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Tag: SEC Los Angeles Regional Office

  • SEC: Binary Options Case Triggers Investor Alert

    breakingnews725Is there a double whammy in your MLM future — first being ripped off in a binary-options “program,” only to be ripped off a second time by scammers posing as government agencies and offering purported refunds for a fee?

    Naturally some MLMers have added binary options to their offerings, with some incredible solicitations and tales being told online. BehindMLM.com, for example, recently reported on the purported death of “Bob Roberts,” an asserted figure from a “program” known as Options Rider.

    In 2015, the PP Blog reported that Quebec’s securities regulator was concerned that binary-options scammers were steering people into reload schemes and posing as government entities. Meanwhile, there was the tale of SpotFN, a purported binary-options platform that reached across the oceans and plains to pluck investors in Missouri.

    At least one Missouri investor was told his money could be retrieved by paying a fee to a purported insurance company, authorities said.

    Binary-options “programs” also are appearing on the Ponzi boards, alongside HYIP, cycler and “advertising” scams.

    In 2013, the SEC brought an action against Cyprus-based Banc de Binary Ltd., its founder Oren Shabat Laurent and three affiliates alleging “that they failed to register the offering before soliciting U.S. customers through YouTube videos, spam e-mails, and other Internet advertising.”

    Banc de Binary has agreed to pay $11 million in a settlement, the SEC said today.

    This includes “$7.1 million in disgorgement and $1.95 million in penalties to the SEC as well as $2 million in penalties to the Commodity Futures Trading Commission (CFTC), which filed a parallel action,” the SEC said.

    “Banc de Binary and its affiliates completely disregarded U.S. laws and registration requirements, and as a result they must surrender millions of dollars and be suspended from the industry,” said Michele Layne, director of the SEC’s Los Angeles Regional Office.

    Harmed investors will receive a distribution from a Fair Fund administered by the National Futures Association, the SEC said.

    Although it is nice that money apparently is available to compensate Banc de Binary customers, that’s not always the case, perhaps particularly with cross-border schemes.

    The settlement wasn’t the only news the SEC announced today. Indeed, the agency announced an Investor Alert that warns of “impersonators” tag-teaming the Banc de Binary case.

    “The SEC has become aware of some impersonators claiming to be affiliated with the SEC or other government agencies who have contacted harmed investors in this Banc de Binary case and asked them to pay a fee to facilitate their settlement payout,” the SEC said.  “It’s important for all investors to know that the SEC never makes people pay to get their money back.”

    Read the Investor Alert. “Avoid becoming a victim twice,” the SEC urged.

    Read the CFTC’s statement, which says a U.S. federal court has imposed “a permanent ban on offering or trading any further off-exchange binary options to U.S. customers.”

    Read Banc de Binary restitution information from the National Futures Association.




  • SEC: Yet Another Social Media Fraud Scheme; Hawaii Woman Charged

    recommendedreading1On the same day the SEC announced a civil and criminal prosecution of alleged Florida-based scammers using YouTube to fleece the masses in a Ponzi scheme, it announced it had charged a Honolulu woman who allegedly engineered two fraud schemes through promotions on her own website and Twitter, Facebook and Skype.

    Keiko Kawamura’s scams featured the posting of third-party screen shots to create the impression “she was personally obtaining incredible investment returns,” the SEC charged yesterday.

    But, the agency alleged, “the account statements were not hers.”

    And Kawamura was not really a hedge-fund manager or investment banker, despite her claims, the SEC charged. Rather, “she had virtually no prior trading experience.”

    The scam was not limited to social networks, the SEC charged. Kawamura built a myth on her own website and advanced it over Twitter and Facebook.

    Subscribers willing to pay “between $94.95 and $174.95” a month received access to “a locked Twitter account that Kawamura used to provide recommendations on when to sell or purchase particular stocks and options,” the SEC said.

    On the myth-making front, the SEC charged, Kawamura “claimed on the site that she had ‘been in the Investment banking industry for nearly a decade, specializing in Wealth Management for a major Financial Institution.’”

    The reality “at the time she created her website,” however, was that Kawamura “knew this was false,” the SEC charged. “She has never worked in the investment banking industry and has never worked for any financial institutions.”

    Her lack of qualifications notwithstanding, Kawamura “also provided all subscribers to her website with access to one-on-one advice over Skype’s instant message service in which she would provide specific recommendations regarding stocks and options to the subscriber,” the SEC charged.

    Kawamura netted nearly $50,000 in fees that flowed from 70 subscribers. Beyond that, roughly $200,000 more came in from at least seven investors duped into believing Kawamura was a professional hedge-fund manager, the SEC said.

    “Despite her promises to invest the funds she obtained, Kawamura misappropriated much of the money,” the SEC charged. “Of the funds she did invest, Kawamura lost everything in risky options trading.”

    Part of the hedge-fund scheme featured the creation of “false tax documents,” the SEC charged.

    The highly touted “experience” of the purported hedge-fund manager proved to be that she had placed “a small number of trades over the preceding few months in an account held in her boyfriend’s name and less than $10,000 traded in brokerage accounts held in her name,” the SEC charged.

    Where did the money go?

    “[L]uxury vacations to Miami and London,” the SEC said.

    And after duping investors in that fashion, she launched the subscription service, the SEC charged.

    “As alleged in our case, Kawamura used social media to ensnare investors and raise money to support her lifestyle,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “Investors should beware of fraudsters who use social media to hide behind anonymity and reach many investors with little to no cost or effort.”

    The SEC’s Los Angeles Office brought Ponzi- and pyramid charges against Phil Ming Xu of the WCM777 “program” last month. WCM777 and companion schemes also traded on social media, including YouTube and Twitter.

    Those schemes fetched at least $65 million, the SEC said.

    See SEC’s 2012 Investor Alert on Social Media and Investing.

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

    breakingnews72URGENT >> BULLETIN >> MOVING: (16th update 5:42 p.m. EDT U.S.A.) The SEC has gone to federal court in Los Angeles, alleging that the WCM777 “program” is a “worldwide” pyramid scheme, a Ponzi scheme and an offering fraud that targeted Asian and Latino communities and gathered more than $65 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    This Monrovia sale never closed, the SEC said.

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

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

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

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

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

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

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

    Commingling

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

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

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

    From the SEC complaint (italics added):

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

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

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

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

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

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

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

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

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

    Liu is known as “Tiger.”

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

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

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

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

    Read the SEC’s statement and complaint.

     

  • BULLETIN: U.S. Citizen Presiding Over New Zealand Firms Ran Ponzi, Stole Millions And Was Aided By Pitchmen In Utah And Louisiana, SEC Says

    secpedrasBULLETIN: The SEC has gone to federal court in the Central District of California and alleged that a U.S. citizen running companies in New Zealand and relying on pitchmen in Utah and Louisiana operated a Ponzi scheme and stole millions of dollars from investors.

    A federal judge has approved an emergency asset freeze, the SEC said.

    Named defendants, according to the SEC, were Christopher A.T. Pedras, a U.S. citizen who resides in Turlock, Calif., and operates firms in both America and New Zealand; Sylvester M. Gray II of Kaysville, Utah; and Alicia Bryan of Bossier City, La.

    Pedras presided over “sham investment opportunities ranging from a bank trading program to kidney dialysis clinics,” the SEC said. The agency added that Pedras “advised investors not to respond if contacted by the SEC.

    “He characterized SEC investor questionnaires as ‘fake’ and stated that the SEC’s investigation was motivated by a ‘personal vendetta’ against him,” the agency said.

    As part of the scam, the SEC alleged in its complaint, “In March 2012, Pedras conducted an in-person seminar at Paramount Studios in Los Angeles for actual and prospective investors. At the seminar, he described the nature and benefits of the Maxum Gold Trade Program and the safety of investors’  funds in escrow accounts.”

    Bryan, the agency said, has a criminal record and pleaded guilty in September 2008 “to a charge of attempted felony theft in the State of Louisiana, arising from her attempt to cash a counterfeit check from her then-employer, an internet company for whom she collected charitable donations and sent them to a purported disaster relief organization overseas.”

    “Rather than conducting any legitimate business activity, Pedras and his partners were simply operating a Ponzi scheme that was ultimately doomed to collapse,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “This emergency action stops them from fraudulently raising any more money from U.S. investors.”

    The scams gathered at least $5.6 million from U.S. investors, the SEC said.

    Corporate defendants include Maxum Gold Bnk Holdings Limited of New Zealand; Maxum Gold Bnk Holdings LLC of Nevada; FMP Medical Services LLC of Nevada; FMP Medical Services Limited of New Zealand.

    From a statement by the SEC (italics added):

    The SEC alleges that Christopher A.T. Pedras, who has residences in Turlock, Calif., and New Zealand, misled his initial investors into believing they were investing in a profitable trading platform in which his company served as an intermediary between global banks.  When Pedras and his companies encountered difficulty paying the promised 4 to 8 percent monthly returns, they began steering investors to a different investment program to purportedly increase the value of their investment by 80 percent by funding kidney dialysis clinics in New Zealand.  Pedras’s business partner Sylvester M. Gray II and lead sales representative Alicia Bryan helped him solicit investors for both programs, and the money was never invested as promised.  Earlier investors were paid supposed returns with funds received from newer investors, and Pedras stole more than $2 million and spent another $1.2 million on sales agents.

    Pedras also is known as Chris Pedras and Antone Thomas Pedras, the SEC said.

    The New Zealand Financial Markets Authority filed a prospectus cancellation against Pedras’ FMP Medical Services Limited last month, saying it that marked “the first time that FMA has cancelled an offer document.”

    The cancellation means “FMP must stop the offer and that it cannot allot any shares,” the New Zealand agency said. “FMP must immediately repay any investors who have subscribed to the offer.”

  • BULLETIN: ‘Bags Of Cash And A Rolex’: KPMG Auditor Charged In Alleged Insider-Trading Scheme Involving Herbalife, Others; SEC Says Tips Went To Auditor’s Golfing Buddy In The Jewelry Business

    The FBI has a photo of Scott London accepting cash in an insider-trading sting. Source: Exhibit A from FBI criminal complaint.
    The FBI has a photo of Scott London, left, accepting cash in an insider-trading sting. Source: “Exhibit A” from FBI criminal complaint filed today against London.

    BULLETIN: (UPDATED 4:44 P.M. EDT U.S.A.) The SEC has gone to federal court in the Central District of California, accusing a former KPMG “lead partner” and auditor of KPMG’s Herbalife account of insider trading by providing nonpublic information on Herbalife and other companies to a golfing buddy.

    Scott London, 50, of Agoura Hills, Calif., was fired last week by KPMG. He now stands formally accused of passing information unlawfully to Bryan Shaw, who also has been charged.  Shaw, 52, lives in Lake Sherwood, Calif., and operates a jewelry business in Encino, the SEC said.

    The men met at a country club and became close friends, the SEC charged.

    London has claimed he wanted to help Shaw because Shaw’s business was struggling, the SEC said.

    At a minimum, however, London’s alleged misdeeds have resulted in civil and criminal liability for himself, while creating a PR crisis for KPMG. At the same time, it put KPMG client Herbalife in the awkward position of having to explain why its stock stopped trading briefly Tuesday morning while its auditor was handling fallout from London’s actions and why it suddenly had no auditor.

    At 2:58 p.m. EDT today, Herbalife’s stock was showing a gain of 3.68 percent. The company said on Tuesday that KPMG had resigned its account  after “it had concluded it was not independent because of alleged insider trading in Herbalife’s securities by one of KPMG’s former partners.”

    Among the SEC’s alarming allegations is that Shaw paid London “at least $50,000 in cash that was usually delivered in bags outside of his Encino, Calif. jewelry store.”

    For good measure, the SEC alleged, Shaw also provided London “an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.”

    “London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,” said George S. Canellos, acting director of the SEC’s Division of Enforcement.

    Using information provided by London, Shaw made more “more than $1.2 million in illicit profits trading ahead of earnings or merger announcements,” the SEC said.

    And, the SEC said, London has been charged criminally. (See photo above from FBI criminal complaint filed today against London, who is charged with criminal conspiracy to commit securities fraud through insider trading. Link to the complaint is in the Comments thread below.)

    On at least one occasion, “London disclosed nonpublic information in the presence of others during a golf outing,” the SEC charged.

    “Prior to public announcements, Shaw received material non-public information from London about numerous earnings announcements and releases of financial results for Herbalife, Skechers [USA Inc.] and Deckers [Outdoor Corp.],” the SEC charged.

    Shaw “grossed profits of more than $714,000 from trading based on confidential financial data about Herbalife, Skechers, and Deckers,” the SEC alleged.

    But the abuse didn’t stop there, the SEC alleged.

    London “also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings [Inc.] and Pacific Capital [Bancorp],” the SEC alleged. “London tipped Shaw with the confidential details. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its Dec. 15, 2011, merger announcement. He made more than $365,000 in illicit profits from his well-timed purchase of Pacific Capital securities prior to a merger announcement on March 9, 2012.”

    “As a leader at a major accounting firm, London’s conduct was an egregious violation of his ethical and professional duties,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.

    “KPMG advised the Company it resigned as Herbalife’s independent accountant solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities and not for any reason related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason,” Herbalife said on Tuesday.

    Herbalife has been the subject of a battle between titans Carl Icahn, who is bullish on the company, and Bill Ackman, who claims Herbalife is a pyramid scheme. On its website, Herbalife denies it is either a pyramid scheme or a Ponzi scheme.