Eric Aronson, the accused New York scammer and convicted felon originally arrested in October 2011 in an alleged Ponzi scheme, now has been formally indicted, federal prosecutors in the Eastern District of New York said.
Charged along with Aronson with conspiracy, securities fraud and money laundering were Vincent Buonauro and Fredric Aaron. Aaron is an attorney from Port Washington, N.Y. In a related civil action by the SEC in October 2011, his age was listed as 47.
In the same civil complaint last year, the SEC listed Aronson’s age as 43. He is a resident of Syosset, N.Y., according to SEC filings. Buonauro was described in the same October 2011 SEC complaint as a 40-year-old resident of West Islip, N.Y.
The men allegedly were principals in Permapave Industries and Permapave USA, which the SEC described as a $26 million Ponzi scheme involving paving stones purportedly imported from Australia.
“The defendants are alleged to have misled investors and, in paying some of them with proceeds from others, engaged in a Ponzi scheme to conceal how flimsy the investment was,” said Janice K. Fedarcyk, assistant director-in-charge of the FBI’s New York Field Office.
‘House Of Cards’
“The defendants allegedly abused the trust placed in them by their investors by lying and stealing the investors’ money,” U.S. Attorney Loretta E. Lynch said. “They promised a sound investment in a quality product, but instead shuttled the investors from one deceptive securities offering to another in an attempt to maintain their house of cards.”
Aronson is a convicted felon who used proceeds from the Permapave scheme to pay restitution to victims of a scheme to which “he pleaded guilty to conducting in 2000? and was sentenced to 40 months in prison, the SEC said last year.
Compound150 says it is a spinoff of T2MoneyKlub, while targeting "compounding lovers" like a sandwich joint targets lovers of cheeseburgers.
The ink was barely dry on the most recent civil judgments for millions of dollars against serial HYIP pitchman Matthew J. Gagnon when Compound150 launched yesterday. On Tuesday, the SEC announced $4.2 million in new court-ordered assessments against Gagnon, who’d earlier been hit with more than $2.5 million in assessments in a related case and became the subject of a criminal complaint filed by the U.S. Secret Service.
Gagnon was a web-based pitchman for the Legisi HYIP Ponzi scheme and other high-yield “opportunities,” including a “program” in which his alleged partner was a twice-convicted felon. The SEC essentially charged Gagnon with turning a blind eye to obvious fraud schemes — repeatedly.
Apparently not taking the clue that HYIP promoters are at risk of both civil and criminal prosecution, the operators of JSS Tripler 2 have launched the Compound150 feeder scam, a companion to the original JSS Tripler 2 scam. After suspending member payouts in December 2011 amid reports of an AlertPay freeze, JSS Tripler 2 — also known as T2 — gave itself a new name: T2MoneyKlub.
The addition of the Compound150 scam means that the entity — purportedly operated by “Dave” from locales ranging from Britain to Cambodia to Thailand — means that the original JSS Tripler 2 entity now has a third entry in its scam lineup.
But the strangeness does not end there: Indeed, JSS Tripler 2 reportedly based its original name on JSS Tripler, a purportedly unrelated “program” whose affiliates became the subjects in January of a probe by CONSOB, the Italian securities regulator. Compound 150 reportedly launched during a period in which “Dave” was building prelaunch buzz while simultaneously battling (or recovering from) a bout with Dengue fever.
In the fraud sphere, it is common for “opportunities” to refer to illnesses, server problems or catastrophes such as typhoons. In upholding the 20-year prison sentence of pyramid schemer Seng Tan, the U.S. Court of Appeals last month pointed out that Tan — who targeted the scam she ran with her husband at Cambodian émigrés in the United States — blamed the scam’s inability to make payouts on Hurricane Katrina.
Tan’s husband — James Bunchan — ultimately received sentences totaling 60 years because he discussed murdering witnesses and the federal prosecutor who brought the case.
How strange could the JSS Tripler2/T2MoneyKlub/Compound150 “opportunity” get? The answer, perhaps, is that the sky is the limit. Perhaps positioning itself as a category creator, Compound150 says “compounding lovers” are among its target audience.
Compound150 apparently believes it is to multilevel marketing (MLM) what a fast-food chain is to lovers of cheeseburgers
Compound150 opened its doors amid a weekend flap at the MoneyMakerGroup Ponzi forum in which “Dave” — posting as Peakr8 — protested the forum’s description that the emerging opportunity was an HYIP, not an MLM opportunity.
“So are we a HYIP?” Dave asked.
“Hell no!” he answered himself, even as Compound150 was claiming on its website that it pays participants “1% daily for 150 days up to 150%.”
In effect, Compound 150 is advertising a (precompounding) annualized return of 365 percent, about the same purported ROI that led to the 2010 indictment of AdSurfDaily President Andy Bowdoin amid allegations he was operating an international Ponzi scheme.
If convicted on all counts in his September 2012 Ponzi trial, Bowdoin, 77, faces up to 125 years in federal prison and fines in the millions of dollars. As part of the ASD Ponzi investigation, the U.S. Secret Service seized the bank accounts of some individual ASD promoters.
Ten of Bowdoin’s personal bank accounts were seized — and five bank accounts allegedly involved in the operation of Golden Panda Ad Builder, a companion autosurf, were seized.
“Dave” was joined in his protest by JSS Tripler2/T2MoneyKlub/Compound150 shill “lolalola,” who insisted that Compound150 was an MLM.
In the civil portion of the ASD case, ASD also insisted it was an MLM. A federal judge was unmoved, ordering the forfeiture of more than $80 million, including more than $65.8 million from Bowdoin’s personal bank accounts.
An “opportunity” can at once be both an HYIP and an illegitimate MLM “program.” (Simply calling a program an ‘MLM” does not cure a program of legal defects, and some scams mix-and-math elements of both pyramid schemes and Ponzi schemes. Such programs may be described by investigators as pyramid-style Ponzi schemes.)
Compound150 appears to have a confluence of payout schemes very similar to the schemes that led to at least FOUR ASD-related forfeiture actions, the filing of a racketeering (RICO) lawsuit against Bowdoin, the seizure of tens of millions of dollars, millions of dollars in ASD-related civil judgments — and the ultimate filing of wire fraud and securities- fraud charges against Bowdoin.
Bowdoin also was charged with selling unregistered securities.
Like Bowdoin, Seng Tan also insisted her “opportunity” was an MLM.
In a 29-page court order announced yesterday by the SEC, U.S. District Judge George Caram Steeh of the Eastern District of Michigan laid out the case of willful blindness against serial HYIP pitchman Matthew John Gagnon.
That case now has resulted in court-ordered judgments of more than $4.2 million against Gagnon, who also was named in a criminal complaint by the U.S. Secret Service in November 2011.
But in the HYIP sphere, which FINRA described in 2010 as a “bizarre substratum of the Internet,” not even the huge judgment against Gagnon announced yesterday appeared to unnerve the serial scammers on the TalkGold and MoneyMakerGroup Ponzi forums.
Posting as “DRdave” on TalkGold, huckster “Ken Russo” announced he’d received a new payment of $482.08 from JSS Tripler/JustBeenPaid, a “program” whose purported daily payout rate of 2 percent dwarfs the purported payout rate of Legisi, one of the “programs” that led to Gagnon’s demise.
In a March 15 conference call, Frederick Mann, the purported operator of JSS/JBP, told members that the company was making the payouts from money sent in by “new members.” Paying “old” members with money from “new” members is the central element of a Ponzi scheme.
Even as “Ken Russo” was making the announcement, the online security company McAfee was publishing a “Warning: Dangerous Site” message about the JustBeenPaid website.
“We tested this site and found it’s risky to visit,” McAfee’s Site Advisor reported.
In 2010, the SEC declared Gagnon a “danger to the investing public” for his serial promotion of scams. (See paragraph 11 of May 2010 SEC complaint.)
Assessing Gagnon more than $4.2 million in disgorgement, prejudgment interest and penalties, Steeh found that:
Gagnon promoted the Legisi HYIP online, through emails and through a forum.
Even though Gagnon promoted the program, he was not associated with a registered broker-dealer and had never been registered with the SEC in any capacity.
Gagnon understood HYIP frauds and Ponzi schemes, and yet gleaned about $3.6 million from Legisi operator Gregory McKnight and did not disclose details of his agreement with McKnight to solicit investors for Legisi.
Gagnon helped orchestrate the “massive” Legisi Ponzi scheme and initially had come into contact with McKnight after Gagnon had recruited McKnight into an MLM business that sold dietary supplements.
Legisi was selling unregistered securities.
Gagnon was selling unregistered securities.
Gagnon did not qualify investors in any way. (In essence, the only necessary qualification was to have money to send to Legisi.)
Gagnon performed no “due diligence” on the profitability of the Legisi program. He did not retain or review trading records, bank or brokerage accounts statements or e-currency account records.
Gagnon knew or “recklessly disregarded” warnings that Legisi was a scam, did not know where McKnight was keeping the money or how McKnight was calculating profits and losses.
Eventually Gagnon distanced himself from McKnight (after learning about an SEC probe, according to the agency), but proceeded to pitch other scams touting the illegal sale of securities. A twice-convicted felon was Gagnon’s alleged partner in one of the scams, but Gagnon performed no legwork up front.
Gagnon eventually learned that a man with the same name as his partner had been convicted of fraud, but “accepted” his partner’s “representation that it was not him.” Gagnon did not investigate his partner’s denials, which were false.
Gagnon then proceeded to another opportunity touting unregistered securities, effectively using the same blueprint he’d used when touting Legisi and the other scam in which his partner was a convicted felon. As in the other scams, Gagnon did no legwork and “recklessly ignored several warning signs.”
Even as he touted the third program, Gagnon had received “several” bad checks from the purported “successful” trader. Gagnon continued to tout the program.
Gagnon then touted a fourth program, apparently one operated by a Ugandan national Gagnon had met on the Internet. (Gagnon stopped promoting this program, according to the SEC, only after the agency subpoenaed his bank records.)
Gagnon has shown “no remorse” for his conduct “and has tried to downplay his culpability.”
Whether “Ken Russo” has conducted any “due diligence” on JSS/JBP is unknown. Whether “Ken Russo” has any qualifications to sell securities is unknown. Whether “Ken Russo” qualified investors in any way is unknown. Whether “Ken Russo” retained or reviewed JSS/JBP records, bank or brokerage accounts statements or e-currency account records is unknown.
What is known is that “Ken Russo” proceeds from scheme to scheme to scheme.
“I would caution everyone not to listen to anyone who is posting negative comments about this program,” “Ken Russo,” posting as “DRdave” on TalkGold, urged today. “JBP/JSSTripler has changed many lives during the past 13 months and it is one of the best programs I have seen since I first entered the industry back in 1996!”
Here, according to the SEC, is how Gagnon, who’d been pitching programs online “since at least 1997,” described Legisi:
“IN ALL OUR EXPERIENCE IF (sic) HIGH YIELD PROGRAMS THIS IS THE ONLY GENUINE PROGRAM THAT WE HAVE EVER FOUND!”
McKnight, like Gagnon, is facing millions of dollars in civil judgments. And McKnight pleaded guilty last month to a criminal charge of wire fraud.
It turned out that Legisi was not “GENUINE” at all.
UPDATED 10:35 P.M. EDT (U.S.A.) Matthew John Gagnon, an HYIP huckster and promoter of the Legisi Ponzi scheme, has been hit with orders of disgorgement and penalties totaling more than $4.2 million, the SEC said.
Gagnon, of Portland, Ore., and Weslaco, Texas, was described by the SEC as a serial promoter of fraud schemes through his Mazu.com website.
“The Court found that Gagnon ‘purposefully built up an image of trustworthiness in the on-line investing community and exploited this trust,’” the SEC said. “The Court also found that Gagnon ‘repeatedly committed egregious violations of the federal securities laws’ and ‘has shown no remorse for his conduct.’”
U.S. District Judge George Caram Steeh of the Eastern District of Michigan presided over the Gagnon case, which the SEC brought in May 2010. The SEC case against Gagnon was not limited to his involvement in Legisi. It also addressed his involvement in a “resorts” securities-fraud scheme from which money was diverted to a recidivist felon, and his involvement in multiple Forex schemes.
Legisi, an HYIP fraud, had a considerable presence on the TalkGold and MoneyMakerGroup Ponzi forums. Legisi operator Gregory McKnight pleaded guilty to wire fraud last month.
Here is the breakdown of the financial penalties ordered by Steeh in the May 2010 case against Gagnon: $3,613,259 in disgorgement; $488,570.47 in prejudgment interest; and a $100,000 civil penalty.
Here is a snippet from Steeh’s order of permanent injunction against Gagnon (italics added):
“[Gagnon] explained that ‘I have a trader I represent in Europe that can trade your funds in amanaged account.’ Gagnon promised that investors in the European Trade Offer would experience ‘consistent monthly profits’ and ‘very few losing trades.’ Apparently, the European trader is ‘Juju,’ who is Jjunju Kateregga, a Ugandan national residing in Finland. Gagnon promoted Juju’s trading prowess after meeting him on the internet, exchanging emails and talking to him on the phone ‘a few times.’”
NOTE: The quoted passage above pertains to a purported “managed Forex trading” offer pitched by Gagnon after he moved on from Legisi. (Read the full order at Justia.com.)
In November 2011, the U.S. Secret Service filed a criminal complaint against Gagnon for his alleged wrongdoing in Legisi.
BULLETIN: Two men, including one who’d filed for bankruptcy when a previous “sales training” venture collapsed, were at the helm of a Ponzi scheme that gathered $51.6 million and left investors with nothing, the Alberta Securities Commission said.
Appearance dates for Dale Joseph Edgar St. Jean and Gregory Dennis Tindall have been set for May 9 in Calgary. The men presided over TransCap Corp. and Strata-Trade Corp., both of Calgary, ASC said.
Both men were charged by the SEC in a 2010 case that alleged they were managing members of a $34 million offering fraud based in Florida that led to the collapse of two hedge funds known as Arcanum Equity Fund LLC and Vestium Equity Fund LLC and subsequent bankruptcy filings.
The 2010 SEC filing also references TransCap, one of the Canadian entities named in the ASC action.
“[I]nstead of investing the investor funds as stated in the Offering Memorandum and contractual documents, St. Jean and Tindall used the investors’ money to orchestrate a Ponzi scheme that ultimately collapsed in November 2009,” ASC alleged.
Meanwhile, “St. Jean, Tindall and Strata-Trade falsely certified that an offering memorandum did not contain a misrepresentation and failed to file an offering memorandum and any reports of exempt distribution as required,” ASC alleged, further claiming that “Tindall made false and misleading statements to ASC investigators.”
In total, the scheme raised about $51.6 million between March 2005 and December 2009, with “at least $25.03 million” coming from “at least 133 Alberta investors,” ASC alleged.
A “sales-training franchise” St. Jean once owned and operated collapsed and caused St. Jean to file for bankruptcy, ASC alleged, further asserting that investors in the Ponzi scheme were not provided accurate information about St. Jean’s track record in business.
Among other jobs, St. Jean had sold mutual funds and worked in construction, retail, computer sales and the jewelry business, ASC said.
Tindall had “no training in securities or investments and no professional designations,” ASC alleged, asserting he lied to investigators about not getting paid from TransCap, a purported bond-trading business with an arm in bridge financing.
“During the times material to these proceedings, Tindall was paid a monthly draw of between $5,000 and $25,000 per month,” ASC alleged. “In 2008, his draw was $300,000.”
“As of about April 29, 2010, TransCap and Strata were indebted to investors in the approximate amount of $51.6 million, and had no funds left to pay investors any principal or returns,” ASC said.
Despite offering materials that asserted otherwise, “TransCap’s business was not primarily related to bond trading or bridge financing,” the agency alleged. “Rather, investor’s funds were used to administer a [P]onzi scheme wherein money was taken from later investors and used to pay returns to earlier investors.”
Investors were lured into the scheme by a “promise of low risk and high returns of 18% to 22%,” ASC said.
EDITOR’S NOTE: Law enforcement has warned that “shell companies” are playing an increasingly larger role in criminal schemes, as scammers turn to them to sanitize their capers, disguise fraud, disarm skeptical investors and keep large sums of cash flowing.
The threat to the U.S. economy and the corrosive effects on legitimate commerce cannot be overstated in this unprecedented era of securities hucksterism. Not only are investors at risk, so, too, is faith in the marketplace itself. The SEC complaint referenced in the story below includes a mention of a website allegedly used as part of the hedge-fund fraud scheme of James Michael Murray.
UPDATED 4:34 P.M. ET (U.S.A., MARCH 16) The SEC has gone to federal court in San Francisco, alleging that Bay Area investment adviser James Michael Murray duped Market Neutral Trading LLC hedge-fund investors through a “shell company” he secretly controlled.
Murray, 42, of Larkspur, Calif., also has been charged criminally, the SEC said. Details about the criminal case were not immediately available.
But in the SEC’s civil action, the agency said that Jones, Moore & Associates Ltd. — purportedly an “independent” Delaware accounting firm that had assessed the hedge fund — actually was a “shell company” set up by Murray to dupe investors by issuing a “bogus audit report” and embellishing the strength of Market Neutral.
Not only was the accounting firm controlled by Murray illegitimate, “at least five” purported “professionals” whose names and purported academic pedigrees appear on the shell company’s website “do not exist,” the SEC charged.
Among the figments of Murray’s imagination were “Richard Jones” and “Joseph Moore,” the two named principals of the firm, the SEC charged.
The scam netted at least $4.5 million in spurts between July 2008 and November 2011, the SEC said.
“Murray conjured up an accounting firm and deliberately faked the audit to induce investors into believing the fund was in better shape than it actually was,” said Marc Fagel, director of the SEC’s San Francisco Regional Office.
UPDATED 7:43 A.M. ET (MARCH 9, U.S.A.) If ever there has been a cautionary tale for HYIP pitchmen, it is Jeffrey Lane Mowen’s Utah Ponzi scheme.
Mowen and at least six promoters ended up inspiring litigation on multiple fronts, with Mowen charged criminally. At issue was Mowen’s Forex Ponzi scheme, which allegedly was funded in part through an alleged high-yield “promissory notes” offering fraud.
Tonight, Mowen, 49, is listed as “in transit” to an unspecified federal prison. He has been jailed in the United States since he was extradited from Panama in 2009. He pleaded guilty to U.S. charges of wire fraud last year and was sentenced to 10 years.
Mowen received a merciful plea agreement in which other serious criminal charges were dropped, including solicitation to commit a crime of violence, witness tampering and retaliating against a witness.
The sidebars in the Mowen story have been every bit as compelling as the story-in-chief. Indeed, Mowen sought to shield himself in Panama when his scheme collapsed.
It didn’t work. Panamanian authorities and the FBI got him quickly.
Jeffrey Lane Mowen
After his return to the United States, Mowen allegedly solicited the murder of four witnesses “with the intent of preventing their attendance and testimony at his federal fraud trial” in the Ponzi scheme case.
That didn’t work. The cellmate through whom he allegedly solicited the murders was a snitch.
But the cautionary tale doesn’t end there. Jeffrey Lane Mowen was a felon and a recidivist securities huckster. Thomas Fry, an unregistered promoter, used at least five other unregistered promoters to raise funds for “opportunities” that purported to pay a return of between 2 percent and 3 percent a month, according to the SEC.
Fry and the pitchmen were sued by the SEC in 2009. All six also now face administration sanctions from the SEC — this after the agency targeted their ill-gotten gains in the earlier lawsuit.
Failure to conduct due diligence and engaging in willful blindness were elements in the SEC’s lawsuit 2009 against the promoters, according to court filings.
“Because the Promoters not only conducted virtually no due diligence in connection with Fry’s purported investment opportunities, but transferred investor money to Fry without any documentation or limitation on his use of the funds, the Promoters were reckless in failing to discover Fry’s association with Mowen and that their funds were being placed into a Ponzi scheme or used for other undisclosed purposes,” the SEC charged at the time.
All of the pitchman now have been barred from the securities business under the terms of the administrative action. In a settlement, none of the pitchmen acknowledged wrongdoing. But the various Ponzi- and fraud-related actions were front-and-center in their lives for the better part of three years.
This common paragraph appears in each of the administrative actions against the five Fry pitchmen (italics added):
“The Commission’s complaint alleged that, from at least January 2007 through July 2008, [Pitchman’s Name] offered and sold purported high-yield promissory notes to investors that he claimed would pay 2% to 3% interest monthly. The funds raised by [Pitchman’s Name] were given to Thomas R. Fry who funneled those funds into a Ponzi scheme run by Jeffrey L. Mowen, a convicted felon and securities law recidivist. The Commission alleged that [Pitchman’s Name] distributed private placement memoranda to investors that falsely stated that all the investors’ funds were being used to make collateralized domestic real estate loans and domestic small business loans and that misrepresented the level of his due diligence as to the investment scheme. The Commission alleged that [Pitchman’s Name] conducted virtually no due diligence in connection with the purported investment opportunities and transferred investor money without any documentation or limitation on the use of the funds.”
Fry knew Mowen was a scammer, but still continued to solicit funds, the SEC said. All in all, he and the other five pitchmen raised more than $18 million for Mowen.
But the FBI said Mowen wasn’t operating a legitimate investment opportunity. What he was doing was buying exotic cars, taking personal vacations, supporting a luxurious lifestyle and making Ponzi payouts that ultimately defrauded more than 200 investors out of between $9 million and $10 million.
The purported monthly returns offered by JSS Tripler/JustBeenPaid — an “opportunity” now making its way around the web — are roughly TWENTY times higher than the scheme pitched by Fry and his promoters, according to records.
As noted above, the alleged offering fraud involving Fry and the other pitchmen was promoted on the purported basis of returns of 2 percent to 3 percent a month. JSS Tripler/JustBeenPaid advertises 60 percent a month.
Also on a monthly basis, the purported payout of JSS Tripler/JustBeenPaid is roughly between TWO and SEVEN times higher than the payout of the Ponzi scheme that put Mowen in prison for 10 years, according to records.
Mowen’s Forex Ponzi scheme scheme offered between 8 percent and 33 percent a month, federal prosecutors said last year.
It is somewhat common for HYIP purveyors who populate Ponzi boards such as TalkGold and MoneyMakerGroup to assert they have conducted “due diligence” on an “opportunity” or to assert that a “program’s” operator and/or management “team” have done so and that prospects don’t have to concern themselves with doing any legwork.
It often proves to be the case that the “due diligence” consists of GIGO — garbage in, garbage out. The promoters simply repeat the company line, rather than doing any sort of critical assessment such as questioning how an HYIP “program” operator could provide returns that may dwarf the returns of Bernard Madoff and other Ponzi schemers such as Mowen.
“There is a line between First Amendment Rights vs. Libel here. So, when does your right to form an opinion begins (sic) and when does it constitute a defamation of character? The answer is, law enforcement agencies don’t pay attention to what’s being said on forums and blogs, so get your head straight and feet firm on the ground.” — “MoneyMakingBrain,” in March 4, 2012, post on RealScam.com
As previously reported on the PP Blog, a JSS Tripler/JustBeenPaid “defender” known as “MoneyMakingBrain” (MMB) has emailed threats to the PP Blog, hatched bizarre conspiracy theories here and at RealScam.com and planted the seed that he was someone to fear.
The email threats were received after MMB claimed Feb. 18 on RealScam he had performed “due diligence” on JSS Tripler/JustBeenPaid. On a website known as “ReviewOPedia,” a poster with the same handle offered this on Feb. 14, in the context of JSS Tripler/JustBeenPaid:
“They are for real! ”
Within the same Feb. 14 ReviewOPedia post, MoneyMakingBrain ventured this (italics added):
“BTW, everybody should check out the JBP live support chatroom which has over 160 people at any given time and is live 24/7. You can ask all the questions you can come up with and there is always moderator. Who does that? I’m sold already. So, if someone here claims that they ‘didn’t get paid’, either they still don’t understand how the matrix works or they’re just internet trolls.”
Whether the “MoneyMakingBrain” on the PP Blog and the “MoneyMakingBrain” on ReviewOPedia are one and the same is unknown to the PP Blog.
Precisely why the MMB known to the PP Blog and RealScam.com has been trying to chill specific individuals and antiscam forums is unclear. What is known is that what he’s doing is hardly unique.
Lessons Of HYIP History Ignored
While asserting that he knows the PP Blog’s IP address and posting location, MMB now is making a claim on RealScam, a forum that concerns itself with international mass-marketing fraud, that “law enforcement agencies don’t pay attention to what’s being said on forums and blogs.”
That claim is contrary to the public record, which shows that any number of agencies, self-regulatory bodies and private attorneys have been noting for years that HYIP schemes are proliferating on the Internet and being spread by posters on forums and social-networking sites. It also ignores the reality — also a matter of public record — that law-enforcement has a history of filing court documents that reproduce HYIP forum posts and of infiltrating HYIP schemes.
Prominent FINRA Warning On HYIPs
In July 2010, the Financial Industry Regulatory Authority issued this highly public alert. FINRA noted that “HYIPs use an array of websites and social media — including YouTube, Twitter and Facebook — to lure investors.”
HYIPs fabricate a “buzz” and create “the illusion of social consensus,” FINRA said, describing the sinister approach as a “common persuasion tactic fraudsters use to suggest that “everyone is investing in HYIPs, so they must be legitimate.”
Forum Posts Become Evidence In HYIP Cases
In the SEC’s May 2008 prosecution of the Legisi HYIP scheme, the agency included page after page of forum posts as part of a 267-page evidence exhibit in support of an asset freeze. A federal judge approved the freeze. (The screenshot below is from one of the forum pages.)
Legisi operator Gregory McKnight pleaded guilty to criminal charges of wire fraud last month. He also faces millions of dollars in civil judgments. The SEC Legisi filings also include a reference to the MoneyMakerGroup forum, which is listed in other federal court filings as a place from which HYIP Ponzi schemes are promoted.
This section of the Legisi Terms of Service purports that members must avow they are not an "informant, nor associated with any informant" of the IRS, FBI, CIA and the SEC, among others. The others included "Her Majesty's Police," the Intelligence Services of Great Britain, the Serious Fraud Office, Interpol and others.
Included within the SEC filings is a reproduction of Legisi’s bizarre Terms. (See graphic at right. It is taken from court filings.) Among other things, the Terms made members avow they were not an “informant” for various government entities.
JSS Tripler/JustBeenPaid has similar Terms. The Terms read like an invitation to join an international financial conspiracy. (The next two paragraphs are verbatim from the JSS Tripler/Just BeenPaid member agreement. Italics added.)
6. I affirm that I am not an employee or official of any government agency, nor am I acting on behalf of or collecting information for or on behalf of any government agency.
7. I affirm that I am not an employee, by contract or otherwise, of any media or research company, and I am not reading any of the JBP pages in order to collect information for someone else.”
When the U.S. Postal Inspection Service filed criminal charges against Nicholas Smirnow in May 2010 for his alleged operation of the Pathway To Prosperity HYIP Ponzi scheme, MoneyMakerGroup, TalkGold and ASAMonitor were specifically referenced in the service’s case filings. Smirnow now has his face on an INTERPOL “Wanted” poster.
MMB took great exception to the PP Blog’s Smirnow post, apparently believing it had no relevance in the context of JSS Tripler/JustBeenPaid. MMB also apparently believes the PP Blog and RealScam are treating Frederick Mann, the purported operator of JSS Tripler/JustBeenPaid, unfairly.
Among other things, MMB asserted on the PP Blog that “no one is invisible to the MoneyMakingBrain and you need to stop doing what you’re doing against this man immediately. Because if you don’t, I am going to make a formal complain (sic) to the very authorities you purport are coming after scam sites and send all the evidence I’ve gathered so far from posting on your site and the realscam site. I don’t like witch hunts and I am sure Fred Mann can whip your ass in court for your highly suggestive, provocative, highly contentious and flat-out defamatory commentaries against his character on your sites.”
MMB further suggested that JSS Tripler/JustBeenPaid critics may be “needing to look for another ISP because you won’t have internet access at home or your office, wherever.”
About three months after the SEC brought the $72 million Legisi/McKnight HYIP Ponzi case, the U.S. Secret Service — in August 2008 — filed evidence exhibits in support of an order to freeze tens of millions of dollars in AdSurfDaily-related bank accounts. The complaint in support of the seizure specifically references an ASD-related “Breaking News” Blog, and an evidence exhibit labeled “Government Exhibit 5” consists entirely of an ASD-related post on a different Blog that took up 15 printed pages.
The 15-page post featured alleged comments from ASD President Andy Bowdoin in which he threatened to sue critics.
“These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit,” the post quoted Bowdoin as saying. (The screen shot below is from Government Exhibit 5. It has been a matter of public record approaching four years.)
Both the ASD and Legisi investigations used government agents in undercover capacities, according to court filings.
Meanwhile, in June 2009, attorneys suing Bowdoin on behalf of ASD members in a civil RICO (racketeering) case referred to the PP Blog’s reporting on the ASD Ponzi case, specifically its reporting on a spinoff surf known as AdViewGlobal (AVG). (See court document. See June 30, 2009, related story. See PP Blog story the attorneys referenced in their filings.)
During its short run, AVG bizarrely asserted that it operated as a “private association” that enjoyed U.S. Constitutional protections in Uruguay. AVG used U.S.-based Gmail addresses to conduct business, something JSS Tripler/JustBeenPaid is doing. The defunct surf further claimed that it had appointed a person who held the title of “Protector.”
Such claims have been linked to the so-called “sovereign citizen” movement. On Feb. 27, 2012, the PP Blog reported that a site linked to Mann published videos of Francis Schaeffer Cox, a purported “sovereign citizen” indicted in Alaska in an alleged murder plot against public officials. The site features a drop-in ad for JSS Tripler/JustBeenPaid that encourages prospects to register with a Gmail address.
Whether MMB is aware of all of these these historical incidents while issuing threats and planting the seed he has the power to divorce JSS Tripler/JustBeenPaid critics from their Internet connections is not known. MMB’s posting privileges were revoked by the PP Blog last week after he emailed threats and menacing communications. RealScam has continued to permit MMB to post on its forum.
The PP Blog believes it is unwise to click on any link MMB has posted on RealScam. He appears to be attempting to bait members of the antiscam community into clicking on links as part of a bid to gather IP addresses and other data from posters — all while asserting he has the power to use the information to harm individuals and entities such as Eagle Research Associates, a California based nonprofit that seeks to educate the public about scams.
Piling On The HYIP Absurdity
In what would become one of the most visited threads in the history of the PP Blog, a poster known as “CORRECTION” repeatedly demanded that the Blog retract this June 3, 2009, headline about the AdViewGlobal (AVG) autosurf and a strategy advanced by a promoter by which AVG upline sponsors could gather money from individual prospects and funnel it through the sponsors’ local banks before passing it to offshore payment processors — instead of letting AVG gather the money.
“Get it right before you lead with this inaccurate, bias (sic) and unfair reporting!!!!!!!!!!!” CORRECTION demanded.
The PP Blog did not submit to the demand to retract the headline.
It was revealed later in court filings that the grand jury that indicted Bowdoin on charges of wire fraud, securities fraud and selling unregistered securities began to meet in May 2009, about a month prior to ASD- and AVG-related threats and demands made against the PP Blog.
“The focus of this sweep was fraud committed against individual investors, including Ponzi schemes, high-yield investment fraud, and market manipulation cases,” said Shawn Henry, the FBI’s executive assistant director. “Operation Broken Trust highlights the pervasiveness of the threat we face, and its impact on individuals from all walks of life.
“The perpetrators of these crimes are those who YOU might trust . . . friends and colleagues — people from your workplace, your child’s soccer team, even your church,” Henry said.
Read this March 1, 2012, story that reports a top U.S. Justice Department official speaking in Mexico referenced bogus libel lawsuits filed to protect criminal enterprises. Read this Justice Department news release last week on a meeting in Ottawa between top U.S. officials and top Canadian officials to discuss cross-border fraud.
More HYIP Nonsense: No ‘Unfriendly Political Jurisdictions’
JSS Tripler/JustBeenPaid purports to pay a daily return of twice that offered by Bowdoin and ASD — and eight times that of Legisi. The JSS Tripler/JustBeenPaid returns are somewhat on par with the returns offered by Pathway To Prosperity.
At the same time, JSS Tripler/JustBeenPaid says this on its website (italics added):
“Our business operations are geographically decentralized. We don’t have any central office. We’re not located in any ‘unfriendly political jurisdictions.’”
It is difficult to conceive how JSS Tripler/JustBeenPaid could send any brighter signals of a scam in progress, given its absurd advertised rate of return and a public proclamation that it is not located in any “unfriendly political jurisdictions.”
In 2008, Frederick Mann, the purported operator of JSS Tripler/JustBeenPaid, identified himself as an ASD pitchman. On Jan. 23, 2012 — six weeks ago today — the Italian securities regulator CONSOB announced it had opened a JSS Tripler-related probe and issued a 90-day suspension order.
During a March 1 conference call for JSS Tripler/JustBeenPaid, a caller informed Mann that a member of his second-level downline had informed him that the member’s bid to advertise the “opportunity” had been blocked in Holland amid concerns of legality.
“Tell him not to advertise in any particular country,” Mann replied.
BULLETIN: Jacquline Hoegel, an American living in American Canyon, Calif., has been charged criminally in an alleged Ponzi scheme that gathered $129.5 million, the office of U.S. Attorney Melinda Haag of the Northern District of California said.
Also indicted was William Wise, a citizen of Canada. Wise, 62, formerly resided in Raleigh, N.C. A warrant has been issued for his arrest, prosecutors said.
Hoegel, 55, made an initial appearance before U.S. Magistrate Judge Carolyn Delaney in Sacramento, and was released on bond, prosecutors said.
The case flowed from an SEC civil prosecution brought in March 2009. Hoegel and Wise now have been charged criminally with conspiracy, mail fraud and wire fraud for their actions involving the sale of CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust.
Hoegel also has been charged with four counts of making and subscribing a false tax return, one count of obstruction and one count of false statements, and Wise also has been charged with money-laundering, prosecutors said.
“The CDs issued by Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust all promised CD purchasers guaranteed rates of returns — sometimes over 16 percent — that were allegedly based on overseas investments,” prosecutors said. “In fact, CD purchasers’ funds were not used for overseas investments that generated the promised returns; the funds were instead used to enrich Wise and Hoegel and to make interest payments to earlier CD purchasers.”
When the SEC brought the civil case three years ago, customer losses were estimated at $75 million. More than 1,200 investors were affected by the scheme, which was unraveled by the IRS, the FBI and federal prosecutors in the Northern District of California and the Eastern District of North Carolina, Haag’s office said.
The 23-count indictment was returned under seal Feb. 21. It was unsealed after Hoegel’s arrest yesterday, prosecutors said.
In 2009, the SEC said the CDs “purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs.”
Nicholas A. Smirnow. Source: Interpol "Wanted" notice.
After the news broke yesterday that Gregory N. McKnight, the accused operator of the Legisi HYIP Ponzi scheme, had pleaded guilty to wire fraud in a $72 million caper, things only got worse for the serial Ponzi-forum cheerleaders — not that they’re likely to abandon their practice of willful blindness while reaching across oceans to pick the pockets of any person with cash and a pulse.
Nicholas Smirnow, a convicted robber, burglar and drug dealer before he became an HYIP operator and darling of the TalkGold, MoneyMakerGroup and ASAMonitor Ponzi forums, is listed as wanted by INTERPOL.
How long Smirnow has been on INTERPOL’s wanted list and the circumstances under which he was placed on the list were not immediately clear. An email yesterday by the PP Blog seeking comment from federal prosecutors in the Southern District of Illinois on the status of Smirnow and the case against him was not immediately returned.
Smirnow, 54, also is known as Nicolay Smirnow, Alexander Judizcev, Nicholas Kachura and Jeff Prozorowiczm. He was charged in the Southern District of Illinois with fraud and money laundering-related crimes in May 2010 for his alleged operation of the Pathway To Prosperity (P2P) Ponzi scheme.
When the charges against Smirnow were announced approaching two years ago, U.S. federal prosecutors said they intended to ask the government of the Philippines to extradite Smirnow to the United States. Whether Smirnow had been jailed in the Philippines and somehow later was set free after the U.S. arrest warrant was issued could not immediately be determined.
What is clear is that INTERPOL is publishing a “Wanted” listing with the following physical details about Smirnow:
Height: 1.76 meter
Weight: 76 Kg
Colour of hair: Brown
Colour of eyes: Green
The INTERPOL poster for Smirnow was up even as the SEC was announcing the McKnight conviction. (See “Wanted” poster, which is active at the time of this post.)
The P2P scheme was almost unimaginably widespread, a postal inspector said in the 2010 affidavit.
“Financial records of payment processors utilized by P-2-P to collect investment funds from investors show that approximately 40,000 investors in 120 countries established accounts with P-2-P,” the postal inspector said. “Despite the fact that the investment was supposedly ‘guaranteed, investors lost approximately $70 million as a result of [Smirnow’s] actions.”
Ponzi-forum cheerleaders yesterday appeared either to be unaware of (or to have to ignored) the news about the guilty plea of Legisi’s McKnight and corresponding civil judgments against him totaling about $6.5 million.
Some of them continued to focus on their efforts to promote JSS Tripler/JustBeenPaid, a “program” purportedly operated by Frederick Mann that also uses AlertPay and SolidTrustPay.
AlertPay and SolidTrustPay also are referenced in court filings in the AdSurfDaily Ponzi case. A 2008 promo for ASD attributed to Mann asserted that Mann was an ASD promoter. ASD operator Andy Bowdoin faces a criminal trial in September 2012 on Ponzi-related charges of wire fraud, securities fraud and selling unregistered securities.
JSS Tripler/JustBeenPaid asserts it pays a daily return of twice what ASD offered. ASD figure Kenneth Wayne Leaming has been linked to the so-called “sovereign citizens” movement and is jailed near Seattle on federal charges of filing false liens against public officials involved in the ASD case.
McKnight’s base program in Legisi offered a return of .25 percent (one quarter of 1 percent) per day, according to a 2008 SEC filing.
Mann’s purported base program offers eight times that return on a daily basis, according to JSS Tripler/JustBeenPaid promos. On an annualized basis, the “program” offers a return that is between 48 and 73 times higher than the returns of imprisoned Ponzi schemer Bernard Madoff.
Madoff is serving a U.S. prison term of 150 years. McKnight faces up to 20 years, the SEC said yesterday.
A promo for JSS Tripler/JustBeenPaid that appeared yesterday on a forum known as CariGold made this claim. (Italics added):
JSS-Tripler now has 213,884 members — continuing to grow by over 3,000 new members a day. (If it hadn’t been for yesterday’s downtime, the number would have been “over 4,000.”) Thank you to our many promoters for doing such a great job!
Purchases of new JSS-Tripler positions are on track for a new all-time record, today.
More than a month ago — on Jan. 23 — the Italian securities regulator CONSOB announced that JSS Tripler promoters were under investigation. Ponzi-forum promoters pooh-poohed the news.
This grainy likeness of Gregory N. McKnight is taken from federal court filings in 2008.
URGENT >> BULLETIN >> MOVING:Gregory N. McKnight, the operator of the Legisi HYIP Ponzi scheme, has pleaded guilty to wire fraud in federal court in the Eastern District of Michigan, the SEC said this afternoon.
McKnight was charged criminally on Feb. 14 — Valentine’s Day. His guilty plea followed two days later, the SEC said. He faces a maximum sentence of 20 years in federal prison. The SEC charged him civilly in May 2008.
Legisi, which gathered more than $72 million and fleeced more than 3,000 investors in the United States and several other countries, was popularized in part on Ponzi cesspits such as TalkGold and MoneyMakerGroup.
MoneyMakerGroup is specifically referenced in U.S. court files in the Legisi case.
Legisi’s Terms of Service resemble those of JSS Tripler/JustBeenPaid, a purported “opportunity” currently being flogged on the Ponzi boards even as CONSOB, the Italian securities regulator, has opened a probe into the actions of JSS Tripler/JustBeenPaid promoters.
Promos by Legisi triggered an undercover operation by the U.S. Secret Service and state regulators in Michigan.
In addition to the prospect of jail time, McKnight is on the receiving end of a civil judgment and penalties totaling about $6.5 million, the SEC said.
Legisi members, according to the Terms, had to affirm they were not an “informant, nor associated with any informant” of the IRS, FBI, CIA and the SEC, among others, according to documents filed in federal court.
The others included “Her Majesty’s Police,” the Intelligence Services of Great Britain, the Serious Fraud Office and Interpol.
JSS Tripler/JustBeenPaid makes members affirm they are “not an employee or official of any government agency.” In addition, it makes them affirm they are not “acting on behalf of or collecting information for or on behalf of any government agency” and not “an employee, by contract or otherwise, of any media or research company.”
One of Legisi’s payment “programs” advertised a return of .25 (one-quarter) percent per day, according to court filings.
JSS Tripler/JustBeenPaid promotes a return of 2 percent a day — eight times higher than Legisi.
A sentencing date for McKnight will be determined later, the SEC said.
U.S. District Judge Mark A. Goldsmith presided over McKnight’s guilty plea, the SEC said.
Frederick Mann is the purported operator of JSS Tripler/JustBeenPaid.
Eric Aronson, the accused New York scammer and convicted felon originally arrested in October 2011 in an alleged Ponzi scheme, now has been formally indicted, federal prosecutors in the Eastern District of New York said.
