John Mattera: Source: Mattera Foundation Nov. 2. 2011, news release.
John A. Mattera, the recidivist Boca Raton swindler who was charged civilly and criminally last year in a new caper, has pleaded guilty to one count of securities fraud, one count of wire fraud and one count of conspiracy to commit securities fraud and wire fraud, federal prosecutors said.
He potentially faces decades in prison.
Mattera, 50, was charged last year by the SEC and the office of U.S. Attorney Preet Bharara of the Southern District of New York with duping investors into believing his purported hedge fund had the inside track on shares of Facebook and Groupon in advance of the IPOs.
The purported fund had the high-sounding name of “The Praetorian Global Fund,” investigators said.
“With false promises of profitable investments in high-profile stock, John Mattera lured unsuspecting investors into a meticulously orchestrated, multi-million dollar fraud scheme, and used their money to fund his lavish lifestyle,” Bharara said.
Investors plowed millions of dollars into the scheme, believing their money would be held in “escrow” at a Florida bank and that they’d have an advantage because Mattera held the key to higher Facebook and Groupon profits when the companies went public, prosecutors said.
“However, instead of maintaining the investor money in the escrow accounts as Mattera promised, Mattera caused the vast majority of the fundsto be transferred to other entities with which he was associated,” prosecutors said. “Ultimately, Mattera misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family, such as expensive jewelry, interior decorating and luxury cars.”
And, prosecutors noted, “neither Mattera, Praetorian nor the G Power Entities held these shares of stock.”
Mattera pleaded guilty in 2003 to seven counts of grand theft in three separate Florida criminal cases, according to court records. Among other things, “Mattera stole $34,000 from two Florida investors by promising to provide them with shares of stock that Mattera falsely represented he owned,” the SEC said of the 2003 cases.
In 2009, the SEC charged Mattera “with fraudulently attempting to avoid registration requirements by backdating promissory notes to obtain improperly unrestricted shares of a company,” according to the agency.
Despite his history of engineering fraud schemes, Mattera positioned himself as a community volunteer and head of a foundation, rubbing elbows with the American Red Cross and Florida’s elite in the days and months leading up to his most recent scam.
Where/When: Stamford, Conn. (today from 9 a.m. to 1 p.m. EDT at the University of Connecticut – Stamford Campus); Nashville, Tenn. (Oct. 4 from 8:45 a.m. to 12:30 p.m. EDT at Vanderbilt University Law School’s Flynn Auditorium located at 131 21st Avenue South) ; San Francisco (Oct. 9, in Walnut Creek, Calif., from 9 a.m. to 1 p.m. PDT at the Rossmoor Retirement Community – Gateway Complex located at 1001 Rain Road); Denver (Oct. 10 from 8 a.m. to 12 p.m. MDT at the Tivoli Building – Turnhalle Auditorium located at 900 Auraria Parkway, Suite 150); Cleveland (Oct. 11 in Beachwood, Ohio, from 8:30 a.m. to 12:30 p.m. EDT at the Montefiore Senior Living Center located at 1 David Myers Parkway); and Miami (Oct. 12 from 9 a.m. to 1 p.m. EDT at the Miami Dade College – in the Chapman Conference Center, located at 245 N.E. Fourth Street, Bldg. 3, Room 3210).
Why: Investment fraud losses have been “staggering,” the Justice Department says.
Since the beginning of 2011, “the Justice Department’s Criminal Division and 85 U.S. Attorneys’ offices have reported that approximately 800 defendants have been charged, tried, pleaded or sentenced in approximately 500 federal prosecutions involving investor fraud. The total reported amount cheated from victims for this time period tops more than $20 billion.”
Summit Sponsors: Department of Justice, U.S. Attorneys’ offices, the FBI, the SEC, the FTC, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), the CFTC, the Bankruptcy Trustees, FINRA, AARP and the Better Business Bureau.
MLM pitchmen and AdSurfDaily figures Todd Disner and Dwight Owen Schweitzer — both of whom went on to become promoters of the alleged Zeek Rewards Ponzi scheme — have accused a federal judge of “sophistry.”
Sophistry, according to Dictionary.com, means “a subtle, tricky, superficially plausible, but generally fallacious method of reasoning.”
Disner turned to MLM after his days as a founder of the Quiznos sandwhich franchise. Schweitzer is a former attorney whose license was suspended in Connecticut. Both men live in southern Florida.
The curious assertion by Disner and Schweitzer against U.S. District Judge Rosemary Collyer appeared on Collyer’s court docket in the District of Columbia on Sept. 17, one month to the day after the SEC alleged in the western District of North Carolina that the Zeek Rewards MLM “program” was a $600 million Ponzi scheme and pyramid fraud that potentially had affected more than 1 million people.
Senior U.S. District Judge Graham C. Mullen of the western District of North Carolina is presiding over the Zeek case. Kenneth D. Bell is the court-appointed receiver.
Zeek and ASD are known to have members in common.
The ASD Ponzi scheme, which collapsed in 2008, affected at least 97,000 people and created at least 9,000 victims, federal prosecutors said.
Disner and Schweitzer also were pitchmen for ASD, which federal prosecutors in the District of Columbia have described as a $119 million Ponzi scheme marketed MLM-style. The ASD duo sued the United States in November 2011, claiming their records in ASD’s database were private and thus unlawfully seized and accusing federal prosecutors and a U.S. Secret Service agent of presenting a “tissue of lies” when bringing the civil- forfeiture case against $65.8 million in the bank accounts of ASD President Andy Bowdoin in August 2008.
On Aug. 29, Collyer sentenced Bowdoin to 78 months in federal prison. Bowdoin, 77, pleaded guilty to wire fraud in May 2012, admitting in a statement of offense that ASD was a Ponzi scheme and that his business never operated lawfully from its inception in 2006.
But Disner and Schweitzer now claim Bowdoin’s admission “was a necessary part of his plea bargain” with the government. They further assert that Bowdoin’s admission was the “coerced confession of an 80 year old man.”
In court filings in May, however, Bowdoin said this:
“I have read this Plea Agreement and discussed it with my attorneys, Michael McDonnell, Esq. and Charles Murray, Esq. I fully understand this Plea Agreement and agree to it without reservation. I do this voluntarily and of my own free will, intending to be legally bound. No threats have been made against me nor am I under the influence of anything that could impede my ability to understand this Plea Agreement fully. I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” (Italics/bolding added by PP Blog.)
In the filing docketed Sept. 17, Disner and Schweitzer claim the Secret Service “manufactured” events to ensure that the ASD case was heard by Collyer. Earlier, Disner and Schweitzer advanced a theory that undercover agents who joined ASD in 2008 had a duty to identify themselves to ASD management.
Even after Bowdoin pleaded guilty in May, Disner and Schweitzer contended that the government’s case was a “house of cards,” according to court filings.
Disner and Schweitzer now have asked for their lawsuit to be reopened and to have Collyer removed from the case. In ASD-related litigation, Collyer has ordered the forfeiture of more than $80 million.
The bid by Disner and Schweitzer to have Collyer removed from ASD-related litigation is at least the third. In 2009, purported “sovereign” being Curtis Richmond unsuccessfully sought to have Collyer removed. So did Bowdoin.
Disner is now involved with purported Zeek Rewards consultant Robert Craddock in an effort to raise money to challenge either the SEC or the court-appointed receiver in the Zeek case.
Among the early theories advanced by Craddock was that Mullen — the judge in the Zeek case — was playing politics by appointing Bell’s firm as the receiver to enable the firm to gorge itself on fees.
Both ASD and Zeek were accused of selling unregistered securities as investment contracts. The U.S. Secret Service brought the ASD case, with the SEC bringing the Zeek case.
The Secret Service confirmed on Aug. 17 that it also was investigating Zeek. The SEC said that, since January 2011, Zeek had “raised more than $600 million from approximately 1 million investors nationwide and overseas by making unregistered offers and sales of
securities through the ZeekRewards website in the form of Premium Subscriptions
and VIP Bids.”
Zeek was an arm of North Carolina-based Rex Venture Group LLC and was operated by Paul R. Burks, the SEC said.
In their filing accusing Collyer of sophistry, Disner and Schweitzer appear to suggest that Collyer needs a lesson in MLM from purported MLM expert Keith Laggos and MLM attorney Gerald Nehra.
Laggos, an SEC defendant in a 2004 case that alleged he issued laudatory press releases without disclosing he was being compensated, is listed in court records as a Zeek consultant. Laggos settled the 2004 SEC case without admitting or denying liability but agreeing to pay more than $30,000, including a $19,500 civil penalty.
Laggos once opined that ASD was not a Ponzi scheme. Nehra also opined that ASD was not a Ponzi scheme. Richard W. Waak, Nehra’s law partner, is listed in court filings by Zeek as an attorney for the firm.
UPDATED 10:05 P.M. EDT (U.S.A.) The SEC today updated its information site on the Zeek Rewards Ponzi scheme case, noting its investigation “is continuing” and pointedly adding language that “ZeekRewards and [Paul R.] Burks immediately consented to an asset freeze, the appointment of a receiver over their assets, and the payment of a $4 million penalty.”
Although the agency gave no specific reason for the update, it occurred against the backdrop of an ongoing effort by Zeek figure Robert Craddock to intervene in the case after collecting donations from individual members of Zeek.
1.
Screen shot of section from Google cache. This is how this section of the SEC's Zeek information page looked prior to today's update.
2.
Screen shot: The red highlights were added by the PP Blog and show today's change to the SEC's Zeek info site.
While the SEC did not provide the reason for the subpoena, some have speculated that recent comments attributed by Craddock to the SEC concerning purported admissions of fault in the SEC’s case against Zeek which were later refuted may have piqued the SEC’s interest.
On Sept. 23, the PP Blog reported that Craddock’s name did not appear on a Sept. 17 list of “EMPLOYEES, OTHER PERSONNEL, ATTORNEYS, ACCOUNTANTS & OTHER AGENTS/CONTRACTORS” submitted by Zeek to Senior U.S. District Judge Graham C. Mullen even though Craddock identified himself in July as a Zeek “consultant.”
Craddock also was present on separate fundraising calls last month with Todd Disner, a Zeek pitchman and a member of the AdSurfDaily 1-percent-a-day Ponzi scheme, and with T. LeMont Silver. Silver was described on a Zeek website in June as a Zeek “employee.”
Among other things, Silver was a pitchman for OneX, which federal prosecutors in the District of Columbia described in April as a “fraudulent scheme” and “pyramid” that was cycling money in ASD-like fashion. Jailed ASD Ponzi scheme operator Andy Bowdoin also was a OneX pitchman.
ASD was a Ponzi scheme that gathered at least $119 million, according to federal prosecutors. Zeek’s business model was very similar to ASD’s business model.
Zeek was a Ponzi scheme that gathered $600 million, according to the SEC.
Andy Bowdoin's booking photo in the District of Columbia.
Convicted AdSurfDaily Ponzi schemer Andy Bowdoin is in the custody of the U.S. Marshals Service and is listed “in transit” to a federal detention facility, according to court filings and the Federal Bureau of Prisons website.
Where Bowdoin, 77, will do his time has not yet been revealed. But a criminal judgment against Bowdoin signed Sept. 21 by U.S. District Judge Rosemary Collyer included a recommendation that Bowdoin be incarcerated “at a Low or Minimum Security facility near Tallahassee,” Fla.
Bowdoin’s ASD, which purported to pay members 1 percent a day, operated in Quincy, Fla., a short drive from Tallahassee.
On Aug. 29, Collyer sentenced Bowdoin to 78 months. He pleaded guilty to a Ponzi-related charge of wire fraud in May and admitted ASD was a Ponzi scheme.
Bowdoin had been held at a jail in the District of Columbia since June 12, the date his bond was revoked after federal prosecutors proffered evidence that he continued to commit crimes after the U.S. Secret Service raided ASD in 2008.
The Secret Service said last month that it also was investigating Zeek Rewards, another 1-percent-a-day-plus “program.” The SEC has described Zeek as a $600 million Ponzi- and pyramid scheme.
ASD gathered at least $119 million, according to court filings.
Zeek and ASD are known to have had members in common.
UPDATED 4:20 P.M. EDT (U.S.A.) Unsolved mysteries remain in the Zeek Rewards Ponzi scheme case. Among the unanswered questions are these:
How many members did Zeek have in common with AdSurfDaily, a predecessor 1-percent-a-day scam to the Zeek scheme?
Why do some Zeek “defenders” appear to be engaged in bizarre bids to harass and menace Zeek critics?
Why did Zeek list certain ASD members or story figures as employees on its website — and why does some of the employee information published on Zeek’s website in June appear to be at odds with employee information contained in court filings by Zeek last week?
How much connectivity did Zeek have with scams such as NarcThatCar, AdViewGlobal, OneX and JSSTripler/JustBeenPaid, a “program” that may have ties to the “sovereign citizens” movement?
On June 7, the PP Blog reported that a Zeek Rewards MLM “program” website was listing the names of 16 Zeek “employees,” including the name of Terralynn Hoy, a mainstay in the AdSurfDaily Ponzi scheme story. Also included was the name of OH Brown, an executive at a company (USHBB Inc.) that produced ads for the NarcThatCar pyramid scheme. This information is reflected in screen shots Nos. 1 and 2. Notes by the PP Blog also are included.
Hoy participated in at least one conference call for Zeek, as did Brown. Zeek’s 1-percent-a-day-plus business model was very similar to the business model of ASD, which the U.S. Secret Service described in 2008 as a massive online Ponzi scheme that had gathered tens of millions of dollars. Zeek launched after the collapse of ASD and had members and/or figures in common with ASD and AdViewGlobal, a collapsed 1-percent-a-day “program” federal prosecutors linked in April 2012 to ASD.
Among Silver’s OneX claims was that OneX positions being given away were worth $5,000. Bowdoin declared OneX an excellent “program” for college students.
Even though Zeek claimed Silver, Hoy, Catherine Parker, Brown, Trudy Gilmond and Marie Young Cain as “employees” in June, they are not referenced as “EMPLOYEES, OTHER PERSONNEL, ATTORNEYS, ACCOUNTANTS & OTHER AGENTS/CONTRACTORS” in a Sept. 17 court filing by Rex Venture Group LLC/Zeek operator Paul R. Burks.
Also absent from Burks’ Sept. 17 list of Rex/Zeek employees/contractors is Robert Craddock, who identified himself in July as a Rex “consultant.” In July, prior to the SEC’s Ponzi allegations against Zeek, Craddock sought to disable the Hub of Zeek critic “K. Chang” by filing a complaint for purported copyright/trademark infringement and libel with HubPages.com. Craddock was successful briefly, but HubPages eventually restored the “K. Chang” Hub. Craddock later became involved in a purported effort to raise funds to “protect” Zeek affiliates from the SEC and/or the court-appointed receiver in the Zeek Ponzi case.
Gilmond once pitched Regenesis2x2, a “program” that became the subject of a U.S. Secret Service investigation in 2009. The Secret Service also is investigating Zeek. The SEC described Zeek last month as a $600 million Ponzi- and pyramid scheme.
Precisely how and when Rex/Zeek hired or replaced/dismissed employees is unclear. The names of a number of individuals listed by Zeek as employees in June do not appear on the list Burks filed in court last week.
NarcThatCar effectively collapsed in 2010, after coming under scrutiny by the Better Business Bureau and investigative reporters. Narc operated from Texas — and yet did part of its banking in North Carolina at one of the banks used by Zeek. Both Narc and Zeek used USHBB Inc. to produce ads for their respective “programs.” Both Narc and Zeek scored “F” grades with the BBB — and when the BBB published negative information about the respective “programs,” some affiliates of the respective “programs” claimed the BBB was a fraud.
Zeek ‘Defender’ Stalks PP Blog, Starts Disinformation Site After HubPages Restores ‘K. Chang’ Site Targeted By Craddock
The PP Blog is reporting today that, after the SEC described Zeek as a $600 million fraud and after HubPages restored the “K. Chang” Hub critical of Zeek and targeted by Craddock, a purported Zeek “defender” used the Internet repeatedly to send harassing communications to the PP Blog. Dated Aug. 28, one such communication was an announcement that the PP Blog and “K. Chang” had been targeted in a retaliation campaign for their respective reporting on Zeek.
3.
4.
The Blog’s stalker created more than a dozen bogus usernames and email addresses to send harassing (and bizarre) communications to the PP Blog.
Here is one from Aug. 31 (italics added):
Watch out for the Romney lover namely KSChang!!!! He was saw holding hands with Mitt, caressing the presidential candidate, while surfing PatrickP’s amazing, smart, funny, and romantic blog.
Mitt Romney is the Republican nominee for President of the United States.
For reasons that remain known only to the PP Blog’s cyberstalker, the individual also sent a one-word harassing communication — “Pussy” — to the thread below this Aug. 29 PP Blog guest column by Gregg Evans. Separately, the cyberstalker sent a communication that planted the seed Evans would get sued for his Aug. 29 PP Blog column.
“Are you willing go toe to toe with a lawyer on your claims and back up this article?” the cyberstalker wrote.
On Aug. 31, the cyberstalker — who’d been banned under multiple identities — sent this harassing communication to the PP Blog:
“What happened to your face dude, looks like you got ran over by an ugly truck.”
UPDATED 7:58 P.M. EDT (U.S.A.) The mystery of precisely who would represent Zeek Rewards figure Robert Craddock in a bid to intervene in the Zeek Ponzi scheme case may be over.
Attorney Rodney E. Alexander of Charlotte has filed an appearance notice for Fun Club USA Inc., Craddock’s Florida business that raised funds for a court action challenging the Zeek case through ZTeamBiz.com.
Meanwhile, attorney Michael J. Quilling of Dallas has applied to the North Carolina federal court handing the Zeek Ponzi scheme case for permission to represent Fun Club.
Quilling’s application was sponsored by Alexander. Quilling is with Quilling, Selander, Lownds, Winslett & Moser, P.C.
In court filings today, Alexander said he “is appearing in this matter as local counsel for Fun Club USA, Inc and other entities whose assets were seized in connection with” the Zeek case.
Fun Club’s name does not appear as a defendant in the SEC’s civil case against Zeek, and it was not immediately clear whether a specific sum was seized from the company or whether Craddock and the unidentified “other entities” plan to argue that Zeek-related seizures in general by the government were unlawful.
The filing did not identify the other entities.
An email attributed to Craddock yesterday suggested that Senior U.S. District Judge Graham C. Mullen had permitted politics to enter the Zeek Ponzi fray. The email described the law firm of the court-appointed receiver in the Zeek case as “politically connected” and therefore potentially lacking “any incentive to protect anyone” and positioned to “run up a bill and submit invoices to the courts so they can pay themselves.”
Craddock did not explain why Mullen — a former Naval officer with 22 years on the bench — ever would play politics with Zeek. Zeek receiver Kenneth D. Bell, whom Craddock has painted as fee-hungry before Bell has submitted a single bill for the judge to review, is experienced as both a defense attorney and a prosecutor.
As a prosecutor, Bell was heralded by the U.S. Department of Justice for gaining convictions in a case against a Hezbollah terrorist cell operating in the United States. (See Bell in this YouTube video speaking about the cell.)
Craddock, though, appears to be dubious of Bell and his firm.
“So now we have an overzealous government agency, making unsubstantiated claims and convincing a judge to freeze the bank accounts and, dismantle the penny auction and for what, so the receiver can employ 100 people making in excess of 500 an hour for 210 weeks or 4.3 years and burn through the $500 million they have grabbed in 16 bank accounts,” the email attributed to Craddock read in part.
Scammers on well-known Ponzi-scheme forums such as MoneyMakerGroup also have planted seeds of doubt against the receiver. Zeek was promoted widely on forums listed in court filings as places from which Ponzi schemes are promoted.
Bell has said there potentially could be 2 million victims in the Zeek case. Yesterday alone attorneys for accused Zeek operator Paul R. Burks of Rex Venture Group filed thousands of Zeek-related records under seal. It is part of Bell’s job to examine those documents.
Craddock’s suggestion of political tomfoolery was curious, given that Craddock used the name of former Florida Attorney General Bill McCollum and the SNR Denton law firm in Craddock’s initial fundraising efforts to hire counsel. SNR Denton dropped out soon thereafter. McCollum is a partner at SNR Denton.
AdSurfDaily Ponzi scheme pitchman Todd Disner was present on a Craddock fundraising call last month. Among other things, Disner asserted in court filings earlier this year that ASD was not a Ponzi scheme even after ASD President Andy Bowdoin pleaded guilty to wire fraud and admitted ASD was a Ponzi scheme.
In a November 2011 lawsuit against the government for alleged misdeeds in the ASD Ponzi case, Disner also accused prosecutors of going shopping for a friendly judge when bringing the ASD Ponzi case in 2008. His claims were dismissed on Aug. 29, the same day Bowdoin was sentenced to 78 months in federal prison.
At an unclear point in time, Disner became a Zeek pitchman. Like ASD, Zeek featured a 1-percent-a-day (or more) payout plan on top of commissions for sales.
On Aug. 17, the SEC described Zeek as a Ponzi- and pyramid scheme that sold unregistered securities and raised $600 million.
Craddock has described himself as a consultant for Rex Venture Group LLC, Zeek’s parent company.
An entry from the court docket in the Zeek Ponzi scheme case.
UPDATED 4:20 P.M. EDT (U.S.A.) Attorneys for accused Ponzi schemer Paul R. Burks of the Zeek Rewards MLM “program” operated through North Carolina-based Rex Venture Group LLC have filed thousands of records under seal.
On Sept. 17, Burks’ attorneys sought the approval of Senior U.S. District Judge Graham C. Mullen to file the documents under seal.
The “anticipated filing contains account and financial information concerning not only Rex Ventures Group, LLC d/b/a ZeekRewards.com, but also thousands of individuals who either paid funds to and/or received funds from Receivership Defendant since January 1, 2010,” the attorneys said in advance of the massive filing.
Mullen permitted the attorneys to submit the documents under seal. The filings now have been made and will remain under seal until further order of the court. The precise form of the filings is unclear because they are not available to the public.
As things stand, the records will be available to Burks, the SEC and to Kenneth D. Bell, the court-appointed receiver in the Zeek case.
Zeek was described Aug. 17 by the SEC as a Ponzi- and pyramid scheme that had gathered $600 million.
The sheer complexity of Ponzi-scheme cases often leads to spectacular paper chases because of the enormous number of records that must be reviewed. But the Zeek case could set a new standard for volume because Zeek used as many as 15 financial vendors and perhaps ensnared between 1 million and 2 million victims while operating over the Internet between January 2011 and August 2012.
Mantria CEO Troy Wragg in a music video by ICEBLOC.
BULLETIN: Two pitchmen for the Mantria Corp. “green” Ponzi scheme have been ordered to pay millions of dollars in disgorgement and penalties, including a purported wealth coach who advised people who contacted him after the 2009 collapse of Mantria to join the Trump Network MLM “opportunity.”
Mantria purportedly was an environmentally friendly investment opportunity. In reality, the SEC said, it was a massive Ponzi scheme that was selling unregistered securities through unregistered broker-dealers.
Any returns paid to investors “were funded almost exclusively from other investors’ funds,” the SEC said.
Wayde M. McKelvy of Speed of Wealth LLC was ordered by U.S. District Judge Christine M. Arguello of the District of Colorado to pay $6,273,632.78 in disgorgement, interest of $869,141.87 and a civil penalty of $6,273,632.78.
McKelvy, an MLM pitchman who also was pushing Mantria, described himself as a wealth coach with “Wealthalete[s]” as pupils and prospects.
McKelvy’s former wife — Donna McKelvy — was ordered to pay $429,731.84 in disgorgement, interest of $55,172.93 and a civil penalty of $214,865.92.
Arguello ordered even greater disgorgement and penalties against Mantria principals Troy B. Wragg and Amanda E. Knorr.
“The Court ordered Wragg and Knorr to pay $37,031,035.36 in disgorgement plus interest of $3,713,772.06 jointly and severally with Mantria Corporation and a civil penalty of $37,031,035.36 each,” the SEC said today.
All in all, Arguello ordered more than $135 million in monetary relief in the Mantria/Speed of Wealth case, the SEC said.
The agency brought the Mantria Ponzi case in 2009, saying the “promoters fraudulently exaggerated Mantria’s green initiatives and used high-pressure tactics to convince investors to chase the promise of lucrative returns.”
Strangeness marked the early days of the Mantria case. When reporters contacted Wayde McKelvy by email for comment, they received back a pitch for the Trump Network.
“I am totally focused on one thing right now which I believe will be very, very fun and the opportunity to put money in your pocket by owning you’re [sic] own business with the help of ‘The Donald,” one of the McKelvy pitches claimed.
Among other things, Mantria traded on the name of former President Bill Clinton, along with a host of other politicians and celebrities. It is not unusual for scams to attach their names to prominent individuals.
Screen shot: Accused Ponzi schemer Paul R. Burks of Rex Venture Group LLC advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina today about Zeek's relationships with various financial vendors. The alleged Zeek Rewards Ponzi scheme operated through Rex Venture..
BULLETIN: (UPDATED 9:18 P.M. EDT U.S.A.) New court filings by accused Ponzi schemer Paul R. Burks of Rex Venture Group LLC show that Zeek Rewards had more than $40 million in offshore payment processors.
Included in that sum is $20.765 million in Canada’s AlertPay/Payza, and $20 million in Canada’s SolidTrustPay.
Today’s filing also shows $10 million on deposit at Bank of America. Court filings in the AdSurfDaily Ponzi scheme case brought by the U.S. Secret Service in 2008 show that ASD also banked at Bank of America.
On Aug. 17, the SEC alleged that North Carolina-based Zeek was a massive online Ponzi- and pyramid scheme that had gathered $600 million since January 2011. Filings by Burks today suggest Zeek did it all with fewer than 40 employees, including part-time contractors such as attorneys and consultants in areas such as payroll, accounting, compliance and marketing.
Included among the consultants listed by Burks was Keith Laggos, a purported MLM expert. Laggos once opined that AdSurfDaily was not a Ponzi scheme. ASD President Andy Bowdoin later admitted that it was. Bowdoin was sentenced last month to 78 months in federal prison.
This grainy likeness of Legisi HYIP operator Gregory N. McKnight appears in U.S. court files.
BULLETIN: Yesterday’s scheduled sentencing of convicted Legisi HYIP swindler Gregory N. McKnight has been delayed until Nov. 19, but federal prosecutors in the Eastern District of Michigan have asked U.S. District Judge Mark A. Goldsmith to sentence McKnight to 15 years in prison.
McKnight and Legisi relied on “semantic obfuscation” in which investors were told they were joining a “loan program,” not making an “investment,” prosecutors said.
A 15-year sentence is at “the top of the sentencing guidelines of 151-188 months” and “may serve to discourage others who are inclined to involve themselves in similar criminal conduct,” prosecutors argued to the judge.
In February, McKnight, 52, pleaded guilty to wire fraud in the Legisi Ponzi caper. The scam, which planted the seed a return of between .25 percent a day and 12 percent a month was possible, was popularized in part on Ponzi boards such as MoneyMakerGroup and Talk Gold.
Court filings show that Legisi used some of the same payment processors used by the AdSurfDaily Ponzi scheme, including e-Gold and e-Bullion. ASD operator Andy Bowdoin was sentenced in August to 78 months in federal prison.
“The principle mechanism by which investor funds would be funneled to defendant was through the utilization of the internet via digital currency, particularly e-gold and e-bullion,” prosecutors said in the McKnight sentencing memo. “The use of these non-traditional funding methods provided McKnight with the opportunity (at least for a while) to conduct the scheme below the radar of regulators.”
And, prosecutors pointed out, “[i]n 2007, the United States government seized the property in approximately 58 e-gold accounts due to various criminal violations, including McKnight’s account . . . Moreover, in 2008, e-gold and its operators were convicted of money laundering and conspiracy to defraud the United States . . . And in 2006, the United States government commenced a forfeiture suit against e-bullion for operating an unlicensed money transmitting business, wire fraud, and money laundering . . . James Fayed, the owner and operator of e-bullion, was later convicted in the State of California of having his wife murdered and sentenced to death row.”
Legisi gathered about $72 million. The SEC and the U.S. Secret Service led the probe, which resulted in civil charges against McKnight by the SEC and a criminal charge of wire fraud against him by the Secret Service.
Legisi pitchman Matthew John Gagnon also was charged civilly and criminally in the Legisi case.
From the prosecution’s sentencing memo on McKnight (italics added/bolding in original):
As if the exorbitantly high interest rates were not enough to induce investors into defendant’s scam, Legisi also offered a referral program whereby investors could earn a 5% to 7% commission on the amount of new funds that a referred investor placed in the program. As McKnight explained, “[a]s an Active Member of Legisi.com, you are encouraged to refer friends, colleagues, and your own website visitors to us and benefit from an additional source of income — a 5% – 7% incentive bonus for each new account opened by your referrals and on any and all future deposits from them!”
Legisi was an acronymn that stood for “Lucrative Electronic Gold Income Services International,” prosecutors said. HYIP schemes spread in part because unlicensed/unregistered brokers (such as Gagnon) push them online to earn “commissions.”
The MoneyMakerGroup Ponzi forum — one of the outlets from which Legisi was pushed — is specifically referenced in court filings in the Legisi case.
Zeek Rewards, which the SEC described last month as a $600 million Ponzi- and pyramid scheme selling unregistered securities, also was heavily pushed on the Ponzi forums. Zeek used both domestic and offshore financial vendors, including AlertPay and SolidTrustPay in Canada.
Zeek planted the seed it could provide a return of between 1 percent and 2 percent a day, far higher than Legisi’s maximum suggested payout of 12 percent a month. Like Zeek, ASD suggested a payout on the order of 1 percent a day. The ASD scheme gathered at least $119 million, federal prosecutors in the District of Columbia said.
ASD relied on wordplay to dupe investors. So did Legisi, prosecutors said in the McKnight sentencing memo (italics added):
In addition to operating a Ponzi scheme, McKnight committed various securities violations. While McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.
From a footnote in the prosecution’s McKnight sentencing memo (italics added):
[Legisi] Investors originated from all 50 states and approximately 33 foreign countries (Australia, Bahamas, Belgium, Canada, Cyprus, Demark, England, France, Finland, Germany, Greece, Iceland, India, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Malaysia, Mexico, Nigeria, Philippines, Saudi Arabia, Singapore, Slovenia, South Africa, South Korea, Sweden, Spain, Thailand, Trinidad West Indies).
