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Tag: SEC

  • URGENT >> BULLETIN >> MOVING: SEC Files Motion In Zeek Case To Oppose Appointment Of Examiner; In Blistering Memo, Agency Accuses Robert Craddock Of Encouraging Affiliates ‘Not To Cooperate With The Receiver’

    breakingnews72URGENT >> BULLETIN >> MOVING: (UPDATED 11:58 A.M. ET (U.S.A.) The SEC has gone to federal court in the Western District of North Carolina to oppose a motion by Zeek “winners” to appoint an “examiner” over all Zeek affiliates. In a blistering, 12-page memo, the agency accused Zeek figure Robert Craddock of encouraging Zeek affiliates “not to cooperate” with Kenneth D. Bell, the court appointed receiver.

    “Moreover,” the SEC claimed, “Craddock has asserted (incorrectly) that the SEC has acknowledged to his lawyers that the SEC has doubts or concerns about its case and is looking for ways to ‘back out’ in order to allow ZeekRewards to re-start its operations. Another Quilling client, David Kettner has repeated assertions similar to those made by Craddock in written communications to former ZeekRewards affiliates.”

    The agency also confirmed in its filing that its Zeek investigation was ongoing. The “confidential nature” of the probe, the agency said, potentially could make it difficult to respond to motions filed by opposition attorneys.

    There could come a time, the SEC said, that it would ask “to provide the Court with additional information under seal or in a closed hearing.”

    The SEC’s filing was dated yesterday — the same day Bell also asked Senior U.S. District Judge not to approve the sought-after appointment of Dallas attorney Michael J. Quilling as examiner. Quilling, Bell said, had an obvious conflict of interest. The SEC argued along the same lines.

    Quilling, the SEC said, is representing “certain significant net ‘winners’ in the ZeekRewards Ponzi scheme alleged in the Complaint” and seeks “to have himself appointed ‘Representative for Affiliates,’ provided with counsel, and compensated out of the Receivership Estate.”

    From the SEC’s motion (italics added):

    The Quilling Motion suffers from several obvious flaws:

    (1) The Motion offers no compelling factual or legal basis for the Court to consider appointing a “Representative for Affiliates” – the Commission continues to work closely with and monitor the Receiver to ensure that as much money as possible is returned to injured investors in the most efficient manner possible;

    (2) Appointment of a “Representative for Affiliates” would serve only to complicate this already complex matter, obstruct the Receiver’s ability to efficiently marshal Receivership Assets, and significantly and unnecessarily deplete the pool of assets available to be distributed to injured investors (given that Quilling and [Charlotte attorney Rodney E.] Alexander seek to be compensated from Receivership Assets); and

    (3) The interests of Quilling and Alexander’s current clients – significant net “winners” in the Ponzi scheme alleged in the Complaint – are diametrically opposed to the vast majority of ZeekRewards investors that were net “losers” in the Ponzi scheme.

    One of the potential issues is whether Craddock — through his Florida-based entity Fun Club USA — gathered money from Zeek losers and used it to bolster the aims of Zeek winners in the early days after the SEC’s Aug. 17 Ponzi complaint. Such an act potentially could have put losers in opposition to their own best interests, given that Bell intends to file clawback lawsuits against winners to help fund the receivership estate.

    In its motion, the SEC said that Fun Club USA appears to have been formed 11 days after the SEC’s actions and that it and other nonparties had “yet to explain why an entity formed after the Court froze ZeekRewards assets and appointed the Receiver should be heard on the subject matter” of the motion to appoint an examiner.

    Read the SEC motion.

  • BULLETIN: Zeek Receiver Opposes Appointment Of ‘Examiner’; Zeek Cheerleaders, ZTeamBiz Missives Get A Mention; Let Them ‘Employ Counsel At Their Own Expense,’ Bell Urges Judge

    “The ZeekRewards scheme has claimed hundreds of thousands of victims who lost hundreds of millions of dollars at the hands of the scheme’s winners who solicited their participation. Now, apparently not appreciating the irony, the lawyer for hundreds of the largest net winners asks the Court to pay him to be an ‘examiner’ or ‘representative for the affiliates,’ yet again at the expense of the scheme’s victims. The requested appointment is unnecessary and ill-advised because it would duplicate and complicate this Court’s, the Receiver’s, and the SEC’s efforts to compensate the victims, not to mention directly reduce the Receivership Assets available to pay them. Furthermore, the individual whom the net winners recommend for appointment (or more correctly who recommends his own appointment) ignores the inherent conflict of interest in seeking to somehow represent both the scheme’s ‘winners’ and ‘losers,’ two groups with irreconcilably adverse interests.” — Zeek receiver Kenneth D. Bell, Dec. 17, 2012

    Section from an email received by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. Source: federal court files.
    Section from an email received by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The note asks the receiver to oppose efforts by Zeek winners to intervene in the case. Source: federal court files.

    Shortly after the SEC described Zeek Rewards on Aug. 17 as a $600 million Ponzi- and pyramid scheme, Zeek figure Robert Craddock solicited donations purportedly to hire an attorney and form a “protected” group of affiliates. Whether Zeek losers gave to the effort conducted at ZTeamBiz through Fun Club USA, Craddock’s Florida-based entity, remains unclear.

    On Aug. 29, PP Blog guest columnist Gregg Evans questioned how Zeek winners and losers ever could be on the same side.

    Today the court-appointed receiver effectively was asking the same question. His conclusion was that they could not — and he asked Senior U.S. District Judge Graham C. Mullen to reject a contention by certain Zeek “winners” that they could.

    “The net winners have already been put on notice that they will be asked to return their winnings to the Receiver for reimbursement to the net losers,” Bell said in court filings. “On the other hand, the net losers hope that they can recoup some of their losses from the gains of the scheme’s net winners . . . Thus, the winners and losers are plainly opposed in their respective interests regarding the winners’ efforts to keep their winnings.”

    Presumptive Zeek clawback targets Dave Kettner, Mary Kettner and David Sorrells asked Mullen last month to appoint Dallas attorney Michael Quilling as “examiner” over all Zeek affiliates. That should not be permitted to happen, Bell contended, because Quilling “has appeared in this case already as an attorney for Fun Club USA and represents the interests of those net winners.”

    In a bid to bolster his claim, Bell cited Craddock ties to Dave Kettner through ZTeamBiz and quoted from a letter attributed to Kettner.

    “In a similar vein, Mr. Kettner sent a letter seeking donations from affiliates that stated, “The SEC has tried to make us all believe that Zeek Rewards was an ‘investment’ and a Ponzi scheme. All the pages that were submitted by the SEC indictment [sic] has [sic] all been one sided and what we believe to be a misrepresentation of the truth and facts of what Zeek Rewards was as a viable and legal business,” Bell advised the judge in a footnote that included the URL to ZTeamBiz.

    Beyond that, Bell argued, the Craddock entity, the Kettners and Sorrells had no standing in the case brought by the SEC.

    And Bell said he has heard from Zeek members who want him to oppose the appointment of Quilling as examiner.

    Here, according to Bell, is a passage from one such Zeek member who contacted Bell after learning about the “examiner motion”:

    As one of the many losers in Zeek Rewards I wish to encourage you to do whatever is possible to block the motion filed on behalf of Fun Club USA (Robert Craddock) David & Mary Kettner and David Sorrells, asking that their personal attorney Michael J Quilling be appointed as the Examiner to oversee and represent the interest of ALL former Zeek Rewards affiliates.

    To many of us this is just another way for another attorney firm to slow up your process of recovery and to diminish the amount of funds to be returned to those of us who are in hopes of being able to recover some of our losses.

    Personally I feel that their agenda is also to help block your efforts to recover funds from the 1200 who received subpoenas.

    The Kettners and Sorrells potentially have exposure of nearly $2 million in receivership clawback litigation, Bell said.

    At least two apparent Zeek winners represented by attorney Ira Lee Sorkin also oppose the appointment of Quilling as examiner, according to filings last week.

    Todd Disner, a Zeek affiliate and figure in the AdSurfDaily Ponzi scheme story, once was on a conference call with Craddock.

    In recent remarks, Craddock said Disner was in Hong Kong with a “lost” passport.

    Reports now have surfaced that Craddock is pitching a “program” known as Offer Hubb that uses a Wyoming mail drop as its address. Disner’s name was listed on the Offer Hubb pitch, according to BehindMLM.com.

  • BRIEF: Zeek Receiver Broadens Reach, Files In Southern District Of Florida — And In Northern Mariana Islands Nearly 15,000 Miles Away

    Bird Island, Saipan. Source: website of U.S. District Court for the Northern Mariana Islands.

    In yet another demonstration of the reach of the alleged Zeek Rewards Ponzi scheme, court-appointed receiver Kenneth D. Bell has filed paperwork in the Southern District of Florida — and in Northern Mariana Islands District Court.

    The Northern Mariana Islands are a U.S. Commonwealth. Saipan is perhaps the best-known island in the chain. The flight distance between Saipan and Miami — the city in which the receiver made the filing in the Southern District of Florida — is about 14,571 miles, according to Flightpedia.

    Saipan is more than 3,500 miles southwest of Hawaii, the U.S. island state in the Pacific.

    Bell previous filed in Guam, a U.S. territory in the western Pacific.

    In August, the SEC described Zeek as a $600 million Ponzi and pyramid scheme with international reach.

    Records suggest Bell has filed in more than 70 of the 94 U.S. districts in advance of anticipated clawback actions against Zeek winners.

  • Prosecution Asks Court To Impose Life Sentence On Jason Bo-Alan Beckman, Pitchman For Trevor Cook Ponzi Scheme; Beckman Says He Should Serve 364 Days And Then Become A Professional Speaker

    “The nature and circumstances of this offense and Mr. Beckman’s history and characteristics, viewed together, cry out for a life sentence. With respect to Mr. Beckman, nothing less than a liberty-ending sentence would reflect the seriousness of this offense, promote respect for the law and provide just punishment. But perhaps most importantly, Mr. Beckman must be locked up for the rest of his life because he is a very dangerous individual who is certain to hurt people if he is ever released.” — From prosecution sentencing memo for convicted swindler Jason Bo-Alan Beckman, a pitchman of the Trevor Cook Ponzi scheme, Dec. 11, 2012

    EDITOR’S NOTE: The $194 million Trevor Cook Ponzi scheme is believed to be the second-largest scam of its sort in Minnesota history, trailing only Tom Petters’ epic, $3.65 billion caper. Cook was sentenced to 25 years. Prosecutors in the office of U.S. Attorney B. Todd Jones now are asking a federal judge to sentence convicted Cook pitchman Jason Bo-Alan Beckman to life in prison — or 411 years. In essence, prosecutors are arguing that Beckman was even worse than Cook, a reprobate drunkard who spent victims’ money on booze, strippers and an enormous mansion, and that Beckman piled on crimes targeted at elderly victims even as he helped Cook steal people into poverty.

    ** _____________________________________ **

    UPDATED 5:20 P.M. ET (U.S.A.) The Trevor Cook Ponzi scheme targeted at senior citizens and conservative Christians never has received the national media attention it deserves. But the Cook case is back in the news today.

    Man, is it ever . . .

    For starters, it became public yesterday that convicted Cook pitchman Jason Bo-Alan Beckman apparently believes he should spend only 364 days in prison “followed by three years of probation requiring 2000 community service hours.”

    While on probation and performing his community service, Beckman contended, he would “devote” himself “to speaking to financial firms and investors about what to do and what not to do.”

    And as an extra carrot for a lenient sentence, “Beckman would arrange for the immediate delivery of a check for $19,000,000 for payment to victims.”

    The Star Tribune of Minneapolis/St. Paul broke the news this morning about Beckman’s apparent belief he could make multiple felony convictions go away with a wrist slap, by using his checkbook as a lure to victims and by turning himself into a professional speaker on the subject of avoiding the perils of intercontinental financial crime.

    One victim who contacted the PP Blog today questioned whether Beckman was having a pipe dream about having $19 million. A court-appointed receiver has been policing up money from the scheme since 2009. Since becoming implicated in the Cook scheme, Beckman has become known for offering up bizarre constructions.

    He “had the temerity to testify that the money he stole from” an elderly couple “constituted his ‘earnings,’” prosecutors said yesterday. And he also divined a construction by which he was the “top ranked” portfolio manager in the United States “based on a Morningstar comparative study,” they asserted.

    To say the prosecution wasn’t impressed by Beckman’s opinion on how justice might best be served perhaps is the greatest understatement in the history of Ponzi-scheme prosecutions worldwide.

    Beckman, 42, deserves life in prison — or, as a technical matter 4,932 months or 411 years, according to prosecutors.

    “Mr. Beckman is a man with no semblance of a conscience who exudes in his conduct and affairs a sense of great entitlement,” prosecutors argued. “Entitlement to make untrue, grandiose claims about himself. Entitlement to groom the trust of vulnerable persons and then to violate that trust. Entitlement to steal his victims’ money and to use it for luxury items for himself. Entitlement to misuse professionals to cloak his schemes with a skein of legitimacy. Entitlement, when caught, to lie to everybody – the press, his victims, hired attorneys, and this Court – doggedly and repeatedly, about what he knew and when he knew it. To all that appears, Mr. Beckman’s entire life has been deeply suffused with sociopathy. In Mr. Beckman’s mind, the rules simply do not apply to him.”

    In 2011, the SEC memorably described Beckman as guilty of “contumacious disobedience” for his manipulation of victims and the courts. The SEC made the claim after criminal prosecutors asserted that Beckman stole millions of dollars from an elderly husband and wife now in their nineties and tried to make it appear as though the wife — a stroke victim with “hemispheric paralysis” — had become his business partner.

    Beckman sold two life-insurance policies on the woman’s “then 92-year old husband” for about $3.9 million, and then converted “the proceeds of that sale for his own benefit,” prosecutors alleged last year.

    As a companion fraud scheme that flowed from Beckman’s role in the Cook Ponzi, Beckman tried to dupe the National Hockey League in a deal that would make him a part owner of the Minnesota Wild, prosecutors said.

    And even as he was stealing from people now in their nineties and confined to a nursing home while trying to run a scam on the NHL and his own attorneys, Beckman “almost completely wiped out the Arthur W. Quiggle [Family] Trust,” prosecutors said.

    “In 2007, without authorization, he sold $3.4 million of its low-basis, high-dividend paying stock, funneling the proceeds to the currency program,” prosecutors said. “This triggered enormous capital gains within the trust and wiped out most of the trust’s dividend income, which defeated the trust’s purpose of providing income to the Quiggle family. Then, in July of 2008, just weeks after several attorneys warned Mr. Beckman that the currency program was illegal and a likely Ponzi scheme, Mr. Beckman caused the trust to borrow $3.7 million against its remaining marketable stocks and stole all of it. Again, much of it ended up paying off huge deficits incurred in Mr. Beckman’s name at various trading houses to buoy his chances of becoming an owner of the Wild.”

    Beckman is scheduled to be sentenced Jan. 3.

     

  • Nearly $2 Million Allegedly At Stake For 3 Arizona Zeek Affiliates Who Received Subpoenas, Filings Say

    “[Zeek operator Paul] Burks is solely responsible for determining the amount of ‘net profits’ to share in the Retail Profit Pool . . . Defendants represent that daily awards are calculated by dividing ‘up to 50%’ of daily net profits by the number of Profit Points outstanding among all Qualified Affiliates. This calculation results in a daily dividend paid to each Qualified Affiliate that consistently has averaged approximately 1.5% per day . . . In fact, the dividend bears no relation to the company’s net profits. 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.” — From the SEC complaint in the Zeek Rewards Ponzi scheme case, Aug. 17, 2012

    “The most successful Affiliates worked the hardest, placed numerous ads, and explained the Zeekler.com penny auction to groups of people several times a month. Some of the Movants, for example, traveled extensively to maintain contact with their network of peers and to educate them, among other things, on how to be successful in the program. These Movants’ successes were a direct result of the amount of time and effort they poured into the effort to promote the penny auction.” — Zeek Affiliates Dave Kettner, Mary Kettner and David Sorrells, Dec. 11, 2012

    Although the SEC accused Rex Venture Group LLC/Zeek Rewards operator Paul R. Burks in August of conducting a massive Ponzi scheme and duping members into believing he was presiding over a business that created enormous profits legitimately, three members of the MLM “program” with potentially millions of dollars in ill-gotten gains subject to clawback aren’t buying it.

    At stake for Dave Kettner, Mary Kettner and David Sorrells of Arizona is at least $1.94 million they allegedly earned in the “program” through hard work, according to court filings.

    Zeek was a legitimate venture, they argued in filings dated Dec. 11. And it was no Ponzi scheme, they advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina. Mullen is presiding over the Zeek Ponzi scheme case brought by the SEC Aug. 17.

    It was not immediately clear whether the Kettners and Sorrells were the recipients of payouts from Zeek’s Retail Profit Pool (RPP) or commissions for sponsoring new members — or some combination of both. The RPP also is known as the Retail Points Pool.

    What is clear, according to their filings, is that each received a letter and subpoena from Zeek Receiver Kenneth D. Bell that paint them as potential clawback targets. The information about the sums Bell is seeking is contained within exhibits filed by the Kettners and Sorrells.

    Zeek records, according to letters from Bell cited by the trio, suggest Sorrells received $945,539 from Zeek while paying in only $1,695. Dave Kettner received $537,577.95 while paying in only $1,378, and Mary Kettner received $465,866.67 while paying in only $1,495.

    Bell has said Zeek created approximately eight losers for each winner. The SEC described Zeek as a $600 million Ponzi and pyramid scheme that potentially defrauded more than 1 million people.

    The PP Blog is working on a related story about assertions by the Kettners and Sorrells that significant sums of money that belong to them effectively are trapped in NxPay, a payment processor used by Zeek. More later . . .

     

     

  • CURIOUS: 3 Of 5 ‘Most Popular’ Stories On PP Blog Last Week Were ‘Old’ Articles On The AdSurfDaily And AdView Global Scams

    UPDATED 8:55 A.M. ET (U.S.A., DEC. 11) Are Zeekers doing research in advance of clawback actions in the Ponzi scheme case or otherwise trying to get a sense of history? Are they (or other readers) trying to gain a better understanding of ties that may exist among Zeek, AdSurfDaily and AdViewGlobal?

    Three of the PP Blog’s five “Most Popular” stories last week were “old” articles about ASD and AVG, according to a tracking service used by the Blog. AVG had not dominated reader interest on the PP Blog for nearly three years.

    Here are links to (and briefs about) those stories:

    From July 16, 2009: (No. 2 in ‘Most Popular’ rankings last week.) BREAKING NEWS: Federal Judge Says Curtis Richmond, Six Other Parties Who Used Pro Se Litigation Blueprint, Cannot Intervene In AdSurfDaily Forfeiture Case

    The July 16, 2009, story reported that seven would-be, pro se intervenors in the ASD Ponzi case were denied standing by a federal judge. In her ruling, the judge pointed out that the first filing occurred in February 2009. It is “representative and seems to be a ‘form’ complaint inasmuch as the others are duplicates,” the judge said.

    A key part of the ruling (italics added): “Fraud victims who voluntarily transfer their property to their wrongdoers do not retain a legal interest in their property; instead, such victims acquire a debt against their wrongdoers.”

    Waves of other pro se filiers later were denied standing in the case. (On at least two occasions, the judge denied the would-be intervenors en masse.)

    It perhaps is worth pointing out that standing also could become an issue in the Zeek case. Given ASD’s history, it also seems possible that “defenders” of the Zeek scheme will ponder the use of shared litigation templates. (The ASD templates, which advanced conspiracy theories and accused public officials of crimes,  didn’t “work.” To date, one Zeeker has accused the court-appointed Zeek receiver of a crime.)

    From Dec. 7, 2009: (No. 4 in “Most Popular” rankings last week.) AdViewGlobal Recording Suggests Member Cashed Out $10,000 Only Days After Formal Launch And That Insiders Were Awarded Bonuses; Less Than Two Weeks Later, Surf Switched To ‘Private Association’ Structure

    The Dec. 7, 2009, story reported that AVG, a  purported offshore entity, had conducted conference calls earlier in the year and lured prospects with “bonuses.” It also reported that some AdSurfDaily figures were among the first to receive the “bonuses.”

    It perhaps is worth pointing out that an effort by some Zeek insiders now appears to be under way to lure their downlines into nascent “programs,” at least one of which is being positioned as a way to maintain a Zeek downline in a new “program” and receive a bonus. The name of the new “program” that purportedly will provide bonuses to Zeek members and its base of operations are unclear.

    Zeek and ASD figure Todd Disner, however, recently was reported to be in Hong Kong with a “lost” passport.

    “Todd Disner,” said Zeek figure Robert Craddock on a call last week. “Bless his heart. I don’t know if he’s found his passport yet, but he’s . . .  in Hong Kong right now assisting us with this new program. And he’s lost his passport. So, I don’t know if he’s made it back to the states yet or not. And, so, we’re all working very, very hard to pull this together for you.”

    Some Zeekers have ported themselves to schemes such as “BannersBroker” and “GoFunPlaces.” It is possible that any number of Zeek members took soiled proceeds from previous scams to their new “opportunities.” What’s not known at this time is what will happen if Zeek “winners” who are the prospective targets of clawback litigation will do if they moved illicit Zeek proceeds into another scheme or dissipated the money in other ways.

    From the Dec. 7, 2009, story (italics added):

    The conference call, hosted by Terralynn Hoy, a Moderator at both the Pro-AdSurfDaily Surf’s Up forum and a ning.com forum set up to promote AVG, did not disclose how the member amassed a large sum in only days and qualified for a cashout. But another participant in the call announced that the man excitedly expected to receive a check for $10,000.

    Terralynn Hoy, a figure in both the ASD and AVG stories, hosted at least one call for Zeek in 2011. ASD was a $119 million Ponzi scheme that collapsed in August 2008. AVG collapsed in a sea of mystery in June 2009. Before it collapsed, it sought to make an 80/20 “program” mandatory and exercised its version of a “rebates aren’t guaranteed” clause.

    Lots of Zeek members tried to encourage fellow members and prospects to keep 80 percent in the “program” and remove only 20 percent. Like ASD and AVG, Zeek also had a version of a “rebates aren’t guaranteed” clause. Some Zeek “defenders” now claim that Zeek should be left alone because it never promised anybody anything. ASD and AVG members said the same thing about those “programs.”

    From July 24, 2009: (No. 5 in “Most Popular” rankings last week.) UNCONFIRMED: Harris Family In Uruguay, AVG Staff Fired

    This story reported that certain members of the Bowdoin-Harris family involved in both ASD and AdViewGlobal purportedly had moved to Uruguay. News about the purported move broke after AVG was mentioned in a racketeering lawsuit against ASD in June 2009.

    From the July 24, 2009, story (italics added):

    AVG has a history of blaming members for its problems and deflecting accountability from management to the rank-and-file. In the past, it has blamed members for the suspension of a bank account and threatened to sue members who shared information outside association walls — and even to contact their ISPs to suspend service of people who asked pointed questions about the company in forums.

    Yesterday’s announcement by AVG also blamed the delay in audit findings on unspecified “complications created by changes in payment processors.”

    Prior to its August 2012 collapse, Zeek appears to have experienced problems with banks and payment processors. Some Zeek promoters cautioned fellow members not to talk too much about Zeek in public. On Aug. 4, Zeek complained on its Blog about unspecified “North Carolina Credit Unions” saying unfair or untrue things about Zeek.

    Zeek members were warned there would be consequences to members who did not toe the company line.

    Just 13 days later, on Aug. 17, the SEC filed an emergency action in federal court that alleged Zeek was a $600 million Ponzi and pyramid scheme

     

  • BULLETIN: Another Major Scam Rocks Florida: Claudio Eleazar Osorio Arrested By Feds, Sued By SEC; Miami Entrepreneur And Friend To Politicians Accused Of Stealing Millions From Investors

    BULLETIN: Florida has served up another doozy — one that is an embarrassment to major figures in both major U.S. political parties.

    Claudio Eleazar Osorio, also known as Claudio Osorio Rodriguez, 54, was arrested by federal agents today, amid charges he scammed the U.S. government out of $10 million in the aftermath of the devastating earthquake in Haiti in January 2010.

    If promising to provide post-earthquake housing in Haiti and not delivering were not enough, Osorio also concocted a ruse by which investors came to believe their money was guaranteed by “a Middle Eastern sovereign wealth fund,” according to court filings today.

    “This claim was patently false,” the SEC charged. “The Middle Eastern sovereign wealth fund investment was a ruse to solicit additional funds from investors.”

    The Aventura resident was charged with conspiracy to commit wire fraud, wire fraud, major fraud against the United States, conspiracy to commit money laundering and making false statements to a U.S. government agency.

    Also charged criminally was accountant Craig Stanley Toll, 64, of Pembroke Pines.

    In a parallel civil action, Osorio and Toll were sued by the SEC, which alleged a massive fraud at Osorio’s InnoVida Holdings LLC.

    Osorio, the SEC said, raised at least $16.8 million from investors and “stole nearly half” of it to “pay the mortgage on his multi-million dollar mansion and other lavish highlife expenses.”

    “From his lap of luxury, Osorio concocted a compelling story about InnoVida by recruiting an impressive board of directors and boasting a bogus financial condition to lure investors into funding his scheme of lies,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

    Former Florida Gov. Jeb Bush, a Republican and the son of former President George H.W. Bush and the brother of former President George W. Bush, once sat on InnoVida’s board. So did Ret. Gen. Wesley Clark, a onetime Democratic candidate for President. Osorio also is listed in a Federal Election Commission database as an individual contributor to the Presidential campaigns of Barack Obama and Hillary Clinton, and the Congressional campaign of Debbie Wasserman Schultz, among others.

    From a statement by the office of U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida (italics added):

    The indictment further alleges that between January 2010 and March 2011, Osorio, Toll and others applied for and obtained a $10,000,000 loan from the Overseas Private Investment Corporation (“OPIC”), a U.S. government agency that promotes U.S. government investments abroad to foster the development and growth of free markets. The purported purpose of the loan was to build a manufacturing facility and 500 homes in Haiti (“the Haiti project”) for displaced families in the aftermath of the January 2010 earthquake. The indictment alleges that Osorio, Toll and others made materially false representations and omissions concerning, among other things, the profitability of Innovida, the purported use of the loan proceeds, an equity contribution to be made by Innovida, and contracts that Innovida purportedly had obtained with third-party vendors. Osorio used the OPIC loan proceeds to repay investors and for his and his co-conspirators’ personal benefit and to further the fraud scheme.

    The SEC, meanwhile, described Osorio as a “former Ernst & Young Entrepreneur of the Year award winner.”

    From a statement by the SEC (italics added):

    To induce funds from investors, Osorio and Toll allegedly produced false pro forma financial statements. A pro forma financial statement for March 31, 2009, stated that InnoVida had more than $35 million in cash and cash equivalents and more than $100 million of equity. A pro forma financial statement for Dec. 31, 2009, listed more than $39 million in cash and cash equivalents and $122 million of equity. In reality, the company’s bank accounts held less than $185,000 on March 31, 2009, and less than $2 million on Dec. 31, 2009. Toll failed to review all of InnoVida’s bank account statements when he drafted financial statements. Instead, he accepted Osorio’s misrepresentations that InnoVida had these assets in an account to which Toll did not have access.

    The SEC alleges that Osorio offered bogus share prices to prospective investors based on false valuations. He told one investor that InnoVida was valued at $250 million, and then a week later told a different investor that the company was worth $50 million. The latter investor purchased $100,000 of Osorio’s stake in the company for five cents per share.

    Read a March 2011 story in the Sun Sentinel.

    Read the SEC complaint.

    Read the indictment.

  • The Incredible Reach Of Zeek: Receiver Files In Guam

    This filing in Guam by the court-appointed receiver in the Zeek Rewards Ponzi scheme case may be the first in a U.S. territory.

    In yet another indicator of the incredible reach of the alleged Zeek Rewards Ponzi scheme, the court-appointed receiver has filed court paperwork in Guam.

    Guam is a U.S. island territory “approximately 3,300 miles West of Hawaii, and 1,500 miles east of the Philippines and south of Japan,” according to the website of Naval Base Guam.

    Whether U.S. military members in Guam bought into Zeek is unclear. Zeek was based in North Carolina, home state to four military installations.

    In August, the SEC said Zeek “raised money from more than one million Internet customers nationwide and overseas.” In July, the PP Blog reported that an article on Google News by an apparent Portuguese-speaking affiliate of Zeek claimed that the MLM “program” had more than 100,000 members in Brazil alone. Haaretz.com reported in August that Zeek may have had 20,000 members in Israel.

    In recent days, Zeek receiver Kenneth D. Bell has been posting notice of the August SEC complaint and his appointment as receiver in federal courts in multiple states.  The filing in Guam appears to be the first in a U.S. territory, as opposed to a state. The filings set the stage to consolidate Zeek-related court actions in the Western District of North Carolina before Senior U.S. District Judge Graham C. Mullen.

    Bell has said he’ll pursue clawback litigation against Zeek “winners.”

    Some military members were victims of the infamous “3 Hebrew Boys” Ponzi scheme in South Carolina, another state that includes multiple military installations.

    Some promoters of AdSurfDaily, a Zeek-like “program” that planted the seed it provided a return of 1 percent a day, deliberately targeted military members and their spouses.

    From a May 2008 pitch for ASD targeted at military families. ASD collapsed in August 2008.

  • UPDATE: Receiver Sets Stage For Clawbacks In Zeek Ponzi Scheme Case: Filings Provide Clues About U.S. States In Which Fraudulent Transfers Allegedly Occurred

    These filings related to the alleged Zeek Rewards Ponzi scheme operated by Rex Venture Group LLC are appearing in federal court dockets in multiple states today. There are 94 federal judicial districts in the United States, and such a filing is possible in any district in which the court-appointed receiver believes Zeek Ponzi proceeds reside.

    UPDATED 11:02 P.M. ET (U.S.A.) PP Blog reader “Tony” posted comments this morning about cases involving Rex Venture Group LLC popping up in federal courts beyond the Western District of North Carolina, home base of the SEC’s Zeek Ponzi scheme case and the court-appointed receiver. Rex Venture is the parent company of North Carolina-based Zeek.

    Tony initially observed that he’d seen case numbers for Rex-related filings such as this one on Justia.com, a site that tracks court filings. Tony noticed Justia references to filings in the Western District of Arkansas and in Arizona.

    It turned out that these two filings were only the tip of the iceberg. As the day proceeded, more and more references to filings began to appear on PACER, the public-access system for the federal courts.

    The ASDUpdates Blog has been tracking the filings today. As of the time of this post, there appears to be more than 40 such filings in various federal districts in various states. That number could increase because there are 94 federal districts and the filings will occur in districts in which the Zeek receiver has traced assets linked to the scheme.

    Receiver Kenneth D. Bell has said he intends to pursue clawback litigation against Zeek net winners in order to make victims of the alleged Zeek fraud scheme as whole as possible. The early math of Zeek suggests there were about eight losers for every Zeek winner.

    The filings now appearing on the dockets today in various federal districts are yet another indicator of the massive scale of the alleged Zeek fraud, believed to be the largest Ponzi scheme in U.S. history based on the number of victims. That number is estimated in the neighborhood of 1 million.

    In August, the SEC described Zeek as a $600 million Ponzi- and pyramid fraud.

    Today’s filings are not lawsuits against individual Zeek promoters; those will come later, if the receiver and the promoters cannot negotiate a deal that will result in the return of sought-after funds. Today’s filings — in effect — are formal notifications to court officials in the various districts that the receiver may be operating in their districts under the authority of the federal court for the Western District of North Carolina.

    Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina is presiding over the SEC’s Zeek case and the receivership.

    Despite the SEC’s Zeek action, the HYIP universe continues to serve up wantonly destructive fraud schemes, thus potentially creating victims by the tens of thousands at a time. In many cases, the schemes are advanced by willfully blind hucksters, including hucksters who populate Ponzi scheme boards such as TalkGold and MoneyMakerGroup and race from scheme to scheme to scheme.

  • BULLETIN: Proposed Class-Action Against Zeek In Louisiana Transferred To North Carolina

    BULLETIN: A federal judge has transferred from the Eastern District of Louisiana to the Western District of North Carolina a proposed class-action lawsuit against Rex Venture Group LLC, Zeek Rewards and Paul R. Burks.

    The ruling by U.S. District Judge Carl J. Barbier  in New Orleans likely paves the way for Senior U.S. District Judge Graham C. Mullen of Charlotte to issue a specific order to stay the case. Both Burks and Kenneth D. Bell, the court-appointed receiver in the Zeek Ponzi scheme case brought by the SEC on Aug. 17 in Mullen’s courtroom, have sought the stay.

    In August, Mullen issued an order that “[a]ll Ancillary Proceedings are stayed in their entirety, and all Courts having any jurisdiction thereof are enjoined from taking or permitting any action under further Order of this Court. . . .”

    The prospective class action was filed in Louisiana on Aug. 24, a week after Mullen issued the stay in North Carolina.

    Burks has contended that the Louisiana plaintiffs tried to circumvent the Aug. 17 stay issued by Mullen by bringing an action in another federal district.

  • EDITORIAL: The ‘Zeek-Step,’ The Stepfordian Shuffle And The Stalinist HYIP

    On Jan. 22, 2011, nearly two years ago and long before the SEC brought the Zeek Ponzi scheme case in August 2012, the PP Blog proposed a new term in an effort to distill the economic and logistical nightmares of viral Internet crime to their essence: fraud creep. This followed our Dec. 12, 2010, post, which explained that America’s largest sports stadiums may not be large enough to accommodate all the victims of a single, web-based crime.

    Today the Blog is proposing another new term: Zeek-step, also known as “The Stepfordian Shuffle.” Zeek-step gets its name from the collapsed Zeek Rewards “program,” a 1.5.-percent-a-day ROI abomination (with accompanying recruitment commissions) boosted in part by serial MLM racketeers and Ponzi-forum criminals who pretended the 2008 AdSurfDaily Ponzi case never happened.

    To do the Zeek-step is to pretend the ASD Ponzi case brought by the U.S. Secret Service more than four years ago is meaningless. At the same time, the Zeek-step is characterized by post-complaint efforts to demonize the SEC and the receiver — and to paint Zeek as a noble enterprise, the sender of a high tide that would lift all MLM boats. The trouble with that claim is that the purported high tide appears to have sunk more than 80 percent of vessels that sought to navigate the Zeek waters.

    If you’re a Zeek victim — and if you’re unfamiliar with the ASD case — you should acquaint yourself with it right away. “Programs” such as ASD and Zeek were cancers on the global marketplace. The math of such schemes is approximately this: 86 percent of participants will become “losers” who subsidize enormous “profits” for a super-class consisting of about 14 percent — the “winners.”

    There may be 1 million or more victims of Zeek, according to court filings. Putting it another way, Zeek could fill the Rose Bowl to capacity with victims about 10 times over. The logistical challenges confronting the court-appointed receiver in the Zeek case may be unprecedented. So, yes, Zeek was an instance of fraud creep. The ASD case — large for its time four years ago with about 100,000 members — has been dwarfed by Zeek.

    Protecting The Super-Class

    Although the Zeeks of the world often are positioned as the byproduct of ingenious Democratic Capitalism even as critics incongruously are dismissed as Communists, Socialists, Nazis and enemies of the “free market,” the fact remains that “programs” such as Zeek are designed to channel huge sums to a super-class that largely is preordained. If Zeek were a political entity, this super-class would be seen as a Soviet-era Politburo. The rest of the field would consist of peasants who keep the uppermost Stalinists in fine liquor and cigars.

    One of the chief incongruities of “programs” such as Zeek is that “defenders” invariably position themselves as visionary Capitalists and rail against Statism — indeed, it’s axiomatic in HYIP schemes that a government agency that stops a scheme will be described as evil — and yet the “programs” being defended are all about keeping the Stalinists in their Chaikas and dachas.

    One way to view Zeek is as a for-profit enterprise that taxed 86 percent of its participants at 100 percent to create the “profits” for the elitist 14 percent. It is likely that some of the people among the 14 percent paid ZERO DOLLARS to Zeek. Zeek was particularly noxious because it planted the seed that MLMers without big lists still could profit by sending the company up to $10,000 and generating a profit over time from an abomination known as the Retail Points Pool.

    The SEC said Zeek manipulated the numbers to make that appear possible, to make it appear as though Zeek were a profitable enterprise capable of paying a return of 1.5 percent a day to potentially millions of people. The Secret Service said ASD did the same thing.

    Zeek was offensive at many levels, including the intellectual one. Most notable, in our view, is that purported Capitalists “defending” Zeek by railing against alleged Statism as practiced by the SEC don’t seem to make the connection that Zeek set things up to the maximum advantage of the Stalinists of the Electronic Age.

    A Ponzi-forum huckster with a big list and practiced in the art of turning blind eye to every HYIP fraud scheme that comes down the pike had a decided advantage over, say, an 85-year-old Florida widow who maxed out her credit card to join Zeek because the huckster caused her to believe she’d have more to leave to her children and grandchildren when God called her home.

    It is our hope that the SEC and the U.S. Department of Justice will act aggressively and quickly to oppose a motion filed Friday by certain members of the alleged Zeek Rewards Ponzi scheme to appoint an “examiner.”

    Jordan Maglich of PonziTracker has a fine story on Friday’s filing. Could it be true that some Zeekers actually want to further deplete the receivership estate of resources that should go to true victims?

    In the PP Blog’s view, embracing a story that Zeek was a legitimate Capitalist venture is to embrace a wicked myth. Hell, Stalin himself might have been the first in, seeing the beauty of how the profits could have propped up the Politburo. If the initial scheme that drove the vast majority of the profits to the elite Statists collapsed, he could simply have announced another five-year plan. PolitburoBids2.com?