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  • URGENT >> BULLETIN >> MOVING: SEC Charges eAdGear, Alleging $129 Million Pyramid- And Ponzi Scheme

    breakingnews72URGENT >> BULLETIN >> MOVING: (12th Update 1:28 p.m. EDT U.S.A.) The SEC has gone to federal court in San Francisco, alleging that the eAdGear “program” was a pyramid- and Ponzi scheme that gathered $129 million. The action against eAdGear is the second major pyramid-scheme prosecution announced by the SEC this week.

    The SEC has identified eAdGear’s operators as Charles S. Wang, 52, and Qian Cathy Zhang, 52, of Warren, N.J., and Francis Y. Yuen, 53, of Dublin, Calif. They have been charged with fraud and an asset freeze has been imposed, the SEC said.

    Zhang is Wang’s wife, the SEC said, alleging the couple was part of a “ruse” that positioned Zhang as an ordinary “member” who “became hugely successful.”

    “During sworn testimony before the staff of the Commission in the investigation preceding the filing of this case, Zhang asserted her privilege against self-incrimination rather than answer questions about her role at eAdGear,” the SEC said in its complaint.

    The eAdGear “opportunity” itself, according to the SEC, was a “fiction.”

    “eAdGear and its operators falsely claimed that they were running a profitable Internet marketing company when in reality, they were operating a Ponzi and pyramid scheme that preyed on Chinese communities and caused investors to lose millions of dollars,” said Jina L. Choi, director of the SEC’s San Francisco Regional Office.

    Though not named a defendant in the eAdGear complaint, Zeek Rewards figure and alleged Zeek “winner” T. LeMont Silver may find himself at the center of yet another Ponzi- and pyramid storm. That’s because eAdGear once tried to sue ZeekRewards.com, amid claims of cyberpiracy, unfair competition and benefiting from copyright infringement.

    And it’s also because Silver’s name surfaced in fraud lawsuits between and among eAdGear Inc., GoFunPlaces Inc., Randal Williams and JubiMax LLC.

    From an SEC statement on the eAdGear prosecution (italics added):

    . . . even though eAdGear claimed to be a successful Internet marketing company, nearly all of its revenue was generated by investors, not its products or services.

    The complaint alleges that eAdGear’s operators used money from new investors to pay earlier investors as well as to repay a personal loan and purchase million-dollar homes for themselves. It alleges the operators concealed and perpetuated the scheme by displaying sham websites on eAdGear’s own site to make it appear as if it had real, paying customers and manipulated revenue distributions to investors to appear profitable.

    eAdGear began operating in December 2010 and grew to include 66,000 accounts held by “tens of thousands of investors” mostly of Chinese descent, the SEC said.

    Corporate defendants include eAdGear Inc of Pleasanton, Calif., and eAdGear Holdings Limited of Hong Kong. The “program” sold “so-called ‘memberships’ or ‘business packages,’” the SEC said.

    From the SEC complaint (italics added):

    Defendants market eAdGear as a successful internet marketing and advertising company that uses search engine optimization (“SEO”) technology they claimed to have developed to help paying clients increase the page rankings of their websites on various search engines. Defendants claim to share 70% of the revenue generated daily by this business with investors.

    In reality, eAdGear’s purported business is a ruse. Instead, well over 99% of the funds eAdGear has received have come from its investors, and eAdGear simply uses new investor money to make payments to — or to credit the accounts of — existing members in classic Ponzi scheme fashion.

    Wang, Yuen, and Zhang have perpetrated this fraud by, among other things: installing Wang as chief executive officer, and Yuen as chief financial officer and chief operating officer of eAdGear, Inc., while portraying Wang’s wife, Zhang, as an ordinary “member” who became hugely successful; creating a fiction of a business that has paying customers when it does not; and manipulating daily revenue distributions to credit investors’ accounts, to make it appear as though eAdGear is operating profitably.

    Earlier this week, the SEC announced charges against a “program” known as Zhunrize, describing it as pyramid scheme that had gathered $105 million.

    Zhunrize presented itself as a “Plan B,” a core fraud signature in the HYIP world. T. LeMont Silver, among others, is a “Plan B” pitchman.

    Zeek receiver Kenneth D. Bell has said that MLM may have a problem with “serial” promoters of fraud schemes.

  • SEC: California Scammer Traded On Agency’s Name To Sanitize $60 Million Fraud And Ponzi Caper; John A. Geringer And GLR Capital Management Charged With Fraud Amid Allegations ‘Fund’ Claimed Handsome Return Before It Even Existed

    “Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy. The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.” — Marc Fagel, director of the SEC’s San Francisco Regional Office, May 24, 2012

    A California investment adviser presiding for years over a $60 million fraud duped investors by making Ponzi payments and used the names of the Securities and Exchange Commission and the National Association of Securities Dealers to sanitize his scheme, the SEC charged.

    Named defendants in a fraud case filed in the Northern District of California were John A. Geringer, 47, of Scotts Valley, and his Scotts Valley-based companies: GLR Capital Management LLC; GLR Advisors LLC; and Geringer, Luck & Rode LLC. GLR Growth Fund L.P. of Scotts Valley was named a relief defendant amid allegations it received ill-gotten gains.

    The SEC said Geringer touted imaginary annual trading profits of between 17 and 25 percent to lure investors into his scam, describing the investigation as one that exposed internal inconsistencies. Fraud schemes are known for such inconsistencies.

    “Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 — before the fund even existed,” the SEC charged. “The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.”

    And Geringer “further lied” to investors when the claimed his venture was “MEMBER NASD SEC APPROVED,” the agency said.

    “The SEC does not ‘approve’ funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority — FINRA),” the SEC said.

    Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area, the SEC said.

    “To mask his fraud, Geringer paid millions of dollars in ‘returns’ to investors largely by using money received from newer investors,” the SEC said. “He also sent investors periodic account statements showing fictitious growth in their investments.”

     

  • BULLETIN: Greater San Francisco Investment Adviser ‘Conjured Up An Accounting Firm’ To Dupe Hedge-Fund Clients, SEC Says; James Michael Murray Of Market Neutral Trading LLC Sued Civily, Charged Criminally

    EDITOR’S NOTE: Law enforcement has warned that “shell companies” are playing an increasingly larger role in criminal schemes, as scammers turn to them to sanitize their capers, disguise fraud, disarm skeptical investors and keep large sums of cash flowing.

    The threat to the U.S. economy and the corrosive effects on legitimate commerce cannot be overstated in this unprecedented era of securities hucksterism. Not only are investors at risk, so, too, is faith in the marketplace itself. The SEC complaint referenced in the story below includes a mention of a website allegedly used as part of the hedge-fund fraud scheme of James Michael Murray.

    UPDATED 4:34 P.M. ET (U.S.A., MARCH 16) The SEC has gone to federal court in San Francisco, alleging that Bay Area investment adviser James Michael Murray duped Market Neutral Trading LLC  hedge-fund investors through a “shell company” he secretly controlled.

    Murray, 42, of Larkspur, Calif., also has been charged criminally, the SEC said. Details about the criminal case were not immediately available.

    But in the SEC’s civil action, the agency said that Jones, Moore & Associates Ltd. — purportedly an “independent”  Delaware accounting firm that had assessed the hedge fund  — actually was a “shell company” set up by Murray to dupe investors by issuing a “bogus audit report” and embellishing the strength of Market Neutral.

    Not only was the accounting firm controlled by Murray illegitimate, “at least five”  purported “professionals” whose names and purported academic pedigrees appear on the shell company’s website “do not exist,” the SEC charged.

    Among the figments of Murray’s imagination were “Richard Jones” and “Joseph Moore,” the two named principals of the firm, the SEC charged.

    The scam netted at least $4.5 million in spurts between July 2008 and November 2011, the SEC said.

    “Murray conjured up an accounting firm and deliberately faked the audit to induce investors into believing the fund was in better shape than it actually was,” said Marc Fagel, director of the SEC’s San Francisco Regional Office.

    Read the SEC complaint.