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Tag: Ontario Securities Commission

  • Ontario Securities Commission Issues Warning On ‘Rockwell Partners,’ A Ponzi-Board ‘Program’

    rockwellpartnersRockwell Partners SA, an HYIP “program” that has a 218-page thread at the MoneyMakerGroup Ponzi forum, now is the subject of a warning from the Ontario Securities Commission.

    A Facebook site that claims an association with Rockwell Partners asserted in March 2014 that “[w]e would like to remind you that Rockwell Partners is not just another fly-by-night HYIP but a stable and safe place to invest your funds!”

    Rockwell Partners purportedly was based in Costa Rica.

    The first post in a MoneyMakerGroup thread in which Rockwell Partners was pushed in March 2014 claims a daily payout of between 1 percent and 3.5 percent. By June 2014, reports surfaced that the “program” was on the rocks. The website no longer resolves to a server.

    Current schemes being promoted at MoneyMakerGroup include Achieve Community, which claims $50 turns into $400.

    Any number of Achieve Community promoters now are pushing other Ponzi-board schemes.

  • BULLETIN: Entities Operating As Fleet Mutual Wealth Limited And MWF Financial Are Online Frauds, SEC Says; ‘Program’ Has Presence On TalkGold And MoneyMakerGroup Ponzi Forums; Money Ordered Frozen In SolidTrustPay, EgoPay And Perfect Money Accounts

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    A website styled MutualWealth.com is fraudulent and is part of an international pyramid scheme, the SEC says.

    BULLETIN: (7th Update 8:51 p.m. ET U.S.A.) Entities known as Fleet Mutual Wealth Limited, MWF Financial Limited and Mutual Wealth are frauds that filed invalid forms with the SEC to dupe the masses, the SEC said.

    An associated web domain styled MutualWealth.com also is a fraud, the SEC said in a statement and emergency court filing that alleges a pyramid scheme in which promoters become referral agents or purported “accredited advisors” to earn recruitment commissions.

    “Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement.

    Some recent scams have purported to operate out of Hong Kong, something that appears also to be the case with Mutual Wealth.

    “[A]lmost nothing that Mutual Wealth represents to investors is true,” the SEC said.  “The company does not purchase or sell securities on behalf of investors, and instead merely diverts investor money to offshore bank accounts held by shell companies.  Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its purported ‘data-centre’ in New York.  Mutual Wealth also lists make-believe ‘executives’ on its website, and falsely claims in e-mails to investors that it is ‘registered’ or ‘duly registered’ with the SEC.

    And, the SEC said, Mutual Wealth may operate through entities in Panama and the United Kingdom “and through Russian or Belarussian nationals.”

    From the SEC complaint (italics added):

    Investors who complete an account application are instructed to transfer money to Mutual Wealth either by wire transfer to banks located in Latvia and Cyprus or through third-party payment processors such as SolidTrust Pay, EgoPay, or Perfect Money.

    Like other fraud schemes, Mutual Wealth has a presence on the MoneyMakerGroup and TalkGold Ponzi forums.

    U.S. District Judge Dolly M. Gee of the Central District of California has ordered an asset freeze on all accounts “at any bank, financial institution, brokerage firm, or third-payment payment processor (including those commercially known as SolidTrust Pay, EgoPay, and Perfect Money) maintained for the benefit of Mutual Wealth,” the SEC said.

    Assisting in the probe are the FBI, the Financial and Capital Market Commission of Latvia, the Ontario Securities Commission and the Cyprus Securities and Exchange Commission, the SEC said.

    From the SEC’s statement (italics added):

    According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia and offshore “payment processors” to divert money from investors.  Mutual Wealth’s sole director and shareholder presented forged and stolen passports and a bogus address to foreign government authorities and payment processors.

    As in previous scams, the Mutual Wealth fraud spread on social media, the SEC said.

    “Mutual Wealth maintains Facebook and Twitter accounts that link to its website and serve as platforms through which it lures new investors,” the SEC said.  “Some of Mutual Wealth’s ‘accredited advisors’ then use social media channels ranging from Facebook and Twitter to YouTube and Skype to recruit additional investors and earn referral fees and commissions.

    “Mutual Wealth’s Facebook page spreads such misrepresentations as ‘HFT portfolios with ROI of up to 250% per annum.  Income yield up to 8% per week,’” the SEC said.  “A Facebook post on Aug. 12, 2013, boasted ‘$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.’  Mutual Wealth regularly posts status updates for investors on its Facebook page, and the comment sections beneath the posts are often filled with solicitations by the accredited advisors.  Mutual Wealth also tweets announcements posted on its Facebook page.”

    Regulators have been warning for years about scams spreading on social media.

    Scammers recently have been purporting they are conducting IPOs or pre-IPOs or are registered with the SEC.

    “Mutual Wealth has filed three Securities Act Forms D with the Commission,” the SEC said. “Each Form D purports to give notice of offerings of securities that are exempt from registration with the Commission under Regulation D of the Securities Act.

    “But Mutual Wealth’s offers and sales of securities do not qualify for the exemptions cited in the Forms D or any exemption under from registration under Regulation D of the Securities Act. Consequently, the Forms D are invalid and of no legal effect,” the SEC said.

    About 150 U.S. investors opened Mutual Wealth accounts, plowing “at least” $300,000 into the scheme, the SEC said.

    Note: Thanks to Jordan Maglich at PonziTracker.com.

    Screen stot of section of SEC complaint alleging that Mutual Wealth is a pyramid scheme. Red highlights by PP Blog.
    Screen shot of section of SEC complaint alleging that Mutual Wealth is a pyramid scheme. Red highlights by PP Blog.

  • BULLETIN: 3 Church Officials, Including 2 Pastors, Arrested By Toronto Police In Alleged Fraud Scheme In Which Money Was Funneled To Panama

    Source: Toronto Police Service.
    Source: Toronto Police Service.

    BULLETIN: Dozens of members of a church congregation were scammed by husband-and-wife pastors and a church administrator in a Forex fraud and “loan” scheme in which money was funneled to Panama, Toronto police say.

    Arrested were Lorraine Bahlmann, 47, Verna Hibbert, 48, and Marlon Hibbert, 49. They’ve been charged with with 38 counts of fraud over $5,000 in the alleged scam, which reportedly gathered about $8.6 million.

    Millions of dollars appear to be missing, police said.

    “Each month, the accused would have statements, which he would send to the victims showing growth in their investment accounts when in fact the accused was losing money,” said Det. Gail Regan of the Service’s Financial Crimes Unit.

    The Ontario Securities Commission was involved in the probe, police said.

    “[L]arge portions of the victim’s money” are believed to have been transferred to Panama, Regan said.

    “The victims are hurt and distraught,” she said. “They still can’t believe that someone like him has done this to them.”

    Investigators have identified 38 victims, but Regan said there may be nearly 200. The phone number to contact police is 416-808-7238.

    Some of the victims lost their homes and life savings, Regan said.

    Between January 2005 and December 2010, “the accused convinced congregation members and their families and friends to invest money with the pastor in the form of loan agreements and investment contracts,” police said.

  • URGENT >> BULLETIN >> MOVING: SEC Calls Zeek ‘$600 Million Online Pyramid And Ponzi Scheme’

    URGENT >> BULLETIN >> MOVING: (UPDATED 6:25 P.M. EDT (U.S.A.) The SEC has filed an emergency action in federal court in Charlotte, N.C., that alleges Zeek Rewards is a $600 million Ponzi and pyramid scheme.

    “The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an associate director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”

    In its emergency filing, the SEC described Zeek as a classic Ponzi scheme. The agency charged that “approximately 98% of ZeekRewards’ total revenues, and correspondingly the purported share of ‘net profits’ paid to current investors, are comprised of funds received from new investors.”

    Records show that the AdSurfDaily Ponzi scheme which, like Zeek, suggested that investors would receive a return on the order of 1 percent a day, also received only about 2 percent of its revenue from sources other than members. Zeek had members in common with ASD.

    Zeek, the SEC alleged, “is teetering on collapse.”

    Zeek CEO Paul R. Burks has been charged with selling unregistered securities as investment contracts, the SEC said. Burks presided over Rex Venture Group LLC, Zeek’s purported parent company. Rex Venture also has been charged. The SEC said it was aided in the probe by the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

    Burks’ program holds “approximately $225 million in investor funds in approximately 15 foreign and domestic financial institutions, and those funds are at risk of imminent dissipation and depletion,” the SEC charged, noting that the Ponzi potentially could affect more than 1 million people globally.

    A federal judge has ordered an emergency asset freeze and a receiver will the appointed, the SEC said.

    “Through the ZeekRewards program, Defendants offer affiliates several ways to earn money, two of which involve the offer and sale of securities in the form of investment contracts: the ““Retail Profit Pool” and the “Matrix,” the SEC charged.

    And, the agency said, the “compounding” effect has created a condition under which 3 billion Zeek “Profit Points” are outstanding.

    “Based on the ZeekRewards current outstanding Profit Point balance, the company would be obligated to pay out approximately $45 million per day if all Qualified Affiliates elected to receive their daily award in cash,” the agency charged.

    Amid Zeek claims that it paid out 50 percent of its daily net and that its business model was “proprietary,” investigators discovered that Zeek delivered an unusually consistent return of about 1.5 percent a day.

    “In fact, the dividend bears no relation to the company’s net profits,” the SEC charged. “Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.

    Similar allegations were made in 2008 against ASD operator Andy Bowdoin.

    Zeek’s fabled Zeekler “bids” were described by the SEC as smoke-and-mirrors. From the complaint (italics added):

    Despite encouraging affiliates to purchase and give away VIP Bids to promote and drive traffic to the Zeekler penny auction website, Defendants fail to disclose that almost none of the VIP Bids given away by Qualified investors are actually used on the Zeekler penny auction website. Of approximately 10 billion VIP Bids purchased by or awarded to investors, less than one-quarter of one percent have been actually used in auctions on the Zeekler penny auction website. Thus, the VIP Bids do little or nothing to actually promote the retail business.

    Zeek operator Burks, meanwhile, “has withdrawn approximately $11 million while operating Rex Venture and ZeekRewards, of which approximately $4 million remains in his possession, custody or control.

    Burks “distributed approximately $1 million of the funds garnered from ZeekRewards to family members,” the SEC said.

    Amid high drama and confusing website reports from Zeek yesterday, including the virtual abandonment of its office in Lexington, N.C., and petition drives by Zeek affiliates to demand the return of Zeek, it turns out that “Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver,” the SEC said.

    The U.S. Secret Service also is investigating Zeek, as is the office of North Carolina Attorney General Roy Cooper.

    Read the SEC complaint.

  • BULLETIN: CFTC Moves Against Alleged Texas Forex Fraudster Christopher B. Cornett; Agency Says Huckster Is Convicted Felon Once Banned By NASD; 5 International Law-Enforcement Agencies Assisted In Probe

    BULLETIN: The CFTC has gone to federal court in Texas, alleging that Christopher B. Cornett of the town of Buda was operating a Forex- pool fraud and misappropriation scheme that gathered more than $14 million in phases between June 2008 and October 2011.

    Cornett has been charged civilly with fraud, which allegedly operated through entities the CFTC identified as ITLDU, ICM, International Forex Management LLC and/or IFM LLC.

    “[M]ost, if not all, of the profits, losses and account balances that Cornett reported to pool participants were false,” the CFTC said.

    Five international agencies, according to the CFTC, assisted in the probe: the U.K. Financial Services Authority, the British Virgin Islands Financial Services Commission, the Ontario Securities Commission, Germany’s BaFin, and the Swiss Financial Market Supervisory Authority.

    In 2003, according to the CFTC, the National Association of Securities Dealers (NASD) “barred [Cornett] with association with any NASD member in any capacity” and ordered Cornett to pay restitution in the amount of $28,423.73 for signing a customer’s name on the back of a check and using the funds for Cornett’s personal benefit without the authorization, knowledge or consent of the customer.”

    NASD was the predecessor agency of the Financial Industry Regulatory Authority (FINRA).

    Also in 2003, Cornett was sentenced to 37 months in federal prison after pleading guilty to five counts of bank fraud, the CFTC said.

    Read the CFTC complaint.

     

     

  • BULLETIN: E-Bullion Operator And Emerging AdSurfDaily Figure James Fayed Formally Sentenced To Death For Contract Slaying Of Estranged Wife; A ‘Cold, Calculating Human Being’

    BULLETIN: The Los Angeles Times is reporting (link below) that James Fayed has been formally sentenced to the death penalty for arranging the brutal slashing death of Pamela Fayed, his estranged wife and a potential witness against him.

    James Fayed, 48, is an emerging figure in the AdSurfDaily Ponzi case. Federal prosecutors in the District of Columbia said in December 2010 that E-Bullion was used to forward money to ASD, which the U.S. Secret Service described as a massive international Ponzi scheme that used multiple payment venues to amass at least $110 million.

    Erma Seabaugh, an ASD member who used E-Bullion, was an ASD trainer, according to the government. Records in Oregon show that Seabaugh, whose assets were seized in the ASD case, was operating a purported “religious” nonprofit firm from Missouri. The purported religious entity was known as Carpe Diem.

    Seabaugh’s assets were seized in February 2009, during a period of time in which the AdViewGlobal (AVG)  autosurf was launching and ASD President Andy Bowdoin was morphing into a pro-se litigant and trying to undo his January 2009 decision to submit to the forfeiture of $65.8 million seized by the Secret Service from 10 Bowdoin bank accounts in August 2008. AVG had close ASD ties, according to members.

    E-Bullion has been linked to multiple Ponzi schemes, including Legisi, Gold Quest International and FEDI. The FEDI scheme has been linked to Abdul Tawala Ibn Ali Alishtari, also known as Michael Mixon. Ali Alishtari pleaded guilty in 2009 to financing terrorism and fleecing investors in the FEDI scheme.

    FEDI participants could expect to receive payouts deemed “rebates,” according to documents obtained by the Ontario Securities Commission from a FEDI promoter who simultaneously was promoting a mysterious business known as the “Alpha Project.” ASD also used the word “rebates” to describe its payouts, according to court filings.

    Ali Alishtari, like ASD’s Bowdoin, contributed money to Republican causes and heralded a purported GOP award for his business acumen, according to documents.

    Seabaugh used ASD’s advertising “rotator” to promote an apparent “pyramid scheme” known as StreamlineGold.net, according to federal court filings. Like ASD, Legisi and GoldQuest International, StreamlineGold.net was promoted on Ponzi boards such as TalkGold and MoneyMakerGroup.

    Pamela Fayed was stabbed 13 times in a Greater Los Angeles parking garage on July 28, 2008. The Times reported today that James Fayed was seated on a nearby park bench “texting” on his cell phone while his alleged accomplices carried out the slaying.

    Los Angeles Superior Court Judge Kathleen Kennedy described James Fayed as “one cold, calculating human being,” according to the Times. Kennedy formally imposed the death sentence yesterday. The jury that convicted James Fayed in May recommended the sentence.

    From the Times (italics added):

    The only person within earshot who didn’t react was the victim’s estranged husband who was sitting on a nearby bench “texting on his cellphone, like he doesn’t have a care in the world,” Los Angeles County Superior Court Judge Kathleen Kennedy said Thursday, moments before sentencing James Fayed to death for the contract killing.

    Read the chilling story in the Times.

  • BULLETIN: Quebec Regulators Reference Cherryshares And Mega Pension Plan — Two ‘Programs’ Pushed On Ponzi Boards — In Freeze And Cease-Trade Orders Against 3 Canadian Promoters, 2 Companies

    BULLETIN: The Autorité des marchés financiers (AMF) has obtained freeze and cease-trade orders against three Quebec residents and two business entities — and has shut down at least one website amid allegations that an international marketing scam was under way.

    At least two of the programs referenced in AMF’s action were promoted on the TalkGold and MoneyMakerGroup Ponzi forums: Cherryshares, an HYIP darling that collapsed last year, and Mega Pension Plan.

    Cherryshares was a paid advertiser on the Ponzi forums. It vanished under mysterious circumstances in December.

    AMF described the scams as insidious because the promoters didn’t ask for big money from individual investors, instead relying on relatively small sums to add up to a larger sum.

    “These seemingly modest amounts add up to anything but,” according to an AMF news release.

    Named in the AMF action are Warren English of Laval, and Alain-André Desarzens and Michèle Amiot of Rimouski. Desarzens and Amiot are married, AMF said.

    “Messrs. English and Desarzens had issued a mass e-mailing to thousands of potential investors with promises of pocketing a lot of money fast,” AMF said.

    Using different email addresses, English and Desarzens promoted “numerous investments,” including Cherryshares and Mega Pension Plan, AMF alleged.

    “They offered thousands of investors around the world, including two Quebeckers, the opportunity to generate possible returns ranging from U.S.$1,000 to $90,000 on a minimum investment of between U.S.$10 and $300,” AMF alleged.

    Even as he was soliciting  new prospects, English was under a cease-trade order issued by the Ontario Securities Commission in 2003, AMF said.

    Desarzens, meanwhile, was under a cease-trade order issued by the Pennsylvania Securities Commission in 1999, AMF said.

    English used some of the funds from the Mega Pension Plan scam to acquire a “luxury condominium” in Laval, AMF said.

    “Based on the data gathered by the AMF, Mr. English moved nearly $525,000 between his accounts and those of his company, Méga International Business,” AMF said.

    All in all, Desarzens allegedly acquired $875,000 as a result of scamming.

    No breakdown of which scam was more profitable was provided, but some of the cash ended up with Desarzens’ spouse — and some of it ended up with a Desarzens-controlled entity known as Institut des médecines universelles, AMF said.

    A website linked to Desarzens — www.myleads.8k.com — was ordered shut down.

  • BULLETIN: Gold Quest International (GQI) UPLINE/DOWNLINE Groups Will Be Subject Of Hearing By Ontario Securities Commission; Case Alleges Respondents Were Both Investors And Promoters Who Pushed Unregistered Securities Of Bizarre Firm

    EDITOR’S NOTE: If you’re pushing Ponzi schemes on MoneyMakerGroup, TalkGold and other criminal forums, allegations brought by the Ontario Securities Commission (OSC) against geographically localized promoters of Gold Quest International (GQI) may interrupt your delusions of invincibility over the next several weeks.

    Upline and downline networks within Gold Quest International (GQI), a bizarre company taken down by the SEC just three months before the U.S. Secret Service raid on AdSurfDaily in 2008, are in the news in the Canadian province of Ontario.

    The Ontario Securities Commission (OSC) will conduct a hearing March 24 to consider taking provincial action against local promoters of GQI, which already has been ruled a Ponzi scheme, pyramid scheme and “sham” investment by the Alberta Securities Commission.

    OSC pointed out that GQI “has never been registered in any capacity with the Commission” and alleged that its promoters within the province also were not registered.

    The case is important because it signals that Ontario regulators have backtracked millions of dollars of GQI transactions that originated in the province, segregated the source of the money to specific groups of promoters within the province and now intend to hold them accountable for spreading financial misery to their fellow citizens.

    The odds of the respondents avoiding sanctions after the hearing may be low. One Ontario man implicated in the GQI scheme already has filed bankruptcy and has been ordered to pay $652,000 in disgorgement and penalties for his role in GQI.  The man, Donald Iain Buchanan, allegedly was introduced to GQI by some of the promoters who are the subject of the hearing next month.

    And the odds may be weighted even more heavily against the promoters prevailing at the hearing because of the bizarre claims of GQI itself, which purported to have a “Lord” among its key managers and said it was immune to regulatory oversight because it was an extension of a North Dakota sovereign “Indian” tribe and was permitted to operate untouched from Las Vegas.

    GQI, which gathered about $29 million in a long-running scheme by promising returns of 87.5 percent a year and huge commissions, sought unsuccessfully to sue the SEC for the astronomical sum of $1.7 trillion. A U.S. federal judge dispatched U.S. marshals to haul key players into court for ignoring court orders, and vast sums of money appear to have gone missing down ratholes in Europe and New Zealand.

    Some of the money also is tied up as a result of criminal allegations — including murder — against James Fayed, the operator of the now-shuttered E-bullion payment processor.

    In its statement of allegations, OSC accused Simply Wealth Financial Group Inc., Naida Allarde, Bernardo Giangrosso, K&S Global Wealth Creative Strategies Inc., Kevin Persaud, Maxine Lobban and Wayne Lobban of promoting unregistered securities. All of the accused companies and individuals have Ontario addresses, according to OSC.

    “During the Material Time, Simply Wealth, Allarde, Giangrosso, K&S, Persaud, Maxine Lobban and Wayne Lobban . . . promoted securities in Gold-Quest to Ontario residents,” OSC charged.

    About 94 Ontario residents plowed $1.6 million into GQI “as a result of promotional activities conducted by Allarde, Giangrosso and Simply Wealth,” OSC charged. “These activities included recommending investment in Gold-Quest, providing information regarding the nature of the investment in Gold-Quest, facilitating the process of investing in Gold-Quest, and, in certain cases, facilitating the transfer of funds to Gold-Quest on behalf of investors.”

    K&S and Persaud, meanwhile, caused about nine Ontario investors to plow about $69,000 into the GQI scheme. Among their alleged customers was Buchanan, who also became a promoter and caused his customers to bring $1.8 million more into the scheme, according to OSC.

    Maxine Lobban and Wayne Lobban also became promoters and caused investors to bring “at least $675,000” into the GQI scheme, the OSC alleged.

    The math of the scheme was doomed to fail, but purveyors were lured by titles and promised both spectacular investment earnings and commissions. Promoters were categorized in upline/downline tiers, the OSC alleged.

    “Individuals who introduced an investor to Gold-Quest would receive the title ‘Administrative Manager’ for the new investor,” OSC alleged. “Administrative Managers would receive an up-front commission of ten percent of that investor’s original investment and then a further four percent per month for a year (for a total commission of 58 percent of the principal invested).

    “The individual who had introduced the Administrative Manager to Gold-Quest would receive the title ‘Managing Director’ for the new investor and would receive a commission of 1.5 percent per month for a year (for a total of 18 percent of the principal invested),” the OSC continued.

    “Lastly, the individual who introduced the Managing Director to Gold-Quest would receive the title ‘Supervisory Managing Director’ for the new investor and would receive a commission of one percent per month for a year (for a total of 12 percent of the principal invested).

    “In sum, when a new investor sent funds to Gold-Quest, 88 percent of the investor’s funds were earmarked for commissions to be paid to the investor’s Administrative Manager, Managing Director and Supervisory Managing Director over the course of a year,” OSC alleged.

    In November 2010, OSC ordered penalties and disgorgement of $652,000 against Buchanan for his role in the GQI scheme.

    “Buchanan’s conduct warrants a substantial administrative penalty,” OSC said. “He was involved in two investment schemes in which Ontario investors invested approximately US $4.3 million.”

    Although commission staff had recommended an administrative penalty of $150,000 against Buchanan, who is bankrupt, OSC doubled the amount to $300,000, saying Buchanan had shown no remorse and that the smaller penalty would not serve as a deterrent.

  • BULLETIN: SEC Halts Alleged $105 Million Ponzi Scheme Operating ‘Offshore’; Daniel Spitzer Charged In Complex International Fraud Case; Several Agencies Credited With Assisting Probe

    Saying his offshore Ponzi scheme was on the verge of collapse but still collecting money, the SEC has charged a resident of the U.S. Virgin Islands with fraud.

    Several international authorities assisted in the probe, the SEC said.

    Daniel Spitzer, a U.S. citizen who resides in St. Thomas, was charged in the scheme. The SEC said the scheme netted $105 million and roped in 400 investors, dating back “at least” to 2004.

    Spitzer is 51, and “desperate for money” to keep the scheme afloat, the SEC charged, describing him as a “purported fund manager.”

    “Daniel Spitzer ran an elaborate Ponzi scheme that he disguised by moving investor money through a complex network of foreign bank and brokerage accounts,” said Merri Jo Gillette, director of the SEC’s Chicago Regional Office. “He deceived investors into believing that he was using a sophisticated investment strategy that didn’t really exist.”

    In an emergency action in Illinois, the SEC said the scheme was on the verge of collapsing and that Spitzer still was collecting money in March to prevent its collapse. Earlier, Spitzer spent more than $900,000 “in cash at the Wynn Las Vegas Casino,” the agency said.

    “Since at least August 2009 and continuing through to the present, Spitzer has attempted to delay and avoided paying requested investor redemptions,” the SEC charged. “Spitzer is desperate for money and has continued to prey on victims.”

    Spitzer was spending money at the casino in October 2009, even as he was delaying payments to investors, according to court filings.

    Also named defendants in the case were these Spitzer-connected companies: Kenzie Financial Management Inc. of St. Thomas; Kenzie Services LLC of Nevis; Draseena Funds Group Corp., an Illinois corporation with offices in Clearwater, Fla., and Stateline, Nev.; DN Management Co. LLC of Nevada; Aneesard Management LLC, also known as Nerium Management Co. LLC of Nevada; Nerium Management Co. of Illinois; Arrow Fund LLC of Nevada; Arrow Fund II LLC of Nevada; Conservium Fund LLC of Nevada; Nerium Currency Fund LP of Nevada; Senior Strength Q Fund LLC of Nevada; SSecurity Fund LLC of Nevada; Three Oaks Advanced Fund LLC of Nevada; Three Oaks Currency Fund LP of Nevada; Three Oaks Fund 25 LLC of Nevada; Three Oaks Senior Strength Fund LLC of Nevada; and USFirst Fund LLC of Nevada.

    Just three months ago, the SEC said, Spitzer railroaded an investor for $100,000 by telling the investor the money would be used “in one of Spitzer’s more conservative investment funds.

    “Rather than invest in said fund, in April 2010, Spitzer used this investor’s money to make $9,492 in Ponzi payments to four other investors, transferred $27,102 to the First Bank of Puerto Rico, and paid $26,257 for third party expenses,” the SEC charged.

    Assisting in the probe were the U.S. Commodity Futures Trading Commission, the Irish Financial Regulator, Danish Financial Supervisory Authority, Autorité des marches financier in France, the Ontario Securities Commission and the Financial Intelligence and Investigations Unit Attached to the Royal Anguilla Police Force in Anguilla, the SEC said.

  • U.S., German, British, Canadian Provincial Regulators Cooperate In Probe Of Alleged ‘Oil And Gas’ Fraud Scheme Operating In Florida, Texas And Aruba; SEC Sues Justin Solomon And Affiliated Firms

    A Florida man selling “joint ventures” in oil-and-gas businesses in Texas to overseas clients through corporate arms in the United States and Aruba has been accused of fraud by the SEC.

    Named defendants in the case were Justin Solomon of Deerfield Beach, Fla., and three affiliated companies: Seisma Oil Research LLC of Boca Raton, Fla., Seisma Energy Research AVV and Permian Asset Management AVV of Aruba.

    Seisma Oil Research LLC also is known as Seisma Energy Research LLC, and Seisma Energy Research AVV also is known as Seisma Oil Research AVV, the SEC said.

    The case is notable for reasons beyond fraud allegations and the number of companies with similar-sounding names. Indeed, the SEC said the agency was assisted in the probe by the Financial Services Authority of the United Kingdom, the Federal Financial Supervisory Authority of Germany, the Ontario Securities Commission and the Nova Scotia Securities Commission.

    Also assisting internationally was the London Police Department. On the U.S. domestic front, the Division of Securities of the Florida Office of Financial Regulation also assisted.

    The defendants have consented to a preliminary injunction and to repatriate “any remaining investor assets” to the United States.

    Solomon and the companies raised “at least” $25 million in the scheme by using “high-pressure sales tactics” on “more than 400 non-U.S. investors,” drawing them into the scheme, the SEC said.

    “The ventures were supposed to purchase undivided working interest in oil and gas projects owned and operated by two unrelated Texas companies,” the SEC said.

    Investigators, though, said “Seisma never acquired any working interest for two of the six ventures and has expended only $9.5 million of the funds raised toward acquiring interests on behalf of the ventures.”

    At the same time, the SEC said, “Seisma misrepresented or omitted material facts about the profitability and prospects of the oil and gas opportunities.”

  • Pathway To Prosperity Case A Subject Of Discussion In Washington’s Highest Power Corridors; Website Of U.S. Attorney General Includes Link To Case Info As Part Of ‘Mass-Marketing Fraud’ Educational Campaign

    From the June 2010 International Mass-Marketing Fraud Working Group report.

    In November 2009, President Obama formed the interagency Financial Fraud Enforcement Task Force (FFETF). By January, U.S. Attorney General Eric Holder, who answers to Obama,  publicly warned fraudsters that “if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

    It now turns out that the investigation into the business practices of Nicholas Smirnow and unnamed co-conspirators in an alleged $70 million, HYIP Ponzi scheme known as Pathway To Prosperity (P2P) was undertaken by elements of the FFETF.

    It further turns out the the U.S. Department of Justice — under Holder’s command — is using the P2P probe and the criminal charges it led to against Smirnow to educate the public on a global scale about “mass-marketing fraud.”

    The P2P case was mentioned prominently in a news release yesterday by the Justice Department to publicize international, cooperative efforts among seven governments to curb the proliferation of fraud that occurs on the Internet, over the telephone, through the mails, through group meetings and through other forms of mass communication.

    Last week, federal prosecutors thanked the Rotterdam-Rijnmond Regional Police in Rotterdam in the Netherlands, Filipino authorities, and the Ontario Securities Commission in Canada for assisting in the P2P probe.

    Meanwhile, an entity known as the International Mass-Marketing Fraud Working Group (IMMFWG) has released a “threat assessment” to provide governments and the public with a current assessment of the nature and scope of the threat that mass-marketing fraud poses around the world.

    IMMFWG’s participating countries include the United States, Australia, Belgium, Canada, the Netherlands, Nigeria and the United Kingdom, as well as Europol, the European police agency.

    “The IMMFWG seeks to facilitate the multinational exchange of information and intelligence, the coordination of cross-border operations to detect, disrupt, and apprehend mass-marketing fraud, and the enhancement of public-awareness and public-education measures concerning international mass-marketing fraud schemes,” the group said.

    In the Justice Department news release yesterday to publicize IMMFWG’s threat assessment, prosecutors pointedly referenced the P2P case.

    “Last week the U.S. Attorney’s Office for the Southern District of Illinois charged an individual for allegedly engaging in an international Ponzi scheme that was operated through a website,” the Justice Department said. “The scheme allegedly resulted in a total of $70 million in losses to more than 40,000 investors in more than 120 countries.”

    The news release included a link to information on the P2P case, and the letterhead in the document featured the logos of both the Justice Department and the Task Force Obama created in November.

    Despite very public warnings from Holder that the United States is serious about sending financial fraudsters to jail and a declaration in the complaint against P2P’s Smirnow that “[a] large percentage, if not all, HYIPs, are Ponzi schemes,” members of Ponzi-pushing forums such as ASA Monitor, MoneyMakerGroup, TalkGold and MyCashForums are still out in full force to push Ponzi schemes on the U.S. and world public.

    For its part, IMMFWG said in its threat assessment yesterday that “[t]here are strong indications that the order of magnitude of global mass-marketing fraud losses is in the tens of billions of dollars per year.”

    IMMFWG also said “[m]ass-marketing fraud has gradually transformed from a predominantly North American crime problem into a pervasive global criminal threat.”

    “For some victims,” IMMFWG said, “the risks extend well beyond loss of personal savings or funds to include physical threats or risks, loss of their homes, depression, and even contemplated, attempted, or actual suicide.”

    IMMFWG noted that “[l]arge-scale criminal mass-marketing fraud operations are present in multiple countries in most regions of the world” and that “similarities between such operations include targeting victims in other countries, foreign outsourcing of operations, and involvement of organized criminal enterprises.”

    Read the Justice Department news release that references P2P in the context of IMMFWG’s global effort to educate the public about mass-marketing fraud and the hideous economic and social consequences of such fraud.

    Read IMMFWG’s threat assessment as published by the interagency Financial Fraud Enforcement Task Force.