Zeek Rewards’ receiver Kenneth D. Bell has gone to federal court in the Western District of North Carolina, alleging that the Payza and Payment World payment processors “facilitated” the epic cross-border Zeek Ponzi- and pyramid scheme.
More than $13.1 million in funds from North Carolina-based Zeek that could be used to compensate victims ended up in VictoriaBank in Moldova, owing to a processing relationship among Payza, Payment World and the bank, Bell alleged.
Now, Bell contends, “based on recent developments in the Receiver’s investigation, there is an open question as to whether the Receivership Assets held on Reserve at VictoriaBank remain or were transferred from the account.”
Prosecutors haven’t revealed the target of the criminal probe. It is unclear whether there is any nexus with the Zeek case, alleged overall to involve $897 million. Zeek, a Ponzi forum “program,” allegedly created tens and tens of thousands of victims worldwide.
Payza is a Ponzi-forum darling. Its predecessor, AlertPay, is referenced in court filings in the 2008 AdSurfDaily Ponzi case. Scores of Ponzi-board “programs” claim to accept Payza, including an emerging scheme known as Traffic Monsoon.
Bell accused Payza, Payment World and VictoriaBank of violating an asset-freeze order issued in 2012 by Senior U.S. District Judge Graham C. Mullen.
In a novel legal maneuver, Bell has persuaded Mullen to freeze a correspondent account VictoriaBank holds on U.S. soil at Bank of New York Mellon. Mullen authorized the freezing of more than $13.1 million in the account.
If the account proves not to hold that sum, VictoriaBank must deposit with the receivership the difference between the frozen sum and the $13.1 million Bell claims as receivership assets, according to the order.
Bell signaled on Feb. 1 that the receivership would pursue Payza, Payment World and VictoriaBank.
Moldova is situated in Eastern Europe. It shares a border with Ukraine, a world hot spot.
The office of U.S. Attorney Channing D. Phillips of the District of Columbia originally anticipated making an announcement about a criminal investigation involving the Payza and OboPay payment processors “shortly” after Jan. 22.
On Feb. 10, however, prosecutors updated their Victim/Witness site to say they now do not expect to make an announcement until “shortly” after April 29.
Payza, alleging fraud, sued OboPay last year. As the PP Blog reported in October, prosecutors intervened in the civil case and requested a stay while the criminal probe continued.
U.S. District Judge Phyllis J. Hamilton of the Northern District of California initially paused the civil case until Jan. 22. The stay now has been extended until April 29 at the request of prosecutors with agreement by the parties, according to court filings.
The target of the criminal probe has not been revealed.
UPDATE MAY 23, 2016, 4:03 P.M. The stay in the civil case has been extended until June 29, 2016. The Victim/Witness site has been updated to reflect this.
BULLETIN: New court filings in the Zeek Rewards’ Ponzi- and pyramid-scheme case brought by the SEC in 2012 say Zeek receiver Kenneth D. Bell may ask a federal judge for a finding of contempt against Payza, a payment processor.
The news comes as federal prosecutors continue a criminal investigation involving Payza and Obopay, another payment processor. Prosecutors are expected to make an announcement on the Payza/Obopay matter soon.
Payza is Ponzi-forum darling.
Some of the Zeek money ended up in Moldova, according to previous filings by Bell. Precisely how that happened remains unclear, but Bell says he is working with authorities in both Moldova and the United States “to locate and recover the funds.”
The Receiver Team continues its efforts to investigate and pursue outstanding funds from the processing relationship and flow of funds between Payza, Payment World, and Victoria Bank . The Team is working with government officials in both the United States and Moldova and with members of McGuireWoods Consulting to locate and recover the funds. The Receiver Team has also begun efforts to file a motion against these entities seeking the return of receivership assets and for a finding of contempt. The Receiver Team continues to investigate and pursue outstanding funds from Solid Trust Pay and Cyberprofit and is working with various government agencies in pursuit of these assets.
On Oct. 19, the PP Blog received traffic from 76 countries. This graphic reflects the Top 10 on that date and suggests high global interest in a criminal probe involving Payza and Obopay.
On the past four Mondays — Oct. 26, Nov. 2, Nov. 9 and Nov. 16 — the PP Blog averaged viewership from 32 countries, according to a compilation of data from Jetpack summarized by the Blog. These numbers are typical. On any given day, viewers from between 25 and 40 countries arrive here.
But on Oct. 19 — also a Monday and the day the Blog reported that a criminal investigation involving the Payza and Obopay payment processors was under way — the Blog’s viewership shot up to 76 countries. That’s nearly 40 percent of the nations in the world. Viewers from other countries followed Payza- and Obopay-related content in subsequent days, suggesting that people in an even higher percentage of the world’s nations are concerned about the probe.
The Blog is reporting today that Payza’s name again has appeared in a filing by the court-appointed receiver in the 2012 Zeek Rewards’ Ponzi- and pyramid scheme case. The filing was dated yesterday and includes these lines (italics added):
The Receiver Team continues to investigate and pursue outstanding funds from Payza, Payment World, Solid Trust Pay, and Cyberprofit and is working with various government agencies and McGuireWoods Consulting in pursuit of these assets.
Millions of dollars tied to U.S.-based Zeek may be in Moldova, according to receiver Kenneth D. Bell. Moldova is a neighbor to Ukraine, a world hot spot described by the Financial Times as “war torn.”
Payza, its predecessor AlertPay and SolidTrustPay are Ponzi-forum darlings operating in an era of almost unimaginable cross-border fraud that frequently has an MLM or direct-sales component. The numbers are truly staggering — so high that agencies such as the U.S. Department of Homeland Security and the FBI have become involved in investigations.
Money moves across borders in a flash these days, including the borders of nations under terrorist threat. Perhaps especially in the HYIP sphere, the aims of the “program” operators and the identities of the recipients of the cash may be particularly murky.
Though uncharged, AlertPay and SolidTrustPay both are referenced in the P2P case, as well as the AdSurfDaily case from 2008. Ponzi forums such as TalkGold and MoneyMakerGroup also are referenced in U.S. filings.
As the PP Blog reported Oct. 19, federal prosecutors have opened a criminal probe involving Obopay and Payza and successfully asked a federal judge to pause civil litigation involving both payment-processing companies.
The Blog is reporting today that federal prosecutors in the Northern District of California and the District of Columbia specifically intervened in a lawsuit filed by Payza against Obopay and others on March 25, 2015. Payza’s lawsuit alleged Obopay had engaged in a multimillion-dollar fraud during business dealings. Prosecutors asked a judge to halt the case on June 23, advising her that a criminal investigation was under way.
The targets of the probe are unclear. It could be one or more parties involved in the litigation between Payza and Obopay.
One part of prosecutors’ filings — and it’s a part that appears before the actual motion to intervene is presented — reads: “The basis for this motion is that the United States Attorney’s Office for the District of Columbia in connection with Homeland Security Investigations and the Washington, D.C. Financial Crimes Taskforce, is actively conducting a criminal investigation into the illegal activities of [REDACTED.]”
On July 20, U.S. District Judge Phyllis J. Hamilton, presiding in Oakland, granted the intervention and ordered the case stayed until Jan. 22, 2016, according to docket entries.
The public portion of prosecutors’ filing is heavily redacted, leaving the targets of the criminal probe unclear.
This is a screen shot of one such redaction in the 16-page filing:
Among other things, prosecutors contended “there are a number of issues in the instant action that may be resolved by the criminal case.” After another redaction, prosecutors continued: “Given the high degree of overlap and interrelatedness of the cases, dual litigation does not serve the interests of efficiency or judicial economy.”
Here is another redaction:
In her July 20 ruling, Hamilton found that “proceeding with the present action would likely force one or more parties into the position of having to choose between waiving their Fifth Amendment rights or invoking the privilege (but with knowledge that adverse inferences could be drawn in the civil action).”
In the United States, the Fifth Amendment is a Constitutional protection against self-incrimination.
The judge also found that the government had an “interest in the stay because discovery in the civil action could affect its ability to pursue a parallel criminal investigation or could compromise existing confidential informants.”
Back then, a site styled obopayusa.com claimed “[t]he US Department of Homeland Security has seized all MH Pillars dba Payza money on deposit with UltraLight FS.”
Payza, meanwhile, contended that “we are unable to complete any requests to withdraw or transfer funds for a part of our U.S. members at this time, since they are being withheld by Ultralight Financial Services (formerly known as Obopay Inc.) a licensed U.S. money transmitter of which Payza was an agent.”
Federal prosecutors in the District of Columbia confirmed earlier this month that Homeland Security Investigations is conducting the criminal probe.
URGENT >> BULLETIN >>MOVING: (Updated 3:03 p.m. EDT U.S.A.) The United States has opened a criminal investigation involving Obopay and Payza, a Ponzi-forum darling.
Details of the probe are unclear. But the office of U.S. Attorney Channing D. Phillips of the District of Columbia confirms on its website that the U.S. Department of Homeland Security through Homeland Security Investigations (HSI) is involved in the investigation. So is the Washington, D.C. Financial Crimes Task Force.
The PP Blog first reported in December 2013 that matters pertaining to Obopay and Payza were under investigation. At the time, however, authorities did not say it was a criminal probe.
In an Oct. 15 update, the U.S. Attorney’s office says a criminal probe is under way and that prosecutors successfully asked a judge to stay civil litigation until early next year.
“The United States government, including Homeland Security Investigations and the Washington, D.C. F[i]nancial Crimes Task Force, is currently conducting a criminal investigation. As part of that investigation, the United States Attorney’s Office for the District of Columbia has requested a United States District Judge to pause curr[en]t civil litigation relating to Payza and Obopay. The Judge has paused the litigation until January 22, 2016. Shortly after that date, additional information will be made available on this website about the status of this investigation.”
Prosecutors’ update includes an email link and phone number.
This note concerning Obopay and Payza is appearing on the website of U.S. Attorney Ronald C. Machen Jr. of the District of Columbia this morning.
EDITOR’S NOTE ADDED AT 10:09 A.M. Federal prosecutors in the District of Columbia now have confirmed that an investigation is under way, but declined to provide details. “The U.S. Attorney’s Office is involved in a pending investigation and we are unable to state the subject of the investigation or provide details,” the office of U.S. Attorney Ronald C. Machen Jr. said moments ago.
Original story below . . .
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The office of U.S. Attorney Ronald C. Machen Jr. of the District of Columbia (Washington, D.C.) did not immediately respond to a request for comment this morning on a note concerning Payza and Obopay that is appearing on its website.
The two-sentence note, which appears under a headline of “Obopay/Payza,” reads as such: “If you have questions or concerns about your Obopay or Payza account, please call 202-252-1903 and leave your name and contact information. Someone will return your call within 3 business days.”
A PP Blog reader reported the existence of the note at 8:58 a.m. today. How long the note had been posted was not immediately clear. Nor was it immediately clear why Machen’s office was involved in an Obopay/Payza matter.
Machen’s office, working with the U.S. Secret Service, successfully prosecuted the $119 million AdSurfDaily Ponzi scheme. ASD used AlertPay, Payza’s predecessor brand.
And Machen’s office, again working with the Secret Service, also successfully prosecuted the eGold payment processor.
Payza/AlertPay also were processors used by the alleged $600 million Zeek Rewards Ponzi- and pyramid scheme. The Secret Service also is investigating Zeek.
See Nov. 28, 2013, PP Blog post on conflicting reports concerning the unavailability of Payza funds in the United States.
This claim appears today on a website styled obopayusa.com. Precisely when it began to appear is unclear.
With Cyber Monday and the traditional online sales coming up a few days from now on Dec. 2, this is what we know: Payza, the successor brand to Montreal-based AlertPay, a Ponzi-forum darling and chronic HYIP- and fraud-enabler, suddenly says this in a headline on its Community forum: “US Funds Frozen | Obopay/Ultralight FS. issue.”
The announcement is dated yesterday, Thanksgiving Eve in the United States.
Today is Thanksgiving Day. U.S. government offices are closed. Black Friday, another day of brisk U.S. sales activity in which retailers cater to door-busting holiday shoppers, is tomorrow.
We also know that the U.S. government has established a tradition of taking down counterfeiting and piracy scams and their enabling websites on Cyber Monday. Moreover, we know that U.S. Immigration and Customs Enforcement (ICE), a division of the U.S. Department of Homeland Security, issued an alert two days ago that it is working with partners and “will be conducting increased operations during the holiday season targeting the importation and distribution of counterfeit and pirated products.”
Beyond that, we know that the United States — the U.S. Secret Service, ICE and other agencies — took down the Liberty Reserve payment processor over the 2013 Memorial Day holiday period and the U.S. Department of the Treasury identified Liberty Reserve as a “Financial Institution of Primary Money Laundering Concern.” The bust was announced on May 28, the day after Memorial Day.
Backing up a few years, we also know that AlertPay and SolidTrustPay enabled the $119 million AdSurfDaily Ponzi scheme and the $70 million Pathway To Prosperity fraud scheme — to name just two of many.
Meanwhile, we know that the court-appointed receiver in the Zeek case is going after money allegedly tied to Payza and SolidTrustPay. The most recent affirmation of this occurred on Nov. 14, when the receiver advised a federal judge that his efforts to gather $10 million from Payza “persisted” and that “new information has come in” that affects his analysis of Zeek-related Payza funds. Whether the $10 million sum would go up or down based on the new information was not revealed in the filing.
Analysis of “transactional data from Payza is not yet complete,” the receiver advised the judge. He also noted that the Payza funds were held in a “foreign bank account” in an undisclosed country. Based on its research, the PP Blog believes the country is in Eastern Europe.
We also know that AlertPay effectively became Payza in May 2012, even as Zeek was conducting auctions for U.S. currency and experiencing trouble with U.S. banks. Payza operates through a New York entity known as MH Pillars Inc., which in May 2012 announced the “recent acquisition of AlertPay’s existing online payment platform.” Payza also is associated with a U.K. entity known as MH Pillars Ltd. of London.
Thanksgiving Confusion
Although Payza’s headline uses the word “Frozen,” the text below it does not identify the party that purportedly froze the funds. At the same time, the text appears to be at least slightly at odds with the headline claim that the money was “Frozen.” Indeed, the text describes the funds as “withheld.”
Although the word choices may or may not be important, one thing seems obvious: Either word is apt to be unsettling to Payza’s U.S. customers who want their money.
“As you may or may not already know, we are unable to complete any requests to withdraw or transfer funds for a part of our U.S. members at this time, since they are being withheld [emphasis added by PP Blog] by Ultralight Financial Services (formerly known as Obopay Inc.) a licensed U.S. money transmitter of which Payza was an agent,” the announcement begins.
“We have tried to resolve this problem by contacting their management, their legal team and State regulators,” the announcement continues. “Their management and legal team were unresponsive. However, State regulators are willing to help us, but they have told us that they will not intervene unless they hear from you, the owner of your funds.
“In this case, Payza is asking all affected members to demand action from both Ultralight FS and your State regulator . . .”
At the time of this PP Blog post, the full Nov. 27 announcement is available at the Payza Community Forum. [See Update at bottom of this PP Blog post.]
These Thanksgiving Eve claims by Payza are at odds with other claims online.
In short, Payza seems to be saying that Ultralight/Obopay Inc. is responsible for its inability to serve U.S. customers because the entities either froze or withheld the money.
But here is where the information diverges and becomes even more fractious: At least two websites that state they’re associated with Obopay claim that “[t]he US Department of Homeland Security has seized all MH Pillars dba Payza money on deposit with UltraLight FS.” Both of these sites are cheesy in appearance. Both also have have copyright notices: One, styled obopayusa.com, says “Content copyright 2013. Obopay, Inc. All rights reserved.” The other, styled ultralightfs.com, says “Copyright @ UltraLight Financial Services. All rights reserved.”
Neither site says when the money purportedly was seized. Nor does either site say how much was seized.
So, the apparent obopay and UltraLight entities are saying the money was seized by the U.S. Feds. Payza is saying it was “frozen” or “withheld” by obopay/ultralight.
What’s the truth? Well, it’s unclear at this time.
There’s also a website styled obopay.com that appears to have the same logo as obopayusa.com. The obopay.com site asserts an association with Obopay Mobile Technology India Pvt. Ltd. of Bangalore and says its partners include Societe Generale, Essar Telecom Kenya Limited and Union Bank of India.
The obopay.com site appears to make no reference to Payza or MH Pillars, but does reference Obopay Inc. of Redwood City, Calif., as its parent company. When the PP Blog clicked on a “State License” tab at the bottom of the obopay.com site, however, it received this error message: “An error occurred during a connection to www.obopay.com. Peer’s Certificate has been revoked. (Error code: sec_error_revoked_certificate).”
So, another layer of the curious.
Searching the database of the Financial Crimes Enforcement Network (FinCEN), the PP Blog located a document that suggests Obopay Inc. of Redwood City, Calif., is a registered Money Services Business in all 50 U.S. states, plus the District of Columbia. FinCEN is an arm of the U.S. Treasury Department. Its stated mission is “to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”
Information on MH Pillars Inc. of New York also appears in the FinCEN database. The information suggests the firm is a registered Money Services Business in at least 48 of the the 50 U.S. states. (California and New Hampshire appear to be possible exceptions.) MH Pillars also appears to be registered in venues such as American Samoa, the Federated States Of Micronesia, the Marshall Islands, the Northern Mariana Islands, Palau and the U.S. Virgin Islands.
It seems clear that both Obopay Inc. and MH Pillars Inc. are registered MSBs. Why, then, can’t U.S. Payza customers get their cash? Could it be because UltraLight isn’t registered? The FinCEN database appears to have no information on UltraLight.
But a Florida Department of State database does, and that information suggests Obopay Inc. is changing its name to ULTRALIGHT FS Inc. The Florida document is date-stamped Oct. 15, 2013. A phone number listed in the document comports with a phone number in Louisiana and Mississippi records as the number for Obopay Inc. of Mountain View, Calif. Like Redwood City, Mountain View is a Silicon Valley community.
Why FinCEN records show Obopay in Redwood City while state records show the enterprise in Mountain View was not immediately clear.
What does seem clear is that some or all of Payza’s U.S. customers can’t get their money and that whatever dispute exists between Payza and OboPay/Ultralight is about money that either was frozen/withheld by OboPay/Ultralight or seized by U.S. law enforcement.
Payza claimed in July 2012 to be cleaning up its act. This claim was made about a month prior to the August 2012 Zeek action by the SEC and an accompanying confirmation from the U.S. Secret Service that it also was investigating Zeek. Whether the Payza claim was just lip service remains to be seen.
When the United States took down Liberty Reserve, the Secret Service changed Liberty Reserve’s domain nameservers to a “sinkhole” URL at ShadowServer.org. This initially caused Liberty Reserve to go offline. When the domain returned, the logos/badges of the U.S. Department of Justice, the Global Illicit Financial Team, the Secret Service, the Treasury Department and Homeland Security Investigations were published on the site to let the world know that crime doesn’t pay in the United States.
Payza’s website loaded quickly this morning, with full Payza branding and services appearing. DNS settings appear not to have been altered, suggesting at least to this point that the domain has not been seized by the United States. Whether the United States intends to seize it now or ever is not known.
But seizing money is an altogether different matter. One of the ways to choke off HYIP and counterfeit-goods/pirating scams is to stop the fuel supply and to starve them out. If the United States desired to cripple criminal HYIPs and counterfeiting enterprises, it theoretically could attack them by seizing money that had been routed through Payza and the AlertPay predecessor.
Whether that’s what’s happening here remains unclear. At the same time, it would be catastrophically foolish for an enterprise such as Obopay or UltraLight (or some combination thereof) to attribute a seizure of Payza funds to the U.S. Department of Homeland Security if it were not true. It also would be catastrophically foolish for Payza to claim that Obopay/UltraLight froze or withheld the money from U.S. Payza customers if that were untrue or not the complete truth.
Seizure of money by the U.S. government requires a court order. Obopay/UltraLight either hasor has not received such a court order or notice that one was on the way.
If the United States has court-worthy evidence that Payza was facilitating online criminal enterprises, then it should become apparent in the coming days. If Obopay/UltraLight played any role, it also should become apparent.
It could be a very interesting Black Friday or Cyber Monday.
Update 7:31 p.m. Nov. 28: The original Payza announcement appears to have been removed this afternoon or this evening and replaced by this considerably shorter one. There’s also a post on the Payza Blog. It is dated today and titled, “Important Update: Limited Services for Certain U.S. States.” Those states are not identified in the Payza Blog post.
BULLETIN: New court filings in the Zeek Rewards’ Ponzi- and pyramid-scheme case brought by the SEC in 2012 say Zeek receiver Kenneth D. Bell may ask a federal judge for a finding of contempt against Payza, a payment processor.
