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  • PROSECUTION BOMBSHELL(S): ASD Had ‘Special’ Class Of Members; Bowdoin’s ‘Silent Partner’ Was His 12DailyPro Sponsor; ‘North Carolina Lawyer’ (And Co-Owner) Of LaFuente Dinero Told Bowdoin U.S.-Based Attorneys Would Be His Business Partners In ‘Offshore’ Surf; Employees Caught ‘Minister’ Stealing From ASD Before He Launched Golden Panda Ad Builder

    Thomas Anderson "Andy" Bowdoin Jr.

    EDITOR’S NOTE: First of two parts. Part Two will be published later tonight or tomorrow.

    Even as AdSurfDaily President Andy Bowdoin was venturing to Washington in June 2008 to receive what his members and prospects were told was the “Medal of Distinction” from the President of the United States, he was harboring terrible secrets and knew full well his autosurf business was a Ponzi scheme that could collapse at any second and lay waste to thousands of investors, according to court records and an affidavit originally filed under seal by the U.S. Secret Service.

    Much of the information from the affidavit, which was filed in February 2009,  is being published today for the first time. Companion court documents in ASD-related litigation show that part of a third civil-forfeiture case brought in December 2010 against assets alleged to be owned by ASD and Bowdoin has been put on hold while Bowdoin is battling criminal allegations — and that some individual ASD members whose assets were targeted for forfeiture in the same case have not filed claims for money seized from their bank accounts. Although the forfeiture action against Bowdoin has been suspended, the cases against the assets of the individual ASD members remain active.

    Just two months prior to his June 2008 Washington jaunt — in April 2008 — Bowdoin had flown at the prompting of a “North Carolina lawyer” to Panama and Costa Rica with his wife and the lawyer. The purpose of the trip, according to the affidavit, was to incorporate ASD Cash Generator and an entity known known as La Sorta Trading outside of U.S. jurisdiction to create wiggle room if U.S. regulators came knocking.

    ASD Cash Generator was the replacement name for the original ASD autosurf business, which was known simply as AdSurfDaily. The first scheme collapsed in 2007, leaving Bowdoin’s first set of investors holding the bag, according to the affidavit. Bowdoin’s later investors were not told about the firm’s dubious history.

    La Sorta Trading, whose purpose was not immediately clear, never before has been referenced in the ASD case. La Sorta is the name of a city in Honduras, another country in Central America. It is not known if the firm was named after the city.

    Bowdoin also was exploring the possibility that he and his wife would move from the small town of Quincy, Fla., to Costa Rica, the Secret Service advised U.S. District Judge Rosemary Collyer.

    “Bowdoin’s wife did not like Costa Rica, however, and his plans to move ASD’s operations off shore were shelved,” according to the affidavit.

    The February 2009 affidavit paints Bowdoin, now 76, as a man experiencing pressure from multiple points of contact — and as a man who made one disastrous decision after another. One of the things allegedly pressuring Bowdoin was fear that the Ponzi could come tumbling down before enough new members were recruited to keep cash churning and the facade of a successful and lawful business in place. Yet-another was fear that insiders, ordinary members and even employees could turn on him. Still-another was fear that a government intervention could occur at any time, according to the affidavit.

    Of the millions of dollars that had flowed into ASD, “less tha[n] $25,000 was derived from independent revenue,” according to the affidavit. The rest had come from members and was being recycled in classic Ponzi scheme fashion, with Bowdoin initially empowering himself and a “silent partner” to rake 10 percent of ASD’s “gross sales” and split it evenly: 5 percent each.

    But even as he was in Washington in June 2008 to receive an award he positioned as a Presidential acknowledgment of his business acumen, Bowdoin knew that his silent partner posed a risk to him, according to the affidavit.

    That silent partner, according to the affidavit, was Bowdoin’s “sponsor” in 12DailyPro, an autosurf the SEC accused of running a massive Ponzi scheme more than two years earlier.

    Through his sponsor, Bowdoin had invested $100 in 12DailyPro. The money was lost quickly because the SEC shut down 12DailyPro soon after Bowdoin joined. But Neither Bowdoin nor his silent partner took the clue from the SEC’s action, according to the affidavit. Instead, they worked on ways to channel 12DailyPro-like revenue to themselves and disguise what they were doing.

    “Based on his experience with 12daily Pro, and his review of the SEC’s filings against it, Bowdoin knew that a paid auto-surf program that promised returns of that magnitude and recycled member funds was a business model that was both unsustainable and illegal. He also knew that selling an unregistered investment opportunity to thousands of investors was illegal. Nevertheless, after the collapse of 12daily Pro, Bowdoin agreed with his 12daily Pro sponsor to start a similar autosurf program. Both individuals were aware that, before its collapse, 12daily Pro had taken in millions of dollars from its members.”

    Under Bowdoin’s agreement with his silent partner, Bowdoin was responsible for managing ASD’s operations. The partner, meanwhile, was responsible for marketing ASD.

    In December 2006, about a year and a half prior to Bowdoin’s June 2008 trip to Washington amid claims he was receiving a Presidential award for business smarts, Bowdoin arbitrarily slashed the silent partner’s cut of the upstart ASD business from 5 percent of the gross to 1 percent, according to the affidavit.

    Despite the fact Bowdoin had been a 12DailyPro member recruited into that SEC-smashed Ponzi scheme by the same person who’d later emerge as his silent partner in ASD, Bowdoin explained to the silent partner that he — meaning Bowdoin — “was performing most of the work, and bearing most of the risk in operating ASD,” according to the affidavit.

    With those words, Bowdoin imposed a pay cut on the silent partner, who later asserted Bowdoin had ripped him off, according to the affidavit.

    In August 2008, during a search of Bowdoin’s home in Quincy less than two months after the Washington jaunt and the Presidential claims, the Secret Service found Bowdoin’s handwritten notes from December 2006 that “show his and his silent partner’s awareness of the risks of the auto-surf program they were conducting,” the Secret Service said in the affidavit.

    “Bowdoin’s notes indicate that he told his silent partner that the partner should have made him better aware of those risks ‘knowing regulators were on the prowl for surfing sites,’” the Secret Service alleged.

    It is known from other documents that the Secret Service opened the ASD probe after becoming aware of the company on July 3, 2008, about 17 days after Bowdoin had ventured  to Washington amid claims he’d be be receiving a Presidential award and dining with President George W. Bush and Vice President Dick Cheney.

    One of the documents is a 57-page evidence exhibit that includes surveillance photos taken in Quincy prior to the seizure of tens of millions of dollars from Bowdoin’s 10 personal bank accounts, one of which allegedly contained more than $31.6 million. The Secret Service was alarmed as it began the process of peeling back layers of the onion, according to court records

    Before July had come to a close, the agency — confronted with a murky fact set and trying to figure out how a man who claimed to have had a remarkable business career that had captured the attention of the President of the United States — had assigned multiple undercover agents to the ASD case.

    One of the earliest puzzles to solve, according to court documents, was that Bowdoin had left behind a string of dissolved companies in Florida and professed to be wealthy — but  had “earned no significant income from legal employment in the twenty years prior to his commencement of ASD’s operation.”

    As the investigation progressed, according to court documents and the February 2009 affidavit, agents discovered that ASD had “special” members who provided Bowdoin start-up capital to varying degrees. These “special” members were grouped as members of  ASD’s “President’s Circle,” “President’s Advisory Board” and “President’s Advisory Counsel,” and also knew about the 12Daily Pro Ponzi.

    At least “some” of them, according to the affidavit, counseled Bowdoin not to use the name he initially contemplated in 2006 for the upstart enterprise: DailyProSurf.

    Some of the special members, who were entitled to higher compensation than ordinary members, “complained” that DailyProSurf sounded too much like 12DailyPro. In response to the concerns,  the enterprise abandoned the DailyProSurf name and used the name AdSurfDaily as a means of avoiding “law enforcement scrutiny,” according to the February 2009 affidavit.

    The document did not name the “special” members. It was filed under seal on Feb. 26, 2009, during a period in which an autosurf known as AdViewGlobal (AVG) was launching.  AVG may represent the fourth iteration of ASD, one launched months after the seizure of Bowdoin’s bank accounts by the Secret Service in August 2008.

    AVG’s name is not referenced in the February 2009 affidavit. In June 2009, however, AVG’s name surfaced in a racketeering lawsuit brought against Bowdoin and North Carolina attorney Robert Garner. In September 2009, the government made a veiled reference to AVG in court filings.

    Lawyers Referenced In Secret Service Affidavit As Bowdoin’s Partners In LaFuenteDinero, The ‘Spanish’ ASD

    NOTE: The PP Blog became aware in 2010 that the government had subpoenaed at least three North Carolina attorneys, including Robert Garner, in the ASD case. The other two attorneys were husband and wife. The husband, who was sentenced to a year in federal prison in 2006 for lying to the FBI in a real-estate case, was disbarred in 2009. Bowdoin challenged the subpoenas, arguing that his communications with the lawyers were privileged. A federal judge ruled that the attorneys had to testify.

    The Blog, which previously has published stories that reference Garner, is doing so again today. Garner is listed in Nevada records as a “director” of AdSurfDaily Inc., with Bowdoin as the president, secretary and treasurer. However, the Blog is choosing today not to publish the names of the husband-and-wife attorneys, but reserves its right to do so in the future.

    Moving on . . .

    One of the most stunning allegations in the February 2009 Secret Service affidavit, which became a public record when the seal was lifted in May 2009 and which the PP Blog is reporting on for the first time today, was that two of the North Carolina lawyers were proposed as Bowdoin’s business partners in LaFuenteDinero (LFD). LFD was ASD’s so-called Spanish autosurf. The proposal was made by one of the lawyers, who described the other lawyer as his “law partner.”

    The section below is verbatim from the February 2009 Secret Service affidavit:

    “In approximately September or October 2007, ASD’s North Carolina lawyer suggested to Bowdoin that they should start a new site that was in Spanish. In addition, the North Carolina lawyer suggested that the company associated with this site should be set up off shore because when these type of companies raise too much money the government comes in and shuts them down. The North Carolina lawyer recommended that he, his ‘law partner’ and Bowdoin would each share ownership of the Spanish site (as 1/3 share partners). In return for the others’ ownership interests, the North Carolina lawyer and his associate would handle the incorporation work and all of the work needed to move operations offshore.”

    By early 2008, with nearly a year and a half of troubled operation under its belt and a Ponzi collapse that had caused ASD to cease operations for weeks in 2007 as it tooled up for a second try under the ASD Cash Generator brand, Bowdoin was growing “suspicious” of at least one of the North Carolina lawyers, according to the affidavit.

    “In February 2008, Bowdoin, the North Carolina lawyer and an ‘Internet marketer’ discussed expanding ASD by beginning a new site in Chinese, which would be called Golden Panda Ad Builder,” according to the affidavit. “The North Carolina lawyer suggested a person that would be well suited to run the site offshore, but Bowdoin was beginning to get suspicious of the lawyer. Bowdoin decided, instead, to split the Chinese site with the Georgia minister. Bowdoin told the Georgia minister that ASD had no outside income sources and that ASD’s survival was depend[e]nt on an ever growing base of new contributors. The Georgia minister began working on developing the Chinese auto-surf site.”

    ‘Georgia Minister’ Allegedly Caught Stealing By ASD Employees; Bowdoin Allegedly Stays Silent About Theft

    Bowdoin, according to the affidavit, confronted trouble from any number of fronts. One of his colleagues — the “silent partner” who had been Bowdoin’s 12DailyPro sponsor whose rake Bowdoin allegedly had slashed after they started ASD — told Bowdoin he believed he was owed $20,000 and  threatened to expose ASD’s new operation.

    “Bowdoin agreed to compensate the sponsor” after initially balking, according to the affidavit.

    And Bowdoin also was under pressure from the “North Carolina lawyer” to move the ASD operation offshore — counsel Bowdoin earlier had resisted but agreed to explore in April 2008, despite his suspicions about the lawyer, according to the affidavit.

    During the first half of 2008, with Golden Panda still not off the ground during a period in which the “Georgia minister” had access to ASD’s computer system, ASD employees began to complain that the minister was “padding” his ASD account by “secretly using his access to the computer system to increase his/relatives’ number of ad packages,” according to the affidavit.

    Bowdoin personally investigated the complaints, comparing the “Georgia minister’s” account with banking records.

    Bowdoin “confirmed for himself that the Georgia minister was in fact stealing money from ASD by creating free ad packages,” according to the affidavit. “When confronted, the Georgia minister denied the allegations and asserted that he had proof that the ad packages he created flowed from legitimate deposits of funds into ASD’s bank accounts. The Georgia minister never showed Bowdoin this proof, however, and each time Bowdoin or someone else inquired about the evidence of deposits, the Georgia minister created an excuse to explain why he did not then have it.”

    Instead of firing the Georgia minister and ending the relationship, “Bowdoin did not pursue the matter,” according to the affidavit.

    Things took a dramatic turn “in about June 2008,” when ASD employees discovered that “the Georgia minister had been permanently enjoined by a court from committing violations of the federal securities laws.

    “When ASD employees disclosed this information to Bowdoin, they told him that ASD needed to distance itself from the minister,” according to the affidavit. “Bowdoin agreed to severe his ties to the Golden Panda operation after several ASD employees indicated that they were unwilling to work with the Georgia minister.”

    Walter Clarence Busby Jr. of Acworth, Georgia, has been identified by the government in other court filings as Bowdoin’s Golden Panda partner. Separate court documents describe Busby as a minister and real-estate professional, and the SEC described Busby in 1997 as a prime-bank swindler.

    In court filings in the ASD case, Busby advised Collyer that he had prevailed upon another minister to assist him in arranging a relaxing day of fishing with Bowdoin in April 2008. During that same month, according to the February 2009 Secret Service affidavit, Bowdoin ventured to Central America with his wife and a “North Carolina lawyer.”

    The fishing excursion took place in Brunswick, Georgia, on April 11, 2008, according to court filings by Busby. Five days later, according to the February 2009 Secret Service affidavit, Bowdoin was in Panama and Costa Rica, discussing ASD business and the formation of the La Sorta Trading firm.

    Coming later: Government moves against money in ASD-related bank accounts in Iowa and other states.

    June 12 Update: See Part Two here.

  • OH, UTAH: SEC Alleges Business Executives Used Bogus Press Releases — And Disbarred Attorney — To Sanitize Precious Metals Fraud Scheme

    BULLETIN: The SEC has gone to federal court in Utah to seek penalties against a precious metals company and associated firms and individuals,  amid spectacular allegations that a PR firm sold the unregistered securities of its own corrupt penny-stock client and a disbarred attorney enabled the scam by issuing a bogus opinion letter.

    Utah has been identified by the interagency Financial Fraud Enforcement Task Force as a hotbed of fraud, and the SEC’s allegations against Copper King Mining Corp. and its co-defendants read like a work of fiction — but the agency says they are true.

    Charged along with the company was its former President and Chief Executive Officer Mark D. Dotson, 52, of Milford. Also charged were Alexander Lindale LLC, a Salty Lake City PR firm; PR executive Wilford R. Blum, 58, of Salt Lake City, and Stephen G. Bennett, 52, of of Merrimack, New Hampshire.

    Bennett formerly was licensed to practice law in Utah, but was disbarred in November 2001 for commingling clients’ money with his personal bank accounts, the SEC said.

    Blum is the general manager of Alexander Lindale, the PR firm.

    Despite Bennett’s disbarment, he provided “stock tradability opinion letters to Copper King which stated Alexander Lindale could have unrestricted Rule 504 stock issued to it pursuant to a purported transactional exemption provided under Minnesota state securities law,” the SEC charged.

    Because of Bennett’s bogus opinion letter and manipulations by Dotson and Blum, the PR firm sold unregistered securities issued by Copper King and profited handsomely, the SEC charged.

    “Bennett’s stock tradability opinion letters were used as the legal authority that enabled Copper King’s stock transfer agent to issue and distribute the company’s stock pursuant to Blum’s instructions,” the SEC said.

    All in all, the SEC said, the PR firm and Blum raised more than $12.2 million in proceeds from Blum’s improper sales of Copper King stock from 2008 through 2010.

    Meeanwhile, “Blum provided Copper King with approximately $9,063,567 in cash or services while Alexander Lindale received approximately $3,291,352 from Blum’s sales of Copper King stock,” the SEC said.

    Among other things, the PR firm is accused by the SEC of improperly paying contractors with unrestricted Copper King stock and hiring “television celebrities to appear on radio talk shows and in infomercials endorsing and touting the merits of investing in the company.”

    The firm and Blum also “arranged for Copper King to be publicized on billboards throughout various Western states and to author and issue press releases that emphasized the purported value and quantity of precious metals that could be extracted and processed from Copper King’s mining and milling operations,” the SEC charged.

    Dotson was accused of posting “false and misleading” information on the copper company’s website and of providing false information to the PR firm, which allegedly regurgitated Dotson’s lies and made millions of dollars by hyping the company and selling its stock .

    Investors were misled by Dotson into believing the copper firm would be capable within five years of processing  2,500 tons of ore per day and extracting $1.21 billion in precious metal, including 230 million pounds of copper, 11.5 million ounces of silver and 115,100 ounces of gold, the SEC charged.

    As president and CEO, the SEC said, Dotson “knew that the mill had no operational history or process to extract copper, gold, and silver from the ore.

    “As a result, Dotson knew that it was misleading to assign recovery amounts and market values to these supposed recoveries,” the SEC charged. “In addition, Dotson knew the mill could not process 2,500 tons of ore per day as the mill did not have, among other things, a sufficient water supply to process the ore through the milling cycle.”

    Meanwhile, the SEC charged, Dotson also knew that “Copper King was permitted to mine only a single twenty acre parcel and that the productive life of the mine site was only two years, not ten as stated on the company’s Internet website.”

    Among the allegations against the PR company is that it issued issued false press releases, including one in which it was claimed that Copper King had found a single customer to purchase “all metals produced at the mine” for the life of the mine.

  • BULLETIN: Part Of Bo Beckman Fraud Case Devolves Into AdSurfDaily-Like Sideshow; Beckman Filing ‘Bizarre’ Pro Se Claims That Are Hindering Victims From Recovering Assets And Adding Litigation Costs, Receiver Says

    BULLETIN: In 2009, federal prosecutors warned that pro se pleadings by members of Florida-based AdSurfDaily had the potential to slow efforts to provide restitution for victims of the ASD Ponzi scheme.

    Pro se filings by ASD President Andy Bowdoin and dozens of ASD members crowded the court docket for months and delayed the implementation of a remissions program for victims by at least a year, according to records.

    All of the pro se pleadings misrepresented the history of the ASD case and the applicable law — and included claims that only can be described as bizarre. Although a federal judge issued rulings that denied standing to the filers, new pleadings from new nonparties making the same arguments streamed into the courthouse, forcing the judge to address them and issue more orders denying standing to the filers.

    After months of such back-and-forth, each of the filers ultimately was ruled to have no standing, including Bowdoin, who at once was representing himself pro se and impermissibly representing his own corporation pro se.

    Now, R.J. Zayed, the court-appointed receiver in civil litigation related to the Trevor Cook Ponzi scheme in Minnesota, says pro se pleadings by accused scammer Jason Bo-Alan Beckman are slowing the receiver’s recovery efforts and wasting resources set aside for victims.

    In March, the SEC charged Beckman with fraud, identifying him as a “leading” figure in a scheme pulled off by Cook and others. Beckman was accused of raising about $47.3 million of the $194 million gathered in the overall fraud — roughly 25 percent of the overall total.

    Beckman has no standing to challenge the receiver’s authority to act in the interests of victims, Zayed argued. And, the receiver alleged, Beckman has filed pro se documents to delay the sale of properties he owns in Texas, actions that have forced Zayed to respond at the expense of victims of the scheme.

    “The law does not permit individuals in Beckman’s position to challenge the Receiver’s actions precisely to prevent this type of costly motion practice,” Zayed argued, citing a provision of the receivership order that required Beckman to “cooperate with and assist the Receiver.”

    Beckman was ordered that he “shall take no action . . . to hinder, obstruct, or otherwise interfere with the Receiver,” Zayed said.

    “The funds available to the investors decrease every time the Receiver responds to an opposition raised by an entity that lacks standing,” Zayed argued. “Thus, the Receiver suggests that the Court consider prohibiting Mr. Beckman from filing additional documents challenging the Receivership’s disposition of assets.”

    Zayed also claimed Beckman was making untrue and “bizarre” claims at odds with his own actions.

    In February, prior to the formation of the receivership and the filing of a complaint against Beckman by the SEC, Zayed said, Beckman put one of the Texas properties on the market.

    Although Beckman himself tried to sell the property only a few months ago, he is now asserting — despite having no standing to make the claim and the fact Zayed wants to sell the property before it becomes a cash-sucking white elephant on the receivership’s assets — that Zayed should not liquidate the property “during a recession or other time of economic difficulty,” Zayed said.

    Beckman, Zayed said, researched the local market before listing the property in February. After his appointment as receiver in March, Zayed went to Texas to research the market himself.

    “Tellingly, evidence that the Receiver recovered shows that Mr. Beckman sought to place the Paseo del Lago house on the market just weeks before the Court put the Receivership in place,” Zayed argued. “It is bizarre at best for Mr. Beckman to attack the Receiver for doing something he himself had sought to do several months earlier.”

    Moreover, Zayed argued, holding onto the property adds costs.

    “These costs — almost $10,000 in the first three months of operation, even excluding local counsel bills — are substantial, ongoing, and clearly outweigh any argument to wait years or even decades for the real estate market to recover,” Zayed said.

    “It would significantly deplete the limited restitution funds if legal fees and other
    expenses continue to accrue if the Receiver must continue to maintain and manage these properties,” Zayed said. “The Receivership is envisioned as a short-term entity, one that seeks to return value to the investors in the near future. As such, the Receivership does not have the luxury to play the market as Mr. Beckman suggests, even if the monthly maintenance expenses somehow disappeared.”

  • BULLETIN: Nevin Shapiro, Operator Of $930 Million ‘Grocery’ Ponzi Scheme, Sentenced To 20 Years In Federal Prison; Fraudster ‘Used Other People’s Money To Live A Fantasy Life,’ U.S. Attorney Says

    BULLETIN: Nevin Shapiro, the Florida-based operator of a bizarre “grocery” Ponzi scheme that gathered nearly $1 billion and caused losses approaching $100 million, has been sentenced to 20 years in federal prison.

    Shapiro, 42, was charged by federal prosecutors in New Jersey last year after investigations by the FBI and the IRS. He pleaded guilty in September to one count of securities fraud and one count of money-laundering. All in all, the scheme brought in $930 million, prosecutors said.

    The SEC also sued Shapiro.

    “Nevin Shapiro used other people’s money to live a fantasy life built on false promises to unsuspecting victims,” said U.S. Attorney Paul J. Fishman.

    Elements of the case were brought by the interagency Financial Fraud Enforcement Task Force established by President Obama in November 2009.

    Shapiro operated a company known as Capitol Investments USA Inc., which purported to be in the wholesale grocery business.

    In reality, prosecutors said, Capitol “had virtually no income-generating business” between January 2005 and November 2009 — and Shapiro was running a colossal Ponzi scheme to fund his extravagant personal spending and penchant for gambling.

    At least $5 million evaporated when Shapiro stole from investors to pay illegal sports bets. He stole $26,000 a month to pay the mortgage on his Miami Beach home, which has been appraised at $5 million. Meanwhile, he stole $400,000 to pay for floor seats to watch the Miami Heat play basketball, while stealing $7,250 a month to make payments on his yacht and $4,700 a month to make payments on a leased Mercedes.

    Shapiro also lavished celebrities and sports figures, including college athletes, with gifts, prosecutors said.

    By the time the scheme collapsed and investor losses were totaled, Shapiro had stolen more than $82 million. He was ordered by U.S. District Judge Susan D. Wigenton to make restitution in the amount of $82.6 million.

    Prior to his arrest, he told investors one of the reasons they weren’t getting their payments was that his accountant was “on vacation,” prosecutors said.

  • BULLETIN: Thanh Viet Jeremy Cao Pleads Guilty In False Liens Case; Ponzi Schemer Admits He Filed 22 Bogus Claims For Hundreds Of Millions Of Dollars Against Public Officials

    BULLETIN: Thanh Viet Jeremy Cao, the California Ponzi schemer sentenced last month to 30 years in federal prison and ordered to pay $12.4 million in restitution, has pleaded guilty in a separate fraud case.

    Federal prosecutors in Nevada alleged last year that Cao filed nearly two dozen bogus liens against SEC attorneys, federal judges, federal magistrate judges, a U.S. Attorney, assistant U.S. Attorneys, U.S. Secret Service special agents and special agents of the IRS.

    In an agreement with prosecutors, Cao pleaded guilty today to six counts of filing false liens against public officials. He admitted he filed 22 false liens in all, the Justice Department, the IRS and the Office of the Treasury Inspector General for Tax Administration said.

    The bizarre Cao saga began in 2007, when the SEC named him a defendant in a fraud lawsuit. At the time, Cao also was under criminal investigation by the U.S. Attorney’s Office for the Southern District of California and the Secret Service for the same fraud scheme — and by the IRS for a tax scheme.

    Cao went on a lien-filing spree in retaliation for the various investigations, claiming in Nevada that various public officials were “debtors” who owed him sums ranging from $25 million to $300 million, according to records.

    Sentencing in the false-liens case is scheduled for Sept. 21 in Las Vegas.

    Cao’s 30-year prison sentence in the Ponzi case was one of the longest sentences in the history of federal white-collar prosecutions in Southern California.

    To keep victims in a state of terror, Cao said he knew people who previously had “chopped up” a baby in front of the baby’s parents, and then killed the baby’s mother, prosecutors said.

    Those threats led to an extortion and firearms case brought by the state of California.

    And Cao dialed up the terror by referencing an “assassination” and “fatal car accident.” When he was arrested, “he possessed a loaded firearm, and body armor and other firearms were found at his residence,” prosecutors said.

  • KABOOM! Web-Based Ponzi Pitchman For Legisi Hit With Judgments Totaling More Than $2.5 Million; Receiver Hires Law Firm To Collect Against Matthew J. Gagnon; Scheme Was Promoted On TalkGold, MoneyMakerGroup, Among Others

    Matthew J. Gagnon, an alleged web-based pitchman of Ponzi schemes and Forex frauds, has been hit with judgments totaling more than $2.5 million by the receiver in the Legisi Ponzi and fraud case. Gagnon also was charged separately by the SEC.

    A web-based pitchman for the alleged Legisi Ponzi scheme has been hit with separate court judgments of $1.69 million and $810,000. Meanwhile, the court-appointed receiver in the Legisi case has hired local counsel in Oregon to pursue the judgments against Matthew J. Gagnon and Mazu Publishing Inc.

    Legisi was alleged by the SEC in 2008 to have operated an international Ponzi and fraud scheme that gathered about $72 million from more than 3,000 investors. The scam was promoted on TalkGold, MoneyMakerGroup and other websites, including Gagnon’s Mazu.com.

    MoneyMakerGroup’s name is referenced in federal court filings in the Legisi case — and records show that shills on TalkGold and MoneyMakerGroup sought to sanitize the scheme even as the U.S. Secret Service and the Michigan Office of Financial and Insurance Regulation were using undercover agents to gather evidence about the fraud.

    The judgments against Gagnon and Mazu illustrate the legal and financial nightmares to which forums such as TalkGold and MoneyMakerGroup contribute. Meanwhile, the fact that Legisi was promoted at the forums even as it was under investigation exposes a myth advanced on such forums that investors would know in advance that a government probe of an “opportunity” was under way.

    In this evidence exhibit given to a federal judge prior to the Legisi asset freeze, a Legisi prospect writes the name "Money Maker Group.com" in longhand. The prospect also wrote the name "Matt Gagnon" in longhand and a telephone number for Gagnon.

    At the same time, the judgments against Gagnon destroy the myths that online promoters of securities schemes have no legal exposure and that offers positioned as “private”  insulate promoters from prosecution.

    Indeed, the judgments against Gagnon resulted from litigation brought by Robert D. Gordon, the court-appointed receiver in the Legisi case, in October 2009. The SEC sued Gagnon in May 2010, seven months after Gordon brought his actions.

    Among the SEC’s allegations against Gagnon was that he continued to promote fraud schemes online — even after the Legisi scheme was exposed.

    “Gagnon has been unrelenting in his efforts to raise money from the public through fraudulent, unregistered offerings,” the SEC said in May 2010. “He remains a danger to the investing public.”

    Despite his sales pitches, “Gagnon has never been associated with a registered broker-dealer and has never been registered with the Commission as a broker or dealer or in any other capacity,” the SEC said.

    After the Legisi HYIP fraud, Gagnon transitioned to pushing Forex frauds, the SEC said.

    Gagnon was hit with an asset freeze after the SEC brought its action.

    Records show that Legisi was among a number of “opportunities” that used E-Bullion, which was operated by James Fayed.

    A jury in Los Angeles last week recommended the death penalty for Fayed for arranging the slaying of his estranged wife, Pamela Fayed.

    Federal prosecutors said in December that AdSurfDaily, yet another alleged Ponzi scheme, had an E-Bullion tie. Records show that Gold Quest International, still another Ponzi scheme, also used E-Bullion.

     

  • URGENT >> BULLETIN >> MOVING: Club Asteria Promoters Blocked By CONSOB, Italian Equivalent Of SEC; Agency Issues Suspension Order; Is ‘Opportunity’ Described As ‘Passive’ Investment Being Targeted At Deaf?

    BULLETIN: UPDATED 7:35 P.M. EDT (U.S.A.) The Commissione Nazionale per le Società e la Borsa (CONSOB), the Italian equivalent of the U.S. Securities and Exchange Commission, is conducting a probe into claims made about Club Asteria and has issued a 90-day suspension order that bars promoters from trading in Italy.

    Club Asteria is based in Virginia. Members say it also conducts business from Hong Kong.

    Promoters in Italy positioned Club Asteria as an investment company that “guaranteed” returns, CONSOB said in preliminary findings.

    CONSOB’s action is detailed in Resolution No. 17790.

    “Asteria Corporation presents itself as a company that ‘started as a U.S. financial company, with the aim of offering . . . humanitarian, educational and financial support in the poorest countries in the world, proposing an investment program with the slogan: ‘How to Invest € 15 After a year and earn 1200 Euros a month and a half for ever!’” the Italian regulator said. (Italian-to-English conversion by Google Translate.)

    The translation uses the phrase “sign language,” giving rise to questions about whether Club Asteria members were targeting the deaf. Investors were encouraged to use PayPal to join.

    Club Asteria reported a problem with its PayPal account last month, claiming promoters had misrepresented the company. A website apparently operated by promoters in Italy appears to have been stripped of content.

    It was not immediately clear if CONSOB removed the content or caused it to be removed from a domain name that ended with an .it extension. The website now carries this message:

    “Il sito à momentaneamente chiuso” — or “The site is temporarily closed.”

    CONSOB said there also were “several” Italian forums in which Club Asteria and the possibility of getting “easy money” from monthly payments were discussed. Word about Club Asteria also was spreading through social-media sites such as Facebook, the regulator said.

    ClubAsteria has been promoted in English on the TalkGold and MoneyMakerGroup forums, both of which are referenced in U.S. court filings as places from which Ponzi schemes are promoted.

    Scores of Club Asteria promoters — not just in Italy — have positioned the firm as a seller of a “passive” investment program that pays $400 a week based on a payment of $19.95 a month.

    Such claims also were made in Italy, CONSOB said.

  • BULLETIN: SEC Charges ‘Sovereign International Group LLC’ Amid Allegations It Funded Ponzi Payout With Cash Infusion From 93-Year-Old Boyfriend Of Accused Fraudster’s Elderly Mother; Arthur Weiss, Ronald Abernathy Charged In Bizarre Scheme That Allegedly Claimed Ownership Of $50 Million Note From ‘U.S. Financial Agency LLC’

    BULLETIN: Two men have been charged by the SEC with fraud in an alleged Ponzi scheme that features allegations that read like fiction — although the agency says they are true.

    Among the SEC’s spectacular claims is that Ponzi payments to investors were made after the 93-year-old boyfriend of the elderly mother of one of the scheme’s accused operators deposited $100,000  with the scheme.  The scheme also traded fraudulently on the names of Major League Baseball, Paul Allen, co-founder of Microsoft, and Ted Turner, founder of CNN.

    Charged in the alleged caper were Ronald Abernathy of Scottsdale, Arizona, and Arthur Weiss of Pasadena, Calif., and Delray Beach, Fla. Also charged was their company: Sovereign International Group LLC (SIG) of Nevada.

    Abernathy is 66; Weiss is 61. Both men were pitchmen for other fraud schemes, and used a deposit made by the elderly boyfriend of Weiss’s elderly mother to make payments to investors in their most recent scheme, the SEC charged.

    At the time the elderly man deposited $100,000 with Weiss and Abernathy, the SEC charged, their bank accounts “collectively held less than $500.”

    The elderly man’s deposit subsequently was appropriated to make $14,450 in Ponzi payments to earlier investors, the SEC charged. All in all, the agency alleged, the scheme gathered $560,000 through the sale of fraudulent promissory notes and investment contracts.

    When investors demanded the return of their funds, Weiss and Abernathy piled on the excuses. Investors were told the men traded in “precious ore concentrate,” along with “multi-million and multi-billion dollar financial instruments” and “fine art,” the SEC charged.

    But it was all just a massive scam — one that included a claim that the men were in “possession of a ‘medium term note’ issued by an entity called ‘U.S. Financial Agency LLC’ with a purported face value” of $50 million, the SEC charged.

    “The U.S. Financial Agency Note is worthless,” the SEC charged.

    Prior to issuing a Summer 2009 update to investors, “Abernathy attempted to deposit the U.S. Financial Agency Note with Banc of America Investment Services,” the SEC charged.  “BAI rejected the worthless U.S. Financial Agency Note.  After this rejection by BAI and despite their knowledge that the U.S. Financial Agency Note was worthless, the Defendants issued the Summer 2009 update which falsely told investors that SIG had been assigned and was in possession of more than $50 million in corporate assets.”

    As payments to investors became further delayed, the men falsely told an investor that they “were in the final stages of a deal that would result in a $15,000,000 to $20,000,000 payout to SIG and that the only thing delaying the payout is the U.S. Department of Homeland Security which was following its standard procedure to make sure that the money involved in the deal had no ties to terrorist organizations or drug trafficking,” the SEC charged.

    “SIG, in its entire existence, has not earned any profits, realized any returns or generated any revenue from any business operations,” the SEC said. “SIG’s only income has consisted of money received from investors.”

    The SIG scam began in “late 2008,” the SEC charged.

    Previous scams in which Abernathy and Weiss were associated were identified by the SEC as “G-5 Global,” “Safevest LLC” and “The Omicron Group LLC.”

    Those three scams led to losses of about $14.7 million, the SEC said.

    Read the SEC complaint.

  • BULLETIN: SEC Employee Was Member Of Collapsed Imperia Invest IBC Fraud Scheme That Targeted Deaf Investors And Drained Millions Of Dollars; ‘Headquarters’ Worker Placed On Administrative Leave

    BULLETIN: An employee of the SEC at its Washington headquarters was a member of a fraud scheme under investigation by the agency and shared misleading information about its ongoing probe with other investors, according to a report to Congress by SEC Inspector General H. David Kotz.

    The document does not reveal the employee’s name or his job title. Nor does it  identify the scheme by name.

    But a date cited in the document matches the date of a dramatic action the SEC’s regional office in Utah filed in October 2010 against Imperia Invest IBC, an extremely murky firm that used “fake” offshore addresses, targeted thousands of deaf investors and stole millions of dollars without returning “a single penny,” according to records. A second date cited in the Kotz document matches the date the SEC obtained a judgment against Imperia.

    The Imperia case has been discussed in Washington’s highest power corridors. It was specifically referenced by President Obama’s Financial Fraud Enforcement Task Force in December 2010 as a firm targeted in Operation Broken Trust, a government action aimed at a broad array of investment-fraud schemes that had drained the U.S. economy of billions of dollars.

    Kotz opened a probe into the matter after receiving information from “a regional office senior official that an employee at SEC headquarters was providing false, misleading, and nonpublic information to investors about an active enforcement investigation and litigation from as early as October 2010 to February 2011,” according to Kotz’s semiannual report to Congress made public yesterday.

    “The regional office senior official was concerned that the employee’s actions not only threatened to jeopardize the ongoing investigation, but also misled several investors into believing that the purported company was legitimate,” according to the Kotz report. “Moreover, some or all of the investors knew that the employee worked at the SEC and, therefore, believed incorrectly that he had first-hand knowledge of the SEC’s investigation and that his representations were credible. After the regional office senior official e-mailed the employee and inquired as to whether he was communicating with investors about the investigation, the employee was placed on administrative leave.”

    Kotz’s office reviewed “nearly 10,000 e-mails” as part of the probe and “took the employee’s sworn testimony,” according to the report. Internet postings also were reviewed, along with transcripts, court records and “other relevant information.”

    “The [Office of Inspector General] found that the employee, by his own admission, communicated with several investors during the SEC’s investigation of, and litigation against, the purported company,” according to the report. “In so doing, the employee shared nonpublic, false, and misleading information with investors.

    “As a result, the OIG found that his conduct not only confused certain investors and gave them a false sense of hope, but it also had the potential to adversely affect an ongoing enforcement investigation,” according to the report.

    Imperia Invest was accused by the SEC of siphoning the money into offshore accounts.

  • ILLINOIS MAN INDICTED: Edward L. Moskop Accused In Alleged Multmillion-Dollar Ripoff Of Elderly Couple, Friends, Relatives — And The Local VFW Post

    In a criminal case that flowed from an SEC civil action, an Illinois man has been indicted on mail-fraud and money-laundering charges in a case that alleges he stole from elderly clients and the local Veterans of Foreign Wars Post.

    Edward L. Moskop, 63, of Belleville, originally was charged in November 2010 by the SEC, which alleged he ripped off an 88-year-old man and the man’s 84-year old wife.  At the SEC’s behest, a federal judge issued an asset freeze while the probe moved forward.

    Federal prosecutors now say the scheme gathered at least $2.4 million over 20 years, with Moskop also ripping off friends, relatives, insurance clients, people referred to the scheme by attorneys and the VFW.

    Moskop was a recidivist, prosecutors and regulators say. Records show he was banned from associating with National Association of Securities Dealers (NASD) reps for ripping off clients more than 20 years ago. NASD was the predecessor agency to FINRA, the Financial Industry Regulatory Authority.

    Regardless, Moskop continued to do business with other people’s money.

    “Moskop had been barred from association with any member of the NASD and was no longer registered to act as a broker in the securities industry,” the FBI said. “It is alleged that from 1991 to 2010, Moskop persuaded customers to provide him with funds for investment, but instead of making the investment, he kept the funds for his own use.”

    Moskop called the elderly couple he was ripping off his “premium clients,” and he was “siphoning away” their wealth and giving them “forged” documents, the SEC charged last year.

    All in all, the SEC said, Moskop stole nearly $300,000 from the couple by making them believe they had accumulated nearly $600,000 in 16 different investments.

    For 20 years, the couple never cashed out any of their holdings, choosing instead to let their profits roll over and believing their money not only was safe, but also was growing, the SEC said.

    In September 2010, however, the couple noticed a renewal discrepancy — and contacted an investment company at which they believed they had holdings through Moskop. The company told them there were no accounts — and that the firm did not even handle the type of investment product the couple believed they had: certificates of deposit.

    Alarmed, the couple contacted their daughter, who went to work unmasking the scheme. Moskop then manufactured stories on the fly, but the daughter demanded the money be returned to her parents.

    Eventually Moskop sent checks for a small portion of the overall investments, but the checks bounced, the SEC said.

    Alarmed again, the daughter did some more digging and found out that Moskop had ripped off her parents in other investments for even greater sums, the SEC said.

    Moskop operated a firm known as Financial Services Moskop and Associates Inc

     

  • URGENT >> BULLETIN >> MOVING: Former NASDAQ Managing Director Charged Criminally, Sued Civilly In Insider-Trading Case; Donald L. Johnson Pleads Guilty To Criminal Securities Fraud Amid Allegations He Cherry-Picked Information While Serving As Stock-Exchange Gatekeeper

    URGENT >> BULLETIN >> MOVING: A former managing director of the NASDAQ stock exchange has been charged by both the SEC and federal prosecutors in an insider-trading case.

    Donald L. Johnson, 56, of Ashburn, Va., already has pleaded guilty on the criminal side of things, the Justice Department said.

    For its part, the SEC said Johnson abused his position, made trades from his work computer and racked up $755,000 dollars in illegal profits over three years.

    Johnson, the SEC said, cherry-picked information on corporate leadership changes, earnings reports, earnings forecasts and regulatory approvals of new pharmaceutical products.

    “This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

    Federal prosecutors also used the fox-and-henhouse analogy.

    “Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished,” said Assistant Attorney General Lanny Breuer, head of the Justice Department’s Criminal Division.

    Meanwhile, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia said Johnson padded his retirement by cheating.

    “He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year,” MacBride said.  “But he learned what every other trader on Wall Street must now realize: We’re watching.”

    Prosecutors gave the U.S. Postal Inspection Service credit for the criminal bust.

    Johnson was a managing director on NASDAQ’s market intelligence desk in New York between 2006 and September 2009, prosecutors said.

    “Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.

    Criminal securities fraud carries a maximum penalty of 20 years in federal prison and a maximum fine of $5 million.