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Tag: SEC

  • Legisi HYIP Ponzi Pitchman Matthew John Gagnon Is In Federal Custody

    Matthew John Gagnon
    Matthew John Gagnon

    Will it be the shot heard ’round the HYIP world — or will serial Ponzi-board and social-media fraudsters continue to pretend it is meaningless?

    Matthew John Gagnon, a 45-year-old pitchmen for the $72 million Legisi HYIP Ponzi scheme and other online fraud schemes, is listed as an inmate at Federal Correctional Institution (FCI) in Sheridan, Ore.

    In July, Gagnon was sentenced to 60 months in prison, ordered to pay $4.4 million in restitution and further ordered to serve three years’ supervised probation after his prison release. He was permitted to self-report to prison. That appears to have occurred yesterday.

    Gagnon colleague and Legisi operator Gregory N. McKnight was sentenced to a prison term of more than 15 years. McKnight’s age is listed as 53. He was sentenced last month and was ordered taken into custody immediately. He is listed as an inmate at the FCI in Milan, Mich. McKnight was ordered to pay more than $48.9 million in restitution and further ordered to serve three years’ supervised probation after his prison release.

    Legisi was promoted on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup. In 2007, Legisi became the subject of an undercover investigation by state regulators in Michigan and the U.S. Secret Service. Both criminal and civil charges followed.

    In court filings on June 6, Legisi receiver Robert D. Gordon said more than 85 percent of the $72.6 million directed at Legisi had flowed through e-Bullion.

    e-Bullion is a now-defunct processor. One-time e-Bullion operator James Fayed is on California’s death row after being convicted of ordering the brutal contract slaying of Pamela Fayed, his wife and a potential witness against him.

    AdSurfDaily, a $119 million Ponzi scheme also promoted on the Ponzi forums, also accepted money from e-Bullion, according to court filings.

    Legisi’s Terms of Service read like an invitation to join an international financial conspiracy. Members had to affirm they were not associated with the SEC, the IRS, the FBI and the CIA — along with “Her Majesty’s Police,” the Intelligence Services of Great Britain and the Serious Fraud Office.

     

  • New Count Of Loan-Sharking Filed Against Accused Ponzi Schemer

    breakingnews72Already facing criminal Ponzi and loan-sharking charges in Massachusetts and a disgorgement order of at least $3.1 million in an SEC civil case brought him in April 2013, Steven Palladino faces a new hurdle: He has been arrested again for loan-sharking.

    That arrest came yesterday, according to the office of Suffolk County (Mass.) District Attorney Daniel F. Conley.

    Less than two months ago (July 18, 2013), the SEC said it had obtained a disgorgement order of at least $3.1 million against Palladino and his company, Viking Financial Group Inc.

    On Aug. 11, Palladino repeatedly “began calling and texting” to demand repayment of $30,000 from a customer to whom he’d provided an illegal loan in February 2013 at a usurious interest rate of 40 percent,  Conley’s office said.

    “The victim contacted Boston Police, who yesterday apprehended Palladino in his 2012 Mercedes CLS 63 AMG Coupe at a West Roxbury gas station,” Conley’s office said. ” In his pockets were wads of cash totaling $4,395 and a check to the Viking Financial Group for $3,499.47.”

  • United Kingdom’s Financial Conduct Authority Issues Warning On SolidTrustPay, An HYIP Darling On The Ponzi Boards

    fcastpwarningseptember2013UPDATED 3:33 P.M. EDT (U.S.A.) Thanks to PP Blog reader “Tony,” who first posted a link to the FCA warning in this story thread on how a Profitable Sunrise Facebook site was being used to promote TelexFree, an alleged pyramid scheme.

    In April 2013, the SEC described Profitable Sunrise as a murky offering fraud that may have gathered tens of millions of dollars. SolidTrustPay, a Ponzi-forum darling used by a stunning number of schemes, reportedly was one of the processors used by Profitable Sunrise. Zeek Rewards, alleged last year by the SEC to have been a combined Ponzi- and pyramid scheme that had gathered at least $600 million, also used SolidTrustPay, according to court filings. So did AdSurfDaily, a $119 million Ponzi scheme broken up by the U.S. Secret Service in 2008. And so did JSSTripler/JustBeenPaid, a “program” purportedly operated by Frederick Mann that has spawned at least three reload scams and, like ASD, may have ties to the “sovereign citizens” movement. “Sovereign citizens” may be gaining a toehold in Canada, one of the bases of SolidTrustPay. (Please note that the “opportunities” referenced above constitute only a small sampling of the HYIP schemes enabled by SolidTrustPay.)

    Also see this 2012 Consent Order between the Securities Department of the U.S. state of Arkansas and SolidTrustPay in which SolidTrustPay agreed to pay a $60,000 civil penalty and did not contest findings that it had been operating illegally in the state for years, had processed about $12 million in Arkansas through about 43,600 transactions and had illegally mined more than $331,000 in fees and commissions in the state.

    What follows below is the warning on SolidTrustPay issued on Aug. 30, 2013, by the Financial Conduct Authority (FCA) of the United Kingdom. From the FCA:

    SolidTrust Pay Ltd

    Published: 30/08/2013

    We believe this firm has been providing financial services or products in the UK without our authorisation. Find out why to be especially wary of dealing with this unauthorised firm and how to protect yourself from scammers.

    Almost all firms and individuals offering, promoting or selling financial services or products in the UK have to be authorised by us.

    However, some firms act without our authorisation and some knowingly run scams like share fraud.

    This firm is not authorised by us but has been targeting people in the UK:

    SolidTrust Pay Ltd

    Website: www.solidtrustpay.com

    How to protect yourself

    We strongly advise you to only deal with financial firms that are authorised by us, and check the Financial Services Register to ensure they are. It has information on firms and individuals that are, or have been, regulated by us.

    If a firm does not appear on the Register but claims it does, contact our Consumer Helpline on 0800 111 6768.

    There are more steps you should take to protect yourself from unauthorised firms.

    You should also be aware that if you give money to an unauthorised firm, you will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

    Report an unauthorised firm

    If you think you have been approached by an unauthorised firm or contacted about a scam, you should contact our Consumer Helpline on 0800 111 6768. If you were offered, bought or sold shares, you can use our share fraud reporting form.

    You can see more ways to report an unauthorised firm and find out what to do if you have been scammed.

     

  • Profitable Sunrise Facebook Site Again Used To Drive Business To TelexFree, An Alleged Pyramid Scheme

    Despite at least seven pyramid-scheme probes into TelexFree, an apparent affiliate of the MLM "program" was promoting it yesterday on Facebook -- on a site once used to lead cheers for the Profitable Sunrise scheme.
    Despite at least seven pyramid-scheme probes into TelexFree, an apparent affiliate of the MLM “program” was promoting it yesterday on Facebook — on a site once used to lead cheers for the Profitable Sunrise scheme.

    A Facebook cheerleading site for Profitable Sunrise — alleged in April by the SEC to have conducted an offering fraud that may have gathered tens of millions of dollars through offshore bank accounts — again is being used to drive dollars the TelexFree scheme. The same Facebook site has been used to drive cash to multiple schemes. Some of the schemes already have disappeared, taking unknown sums with them.

    “100% Guaranteed Get Paid To Post Telexfree Ads,” a post on the Profitable Sunrise site roared yesterday. There was no mention that at least seven pyramid-scheme probes into TelexFree are under way in Brazil.

    The TelexFree pitch on the Profitable Sunrise Facebook site is surrounded by claims that a “conference call” has been held with a purported Profitable Sunrise “Admin” and that a new call will be held today and that some sort of good news is in the offing.

    With respect to Profitable Sunrise, a post dated Aug. 21 declares that the U.S. government “Is The Crooked One.”

    In 2010, FINRA said that HYIP fraud schemes were spreading though social-media sites through which pitchmen seek to sanitize the scams by making them appear to be legitimate programs.

    “Whack-a-mole” also is an element in the scams: As soon as one scam is shut down, others pop up to replace it. The interconnectivity of the schemes and the willful blindness of many participants put banks and payment processors in the position of becoming warehouses for fraudulent proceeds, leading to questions about money-laundering, wire fraud and national security.

    In August 2012, the SEC said the Zeek Rewards MLM scheme had gathered at least $600 million through a combined Ponzi- and pyramid scheme. The final haul of Profitable Sunrise, which the SEC described in April 2013 as a scheme operated by an apparent ghost, is unknown.

    By some estimates, TelexFree has gathered $300 million or more. Some promoters have planted the seed that TelexFree was “authorized” by the U.S. government. The U.S. government does not authorize such schemes.

    BehindMLM.com is reporting today that investigators in Brazil have established promotional links between TelexFree and BBOM, another alleged fraud scheme operating in Brazil.

  • Zeekers Targeted In New Scheme With Ties To Piccolo Organization

    truecashnetworkBULLETIN: Zeek Rewards members are being targeted in a new scheme with ties to the Phil Piccolo organization and are being solicited for sums ranging from $600 to $60,000 “in return for ” . . .  “guaranteed 50 percent interest” from a purported “unique and legal loan system” over an unspecified time period, the PP Blog has learned.

    The offering, which hints of some sort of falling out with Zeek’s management, has been styled on YouTube as “The Diamond Club by TRUE CASH.” The emerging “program” was the subject of an email pitch yesterday that appears to have been targeted by an unknown party at former Zeek “Diamond” affiliates, potentially including some of Zeek’s largest “winners” who have exposure to clawback lawsuits filed by the court-appointed receiver and who previously have been solicited to make contributions to a purported defense fund for Zeek affiliates. Zeek “losers” also could be targets.

    Previous schemes linked to Piccolo include the uber-bizarre Data Network Affiliates (DNA) “program” and One World One Website (OWOW), an equally bizarre money grab. (Use the PP Blog’s search function for information on those “programs.”)

    In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme. In April 2013, the SEC took down a purported “loan” program known as Profitable Sunrise that may have gathered tens of millions of dollars through an alleged offering fraud. How the “The Diamond Club by TRUE CASH” offering intends to collect money is unclear, although  a website to which pitchmen are directing traffic includes the logo of SolidTrustPay, one of the offshore processors used by Zeek.

    Certain members of a Zeek-related email chain received the purported “Diamond Club” pitch yesterday. Hinting of bad blood, the pitch appeared below this headline, “Zeek Management Belongs in Prison – On 8/27/2013 I earned over $500,000 – I will pay your way in from $600 to $3000.”

    How the $500,000 purportedly was earned was not explained. Also unclear was the identity of the sender. Among the claims in the pitch is this one (italics added):

    IF YOU LOST $10,000 IN ZEEK OR RECRUITED 10 PEOPLE IN ZEEK I WILL PUT UP $3,000.00 FOR YOU

    The principal part of the pitch claims this: “I just made $500,000.00[.] I will put up the $600 minimum for you – You pay me back ‘ONLY OUT OF COMMISSIONS’. If you are already in one of TCN 12 opportunities and want to be on my “DIAMOND CLUB” Team then you need to re-sign up. If you are resigning up you will need a new e-mail address. Get a free g-mail account from Google.”

    From the lowerright corner of the True Cash Network website. Source: Aug. 30 screen shot.
    From the lower-right corner of the True Cash Network website. Source: Aug. 30 screen shot.

    In the same email, the pitch points recipients to a YouTube video and a website URL of ThePowerTeam.TrueCashNetwork.Com. “TrueCashNetwork” is using the same acronym used by TextCashNetwork (TCN), an earlier scheme linked to Piccolo and Joe Reid, a longtime huckster associated with Piccolo. On the TrueCashNetwork website, an emblem labeled SiteLock SECURE appears, along with the word “Passed.” The emblem incongruously includes the name of “TEXTCASHNETWORK.COM,” even though it appears on the TrueCashNetwork domain. The TrueCashNetwork domain appears to have been registered behind a proxy on June 28, 2013.

    Reid, according to the TrueCashNetwork website, is the new TCN’s “Master Referral Agent” or “MRA.”

    Precisely what happened with the original TCN, a purported daily deals site that purportedly used text-messaging, never has been clear. The emerging TCN, however, appears to have access to the original’s database and appears already to have used it to create affiliate links for “old” TCN members — this despite the fact TextCashNetwork is listed in Wyoming as a “dissolved” entity and its members may not have given permission to be ported to the “new” TCN.

    These links shown in Google search results are show the name of "textcashnetwork" in the URL. But all of them rotate to True Cash Network.
    These links shown in Google search results are showing the name of “textcashnetwork” in the URL. But all of them rotate to True Cash Network.

    The “new” TCN purports to be operating as “True Cash Network, Inc.” Disputes, according to its website, will be handled under Wyoming law, but there appears to be no corresponding registration for True Cash Network in the state. Meanwhile, the “new” TCN is using the same Boca Raton (Fla.) business address as the “old” TCN. The old TCN once curiously purported that a member’s agreement with it “may not be transferred or assigned without prior written consent of REX Venture Group.”

    Rex was the operator of Zeek Rewards and one of the defendants in the SEC’s Ponzi case.

    True Cash Network — like TextCashNetwork before it — appears to be positioning itself as an MLM company that pushes affiliate products, including a “Medical Savings Plan,” X8 Energy Gum, Parcman Male Enhancer and more.

    While TCN was operating as TextCashNetwork, the Piccolo organization appears to have tried to dupe people into believing the company was owned by Johnson & Johnson, a component of both Dow Jones and the S&P 500 and an internationally famous maker of pharmaceuticals and consumer products that are household names.

     

  • URGENT >> BULLETIN >> MOVING: SEC: Ponzi Money Collateralized Credit Line Used To Fund ‘Bridal Store, A Bounty Hunter Reality Television Show, And A Soul Food Restaurant’

    “Marcum’s scheme began to unravel in mid-2013, when certain of his investors began demanding distributions. Marcum could not comply, because virtually all of his investors’ money is gone. However, Marcum has attempted to reassure his investors that their investment is secure by producing fabricated documents showing that he has purported net worth of nearly $300 million. In fact, Marcum is nearly broke, and his accounts contain less than $2,000.” — SEC complaint against John K. Marcum, Aug. 26, 2013

    americaatrisk4URGENT >> BULLETIN >> MOVING: The SEC has gone to federal court in Indianapolis to obtain an emergency asset freeze against John K. Marcum and Guaranty Reserves Trust LLC. Marcum was accused by the agency of conducting a purported day-trading Ponzi scheme that gathered $6 million, collateralizing a $3 million line of credit with Ponzi proceeds — and using the line to a fund “a bridal store, a bounty hunter reality television show, and a soul food restaurant owned and operated by the bounty hunters.”

    Investors did not know their money was being used in this fashion, the SEC alleged.

    Moreover, the SEC charged, Marcum swindled investors by targeting their retirement savings,  providing account statements showing false gains and promising a guaranteed return of the principal. Some of the money went to “pay personal expenses accrued on credit card bills, including airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub.”

    And when the scheme was imploding, Marcum told existing investors that he intended to recruit new investors, setting the stage for a new round of swindling, the SEC charged.

    “Marcum tricked investors into putting their retirement nest eggs in his hands by portraying himself as a talented trader who could earn high returns while eliminating the risk of loss,” said Timothy L. Warren, acting director of the SEC’s Chicago Regional Office. “Marcum tried to carry on his charade of success even after he squandered nearly all of the funds from investors.”

    Marcum, 49, resides in Noblesville, Ind., the SEC said.

    In a particularly disturbing series of allegations, the SEC alleged that Marcum bartered his life during a conference call with investors in a bid to keep the scam afloat.

    Read the SEC statement.

  • BULLETIN: George Theodule, HYIP Ponzi Huckster Identified In 2008 By SEC, Arrested On Criminal Charges

    breakingnews72George Louis Theodule, identified by the SEC in a 2008 civil case as a multimillion-dollar Ponzi huckster and affinity fraudster largely targeting the Haitian community through so-called “investment clubs,” now has been arrested on criminal charges, federal prosecutors in the Southern District of Florida said.

    Investors were duped into believing Theodule’s HYIP “program” through entities known as Creative Capital Consortium LLC and A Creative Capital Concept$ LLC had been endorsed by a regulatory agency, the SEC said in December 2008

    The FBI and the Florida Office of Financial Regulation joined in the probe, prosecutors said.

    “This case provides an egregious example of someone exploiting the trust of members of their own community,” said OFR Commissioner Drew J. Breakspear.

    “Ponzi schemes, affinity fraud schemes, and high-yield investment fraud scams such as this pose a serious threat to people,” said U.S. Attorney Wifredo A. Ferrer.

    Theodule, formerly of Wellington, Fla., is 52. He has been charged with with multiple counts of wire fraud, securities fraud and money-laundering, prosecutors said.

    “This is a stark reminder that promises of large returns with little risk should immediately send up red flags and make investors run the other way,” said Michael B. Steinbach, special agent in charge of FBI’s Miami office..

     

  • REPORTS: Ice Cream Flavor Named After TelexFree, An Alleged Pyramid Scheme; Separately, TelexFree Affiliates May Be Crossing National Borders To Keep The Money Flowing — Even As Purported Opportunity Turns To New Payment Method

    telexfreegpgThe HYIP world is known for promoters’ bids to change the storyline, but this one may take the cake — or at least be a sweet complement.

    There are reports in Brazilian media that a promoter of the TelexFree MLM scheme — alleged to be a massive pyramid — has named an ice cream after TelexFree to show support for the embattled firm.

    “The ice cream is not a pyramid,” a person was quoted as saying in DiarioDigital, according to a translation — and neither is its namesake.

    Here is a link to the story in Portuguese; here is a link to the English translation by Google Translate.

    Recruitment by TelexFree is banned in Brazil while investigations by at least seven Brazilian states proceed. Payments to Brazilian participants by TelexFree likewise are blocked. The purported “opportunity,” however, still is operating in other countries and apparently gathering money and issuing payments.

    Separately, Veja.com is reporting that undercover investigators in Brazil have noticed that some Brazilian promoters of TelexFree have crossed national borders into Bolivia and Paraguay to keep TelexFree investment money flowing. Here is a link to the story in Portuguese; here is the link to the English translation by Google Translate.

    The United States long has warned about cross-border fraud such as was present in PathwayToProsperity, an alleged $70 million Ponzi scheme whose operator is listed by INTERPOL as an international fugitive. P2P, as the “program” was known, made its way across multiple continents and 120 countries, according to court filings.

    Meanwhile, U.S. promoters of TelexFree have been busy watching a promoter’s Aug. 16 YouTube video titled, “How to register your GPG account with TelexFree.”

    GPG, according to the video, stands for Global Payroll Gateway.

    The company, according to its website, provides services such as loading payrolls onto debit cards. TelexFree, according to the affiliate’s video, is now a GPG client and TelexFree affiliates must “connect” their account to GPG to get paid.

    A screen shown in the TelexFree affiliate’s video shows an apparent executive of TelexFree announcing that the changeover to GPG’s services “is causing a delay in our payment process for the first run.”

    The FBI long has warned that certain types of debit cards can be abused and that a “shadow banking system” is playing a role in fraud schemes that affect national security.

    If TelexFree is adjudicated a scam, it may be difficult for the governments of the world or the receivers/trustees they may appoint to gather proceeds for victims. HYIP money may dissipate quickly, perhaps particularly quickly if it is offloaded with debit cards. In a money-laundering case brought in 2008, federal prosecutors in Connecticut said that millions of dollars in narcotics proceeds were offloaded at ATMs in Colombia.

    Robert Hodgins, a Canadian currently listed by INTERPOL as an international fugitive in the Connecticut money-laundering case, reportedly supplied the debit cards through a firm known as Virtual Money Inc. and had ties to the HYIP world and schemes such as PhoenixSurf and AdSurfDaily.

    Another screen in the TelexFree affiliate’s video shows folders with titles such as “telexfree,” “Banner[s] Broker, “hyip monitors,” “forex”and “Passive peeps.”

    The context of the folders shown in the video is unclear. Banners Broker, however, is a bizarre HYIP scheme. HYIP monitors are websites that monitor whether a particular HYIP site is “paying.” Meanwhile, the word “passive” often is used in HYIP scams that promote tremendous returns for investors inclined to sit back and wait for the payments to flow in, instead of recruiting other investors to earn downline commissions from a “program.”

    TelexFree has been promoted on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup. The names of both forums appear in U.S. court filings as places from which fraud schemes are advanced.

    From a promo for the alleged $600 million Zeek Rewards Ponzi- and pyramid scheme.
    From a promo for the alleged $600 million Zeek Rewards Ponzi- and pyramid scheme.

    Zeek Rewards, an alleged $600 million Ponzi- and pyramid scheme that had a Ponzi-forum presence and became the target of an SEC action last year, was promoted as a “passive” program. Like Zeek, TelexFree purportedly has a requirement that participants post ads for the “program” online.

    There have been reports in Brazil that a judge and prosecutor involved in the TelexFree case have been threatened with death.

    But not even those disturbing reports were enough to cause TelexFree to cancel a rah-rah event in California last month. The company says it also plans an “at sea” event in December. Earlier, some TelexFree pitchmen provided AdSurfDaily-like coaching tips to enrollees, especially on matters of how to speed the flow of money to the company.

    ASD was a $119 million MLM Ponzi scheme broken up by the U.S. Secret Service in 2008. Like Zeek and TelexFree, the ASD “program” also had a Ponzi-forum presence and was promoted as an opportunity for “passive” participants.

    Some TelexFree promoters in Brazil appear to believe that TelexFree has been deemed legal in the United States by the U.S. government. This errant belief may in part have been instilled by promoters of TelexFree who worded MLM HYIP pitches to suggest that the U.S. government had authorized the “program.”

    Some TelexFree promoters have claimed a payment of $15,125 to the firm will fetch a return of more than $42,000 in a year. Even the cautious “Aunt Ethels” of the world will grow to become keen on TelexFree, according to a promo.

  • BULLETIN: Songkram Roy Shachaisere, Figure In AdSurfDaily Ponzi Story, Indicted With 8 Others In ‘One Of The Largest International Penny Stock Frauds In History’

    breakingnews72BULLETIN: Songkram Roy Shachaisere, a sidebar figure in the AdSurfDaily Ponzi scheme story, has been indicted with several others in what federal prosecutors in the Eastern District of New York are calling “one of the largest international penny stock frauds in history.”

    The probe “used wiretaps in the United States and undercover agents in foreign countries,” prosecutors said.

    Chillingly, prosecutors said some of the scammers impersonated IRS employees. Others joined forces to scam victims a second time by creating a “fake law firm.” Some of the money allegedly ended up in “an account maintained in Beirut, Lebanon.”

    Indeed, prosecutors said, some of the scammers branched off from the penny-story scheme to orchestrate a scheme “in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses,” the office of U.S. Attorney Loretta E. Lynch said.  “In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed.  To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.”

    “The criminals behind this scheme were shameless in heartlessly defrauding hundreds of victims out of their savings and retirement accounts for their own enrichment,” said James C. Spero, special agent in charge of Immigration and Customs Enforcement Homeland Security Investigations (HSI) in Buffalo.

    All in all, the scams netted at least $140 million and defrauded victims in 35 countries, prosecutors said.

    Fake news releases, bogus announcements about nonexistent ventures, bribes and fake posts on social-media sites were used to dupe the masses, prosecutors said.

    Shachaisere allegedly was involved in a massive pump-and-dump scheme. In 2010, according to the SEC, Sahachaisere fraudulently touted the stock of Praebius Communications. That’s the company ASD once conveniently announced was providing it a $200 million revenue infusion. ASD made the claim while awaiting a key ruling by the federal judge presiding over the ASD Ponzi case brought by the U.S. Secret Service in 2008.

    Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.

    Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.

    ASD’s name was not referenced in the SEC’s 2010 complaint against Shachaisere, and Praebius was not listed as a defendant in the case. Praebius was referenced in the case as a client that paid Sahachaisere and his company in stock “to provide investor relations services.”

    All in all, seven defendants were arrested today, with nine indicted. Before the bust, one of the defendants bragged, “We know enough to be subtle,” prosecutors said.

    Here is a list of the defendants:

    • Sandy Winick
      Citizenship: Canada
      Age: 55
      Bangkok, Thailand
    • Gregory Curry
      Citizenship: Canada
      Age: 63
      Bangkok, Thailand
    • Kolt Curry
      Citizenship: Canada
      Age: 38
      Ontario, Canada
    • Gregory Ellis
      Citizenship: Canada
      Age: 46
      Ontario, Canada
    • Gary Kershner
      Citizenship: United States
      Age: 72
      Tucson, Arizona
    • Joseph Manfredonia
      Citizenship: United States
      Age: 45
      Tom’s River, New Jersey
    • Cort Poyner
      Citizenship: United States
      Age: 44
      Boca Raton, Florida
    • Songkram Roy Shachaiser
      Citizenship: United States
      Age: 43
      Huntington Beach, California
    • William Seals
      Citizenship: United States
      Age: 51
      Fallbrook, California

    Here’s how prosecutors described the pump-and-dump scheme (italics added):

    As alleged in the indictment, defendants Sandy Winick, Gary Kershner, Joseph Manfredonia, Cort Poyner, Songkram Roy Shachaisere and William Seals orchestrated one of the largest international penny stock frauds in history. First, the defendants gained controlling interests of huge quantities of worthless stock in 11 public companies known in the industry as ‘file cabinet businesses’ – thinly traded companies with minimal assets and non-existent business operations, which in many cases were mere shell companies. They then ‘pumped up’ the share prices of the companies’ stock by engaging in fraudulent and illegal sales campaigns, which included distributing false press releases, announcing non-existent business ventures and fake mergers, posting false information on social media sites and bribing stock promoters and brokers.

    And here’s how prosecutors described the advance-fee component of the scam (italics/bolding added):

    As the indictment alleges, defendants Winick, Gregory Curry, Kolt Curry and Gregory Ellis perpetrated a second scheme in which they fraudulently induced penny stock victims to pay advance fees, on the promise that the victims would then either be able to sell their securities to other waiting investors or join lawsuits to reclaim their losses. In reality, the advance fees were nothing more than a con, as neither the investors nor the lawsuits existed. To hoodwink the penny stock owners, the advance fee defendants invented fake trading companies and a fake law firm and then posed as employees of those entities while soliciting advance fees from the penny stock victims.

    To facilitate the scheme, the defendants established boiler rooms or call centers from which members of the conspiracy would solicit advance fees from the unsuspecting penny stock victims. The call centers were located in various locales around the world, including Canada, Thailand and the United Kingdom. Recently, the defendants began planning to open a new call center in Brooklyn, New York. Some of the victims were told that they either needed to pay the advance fee to remove restrictions that were placed upon their penny stock, which prevented the victims from selling their stock in the market, or to join investors in a pending or anticipated lawsuit to recover losses that they incurred while owning the penny stock. Victims were then told that the advance fees were needed to convert the warrants of their stocks to a saleable security. In several instances, the advance fee defendants even pretended to be IRS employees collecting a bogus advance tax from victim investors before they could unload their penny stocks. The victims were directed to send payment of the advance fees to banks around the world, including bank accounts in New York City. The fraud proceeds were then transferred through a funds transfer network, located in Getzville, New York, to an account maintained in Beirut, Lebanon. Ultimately, these defendants generated more than $20 million in fraudulently obtained advance fees.

    Defendant Kolt Curry described the Advance Fee Scheme in the following way over an intercepted wire communication: “I would say that 100 percent of these stocks are like uh pink uh… just dumps . . . . so … ya know they’re totally, they’re like, so a lot of these guys are dying . . . . to get rid of this crap. . . . The money is good, it’s easy. It’s easy money. Definitely easy money, and it’s good money.” In fact, while bragging about his prowess as a fraudster, defendant Kolt Curry further stated, “I had a guy send me a million dollars over one phone call . . . . He actually sent me almost two million dollars over the period of the hit . . . . I guess in the industry they coin it as a smash and grab.” As for the group’s recent plans to open a call center in Brooklyn, New York, defendant Kolt Curry said, “I tell you what man . . . hitting the Americans would be like taking money from a baby.”

    Lynch’s office thanked various U.S. agencies for their worked on the probe. She also thanked the Royal Canadian Mounted Police, Financial Crime Intelligence Unit in Vancouver and the Integrated Market Enforcement Team in Toronto, and the Serious Organized Crime Agency in the United Kingdom. Meanwhile, prosecutors said that significant assistance was also provided by the United States Embassies in Ottawa, Toronto, London, Bangkok and Beijing.

  • Full Statement Of SEC On Criminal Conviction, Prison Sentence, Restitution Order And Civil Liability Of Legisi HYIP Ponzi Operator Gregory N. McKnight

    EDITOR’S NOTE: As the PP Blog reported on Aug. 6, Legisi HYIP Ponzi-scheme operator Gregory N. McKnight was sentenced to 188 months in federal prison. McKnight is 53. He was ordered taken into custody immediately after sentencing last week and is listed as “in transit” to an unspecified detention facility. Legisi was promoted in part on Ponzi forums such as TalkGold and MoneyMakerGroup.

    The SEC today released the statement reproduced below . . .

    U.S. SECURITIES AND EXCHANGE COMMISSION

    Litigation Release No. 22776 / August 13, 2013

    Securities and Exchange Commission v. Gregory N. McKnight, et al., Civil Action No. 08-cv-11887 (E.D. Mich.)

    15 Year Prison Term for Gregory Mc[K]night, Orchestrator of $72 Million Ponzi Scheme

    The Securities and Exchange Commission announced that on August 6, 2013, the Honorable Mark A. Goldsmith of the United States District Court for the Eastern District of Michigan sentenced Gregory N. McKnight to 188 months (15 years and 8 months) in prison, followed by supervised release of 3 years, and ordered McKnight to pay $48,969,560 in restitution to his victims. McKnight, 53, of Swartz Creek, Michigan, had previously pled guilty to one count of wire fraud for his role in orchestrating a $72 million Ponzi scheme involving at least 3,000 investors. The U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against McKnight on February 14, 2012. McKnight was taken into custody immediately after the sentencing hearing.

    The criminal charges arose out of the same facts that were the subject of an emergency action that the Commission filed against McKnight and others on May 5, 2008. On that same day, the Court issued orders freezing McKnight’s assets and those of several companies he controlled, and appointed a Receiver. The Commission’s complaint alleged that, from December 2005 through November 2007, McKnight, through his company Legisi Holdings, conducted a fraudulent, unregistered offering of securities in which he raised approximately $72 million from more than 3,000 investors in all 50 states and several foreign countries. According to the Commission’s complaint, McKnight represented that he would invest the offering proceeds in various investment vehicles and pay interest of as much as 15 percent per month from the resulting profits. The complaint charged that McKnight invested less than half of the offering proceeds and that these investments resulted in millions of dollars in losses. The Commission’s complaint further charged that McKnight used investor funds to make Ponzi payments to investors and for his own use. The Commission’s complaint charged McKnight with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.

    On July 6, 2011, the Court entered a final judgment against McKnight in the Commission’s action, and ordered McKnight to pay disgorgement of ill-gotten gains, prejudgment interest, and civil penalties totaling approximately $6.5 million. The court also issued orders permanently enjoining McKnight from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. On July 9, 2013, McKnight’s associate Matthew J. Gagnon was sentenced to five years in prison for his role in promoting Legisi.

    For additional information, see Litigation Release No. 20563 (May 8, 2008), No. 20588 (May 20, 2008), No. 22269 (Feb. 24, 2012) and No. 22749 (July 11, 2013).

    http://www.sec.gov/litigation/litreleases/2013/lr22776.htm

  • **[UNCONFIRMED]** Report In Brazil Says Prosecutors Have Asked U.S. Court To Block TelexFree Accounts, New Signups **[UNCONFIRMED]**

    telexfreelogo**[UNCONFIRMED]** A report in Brazilian media translated by Google Translate from Portuguese to English says that prosecutors in Brazil have asked a U.S. court to prevent new members from joining TelexFree and to block the accounts of TelexFree figures Carlos Wanzeler, James Merrill, Carlos Costa and Lyvia Wanzeler.

    The PP Blog could not immediately confirm the report. If it is true, it could mean that law-enforcement agencies in Brazil have contacted their U.S. counterparts and asked them to begin the process of investigating a potential seizure of TelexFree-related funds that may be in the United States and perhaps to disable or otherwise block the functionality of the TelexFree web domains. The United States has said on various occasions that it is interested in fostering partnerships with law-enforcement agencies across the globe to combat commercial fraud online.

    As of 1:03 p.m. EDT today in the United States, the TelexFree websites remained online and appeared still to be capable of enrolling recruits.

    TelexFree has said it has U.S. arms in the states of Massachusetts and Nevada. Some U.S. afffiliates of TelexFree also appear to have formed business entities in California and Florida. Some TelexFree affiliates have claimed the “opportunity” did business through Bank of America, TD Bank and ProPay. (See July 8, 2013, PP Blog report on some of the claims.)

    Despite allegations in Brazil that TelexFree was conducting a massive pyramid scheme and that a Brazilian judge and prosecutor had been threatened with death, TelexFree nevertheless held a rah-rah session in California late last month in which an MLM pitchman appears to have tried to sustain the scheme by telling a joke about “Carlos Danger,” an online identity purportedly used by U.S. Democratic politician Anthony Weiner. A companion TelexFree promo playing in the United States on YouTube claims that people who send $15,125 to TelexFree can expect to profit to the tune of more than $42,000 in a year.

    TelexFree has a presence on well-known Ponzi-scheme forums such as TalkGold, MoneyMakerGroup and DreamTeamMoney. The forums previously were used as staging grounds for the Legisi Ponzi scheme, the AdSurfDaily Ponzi scheme, the PathwayToProsperity scheme, the Zeek Rewards scheme and the Profitable Sunrise scheme, among others. The SEC has described Zeek as a $600 million Ponzi- and pyramid fraud. The agency has described Profitable Sunrise as a fraud that may have gathered tens of millions of dollars through a series of accounts. Federal prosecutors in Illinois have described PathwayToProsperity as a fraud that made its way into at least 120 countries.

    In May, the United States indicted the Liberty Reserve payment processor and forced it offline, amid allegations that Liberty Reserve and some of its operators had engaged in a $6 billion money-laundering conspiracy. In June 2011, U.S. Attorney General Eric Holder described the amount of money being stolen online as “staggering.”

    “In recent years, we’ve seen clear, and alarming, advances in the sophistication and commercialization of crimes involving electronic networks,” Holder said.  “And the staggering volume of money being stolen online today has the potential to threaten not only the security of our nation — but the integrity of our government, the stability of our economy, and the safety of our people.”

    Nearly a year later — in May 2012 — INTERPOL said that “[Eighty] per cent of crime committed online is now connected to organized gangs operating across borders.”

    In October 2012, Lisa Monaco, then-Assistant Attorney General for National Security, said that cyber intrusions may have resulted in “the greatest transfer of wealth in history.”

    Monaco is now President Obama’s chief counterterrorism adviser.

    Some TelexFree members have claimed that the purported “opportunity” has gathered in excess of $300 million. Among other things, TelexFree has purported to be in the hotel-development business in the run-up to the 2014 World Cup and the 2016 Summer Olympics in Brazil. TelexFree, an MLM business, also purports to be in the VOIP telephone business.

    Many HYIP “opportunities” that use an MLM sales model have members and promoters in common and promise absurd rates of return. The practice has led to questions about whether groups of MLMers — however loosely associated — may be engaging in willful blindness and causing banks and payment processors to become warehouses for fraud proceeds.

    The ASD, Zeek, Legisi, PathwayToProsperity and Profitable Sunrise HYIP schemes may have gathered on the order of $1 billion, court filings suggest. Alleged PathwayToProsperity operator Nicholas Smirnow is listed as wanted by INTERPOL. So is Robert Hodgins, who reportedly once provided payment services to ASD and is listed as an INTERPOL fugitive in a money-laundering case allegedly involving the offloading of narcotics profits in Colombia.

    See Aug. 12 TelexFree report on BehindMLM.com.