interagency Financial Fraud Enforcement Task Force.
Hainsworth was accused of receiving $541,000 over the course of the unregistered offering, “through checks he issued to himself and his wife and ATM withdrawals,” the SEC said.
Meanwhile, Comiskey, Tamimi, and Selenow received about “$322,000 of the offering proceeds as selling commissions,” the SEC said.
Hainsworth, Tamimi and Selenow had previous run-ins with regulators, the SEC said.
“In 1995, the Kansas Securities Commission entered a consent order against Hainsworth to cease offering to sell unregistered securities in that state,” the SEC said.
Hainsworth was also a subject of the South Dakota cease-and-desist order earlier this year, stemming from the business practices of Winning Kids, according to records.
Tamimi, 33, of Palm Beach Gardens, was filed $5,000 by the National Futures Association (NFA) in 2006 “for making misleading sales solicitations and using high-pressure sales tactics,” the SEC said.
He received $194,250 in sales commissions from Winning Kids between May 2007 and September 2008, the SEC said.
Selenow, 48, of Royal Palm Beach, was charged with securities violations by the SEC in 2002 and ordered to disgorge $30,000. The 2002 case involved a company known as “The Gaming Factory Inc.,” according to records.
In 1995, according to records, the NFA fined Selenow $50,000 “for making misleading sales solicitations and using high-pressure sales tactics,” the SEC said.
Selenow received $41,500 in Winning Kids’ commissions between April and December of 2007, the SEC said.
Comiskey, 62,of Palm Beach Gardens, received $86,975 in Winning Kids’ sales commissions between April 2007 and September 2008, the SEC said.
Holder spoke in South Florida Jan. 8, saying the area was altogether too familiar with financial fraud and using an event at the Forum Club of the Palm Beaches to spotlight the Interagency Financial Fraud Enforcement Task Force.
Only three weeks after Holder left, the SEC filed the Winning Kids’ action. The litigation once again puts Palm Beach County in an unwanted spotlight. It is the home of each of the Winning Kids’ defendants and the same county in which Holder spoke, describing the area as “Ground Zero” of financial fraud.
Each of the defendants was familiar with securities laws and held various securities licenses over the years, the SEC said.
“Winning Kids marketed its securities offerings primarily through a radio advertisement Hainsworth placed on a station covering New York, New Jersey, and Connecticut,” the SEC said. “The ad provided a toll-free number for interested investors to call. Hainsworth hired Comiskey, Tamimi, Selenow, and other sales agents to speak with potential investors.”
Prospects were told “that Winning Kids was a “dividend yielding investment” to be paid out on a quarterly basis,” the SEC said.
Lies were part of the scheme, the SEC alleged.
“The sales agents told investors they were vice presidents of Winning Kids, and Hainsworth provided them with business cards stating that,” the SEC said.
In reality, however, the SEC said, “they were independent contractors that received commissions based on the sale of Winning Kids securities.”
Sales agents were paid “cash commissions of 15 to 20 percent of each sale they made,” the SEC said. “In addition, Selenow received for a few months 5 percent of the sales proceeds the other sales agents raised.”
Hainsworth, the SEC said, “paid the entire 20 percent at the time the sales agent made each sale.”
Hype also was part of the scheme, the SEC charged.
Winning Kids’ pitch included claims the company “was starting an acceleration phase of extraordinary growth,” the SEC said. “In reality, Winning Kids generated almost no revenue from the sale of its books or any other product from 2004 through 2008. In addition, Winning Kids spent most of 2007 redesigning the books rather than trying to actively sell them.
“Furthermore,” the SEC said, “Winning Kids did not actively try to sell its books for most of 2008.”
Winning Kids suggested in offering materials that “for each $10,000 [customers] invested, they could expect to get back $30,000 a year — in other words, a 300 percent annual return,” the SEC said.
Winning Kids based is assertions on unrealistic projections, while also misleading investors on how the company would use their money, the SEC said.
Although Private Placement Memoranda “represented that 90 percent of the offering
proceeds would be used for product development, manufacturing, advertising, marketing, and working capital,” the SEC said, “Hainsworth and the sales agents received at least 40 percent of the $1.9 million Winning Kids raised.”
Winning Kids and Hainsworth have consented to the entry of a final judgment that permanently enjoins them from committing or aiding and abetting future violations of the above provisions, and orders them to pay disgorgement of ill-gotten gains and a civil penalty.
Winning Kids and Hainsworth neither admitted nor denied the SEC allegations, in consenting to the judgment.
David Krywenky of KINGZ Capital Management: Source: Marketwire
UPDATED 5:25 P.M. ET (U.S.A.) KINGZ Capital Management Corp. (KCM) might have been used or contemplated for use as a tool in two far-reaching, incredibly elaborate Ponzi schemes, according to an analysis of public records and other information.
One of the schemes ultimately appears to have consumed tens of millions of dollars in a squalid venture that used a royalty theme trading off the name “Crown.” It involved purported forex trading in Switzerland under the name “Crown Forex SA” and an American namesake called “Crown Forex LLC” allegedly set up to confuse investors and perhaps authorities.
The other scheme, which appears to have been nipped before it could mushroom on a grand scale, sought to kickstart a rapidly collapsing autosurf believed to be an offshoot of an existing criminal enterprise desperately seeking to extend its reach from the United States into the Caribbean, Central America, South America and perhaps Europe to keep itself alive.
The first scheme, which included other confusingly similar corporate names such as Oxford Global Partners LLC and Oxford Global Advisors LLC, became the subject of fraud charges filed by the SEC and the CFTC in November. Investors appear to be out tens of millions of dollars.
Charged in the $190 million November case were Trevor Cook, former Christian radio host Pat Kiley and several other companies. The allegations paint the picture that Crown Forex LLC set up a U.S.-based bank account to siphon money investors believed was destined for the Swiss entity, which they knew as Crown Forex SA.
“Cook and [Pat] Kiley, directly and acting through others, deposited checks from many investors, into a U.S. bank account in the name of a domestic shell company, with a name — Crown Forex, LLC –Â that was misleadingly similar to the Swiss firm Crown Forex, S.A.,” the SEC said.
Cook was jailed earlier this week for violating a court order that required him to turn over assets.
Separately, the National Futures Association (NFA) charged KCM in September with permitting Cook — who was not accredited and previously was disciplined by NFA for highly questionable business practices — to manage a KCM fund that purportedly contained “somewhat above and below $300 million” between September 2008 and July 2009.
KCM now has been permanently banned from NFA membership. David Krywenky, KCM’s vice president, has been banned for three years.
It’s anybody’s guess how much money the fund actually contained and what happened to the money. The SEC, the CFTC and a court-appointed receiver are turning over numerous domestic and international rocks to find assets of Cook and Kiley’s alleged epic fraud.
NFA’s allegations against KCM are disturbing. Not only was Cook managing a KCM pool known as KCI, according to the allegations, Cook’s Oxford Global Partners “appeared to be the only investor” in the KCI pool and all of the pool’s money was dumped into Crown Forex SA, a company in which Cook purportedly owned a majority stake and a company Swiss authorities declared bankrupt.
Was Cook At The Intersection Of A Second Scheme?
The second scheme to which KCN’s name has been linked was called AdViewGlobal (AVG), an autosurf purportedly headquartered in Uruguay but believed actually to have operated from inside the United States, most likely from Florida but perhaps also from Arizona. Autosurfs pose as “advertising” companies to skirt securities laws, authorities say.
AVG had close family, membership and promoters’ ties to AdSurfDaily, a Florida company implicated by the U.S. Secret Service in a $100 million Ponzi scheme. Federal prosecutors are well aware of AVG. So are attorneys suing ASD President Andy Bowdoin and ASD attorney Robert Garner for racketeering.
KCM’s tie to AVGÂ — according to AVG — was as the surf’s new facilitator of offshore wire transfers after AVG earlier had lost access to a bank whose name was not disclosed. AVG, among other things, claimed to own a payment processor known as eWalletPlus.
Records suggest eWalletPlus was an extension of corporate shells in Nevada and Arizona. At least two other companies claimed to own eWalletPlus during the same time period in which AVG claimed ownership. In March 2009, AVG announced its back account had been suspended. Problems with eWalletPlus were reported at the same time.
AVG identified KCM as its new wire facilitator on May 4, 2009, the same day the Obama administration announced a crackdown on international financial fraud. KCM denied AVG’s claim on May 7, saying it believed AVG had targeted it in a scam and perhaps was tying to use a third company based in Florida to route money to itself.
KCM identified the third company as Living Legacy One LLC. Records in Florida identified Gerald Castor as Living Legacy One’s principal, and a communication from AVG identified Castor as an employee of the surf’s “Compliance” department.
Michael P. Krywenky, David Krywenky’s father, denied any AVG ties in an interview with the PP Blog. The interview was conducted in May 2009, after Michael Krywenky contacted the Blog and asked it to remove a story citing AVG’s wire claim.
The Blog declined to remove the story. Instead, it published a story about Michael Krywenky’s denial. The story was based on an interview the Blog conducted with Michael Krywenky and an email Michael Krywenky sent the Blog on May 7, 2009.
“I think that we may be victims of a scam here and we are investigating this further at our end as well,” Michael Krywenky said in the email. “Thank you for bringing this to our attention. In the meantime, we please (sic) remove this posting since it contains false information that is detrimental to our company.”
A month later, in June 2009, the SEC began to investigate the Cook/Kiley entities. By September 2009, the NFA was accusing David Krywenky and KCM of permitting Cook to manage an investment fund and not making a claim for money lost when the Swiss entity went bankrupt.
Whether NFA questioned David Krywenky and KCM about AVG is unclear.
“KCM and D. Krywenky failed to act in the best interests of KCI’s participants, both known and unknown, in that when they knew or should have known that funds on deposit at Crown Forex, SA were frozen pursuant to that firm’s bankruptcy they took no action on behalf of the KCI pool to participate in the bankruptcy as a creditor or otherwise protect KCI’s equity,” NFA said.
NFA further accused David Krywenky and KCM of turning a blind eye to Cook, now implicated with Kiley in a colossal fraud.
AVG, which shielded members from knowing the identities of its owners by signing communications “The AVG Management Team,” never explained how it had identified KCM as a possible facilitator. The surf also ignored Michael Krywenky’s public denial that it had any business relationship with AVG, explaining that the wire deal it had announced as completed only days earlier — up to and including providing detailed wiring instructions — had fallen through as a result of failed negotiations.
Meanwhile, the surf also did not address Michael Krywenky’s claim that AVG appeared to be trying to route money to itself through Living Legacy One, the entity associated with Castor.
Michael Krywenky said KCM was consulting with attorneys to address AVG’s false claims and that the company had taken steps to ensure AVG could not receive money through KCM. AVG spent the balance of May promoting the launch of a new website and telling both prospects and recruiters that they could earn matching bonuses of 200 percent for sending money to the company or causing money to be sent to it.
Like ASD, AVG used offshore payment processors such as Canada-based Solid Trust Pay.
AVG collapsed in June, taking an unknown amount of money with it. Before the collapse, AVG identified George and Judy Harris of Tallahassee, Fla., as its owners. They previously had been identified as “Trustees” of AVG’s “private association,” which had cited U.S. Constitutional protections while purporting to he headquartered in Uruguay.
AdSurfDaily members later said ASD President Andy Bowdoin was a silent partner in AVG, claiming that Bowdoin had dispatched George Harris to Switzerland to establish bank accounts.
George Harris is Bowdoin’s stepson. The Harrises were named beneficiaries by the U.S. Secret Service of ASD’s illegal conduct in December 2008. AVG formally launched two months later, in February 2009, after the Harrises and Bowdoin’s wife, Edna Faye Bowdoin, had been named recipients of ill-gotten ASD gains — and after a major court ruling went against ASD, and after Bowdoin had been named a defendant in a racketeering lawsuit brought by members.
In May 2009 — the month during which AVG purportedly had turned to KCM to establish a wire facility and during a period in which Trevor Cook allegedly was managing money for a KCM entity known as KCI — the alleged Cook/Kiley Ponzi scheme appears to have been collapsing.
Cook has not been publicly linked to AVG. At a minimum, however, someone within AVG appears to have identified Barbados-based KCM as a solution to the company’s wire problem — and the NFA allegations establish a tie between KCM and Cook.
At least for a few days in May 2009, AVG was sufficiently confident that its wire problem was solved, so much so that it provided members detailed wire instructions with KCM’s name and an account number.
Given the nature of NFA’s allegations that Cook somehow had wormed his way into KCM’s purported forex operations with KCM turning a blind eye, it is reasonable to ask whether Cook also somehow had wormed his way into an intersection at which he could have cherrypicked funds from other KCM customers — and whether AVG and other autosurfs and HYIPs had turned to KCM to solve domestic banking and wire problems.
Investigators might be interested in determining if Cook somehow positioned himself to cherrypick fresh autosurf cash and apply it to his alleged existing Ponzi scheme, thus funding it with proceeds from other Ponzi schemes. Indeed, it is reasonable to ask if Cook’s influence with KCM extended from the forex fund to other areas of the business.
Why?
Because KCM, which became an NFA member in November 2007, issued two news releases less than a year later — in October 2008 — announcing it was managing more than $330 million. In a release dated Oct. 15, 2008, KCM said it had “received investment subscriptions of $334,263,000.” In a release eight days later — on Oct. 23, 2008, KCM said “clients who participated in their first raise of just over $330 Million US . . . have reported a very steady and consistent cash flow and rate of return.”
The Star-Tribune of Minneapolis/St. Paul, quoting a lawyer for KCM, reported in November 2009 that Cook offered to provide KCM start-up funding. KCM executives met Cook at a function in West Palm Beach, Fla., according to the attorney. Florida has become Ground Zero for Ponzi schemes.
A Mysterious Investor
NFA asserted in this filing that Cook perhaps peeled off $75 million from the purported Swiss fund and directed it to a mysterious investor. Cook also was alleged to have changed “passwords” on KCI “accounts” as part of the scheme.
KCM, according to the NFA allegations, “permitted Cook to effectuate a purported $75 million withdrawal from KCI’s trading accounts for a purported [Oxford Global Partners] investor who was identified to them by Cook only as “Fased.”
KCM is said to be cooperating with investigators from more than one state and federal agency.
It is unclear if “Fased” is a person, a business, an acronym, a proper name, a misspelling of the word “phased” or a slang spelling of “phased,” an amalgamation of some sort or a complete fiction.
What is clear is that Cook allegedly was managing money for KCM, a company to which AVG said it had turned last year to facilitate offshore wire transfers. AVG’s announcement — and the subsequent actions by the NFA, the SEC and the CFTC, may put KCM at the intersection of two murky worlds — the worlds of underground currency-trading schemes and offshore autosurf and HYIP schemes that promise enormous returns.
It’s worth investigators’ time to check it out — if for no other reason than to rule out the possibility that Cook also was playing the autosurf and HYIP games either as an investor or by somehow positioning himself at an intersection in these noxious worlds to siphon funds and divert them to his alleged principal Ponzi scheme.
What’s more, an HYIP known as Gold Nugget Invest (GNI) collapsed earlier this month, several weeks after NFA brought its action against KCM, and the SEC and CFTC brought their actions against Cook and Kiley.
GNI reportedly was having trouble accessing needed funds in a European bank, but announced a “Re-organization” plan that would reduce payouts from 7.5 percent a week to a mere 20 percent a month.
No, it’s not a misprint. GNI purportedly launched in October 2006, the same month AdSurfDaily was preparing for launch. ASD promoters advertised returns of 1 percent a day for viewing “advertisements.” Prosecutors said it operated as a virtually pure Ponzi scheme.
Some GNI members have referred to money — or representations of money — in their “ewallets.” It is unclear if the “ewallets” to which they refer have any connection to eWalletPlus or if the term “ewallet” is being used as a generic.
What is clear is that HYIP, autosurf and forex schemes have many players in common — and that tremendous sums of money go missing routinely.
UPDATED 1:18 P.M. ET (U.S.A.) A company that denied any ties to the AdViewGlobal autosurf after AVG listed it as a facilitator of offshore wire transfers has been permanently banned by the National Futures Association (NFA) amid allegations that it failed to uphold high ethical standards and failed to supervise its operations.
KINGZ Capital Management Corp. (KCM), which operates in Barbados and has corporate officers in Canada, was banned as a result of permitting Trevor Cook to manage an investment pool, according to NFA.
Cook is one of the two central figures in the alleged Cook/Pat Kiley Ponzi scheme in Minnesota.
AdViewGlobal (AVG) is not mentioned in NFA’s Business Conduct Committee complaint against KCM and its vice president, David M.S. Krywenky.
Michael P. Krywenky, president and chief executive officer of KCM, issued a public denial in May that KCM had any ties to AVG. Michael Krywenky’s denial came after AVG identified KCM as a newly acquired facilitator of offshore wire transfers.
AVG made the announcement that KCM was facilitating wire transfers on the same date — May 4, 2009 — the Obama administration announced a crackdown on international financial schemes. Three days later, on May 7, 2009, Michael Krywenky told the PP Blog that KCM had no connection with AVG, suggesting that AVG had tried to route money to itself through an account in the name of a separate company, Living Legacy One LLC of Florida.
Link To Alleged Cook/Kiley Scheme
David Krywenky let Cook take control of an offshore investment pool that a KCM-related entity known as KCI was supposed to be operating, according to NFA’s complaint. Cook was neither an NFA member nor properly registered with the Commodity Futures Trading Commission (CFTC), NFA charged.
NFA is a self-regulatory body.
“In July 2009, NFA received information that indicated that KCM had links to an intertwined group of NFA Member and non-NFA Member entities and individuals that had come under some scrutiny because of difficulties that some investors had encountered in trying to retrieve their investments,” NFA said in a Sept. 30 charging document.
As its investigation proceeded, NFA learned that a Cook-controlled entity — Oxford Global Partners — “appeared to be the only investor in KCM’s KCI pool and that all of the pool’s money had purportedly been deposited with an entity named Crown Forex, SA, a non-NFA Member firm that is regulated by the Swiss Financial Market Supervisory Authority and that was put into bankruptcy by that body in May 2009,” NFA said.
Cook and Kiley later were implicated in an alleged Ponzi- and forex-fraud scheme involving at least $190 million, according to the SEC and the CFTC. A federal judge jailed Cook earlier this week until he turns over tens of millions of dollars linked to the alleged Cook/Kiley scheme.
NFA charged KCM with “cheating, defrauding or deceiving another person or attempting to do so.” The company consented to the permanent ban without admitting or denying the allegations.
David Krywenky also was charged with failing to uphold high ethical standards and failing to supervise. Like KCM, he neither admitted nor denied the allegations.
Should David Krywenky wish to become an NFA associate after his ban, he’ll be required to pay a fine of $25,000, NFA said.
AdViewGlobal Cited KCM Tie In May
In March 2009, AVG announced its bank account had been suspended because too many participants had wired transactions in excess of $9,500. The surf said it was working on a remedy.
Its purported remedy — routing wire transfers to itself with KCM as a facilitator — was announced with great fanfare on May 4, only hours after Obama appeared on national television to announce a crackdown on offshore fraud schemes.
AVG provided specific, detailed wiring instructions. Members were given the instructions under a headline titled, “BREAKING NEWS Fund your Advertising.†The instructions appeared on an AVG forum operated by some of the Mods and members of the Pro-AdSurfDaily Surf’s Up forum.
The instructions later were deleted, AVG members said. AVG never addressed KCM’s denial, choosing instead to explain that negotiations it had described as completed had broken down.
By June 25, AVG announced it was suspending members cash-outs and exercising its version of a “rebates aren’t guaranteed” clause, thus empowering itself to keep all money previously sent in by members who were expecting to receive not only 100 percent of their money back, but also a profit. AVG has close ties to AdSurfDaily, implicated in a $100 million Ponzi scheme.
Critics observe that the “rebates aren’t guaranteed” clause effectively is a license to steal. Autosurfs, which operate as virtually pure Ponzi schemes and position themselves as “advertising” companies, dangle the promise or suggestion of an investment return, sometimes gathering tens of millions of dollars.
Investigators say such clauses are designed to skirt securities laws.
Player in a Ponzi scheme? If alleged Minnesota schemer Trevor Cook’s experience is any indication, you should expect to be placed under a microscope by local merchants and police if you’re named in a complaint by regulators.
Cub Foods, a Minnesota-based grocery chain, placed Cook under video surveillance when he entered a local store. A loss-prevention specialist cited fears Cook might use the store to purchase gift cards in a scheme to hide assets from investigators.
Meanwhile, the 71-member police department in Eagan, Minn., alerted the court-appointed receiver in the alleged Cook/Pat Kiley scheme that Cook was using a credit card after a federal judge froze his assets, according to court filings.
Cook now is the subject of a contempt hearing. Receiver R.J. Zayed said Cook initially failed to disclose the existence of four credit cards and is not cooperating, and the SEC said U.S. Chief District Judge Michael Davis may have to jail Cook to enable investigators to prevent assets from being dissipated.
Cook had at least one other undisclosed credit card, Zayed said.
“The only reason the fifth card was known to the Receiver was because the Eagan Police Department informed the Receiver of this account after Cook used it to purchase” gift cards, Zayed said.
Zayed said Cook used credit cards after the asset freeze was imposed in November to purchase more than $30,000 in gift cards at Target, Holiday, SuperAmerica, Home Depo, AMC Theater, Regal Cinema, Nordstroms, Cheesecake Factory, Olive Garden, Old Chicago, Ruby Tuesday, Chilis, Applebees, PetSmart and Bath&Body Works.
Cook also purchased “numerous phone cards,” Zayed said.
Although Cook now has turned over the gift cards and the credit cards, he has taken the 5th Amendment in the case. Zayed, though, argued that Cook was using the 5th Amendment in a bid to pick and choose when and how he would cooperate in locating and preserving receivership assets.
“Cook now tells the Court that he will not turn over any additional assets because it would violate his privilege against self-incrimination,” Zayed argued in a brief to Davis. “Cook cannot have it both ways, turning over assets when it benefits him while continuing to hide other assets from the Receiver. Approving Cook’s strategy would make a mockery of the Court’s Orders and runs afoul of basic Fifth Amendment jurisprudence.”
By turning over some assets and testifying to the existence of others, Zayed argued, Cook has waived his 5th Amendment protections.
“Cook voluntarily testified about assets in his possession when he turned over a portion of those assets to the Receiver,” Zayed said. “He did not do this accidentally or out of the goodness of his heart.
“He did it to present himself in the most positive light he could to the Court when he was caught violating the Court’s Orders,” Zayed continued. “Cook also testified with respect to his assets when he provided the Receiver with a laundry list of expenses and asked the Receiver to provide him and his wife with thousands of dollars in monthly living expenses from the Receivership estate to maintain his lifestyle. Having ‘testified about certain assets for his benefit, Cook cannot now shield all other relevant facts on these topics.”
Counting holiday delays and time scheduled for attorneys to file briefs, the Cook contempt proceedings have been under way for more than a month. The SEC and the CFTC sued Cook and Kiley in November, alleging an international Ponzi scheme involving more than $190 million.
In 2006, the National Futures Association (NFA) fined Cook $25,000, saying he had committed a “very serious violation” in the manner in which he treated funds entrusted to him by an 80-year-old woman who was the guardian over her elderly sister. The case featured assertions of side-dealing and fabricated signatures on account documents.
A footnote in NFA’s summary of the case concluded that Cook was operating an unregulated gold and bullion business. The name he chose for the business closely resembled the name of a futures-trading firm, but Cook told NFA that the name was a coincidence.
Read NFA’s summary of the evidence in the Cook case and its decision. Pat Kiley, a former Christian radio host, was among the witnesses called.
We’ve previously pointed out that, in recent times, some of the actions filed against financiers and fund managers — and the findings of investigators — have read like works of fiction. On Friday, for example, Irving Picard, the trustee in the Bernard Madoff case, asserted that Madoff appears not to have purchased securities for customers in at least 13 years.
It’s an incredible assertion that suggests Madoff was running a virtually pure Ponzi: money in, money out, with no attempt even to try to make it work in a legitimate way.
Now comes incredible assertions by the National Futures Association against Paul Greenwood and Stephen Walsh, who’ve been suspended from NFA for stonewalling on an audit.
On Friday, Carnegie Mellon University and the University of Pittsburgh sued Greenwood, Walsh, Westridge Capital Management (WCM) and related entities for the return of $114 million feared lost in an investment swindle.
At least 16 public entities invested with WCM, including universities and retirement funds for educators, police officers and firefighters. It is possible than $2 billion or more is at risk.
CMU and Pitt sued in the aftermath of the NFA audit. NFA’s documentation of its attempts to audit Greenwood and Walsh — its recounting of the stonewalling and its partial findings based on what it what it was able to uncover despite the stonewalling — is yet another example of nonfiction that reads like fiction.
Big money is involved here, and the facts are not all known. But NFA’s document can only be described as jaw-dropping. It really makes one wonder how many other shoes will drop and how many more times the public will be asked to suspend its disbelief before these almost unbelievable financial tales come to an end.
UPDATE 10:55 P.M. EST (Feb. 22, U.S.A.) We’ve added to the bottom of this post some information about Westridge Capital’s website, which appears to consist of a single page and is amateur by any modern standard. We’ve also associated a second domain to the company. It, too, appears to consist of a single page — a page that appears to be just a holding page from the company’s hosting provider.
We’ve also added some links to public employee retirement funds that list Westridge Capital Management in their financial reports.
Here, below, our earlier post . . .
It could be the maximum case of brains getting drained by fraudulent investment advisers.
Two universities in Pennsylvania known for producing top thinkers in computer science and medicine fear they have lost at least $114 million in an investment swindle and have filed an emergency lawsuit to recover the money.
Because the investment fund in question has as many as 16 participants, including university foundations and retirement and pension plans — and perhaps $1.8 billion or more under management — the losses could be enormous.
Carnegie Mellon University and the University of Pittsburgh seek the immediate return of money they invested with Westridge Capital Management (WCM) of Santa Barbara, Calif. Also named in the complaint are company principals and various affiliates, including WG Trading Investors LP of Greenwich, Conn.
The universites said they contacted the Securities and Exchange Commission and the Commodity Futures Trading Commission this week and requested an emergency investigation. Attorneys for the universities filed a lawsuit in U.S. District Court for the Western District of Pennsylvania.
In an extraordinary assertion made after a panicked trip Monday by a university administrator to New York, New Jersey and Connecticut to speak with WCM executives, CMU and Pitt said the money might have been “converted” and IOUs left in its place.
“The Defendants named herein have converted investor funds to their own use,” the universities charged.
Lawsuit claims managers left IOUs for hundreds of millions of dollars.
Two of WCM’s principals — Paul Greenwood and Stephen Walsh — were suspended by the National Futures Association (NFA) last week in a little-publicized emergency action.
The universities, in their lawsuit, said “personal promissory notes” for “hundreds of millions of dollars” from Greenwood and Walsh made payable to WG Trading Investors were uncovered in an NFA audit last week.
Greenwood and Walsh control WG Trading Investors, also known as WGTI.
NFA said Greenwood and Walsh stonewalled and refused to participate in the audit in any material way. One of the excuses Walsh used, despite the obvious importance of the audit, was that he “would be in a meeting all day” and unavailable to speak with NFA, the universities said in the lawsuit.
Greenwood and Walsh are sole proprietor Commodity Pool Operator (CPO) Members of NFA in Greenwich, NFA said.
“Additionally,” NFA said, “Greenwood and Walsh have failed and refused to respond to NFA’s inquiries regarding numerous promissory notes totaling hundreds of millions of dollars executed by them individually in favor of an investment vehicle to which two NFA listed commodity pools have loaned a total of over half a billion dollars.”
Read the CMU/Pitt lawsuit against Westridge Capital Management, WG Trading Co. Limited Partnership,Westridge Capital Management Enhanced Funds Inc., WG Trading Investors LP, Paul Greenwood, Stephen Walsh, Jack Eldred Reynolds, James Carder and Deborah Duffy.
Updates: We typed Westridge Capital Management’s street address as listed in the lawsuit into Google. Several businesses are listed at the same address — 222 E Carrillo St, Santa Barbara, Calif. 93101. The busineses list “suite” numbers. Westridge Capital’s suite number is 300.
Its site basically is a blue page that lists only Westridge Capital’s name, Santa Barbara street address, phone and fax numbers, and an email address. There is no content on the landing page beyond that.
We associated a second domain using registration data for the westridgecap.com domain. Here is the second domain:
The wgtrading.com domain resolves to a holding page that says:
“Welcome wgi6 to Your New Virtual Private Server !
“We would like to welcome you to your new Virtual Private Server. We are committed to bringing you the best service and finest Internet hosting solutions available. To help you get acquainted with your Virtual Private Server we have prepared “Getting Started” pages on our Web site. We encourage you to visit these pages and add them to your list of bookmarks.
“Best wishes in using your new Virtual Private Server!”
The wgtrading.com domain has been registered since July 12, 2000, when Bill Clinton was president. Meanwhile, the westridgecap.com domain has been registered since Oct. 22, 2003.
A New York man sued by the CFTC last month for registration violations has been arrested on criminal charges of threatening to kill 47 current or former market regulators, federal prosecutors said.
