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  • BULLETIN: Vincent McCrudden Pleads Guilty To Threatening Regulators, Government Officials

    BULLETIN: Vincent McCrudden, who was arrested in January amid allegations he threatened to kill 47 regulators and government officials, has pleaded guilty to two counts of transmitting threats to kill.

    McCrudden, 50, faces up to 10 years in prison. He has been jailed since his arrest in New Jersey.

    “Mr. McCrudden made bone-chilling and graphic threats against dozens of public officials,” said Assistant Attorney General Lanny Breuer. “As this prosecution reflects, the Department of Justice will act swiftly to identify and prosecute anyone who attempts to retaliate against public officials. Public servants must be able to carry out their duties without fear of being targeted.”

    On Sept. 30, prosecutors said, McCrudden sent an email to an employee of the National Futures Association (NFA) that made a death threat.

    “[I]t wasn’t ever a question of ‘if’ I was going to kill you, it was just a question of when,” the email read, prosecutors said. “And now, that question has been answered. You are going to die a painful death.”

    McCrudden also published an “Execution List” on his website. The list included the names of 47 current and former officials of the SEC, FINRA, NFA, and CFTC.  Included on the list were the names of the “the Chairperson of the SEC, the Chairman of the CFTC, a former Acting Chairman and Commissioner of the CFTC, the Chairman and CEO of FINRA, the former chief of Enforcement at FINRA, and other employees of the NFA and CFTC,” prosecutors said.

    “[T]hese people have got to go,” McCrudden wrote, prosecutors said. “And I need your help, there are just too many for me alone.”

    And McCrudden “posted a $100,000 reward on his website for personal information of several government officials and proof that those officials were punished,” prosecutors charged.

    On Dec. 16, according to the complaint, McCrudden sent a CFTC official an email with a subject line of, “You corrupt mother[*!&$$%]!”

    A top FBI official said such behavior would not be tolerated.

    “The conduct of McCrudden was way beyond mere speech,” said Janice K. Fedarcyk, assistant director in charge of the agency’s New York office. “By his admission, he not only directly threatened to kill government and regulatory officials, but he also listed dozens of officials and offered a reward to others to kill them. This outrageous conduct is not only dangerous, but an affront to civil society.”

    Fedarcyk was backed by U.S. Attorney Loretta E. Lynch of the Eastern District of New York.

    “This defendant crossed the line when he directly threatened to kill public officials who were working to keep our financial markets fair and open, and invited others to join him,” Lynch said. “He thought he could hide in the shadows of the Internet and disseminate his threats and instructions. He was wrong. This office will not tolerate, and will vigorously prosecute, those who threaten to kill men and women who dedicate their lives to public service.”

  • URGENT >> BULLETIN >> MOVING: KABOOM! Feds, SEC, CFTC Move Against Alleged U.S. Huckster Who Ran Forex Ponzi Scheme From Panama And Fled To Peru; Self-Styled ‘Christian’ Jeffery A. Lowrance Registered Business In New Zealand And Routed Ponzi Payments To And From The Netherlands, Officials Say

    URGENT >> BULLETIN >> MOVING: A U.S. citizen who told investors he was a “Christian” who shared their political philosophy of “limited government” ripped off hundreds of people in a $21 million Forex Ponzi scheme involving “fictitious trading,” used some of the cash to start an alternative newspaper, preyed on followers of U.S. Rep. Ron Paul and fled to Peru when his Panama-based scheme collapsed, U.S. officials said today.

    Jeffery A. Lowrance, 50, was arrested in Lima earlier this year. He was extradited to the United States yesterday and arraigned today on criminal charges filed in the Northern District of Illinois, federal prosecutors said. Separately, the SEC charged Lowrance with fraud in a civil complaint, as did the CFTC.

    The office of U.S. Attorney Patrick J. Fitzgerald of the Northern District of Illinois said this afternoon that Lowrance operated his Forex swindle from Panama, involving as many as 400 investors and causing losses of at least $5 million.

    Fitzgerald is perhaps the most famous prosecutor in the United States, and has served during both Republican and Democratic administrations in Washington. Lowrance was jailed in the United States today after his arraignment in Chicago on charges of wire fraud and money laundering.

    In bringing the case, government officials described Lowrance’s alleged crimes as a form of affinity fraud targeted at Christian voters with a keen interest in politics. Investigators have fretted that certain types of schemes have been designed deliberately to trade on sentiment against big government and that scammers have lined up to take advantage of the sentiment while leaving investors holding the bag.

    Investors in 26 states, including California, Oregon, Illinois and Utah, were targeted in the scam, the SEC said.

    Paul, R.-Texas, is an advocate for limited government and is a candidate in a crowded GOP field for next year’s Presidential nomination.

    During the 2008 U.S. election cycle, Lowrance showed up at a Paul political rally in Minnesota, placing a copy of a newspaper Lowrance produced with investor funds he had “secretly” diverted “on every seat at the rally,” the SEC charged.

    Even as he was touting his newspaper and his investment program at the Paul rally, the Ponzi scheme already was in a state of collapse, the SEC charged.

    And, the SEC added, Lowrance’s purported investment firm — First Capital Savings & Loan Ltd. — actually was registered in New Zealand. Investors were instructed to send money to a “money converter” in Maryland, where it was whisked overseas to the Netherlands.

    Ponzi payments were made from the Netherlands, the SEC alleged.

    A Lowrance predecessor entity known as Mentor Investing Group had been ordered by the state of California in 2006 to “cease and refrain” from selling commodities and Forex contracts, according to records.

    “[Lowrance]  used a significant portion of the money he raised from investors to fund the creation of his alternative newspaper, USA Tomorrow, which claimed to promote ‘truth in journalism’ and contained articles and advertisements advocating a limited government ideology,” the SEC charged. “He then included in at least one edition of USA Tomorrow a flyer advertising the First Capital investment opportunity which he distributed at the September 2008 Ron Paul Rally for the Republic in Minneapolis, Minnesota. USA Tomorrow was placed on every seat at the rally,” the SEC charged.

    Lowrance specifically targeted Christians and inexperienced investors in his sales pitches, the SEC charged.

    Along the way to ruin, “Lowrance and First Capital knowingly and/or recklessly made the materially false claim that First Capital used investor money to trade foreign currency and in return, pay them a high,  fixed, monthly rate of return,” the SEC charged.

    “Before February 2008, First Capital offered monthly rates of return ranging from 4% to 7.15% (resulting in annual rates of return up to 85.8%),” the SEC charged. “It also offered to pay referral fees for new investors ranging from 5% to 6% of the amount invested. As of July 2010, First Capital’s website offered monthly rates of return ranging from 1.104% to 1.558% (resulting in annual rates of up to 18.7%) and referral fees ranging from 1 % to 2%.”

    Like other investment scams, the Lowrance Forex Ponzi used “a chart and spreadsheet purporting to show its multi-year history of profitable trades,” the SEC alleged.

    But “First Capital never entered into the trades detailed on First Capital’s website,” the SEC charged. “Moreover, First Capital never was profitable.”

    Even after the scheme collapsed, Lowrance continued to solicit funds, telling some investors in early 2009 that “the millions lost [did] not shake [him],” the SEC charged.

    He urged investors that he had just acknowledged swindling to continue to have faith in him and said that he would trade foreign currency “to pay them back,” the SEC charged.

    When some of his investors told others that Lowrance had swindled them, Lowrance sent “purported updates to other investors disparaging the character of those persons who circulated his earlier admissions and disparaging the character of anyone who questioned L[o]wrance’s integrity,” the SEC charged.

    What he did not do was stop soliciting prospects for money and take his website offline. The site remained active until “at least” July 2010, despite the scheme’s 2008 collapse, the SEC charged.

    On March 5, 2009, a month after Lowrance acknowledged that investors had lost their money, the Netherlands bank account contained $121, the SEC charged.

    “In addition to failing to disclose First Capital’s true financial condition and operations to investors solicited between June 2008 and February 2009, Lowrance did not use any new investor money to trade foreign currency,” the SEC charged. “Rather, he used new investor money to pay himself, pay some 6 investors’ returns, and to pay for expenses associated with his start-up newspaper.”

    Also involved in the probe are the FBI and the IRS. Elements of the investigation were assembled by member agencies of the interagency Financial Fraud Enforcement Task Force created by President Obama in 2009.

  • Millions Of Dollars In Payments To Accountant, 73, Provided Him ‘Powerful Incentive’ To Look The Other Way As Joseph Forte Pulled Off $75 Million Ponzi Scheme, SEC Says

    Joseph S. Forte, one of the earliest of the so-called mini-Madoffs, was sentenced in November 2009 to 15 years in federal prison — slightly more than a year in jail for each year his 13-year scheme operated. The SEC now says he had help from an accountant who looked the other way because Forte, a failed computer salesman, became a cash cow when he reimagined himself as an investment strategist in 1995.

    John N. Irwin, 73, of Villanova, Pa., presided over a consulting firm known as Jacklin Associates Inc. , the SEC said.

    Both Irwin and the firm solicited business for Forte, and Irwin racked up more than $5 million in ill-gotten gains after performing no “due diligence” and relying “exclusively on Forte’s misrepresentations about Forte LP’s stellar performance,” the SEC said.

    Forte had been running a Ponzi scheme between 1996 and 2008, according to the U.S. Postal Inspection Service. The scheme ultimately gathered more than $75 million, and Forte simply made up profitability numbers to hoodwink investors.

    Just prior to the collapse of the scheme in late 2008, according to postal inspectors, Forte told investors his fund had a total value of more than $154 million, but the fund’s actual value was $150,000 — and Forte kept collecting money from customers.

    In a settlement with the SEC, Irwin and Jacklin neither admitted nor denied the allegations. The financial aspects of the settlement, which requires judicial approval, will be determined later, the SEC said.

    Irwin has been suspended from appearing before the SEC as an accountant.

    “In communicating the fraudulent information to investors, Irwin disregarded red flags that should have alerted him that the information that he was passing on was false,” the SEC said.

    “Irwin had a powerful incentive to disregard those red flags,” the SEC charged, “because Forte paid him and Jacklin millions of dollars in the form of purported trading profits and fees.”

    During the course of the Forte scheme Irwin was both an investor in Forte’s limited partnership and a provider of accounting services to Forte, the SEC said.

    What red flags were missed?

    “[F]or approximately four and a half years, between October 2002 and February 2007, Forte did not deposit any investor funds into the trading account of Forte LP, and from October 2004 through July 2007, Forte conducted minimal trading in the account,” the SEC charged.

    “Rather, Forte diverted most of investor funds to meet redemption requests of other investors in Forte LP, to pay fees to himself and Jacklin, for personal use and the use of his family and friends, and to various third parties as donations or otherwise.”

    Irwin also overlooked red flags pertaining to Forte’s treatment of tax matters, the SEC alleged.

    “[F]rom 1995 through 2002, Forte provided Irwin with false investment account documents that purported to be 1099 forms from Forte LP’ s brokerage firm,” the SEC charged. “Each of the forms appeared on its face to have been altered or fabricated. In 2003, Forte stopped sending Irwin the 1099 forms as year-end support for the numbers he was reporting. However, despite Irwin’s considerable accounting experience, he failed to request the documents from the institutions themselves.”

    Forte’s “exclusive control” over the firm’s brokerage and bank accounts and the “consistently large gains reported by Forte every year” also sent up red flags that Irwin ignored, the SEC charged.

    Forte became a CPA in 1961, the same year President Obama was born.

    “Given Irwin’s significant experience as an accountant, investor, and businessman, and his active role in Forte LP, he should have been skeptical of Forte’s reports of consistently large trading profits in the trading of futures over a period of thirteen years, and should have independently verified the same before communicating with investors,” the SEC charged.

  • INCREDIBLE: Texas Forex Fraudster Allegedly Scammed Georgia Attorney Now Jailed In $40 Million Ponzi Scheme; Mark E. Rice Accused By CFTC Of Ripping Off Seminar Swindler Robert P. Copeland

    In a case that could provide even more inspiration for lawyer jokes and black comedy on America’s epidemic of white-collar crime and hucksterism, the CFTC has gone to federal court in Texas to accuse an alleged Forex scammer of defrauding a Georgia attorney now serving a 10-year prison sentence for ripping off senior citizens in a $40 million Ponzi and fraud scheme.

    Mark E. Rice, the alleged Forex fraudster, was not registered with the CFTC “in any capacity,” the agency said. He is accused of ripping off attorney Robert P. Copeland of Marietta, Ga.

    In August 2009, Copeland, whom federal prosecutors said practiced “elder law,” was sentenced to 10 years in federal prison for swindling retirees in a five-year, $40 million Ponzi caper involving bogus real-estate investments and at least 125 victims. Copeland recruited victims at seminars and doled out “commissions” to people who helped him line up business, according to prosecutors.

    U.S. District Judge Lee H. Rosenthal of the Southern District of Texas has frozen the assets of Rice and his company, Financial Robotics Inc. (FinRob) of Houston.

    Copeland surrendered his law license and received the equivalent of a disbarment in June 2009 from the Supreme Court of Georgia, according to records in Georgia.

    Prior to his 2009 conviction for wire fraud in the Ponzi swindle, Copeland plowed $10.4 million into Rice’s alleged Forex swindle — and the money came from Copeland’s investors in the Ponzi scheme for which he was imprisoned, the CFTC alleged.

    Rice, of Sugar Land, Texas, began to pitch Copeland on managed Forex in 2006, prior to the 2009 exposure of the Copeland real-estate Ponzi scheme, according to court records. Rice told Copeland that his investment was “risk free” and “insured against loss,” the CFTC said.

    While soliciting Copeland, Rice told him that he and his firm had developed automated Forex software trading programs that had generated “phenomenal returns” of 30 percent a month while being tested in Europe and the United States and 30-day returns of between 10 percent and 15 percent in actual trading, the CFTC alleged.

    Copeland’s trading with Rice initially started with a $502,000 investment in 2007. Between March 2007 and August 2008, Copeland plowed an additional $9.9 million into the Forex scheme after Rice allegedly told him that Rice was “going to move all of his investments to England, as that market could provide greater returns than the American market,” the CFTC said.

    By September 2008, Rice presented Copeland a “spreadsheet” that showed the value of Copeland’s investment had grown to $15 million — and Copeland contemplated cashing out, the CFTC said.

    But Rice persuaded him that the $15 million would turn into $20 million by January 2009, and Copeland decided not to liquidate his account.

    In November 2008 — just two months after Rice told Copeland that $20 million would be on the table for him in January — Rice told Copeland that “all” of his funds “purportedly” had been lost in trading, the CFTC said.

    Later, in February 2009, Rice told Copeland that the account never had been insured against loss.

    By April 2009, according to records, Copeland’s own Ponzi scheme had come tumbling down — and the SEC was investigating.

    “This case is particularly disturbing because the defendant was a lawyer and many of his victims were senior citizens, some of whom lost their life savings,” said then-U.S. Attorney David E. Nahmias in April 2009. “[Copeland] is now cooperating in the ongoing investigation and in our efforts to recover whatever assets are left, but he will still face the punishment that this devastating crime requires.”

    In August 2009, Copeland was sentenced to 121 months in federal prison.

    The CFTC did not say whether the cooperation Copeland pledged two years ago had resulted in the charges against Rice.

    Whether victims of Copeland’s Ponzi scheme can expect a recovery from assets frozen in the emerging Rice case was not immediately clear. At his August 2009 sentencing, Copeland was ordered to pay about $16.7 million in restitution.

  • June Ends With MULTIPLE Fraud Filings By CFTC; Air-Traffic Controllers Who Allegedly Solicited Colleagues Into Fraud Scheme Charged In Georgia; Investigators Link Georgia Scheme To Alleged Botfly Caper In Florida, Saying Federal Aviation Administration Employees Became Investors

    EDITOR’S NOTE: The disturbing information that follows this intro is presented largely in capsule form, with links to CFTC charging documents in three new cases. Perhaps the most notable case in this summary is the one filed in Georgia. As things stand, it demonstrates:

    Interconnectivity: Ties between and among scams and scammers are common in the fraud universe, contributing to a condition the PP Blog has described as “fraud creep.” The CFTC says two of the defendants charged in the Georgia case were investors in Botfly LLC, an alleged Ponzi scheme that operated internationally from Florida. The Botfly case is just plain creepy. Elements of it are reminiscent of the AdSurfDaily case. ASD, too, was based in Florida.

    Familiarity/Affinity: Two of the Georgia defendants are employees of the U.S. government — specifically air-traffic controllers employed by the Federal Aviation Administration (FAA). Based on court filings, it appears as though the FAA employees were moonlighting as Forex managers and that other FAA employees got sucked into one or more scams.

    Vulnerability: Can anybody be truly safe in this unprecedented era of white-collar crime and rampant hucksterism? Government employees allegedly got sucked into a Ponzi caper operated by Kenneth “Wayne” McLeod, a Florida man who reportedly killed himself last year after the SEC opened a probe. If the allegations by the CFTC in the Georgia case are true, it may mean that other government workers saw their wealth eviscerated in a fraud scheme. It is unclear if retirement savings were plowed into the alleged Georgia scam. What is clear, however, is that the U.S. government now has at least two cases on its books in which it is alleged that federal workers were drafted into fraud schemes by individuals either employed by the government or paid by the government.

    We are presenting summaries because the information is voluminous. Here, now, the capsules . . .

    In an extraordinary series of actions on the Ponzi and fraud front, the CFTC has closed out the month of June by filings fraud cases in federal courts in Georgia, Colorado and Nebraska.

    Georgia Case

    Charged civilly with fraud and misappropriation in the Georgia case were Louis J. Giddens Jr. of Fayetteville, Ga., and Anthony W. Dutton of Peachtree City, Ga. Giddens and Dutton are air-traffic controllers, the CFTC said.

    Also charged in the Georgia case was Michael Gomez of Valrico, Fla. Gomez is a commodity trader, the CFTC said.

    The men are charged with operating a Forex fraud scheme that gathered about $1.4 million and involved at least four companies: Currency Management Group LLC, Pinnacle Capital Partners LLC, Pinnacle Trade Group LLC and Elyon LLC.

    Giddens, the CFTC said, was an air-traffic controller in Atlanta. In “late 2008,” according to the CFTC, he learned about Botfly LLC, a Florida Forex company that offered investors a return of 10 percent a month.

    After meeting with a “principal” of Botfly, Giddens became a Botfly investor and solicited fellow Federal Aviation Administration (FAA) employees in Georgia to become Botfly investors, the CFTC charged.

    Dutton, Giddens’ fellow air-traffic controller, became a Botfly investor, the CFTC said. So did other FAA employees.

    In April 2010, the state of Florida charged Botfly in a Ponzi case and froze its assets.

    Giddens and Dutton used essentially the same business model as Botfly, and started their own pooled Foex business, using their unregistered companies to do so, the CFTC charged.

    Eventually, Gomez, who also was unregistered, became part of the mix, the CFTC charged.

    Investors plowed $1.4 million into the fraud scheme, the CFTC charged.

    Read the Georgia charging document.

    Colorado Case

    Shawon McClung of Denver and Flint-McClung Capital LLC (FMC) of Englewood, Colo., have been charged civilly with fraud and misappropriation in an alleged $1.9 million Forex Ponzi scheme.

    The scheme operated in part through a website, and McClung positioned himself and the company as “sophisticated” players with a cash reserve of nearly $100 million.

    Investors were told their funds were “guaranteed” against loss, the CFTC charged.

    Prospects were lured “with the prospect of quickly making large profits with returns such as 50 percent in thirty days or 15 percent per month for six months,” the CFTC charged.

    McClung “has never been registered” with the CFTC, the agency charged, adding the FMC also “has never been registered.”

    Read the Colorado charging document.

    Nebraska Case

    Grace Elizabeth Reisinger of Grand Island, Neb., and ROF Consulting LLC (ROF) have been charged civilly with operating a fraudulent commodity pool scheme known as NCCN LLC (NCCN), the CFTC said.

    The unregistered scheme gathered about $4 million and falsely claimed registration exemptions, the CFTC said.

    Read the Nebraska complaint.

  • URGENT >> BULLETIN >> MOVING: Paranoia-Maker: FBI Undercover Sting In Florida Leads To Criminal, Civil Charges Against 5 In Alleged Penny-Stock Capers; Agents Established ‘Phony’ Consulting Company

    URGENT >> BULLETIN >> MOVING: An undercover sting by the FBI in Florida has led to criminal and civil charges against five alleged penny-stock fraudsters in Florida, Texas, Nevada and California.

    The sting featured a phony “consulting” company created by the FBI, authorities said. News about the make-believe consultancy followed on the heels of news last month that U.S. investigators had created a “payment processor” as part of a different probe into illegal gambling.

    Charged criminally in today’s undercover cases were Brian Gibson, 63, of Coconut Creek, Fla; Donald W. Klein, 40, of Frisco, Texas; Douglas Newton, 66, of Rancho Mirage, Calif; Charles Fuentes, 66, of Dana Point, Calif; and Thomas Schroepfer, 54, of Las Vegas. Schroepfer also is known as Thomas Schroepfer Baetsen.

    The men and several companies also were charged civilly by the SEC in what the agency described as a coordinated law-enforcement assault against microcap hucksters.

    “Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement.

    The Miami region’s top federal prosecutor, meanwhile, said the cases evolved from the Southern District of Florida’s ongoing Securities and Investment Fraud Initiative, a task force aimed at criminals and fraudsters operating in the region.

    “The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” said Wifredo A. Ferrer.

    Undercover FBI agents posed as scammers and set up a phony “consulting” business as part of the probe, the SEC said.

    “The defendants charged today were intent on making profits for themselves while defrauding others,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office.

    Newton, the SEC said, was chief executive officer of Real American Brands Inc., now known as Real American Capital Corp. He was accused of paying kickbacks to a “purported employee pension fund trustee” to buy more than 6.2 million shares of restricted Real American Brands stock.

    He further was accused of trying to conceal the kickbacks through a “consulting” firm.

    However, the trustee Newton believed to be corrupt actually was “a fictitious person,” the SEC said. Meanwhile, “the trustee’s business associate who helped arrange the deal was an undercover FBI agent,” and the consulting company was a “phony” one created by the FBI, the SEC added.

    Klein was the president and chief executive officer of KCM Holdings Corp. He is accused of engaging in two restricted stock transactions and one market transaction involving KCM Holdings’ stock.

    “Klein and the company paid kickbacks to an undercover FBI agent who portrayed himself as a business associate of a corrupt trustee of an employee pension fund, in exchange for the fund’s purchase of 2.5 million shares of restricted KCM Holdings stock,” the SEC said. “Klein attempted to conceal the kickbacks through a consulting agreement with a phony company that would receive the kickbacks. In another scheme, Klein bribed a purported corrupt stockbroker (actually an undercover FBI agent) to purchase KCM Holdings stock in the open market for brokerage clients with discretionary accounts.”

    Thomas Schroepfer was president and president of of SmokeFree Innotec Inc. He, too, got caught in the sting, the SEC said.

    For his part, Fuentes was a promoter of SmokeFree’s stock, and “paid kickbacks to an undercover FBI agent, posing as the business associate of a corrupt employee pension fund trustee, in exchange for the fund’s purchase of 400,000 shares of restricted SmokeFree stock,” the SEC said.

    Schroepfer, the SEC said, “attempted to conceal the kickbacks through a consulting agreement with a phony company created to receive the kickbacks.

    “In addition, SmokeFree issued shares of its stock to a cooperating witness for acting as a middleman in the scheme,” the SEC said.

    Gibson “created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International Inc., as part of a planned pump-and-dump scheme,” the SEC charged.

    He is accused of touting Xtreme Motorsports “by blasting a series of e-mails to potential investors” and posting “false testimonials on the site from purported investors raving about their success in following the website’s stock picks,” the SEC said.

    In a separate case in Maryland last month, prosecutors announced that federal agents had created a “payment processor” to infiltrate illegal gambling operations.

    The name of the Feds’ “payment processor” was Linwood Payment Solutions — and its website now serves this message:

    “Linwood Payment Solutions is a Department of Homeland Security Undercover Business set up to identify and prosecute companies accepting and paying out funds for U.S. customers who gamble online illegally.”

    In response to a white-collar fraud epidemic involving huge sums of money and fraudsters and criminals operating both domestically and internationally, U.S. agencies, including the Secret Service, ICE and others, have been employing techniques once largely reserved for organized-crime probes.

  • BULLETIN: Christopher Pettengill Pleads Guilty In Trevor Cook Ponzi Scheme

    BULLETIN: Christopher Pettengill, a figure in the $194 million Trevor Cook Ponzi scheme, has pleaded guilty in Minneapolis to securities fraud, money-laundering and conspiracy, the FBI said.

    Read Breaking News coverage in the Star Tribune, which is reporting that Pettengill says he has been cooperating with federal investigators since January.

    Pettengill, 54, of Plymouth, Minn., was charged criminally on June 13. He potentially faces up to 20 years in federal prison.

    Cook is serving a 25-year sentence. Pettengill conceivably could be sentenced to a prison term shorter than 20 years, depending on his level of cooperation and his ability to persuade a federal judge that he deserves less time behind bars.

    Part of the Cook scheme traded on the acronymn UBS, a famous financial company, according to court records.

    It is common in the fraud universe for hucksters and criminals to leech off the brands of famous companies and to use famous names to sanitize fraud schemes.

    The Cook scheme also traded on the name “Oxford.” Some of the money ended up in  a company known as Crown Forex, which had a regal theme.

    Cook, former radio host Pat Kiley, and Jason Bo-Alan Beckman have been sued by the SEC. Cook and Kiley also confront a lawsuit from the CFTC.

    Jon Jason Greco, 40, of Minneapolis, was charged criminally in March with making false statements to federal agents. Greco was accused of hiding loot from the scheme.

     

  • BULLETIN: Defendant In January CFTC Sweep Ordered To Pay $280,000 Penalty; ‘ForInvest’ Also Ordered To Remove Forex Solicitation Pages From Internet; Firm Used Same Payment Processor As Imperia Invest IBC, Ponzi Forum Darling And Defendant In SEC Action

    BULLETIN: A Delaware company accused by the CFTC in January of illegally hawking Forex offers has been hit with a $280,000 penalty and ordered to remove its Forex solicitation pages from the Internet.

    U.S. District Judge James B. Zagel of the Northern District of Illinois entered the order against ForInvest Group of Delaware. ForInvest also is known as ForInvests Group LLC.

    ForInvest also was banned permanently “from engaging in any commodity-related activity, including trading, and from registering or seeking exemption from registration with the CFTC,” the CFTC said.

    The company was one of 14 Forex outfits sued by the CFTC in what was described as a nationwide sweep of unregistered firms illegally targeting U.S. residents.

    ForInvest advertised that it accepted payments via Perfect Money, a murky firm purportedly based in Panama that allegedly was used by a company that defrauded thousands of deaf investors in a scheme known as Imperia Invest IBC. The SEC said in October 2010 that Imperia Invest had stolen millions of dollars from investors.

    In the same CFTC sweep, the agency also sued InstaTrade Corp., doing business as InstaForex. InstaForex is an advertiser on the TalkGold Ponzi scheme and criminals forum, and research showed that InstaForex — like Imperia Invest and ForInvest — also used Perfect Money.

    Imperia Invest and InstaForex also were promoted on TalkGold and other Ponzi forums, according to records.

    Zagel ordered “[a]ny person or entity providing web-hosting or domain name registration services” for ForInvest  to preserve documents and “[a]ny person or entity providing web-hosting or domain name registration services to “remove or cause to be removed from the Internet all webpages within their control . . .”

    See earlier story.

    Read the ForInvest court order.

  • BULLETIN: R.J. Zayed, Court-Appointed Receiver In Trevor Cook Ponzi, Recovers More Than $1.1 Million In Switzerland

    Trevor Cook

    BULLETIN: The court-appointed receiver in the Trevor Cook Ponzi scheme has recovered more than $1.1 million that had been tied up in Switzerland.

    Receiver R.J. Zayed says that $1,127,495 has been deposited in a U.S. Court account.

    “[T]he Receiver has now accomplished the goal of repatriating the Swiss funds so that money can be returned to investors,” Zayed said in a court filing dated yesterday.

    The development is good news to Cook’s swindled investors — but it was not without costs and legal drama.

    An individual U.S. investor in the Cook Ponzi scheme filed a criminal complaint in Switzerland to give himself priority to the funds, putting himself ahead of hundreds of other swindled investors and violating a U.S. court order, Zayed said.

    Records show that the U.S. investor who filed the claim lost at least $598,921 in the swindle.

    A Swiss prosecutor would not release the Cook cash to U.S. investors as a whole while the individual complaint was pending, and Zayed filed a contempt motion in the United States against the individual Cook investor, accusing him of being an impediment to the receivership’s efforts to claim the sum for all defrauded investors.

    The Swiss complaint filed by the U.S. investor was withdrawn on May 24, Zayed said.

    With the impediment of  the U.S. investor’s complaint removed, “the Swiss prosecutor was able to lift the freeze on the Receiver’s UBS account and clear the way for the money to be returned to the United States and the victims of this fraud,” Zayed said.

    Zayed said the U.S. investor likely did not have the resources to pay back the receivership estate for the money it expended trying to prevent a single investor from gaining an unfair share of the Swiss proceeds, so the receivership — with the Swiss sum safely returned to the United States for the benefit of all investors — dropped the contempt complaint.

    Jason Bo-Allan Beckman helped finance the U.S. investor’s Swiss action in December 2009 — more than a month after Cook’s assets were frozen and investors were prohibited by court order from engaging in self-help to recover stolen funds, according to court filings.

    Beckman later emerged as a defendant in an action filed by the SEC that accused him of being a leading figure in the $194 million Ponzi and Forex caper.

  • Second Man With Trevor Cook Tie Charged Criminally In Massive Minnesota Ponzi Scheme; Christopher Pettengill Faces Securities-Fraud, Conspiracy And Money-Laundering Accusations

    A Minnesota man has become the second person with ties to convicted Ponzi schemer Trevor Cook’s Forex scam to be charged criminally.

    Christopher Pettengill, 54, of Plymouth, “knowingly concealed information from investors concerning the foreign currency program sold by Pettengill, Cook, and others,” federal prosecutors said.

    He has been charged with securities fraud, money-laundering and conspiracy to commit wire fraud, the office of U.S. Attorney B. Todd Jones of the District of Minnesota said.

    Cook pleaded guilty in the $194 million caper last year and was sentenced to 25 years in federal prison.

    Jon Jason Greco, 40, of Minneapolis, was charged in March with making false statements to federal agents. Greco was accused of hiding loot from the scheme.

    Pettengill was accused of lending credibility to the scam and encouraging people to invest money.

    “Pettengill allegedly conducted numerous wire transfers during the course of the conspiracy, and on September 3, 2008, he allegedly made a credit card payment of $11,369.19, which was derived from the proceeds of the securities fraud,” prosecutors said.

    He faces up to 20 years in prison, if convicted on all counts.

    The SEC and CFTC sued Cook and former radio personality Pat Kiley in November 2009. Earlier this year, the SEC filed suit against Jason Bo-Alan Beckman, another alleged promoter of the scam.

  • PART 2: PROSECUTION BOMBSHELL(S): Operators And ‘Insiders’ Received ‘Millions Of Dollars’ From ASD; Bowdoin Changed Subject When Told What He Was Doing Was ‘Not Mathematically Possible’; Government Targeted ASD Money In Iowa Bank Accounts

    EDITOR’S NOTE: See Part One here.

    UPDATED 1:46 P.M. EDT (U.S.A.) AdSurfDaily “paid out millions of dollars to operators and insiders,” according to a U.S. Secret Service affidavit originally filed under seal in February 2009.

    But ASD President Andy Bowdoin changed the subject when people told him that what Florida-based ASD was doing not only was illegal, but also was “not mathematically possible,” according to the affidavit.

    What he was trying to do, according to court filings, was establish at least three autosurfs that would generate Ponzi-extending cash while Bowdoin positioned them as legitimate “advertising” businesses.

    And Bowdoin also wanted to persuade members that he had discovered a formula that purportedly made it possible for ASD to set aside 50 percent of its daily revenue and pay participants 125 percent of what they paid in — all while planting the seed that members could expect a return of 8 percent a day on some days.

    Investigators saw things a different way, saying ASD was creating a minimum liability of $1.25 for every dollar it took in.

    “Try it — it works,” Bowdoin simply told the doubters, changing the subject instead of addressing the mathematical realities, according to the Secret Service.

    There was too little profit in operating legitimately, Bowdoin told a consultant, according to the Secret Service.

    As ASD was facing a Ponzi abyss, a consultant told Bowdoin there was a way for ASD to clean up its act, according to the Secret Service.

    “Bowdoin, however, was dissatisfied with the consultant’s revenue sharing proposal and with the limited revenue a legitimate business would produce,” the Secret Service alleged in the February 2009 affidavit. “Bowdoin rejected the consultant’s plan and terminated his relationship with the consultant.”

    Bowdoin had arrived at his 50-in/125-out formula after an earlier formula in which ASD purportedly had set aside 60 percent of its revenue to pay participants 150 percent of what they paid in had brought on a Ponzi collapse that caused the company to cease operations and leave investors in limbo for weeks in 2007, according to the Secret Service.

    ASD’s original formula was concocted by Bowdoin and his “silent partner,” a man who recruited Bowdoin into the 12DailyPro autosurf Ponzi scheme, according to the Secret Service.

    Both of ASD’s formulas were just a means of hiding ASD’s true nature as a financial beast with a fatal disease, according to court filings.

    Despite the spectacular collapse of 12DailyPro amid Ponzi allegations filed by the SEC in early 2006, Bowdoin and his silent partner ruminated that 12DailyPro simply had promised to pay out too much money on a daily basis, according to the Secret Service.

    Upstart ASD, Bowdoin and his silent partner speculated, could take regulators out of play and avoid the Ponzi fate of 12DailyPro by telling investors that the firm would pay out less money and by introducing verbal sleight-of-hand to disguise the true nature of the business, according to the Secret Service.

    ASD also speculated that it could circumvent the Ponzi problem and law-enforcement scrutiny by suggesting that ASD’s payouts, which the firm called “rebates,” were not “guaranteed,” according to the Secret Service.

    Despite telling members to “Try it — it works,” Bowdoin had no confidence in his business model and knew it was still a Ponzi despite the post-12DailyPro tweaking. In the end, according to court documents and other records, ASD still was telling investors they’d get back more than they paid in and, on a yearly basis, would receive a return of 365 percent at a “rebate” rate of 1 percent a day.

    Even as ASD was playing in the post-12DailyPro fields and grew eventually to suck in tens of millions of dollars a week, less than 2 percent of its revenue came from external sources. More than 98 percent came from members and was simply being recycled to other members to keep the Ponzi afloat, according federal prosecutors.

    At a certain point in time, Bowdoin did away with unlimited purchases and limited the amount investors could pay ASD to $12,000 “because he did not want members to lo[]se too much money should ASD collapse,” according to the February 2009 Secret Service affidavit.

    The import of the claim is that prosecutors can argue to a jury that Bowdoin himself was worried about the imminent demise of ASD — a demise Bowdoin brought on through the use of various mathematical concoctions, linguistic fantasies and fabrications designed to separate people from their money to keep the Ponzi afloat.

    Meanwhile, the claim sets the stage for prosecutors to tell a jury that Bowdoin anticipated a catastrophe and sought to insulate himself from prosecution by suggesting that ASD did not guarantee rebates and that customers were purchasing “advertising,” as opposed to entering into an investment contract with ASD.

    “[T]o ensure that no individual investor monopolized the rebate pool, and to reduce the
    likelihood that any individual investor would suffer a catastrophic loss, Bowdoin placed a limit on the amount of ‘advertising’ members could purchase,” the Secret Service said. “Of course, it would have made no sense to impose such limitations if ASD was actually selling, and members actually were purchasing, Internet advertising.”

    Bowdoin’s various stories were at odds with themselves, the Secret service alleged. Even as Bowdoin was telling members ASD was not in the investment business and instead was a provider of  advertising “rebates,” ASD’s computer systems described member payouts as “ROI” — for Return on Investment.

    And even as he positioned himself as a Christian “money magnet” and merchant who’d been recognized by the President of the United States — and even as he purportedly was enforcing a $12,000 purchase ceiling to minimize the chance an individual investor would become engulfed in a calamity — Bowdoin told attendees of company “rallies” in U.S. cities that ASD would match the money they plowed into the firm 50 cents on the dollar.

    “At the rallies, to raise more money, Bowdoin concocted the idea of running ‘rally-only promotions,’” the Secret Service alleged. “New members were told they would receive a 50% bonus for joining at the rally. For example, if a new member purchased $500 in ‘ad packages’ as a bonus she would be credited $750 to her account. Representatives of ASD stated this was a ‘World Wide Wealth’ program that was available to anyone with Internet access.”

    In early 2008, Bowdoin became a participant in a scheme with a “North Carolina” attorney to assure prospects that ASD had been vetted and was operating lawfully. ASD’s 26-minute legality video and the rallies caused tens of millions of dollars suddenly to flow into the firm, according to the Secret Service.

    Just a year earlier, the company suspended operations because it was starved for cash flow and faced a collapsed Ponzi, according to the Secret Service. ASD’s response to the collapse was to launch a new autosurf Ponzi under a new name — and to port the accounts of its original set of victims into the new scheme, where the payouts early loyalists had expected would be funded by incoming participants who did not know their money was being distributed to Bowdoin’s orginal victims.

    Later in 2008, as spring and summer warmth returned to northern climes, ASD found people throwing money at it. Some of the people who threw money at ASD did so at rallies in Iowa, according to the Secret Service.

    Affidavit For Seizure Targeted At At Least 7 Iowa Bank Accounts

    The PP Blog reported in December 2010 that funds traced to Bowdoin and two other ASD members had been targeted in yet-another forfeiture action in the District of Columbia. The action was filed less than three weeks after Bowdoin’s Dec. 1 arrest by federal agents in Florida on Ponzi-related charges of wire fraud, securities fraud and selling unregistered securities.

    Prosecutors’ December civil-forfeiture action was at least the third targeted at assets owned by Bowdoin. Assets of two other ASD members — Erma “Web Room Lady” Seabaugh and Robyn Lynn Stevenson (also: Robyn Lynn) of Florida — also were targeted.

    The civil case against Bowdoin’s assets is on hold because of the criminal allegations against him. But the cases against the assets of Seabaugh and Lynn remain active. Neither Seabaugh nor Lynn had filed a claim for the money as of Friday.

    In the case against Seabaugh’s assets, the government was authorized to seize $213,693 from a bank account, but found only $153,097 in the account. The Secret Service seized $96,525 from two bank accounts linked to Lynn.

    Some of the money Seabaugh plowed into ASD originated at E-Bullion, a shuttered California money-services business operated by convicted murderer James Fayed, who ordered the execution of his estranged wife in 2008.

    Pamela Fayed, a potential witness against her husband on matters pertaining to E-Bullion and an associated business known as Goldfinger Coin & Bullion, was slashed to death in a Los Angeles-area parking garage on July 28, 2008.

    On Aug. 1, 2008, the Secret Service seized tens of millions of dollars from Bowdoin’s bank accounts. The December 2010 claim by federal prosecutors that Seabaugh had used E-Bullion to fund one of her ASD accounts was the first public tie between ASD and E-Bullion, which has been linked to multiple Ponzi schemes.

    Seabaugh had multiple ASD accounts with multiple email addresses — and appeared to be “selling her own investment ‘ad packs’ to clients and representing herself as ASD,” the Secret Service alleged.

    The PP Blog learned on June 10 that the Secret Service, in February 2009, also targeted proceeds in seven bank accounts belonging to ASD members in Iowa for forfeiture. In an affidavit, the agency said the accounts contained at least $413,018.

    How the cases are evolving was not immediately clear. The Secret Service, according to the affidavit, identified the assets as proceeds of an ASD-related wire-fraud scheme.

    Acting as pro se pleaders and using a litigation template associated with ASD participant Curtis Richmond, one of the so-called Arby’s Indians, two of the individuals associated with the Iowa accounts cited by the Secret Service in the February 2009 affidavit later attempted unsuccessfully to intervene in the main civil-forfeiture case against Bowdoin’s assets.

    The February 2009 Secret Service affidavit identifies the individuals as Joyce and Michael Haws.

    “Joyce Haws was an active participant in and large promoter of the ASD wire fraud
    scheme,” the Secret Service alleged in the affidavit. “Ms. Haws was one of several people who requested and facilitated one of the first rallies within ASD, in Ankeny, Iowa, on about March 15th, 2008.”

    Haws recruited her mother and others into the scheme, according to the affidavit.

    Walter Clarence Busby Jr., a Georgia minister and Bowdoin’s alleged business partner in Golden Panda Ad Builder, identified Joyce Haws and her “spouse” in 2008 as “founders” of Golden Panda.

    In the same Busby affidavit, filed on Aug. 29, 2008, Busby identified Robyn Lynn as the person who introduced him to ASD.

    Curtis Richmond was an early mainstay in the ASD story. He has a contempt-of-court conviction for threatening federal judges, has been banned from the practice of law in Colorado even though he is not an attorney and has been sued successfully under the federal racketeering statute for harassing public officials and participating in schemes to place bogus financial judgments against them.

    Richmond, who proclaimed himself a sovereign being answerable only to God,  was a member of a Utah “Indian” tribe a federal judge ruled a “sham.” The “tribe” got its derisive name — the Arby’s Indians — because it once held a meeting in an Arby’s restaurant.

    The “tribe” also used the address of a Utah doughnut shop as the address of its “Supreme Court,” while threatening public officials with arrest and detention for carrying out their official duties.