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Tag: SEC

  • BULLETIN: Federal Judge Signs Order That Bars Convicted Attorney Gregory Bartko From Representing Defendants In ‘Billionaire Boys Club’ Ponzi Case In Michigan

    BULLETIN: John Bravata, the subject of the “Billionaire Boys Club” Ponzi scheme case in Michigan brought by the SEC, will have to go shopping for a new attorney.

    U.S. District Judge David M. Lawson of the Eastern District of Michigan has barred Atlanta-based attorney Gregory Bartko from representing Bravata, citing Bartko’s conviction earlier this month for conspiracy, mail fraud and selling unregistered securities in a separate case in federal court in North Carolina.

    Bartko now has been suspended from the practice of law in the Eastern District of Michigan, which “renders him unqualified” to represent Bartko and two family members, Lawson ruled.

    Bravata and his family members have been given 30 days to find a new attorney.

    See earlier story.

  • OWOW Defender And Phil Piccolo Apologist Demands To Know If PP Blog Is ‘Israeli’; Says Blog Spreads ‘Islamophobia’ And That Terror Scares Are ‘FAKE’; Suggests Cover-Up Followed 9/11 Attacks

    Hours after the PP Blog published a story about the FBI foiling a bid to detonate a bomb targeted at American children and families at a Christmas tree lighting ceremony in Portland, Ore., a poster defending OWOW — the apparent successor company to Data Network Affiliates (DNA) — demanded to know if the Blog was “Israeli,” planted the seed that the Blog was racist and accused it of spreading “Islamophobia.”

    “On a sep[a]rate note, [I] was shocked to discover that you are also spreading Islamophobia, so not only are you a two-bit hack, some might say that you are a racist,” a poster identified as “John” wrote in a comments thread below a Nov. 21 story that referenced OWOW. “For your information, most educated people know that the terror scares are FAKE, and that the Sept 11th attacks were carried out by another group, Israel being prime suspects.”

    “John” also railed against the SEC, in response to a comment by the Blog that raised the question of whether OWOW, which is associated with Internet Marketer Phil Piccolo, was offering unregistered securities as investment contracts by advertising that it paid 24 percent annual interest to members who sent in money.

    Piccolo has gained a reputation online as a “one-man Internet crime wave.” During a radio program in August, Piccolo threatened to sue critics and planted the seed that he could cause them to experience physical pain.

    Rather than answering the question, John wrote, “The SEC? In between watching porn all day? The same SEC covering up the biggest financial crime i[n] history, IE the long term manipulation of the Gold and precious metals markets? That SEC?”

    Earlier this year, the inspector general for the SEC said he was investigating reports that some SEC officials had used government computers to view pornography.  Such an announcement, though embarrassing to the agency,  did not legalize securities fraud or create a new defense for securities violations or potential securities violations.

    DNA is a Nevada-registered company whose website is registered behind a proxy in the Cayman Islands. The company explained months ago that it registered the domain privately in the Caymans to prevent management from having to “put up with 100 stupid calls a day.”

    Dean Blechman, DNA’s former CEO, resigned suddenly in February after just weeks with the firm, saying later that the company was engaging in “bizarre” conduct and a campaign of “misinformation and lies.”

    Despite its Caymans’-registered domain, DNA asserted it was paying members of its multilevel-marketing (MLM) program to write down license-plate numbers at churches, “doctors’ offices” and retail outets such as Walmart. The plate numbers, according to DNA, would be entered into a database that was being developed to help law enforcement and the AMBER Alert program rescue abducted children.

    The license-plate program raised privacy concerns, and no guidance was given members in the areas of propriety, legality and safety. DNA later morphed into a purported cell-phone company, proclaiming it had destroyed all competition on earth overnight by offering a free cell phone with unlimited talk and text for $10 a month.

    Members flooded the Internet with ads. DNA later said that it had been hoodwinked by a vendor that had led it to believe it could deliver the $10 unlimited plan. In a bizarre email, the company acknowledged that it had not studied cell-phone pricing before declaring itself the world’s low-price leader. Just weeks before, the company sent an email to announce its cell-phone venture in which it made the all-caps claim of “GAME OVER — WE WIN.”

    By July 4 — and with no new cell-phone plan announced to replace the failed venture — DNA said it was entering the mortgage-reduction and resorts businesses. The purported mortgage-reduction program was positioned as the “MORAL OBLIGATION’ of churches to promote.

    Later in July the company announced it was selling a “protective spray” that would help buyers obscure the license-plate numbers of their cars to guard against getting traffic tickets. The spray purportedly would block cameras from snapping usable photos of the plates, and DNA said the spray protected against “wrongful ticketing by city cameras worldwide.”

    DNA did not explain the incongruity of saying it supported law enforcement in its efforts to locate abducted children while at once working against law enforcement in its efforts to enforce traffic laws. Nor did DNA say whether it believed criminals who abducted children and sped off in cars would find the “protective spray” useful when making a getaway.

    Even as DNA was announcing the availability of its purported “protective spray,” the company announced it soon would adopt a browser-based “DNA World Wide Alert Button” to let members know when a “child is reported missing in your immediate area.”

    It is unclear of DNA ever developed such a button.

    What is clear is that multiple domain names associated with the company now redirect to a website known as “One World, One Website” or OWOW.

    Members have been prompted to send prospects an email that advertises a cure for cancer.

    (Italics added):

    Invest 90 Seconds to earn $4,600 to $46,000 Monthly
    Send A Simple E-mail “The Secret Cure For Cancer”

    JUST FORWARD THIS E-MAIL TO EVERYONE YOU KNOW…
    YOUR PERSONAL WEBSITE IS EMBEDDED IN THIS E-MAIL…

    Invest 90 Seconds + Send out a Simple Cure for Cancer e-mail… Earn $4,600 to $46,000 a Month within 100 days or less…

    +++++++++++++++++++++++++
    The Simple & Short E-mail
    +++++++++++++++++++++++++

    Most likely someone you love will die of Cancer or
    some type of Flu type Disease and when it happens
    you will say I wish I could have done something…

    The SECRET CURE FOR CANCER…
    Are you ready for the Simple & Secret CURE…
    Here it is “DON’T GET IT”…

    THE BOTTOM LINE IS
    Take TurboMune & DON’T GET IT & If you GOT IT
    Take TurboMune To Help You Get Rid You Of IT…

    This product use to sell for $150 a capsule…
    It currently sells in ASIA for $300 a bottle…
    OWOW sells the product as low as $19.95 a bottle…

    ++++++++++++++++++
    Invest 90 Seconds

    The PP Blog first reported the existence of the email Saturday. The Blog also reported that Phil Piccolo had been a member of a company in California that had been expressly warned by the state not to make false and misleading claims in promotional materials and not to advertise that tax “write-offs” were available for joining an MLM company.

    DNA advertised that members who recorded license-plate numbers on its behalf could qualify for hefty mileage deductions despite the fact that no evidence has surfaced that the firm’s license-plate program is a legitimate business.

    “Did you know about your DNA Tax Benefits . . .” the DNA pitch began. “Imagine driving 10,000 miles for your DNA Business = up to a $5,000 Tax Deduction… “IRS Announces 2010 Standard Mileage Rates” IR-2009-111, Dec. 3, 2009… and this is just one of many…”

    Less than enthused about the PP Blog’s reporting, “John” apparently embarked on a strategy of trying to discredit the Blog by advancing a conspiracy theory about the 9/11 attacks, the “the long term manipulation of the Gold and precious metals markets” and tying the Blog to Israel.

    “John” even demanded that another poster answer a question about whether the Blog is “AN ISRAELI?” He also observed that “Millions consider the [Food and Drug Administration] to be a filthy cabal of criminals” and suggested there was nothing misleading about Piccolo’s cancer-cure email to OWOW members.

    The Blog specifically asked “John” why someone would plant the seed that the OWOW TurboMune product cures cancer.

    “THERE YOU GO AGAIN, wrong AGAIN, spreading lies AGAIN,” John claimed. “The email says ‘The Secret Cure For Cancer” IS ‘Dont get it.’”

    “John” offered no comment on the part of the email that read, “THE BOTTOM LINE IS
    Take TurboMune & DON’T GET IT & If you GOT IT Take TurboMune To Help You Get Rid You Of IT…”

  • BREAKING NEWS: Atlanta Securities Attorney Gregory Bartko Jailed Immediately After Guilty Verdicts In North Carolina Fraud Case; Judge Finds That Lawyer Committed Perjury While Testifying

    The Atlanta securities attorney who was defending clients in the alleged Billionaire Boys Club Ponzi case in Detroit and then was indicted in North Carolina on charges that he was running his own fraud scheme has been found guilty.

    Gregory Bartko was immediately jailed by U.S. District Judge James C. Dever III, who found that Bartko had committed perjury on the witness stand in the North Carolina case. Jurors had just returned guilty verdicts against Bartko for conspiracy, mail fraud and selling unregistered securities.

    How the Detroit case in which Bartko was representing accused Ponzi schemer John J. Bravata against civil charges filed by the SEC will proceed is unclear.

    Prosecutors said the North Carolina case against Bartko was one in which an attorney tried to hide behind criminals to insulate himself from prosecution.

    “We should not let criminals get away simply because they have carefully covered their tracks,” said U.S. Attorney George E.B. Holding of the Eastern District of North Carolina.

    “Complicated and difficult crimes by sophisticated and careful criminals may not be easy to investigate or prosecute, but they are some of the most important cases our office handles,” Holding said. “In this case, an experienced Atlanta securities attorney had used other criminal players to insulate himself from prosecution. He had evaded SEC audits, avoided examination by the bar association, and managed to fool nearly everyone, keeping both his license to practice law and his securities licenses.

    “The Defendant was involved in a scheme to defraud victims of millions of dollars but yet was still representing clients before the SEC,” Holding said. “Such a defendant deserves to be prosecuted to the full degree under the law.”

    Assisting in the Bartko case were the FBI, the U.S. Postal Inspection Service, the IRS and the North Carolina Secretary of State’s Office.

    See earlier story on the PP Blog.

    See Holding’s news release on the conviction and jailing of Bartko.

    The 2009 Michigan case became known as the “Billionaires Boys Club” prosecution because a Bravata company was named “BBC Equities,” and the SEC asserted in July 2009 that BBC was intended to stand for “Billionaire Boys Club.”

    A California Ponzi scheme in the 1980s also was known as “The Billionaire Boys Club.”

  • BULLETIN: SEC Files Emergency Action To Halt Alleged ‘Diamond-Themed’ Ponzi Scheme And Related Fraud In Colorado; Richard Dalton Of Golden Accused Of Running Bizarre Multistate Scheme

    BULLETIN: (UPDATED 7:49 P.M. ET (U.S.A.) A Golden man ran a diamond-themed Ponzi scheme as part of a larger fraud, the SEC has charged in an emergency court action in federal court in Colorado.

    The agency said it filed the lawsuit to halt the actions of Richard Dalton and his company: Universal Consulting Resources LLC (UCR).

    Among the explanations for delayed payments to investors were that an airplane the firm used to shuttle diamonds from Africa lost an engine and had to make an emergency landing in Amsterdam and that the firm ultimately had been sold 18,000 fake gems, according to the complaint.

    Dalton’s age was not immediately clear. Regulators said he lived in Golden, and had been operating the diamond scam and a related fraud dubbed the “Trading Program.”

    UCR “solicited investors for two fraudulent offerings that were generally referred to as the ‘Trading Program’ and the ‘Diamond Program’ and promised returns of between 60% to 120% per year,” the SEC charged.

    “Dalton acted as an unregistered broker-dealer in actively soliciting investors to purchase securities – and commissioning finders and brokers to do the same – and Dalton and UCR offered and sold securities in violation of the registration provisions of the federal securities laws,” the SEC charged.

    The scheme began in March 2007 and operated through June 2010, the SEC alleged.

    Regulators charged that the scheme began to collapse in March and April of 2010.

    “From that time until at least November 12, 2010, Dalton and UCR have made false and misleading statements to investors to try to lull them into complacency and delay the disclosure of their fraudulent scheme,” the SEC charged.

    The diamond-themed fraud evolved from the initial fraud, the agency alleged. All in all, about 130 investors from 13 states plowed approximately $17 million into the schemes, according to the emergency filing.

    Dalton “funded his personal life at the expense of investors and also transferred more than $900,000 in order to purchase a home in the name of his wife,” the SEC charged.

    The SEC identified Marie Dalton as Dalton’s wife. She is named a relief defendant, meaning the agency believes she received ill-gotten gains from the scheme. Richard Dalton doled out thousands of dollars in cash as part of the scheme, including $936,000 in cash to purchase a home in his wife’s name, $35,000 for cosmetic dentistry, $38,000 for  Toyota truck and $5,000 for his daughter’s wedding, the SEC charged.

    The agency is seeking an asset freeze.

    “[I]n early 2009, UCR began offering the Diamond Program, which Dalton claimed would profit by using investor funds for diamond trading,” the SEC charged. “Similar to the Trading Program, Dalton claimed that investor funds would be safely held in an escrow account. Under the Diamond program, Dalton enticed investors with a guaranteed ten percent monthly return – or 120% yearly return.”

    Commission-based salespeople helped Dalton sell the scam, the agency said.

    “Investors typically learned about UCR’s investment programs from ‘finders’ or ‘brokers’ who were paid commissions by UCR, or from earlier investors who had received what they believed to be monthly distributions of profits from UCR, some of whom also received commissions for bringing in new investors,” the SEC said.

    “According to one investor,” the SEC continued, quoting the investor, “[A]s a result of the consistent returns from this investment, I started telling my friends and family about the investment I had made with Dalton. My friends and family started meeting with Dalton and some of them eventually invested with Dalton.”

    Some investors invested funds from their self-directed IRA retirement accounts, the SEC said.

    “As part of soliciting investors for the Trading Program, Dalton and UCR falsely told prospective investors that their invested funds would be held safely in an escrow account at a bank in the United States, and that a European trader (often referred to simply as ‘the Trader,’ but never known or referred to by name) would use the value of that account, but not the actual funds, to obtain leveraged funds to purchase and sell bank notes,” the SEC charged.

    The diamond-themed scheme operated in similar fashion, the SEC said.

    Read the emergency complaint.

    The complaint includes a reference to a Q&A session the SEC conducted with Dalton while investigating the case.

    Dalton refused to answer the following questions, according to the SEC:

    • Q Has UCR earned a profit in any year between 2007 and 2010?
    • Q How much revenue has UCR earned between 2007 and 2010?
    • Q Is it true that you currently have insufficient money to repay investors the
      outstanding principal and returns they are owed in the [Trading Program]?
    • Q Is it true that some of the money that you raised for the [Trading Program] was used to repay other investors rather than being invested in foreign . . . notes?
    • Q Is it true that some of the money you raised for the [Trading Program] was used for your own personal benefit to cover your personal expenses
      instead of for the benefit of that investment?
    • Q Is it true that the foreign note investment was a Ponzi scheme?
    • Q Is it true the mid-term note investment was a Ponzi scheme?
    • Q Did UCR ever buy any diamonds?
    • Q Have you ever bought any diamonds?
    • Q Has any investor money ever been used as collateral for the purchase of
      diamonds?
    • Q Have you ever engaged a bank to purchase diamonds?
    • Q Do you currently have any diamonds in your possession?
    • Q Do you have diamonds at your home?
    • Q Do you any diamonds in storage?
    • Q Have you moved diamonds to a foreign country?
    • Q Have you ever made any profit from the diamond investment business?
    • Q Isn’t it true that the diamond program is a Ponzi scheme?

    If the SEC’s allegations are true, it means that Dalton and the company were telling tall tales to investors even after the agency had questioned him under oath. Indeed, the agency said, the Q&A session took place in August 2010 — and Dalton and the company made “false and misleading statements to investors” right up until last week.

    Among the claims made as recently as last week was that investors could expect their funds   “soon,” the agency said.

    The “soon” explanation was part of a long-running pattern, and “after ‘soon’ had passed,” Dalton provided “a different excuse for why investors have not been repaid.” the SEC charged.

    One of the excuses was that the “number three engine” on the plane the company used to transport diamonds from Africa went out “and [the plane] had to land in Amsterdam for repair,” the SEC charged.

    Dalton next claimed the company discovered after the plane finally made its way to New York that “18,000 fake diamonds” were included in its cargo.

    He also did not turn over documents, according to the complaint.

    “Dalton produced no documents to the SEC,” the agency alleged. “He provided no evidence that the Trading Program and Diamond Program were legitimate investment programs. UCR did not produce a single accounting record.”

  • Justice Department Using Undercover Agents To Battle White-Collar Criminals; Top Official Says Investigative Tactics Normally Used To Prosecute Organized Crime Figures Useful In Battling Fraud Epidemic

    EDITOR’S NOTE: The remarks below are excerpted from a speech last week in New York by Assistant U.S. Attorney General Lanny A. Breuer. As the PP Blog has previously reported, the Justice Department and agencies such as the FBI and U.S. Secret Service have been using undercover operatives to infiltrate criminal operations and networks used by the criminals.

    One of the FBI investigations Breuer referenced was the Trevor Cook Ponzi scheme in Minneapolis. The scheme consumed tens of millions of dollars, defrauding victims of at least $158 million. Many mysteries remain in the case.

    Meanwhile, undercover operatives also recently were used to expose penny-stock schemes operating in Florida.

    It also is known that the Secret Service used undercover operatives in the AdSurfDaily case, the INetGlobal case, the Regenesis 2×2 case, the Legisi case and a case involving alleged international fraudster Vladislav Horohorin, accused of using criminal forums to peddle stolen credit-card information.

    Here, now, some excerpts from Breuer’s speech . . .

    Part of Trevor Cook's stash.

    “Now, as I’m sure you know, financial criminals can be extraordinarily innovative, and they are often expert at covering their tracks. So we are always looking for creative ways to gather the evidence we need to bring financial criminals to justice. To that end, we have begun increasingly to rely, in white collar cases, on undercover investigative techniques that have perhaps been more commonly associated with the investigation of organized and violent crime.

    “As part of this effort, we have significantly strengthened the Criminal Division’s Office of Enforcement Operations (known as OEO), which is the office in the Justice Department that reviews and approves all applications for federal wiretaps from across the country. We have a dynamic new OEO Director, Paul O’Brien, and we’ve substantially increased the number of attorneys at OEO who review these wiretap applications, adding to their ranks experienced prosecutors and recent graduates who have completed federal clerkships. As a result, the number of wiretaps we authorize – in all types of cases – has gone up.

    “Let me give you just two examples of white collar cases in which we have used undercover techniques, both of which also highlight areas in which we have stepped up our white collar enforcement efforts more generally.

    “The first example is the case of Trevor Cook, which was prosecuted by the U.S. Attorney’s Office in Minneapolis. Mr. Cook is just one of dozens of individuals whom we’ve prosecuted in recent months for participating in investment fraud schemes. Over the course of several years, Mr. Cook schemed to defraud at least 1,000 people out of approximately $190 million by pretending to sell them investments in a foreign currency trading program.

    “In reality, he was pocketing the money or using it to pay off other investors. As was recently reported in the New York Times, we gathered evidence against Mr. Cook by using an undercover informant to record his transactions and conversations. [Cook] pleaded guilty earlier this year and was recently sentenced to 25 years in prison.

    “Trevor Cook is one of literally hundreds of financial criminals who have preyed upon vulnerable, individual investors and bilked them out of their savings using investment fraud schemes. And as with Mr. Cook, we have been prosecuting these people aggressively, all over the country – from New Jersey and Connecticut to Texas and California, and everywhere in between.

    “The second example comes from our enhanced efforts in the area of FCPA enforcement. Earlier this year, as I’m sure many of you know, we indicted 22 defendants in the military and law enforcement products industry for their participation in widespread schemes to bribe foreign government officials. These indictments resulted from the Department’s most extensive use ever of undercover law enforcement techniques in an FCPA investigation, and they represent the single largest prosecution of individuals in the history of our FCPA enforcement efforts. In September, one of the defendants in the case, Richard Bistrong, pleaded guilty . . .

    “Over the last 18 months, we’ve devoted significant additional resources to the Criminal Division’s Fraud Section. We’ve recruited talent not only from white shoe law firms, but also from a deep pool of prosecutors around the country who bring with them extensive experience in prosecuting everyone from violent mobsters to dangerous terrorists. We are now bringing that extraordinary talent and experience to bear on prosecuting financial fraudsters.”

    See related story on alleged Pathway To Prosperity Ponzi scheme.

    See related story on alleged Legisi Ponzi scheme.

    See related story on Matt Gagnon and Mazu.com.

  • Feds Charge Robert Stinson Criminally On Heels Of SEC Lawsuit; Prosecutors Say ‘Life’s Good’ Operator Stole More Than $17 Million In Ponzi Scheme, Wired Money Even As FBI Was Conducting Raid

    Even as the FBI was executing search warrants in the case of Life’s Good Inc. operator Robert Stinson Jr., Stinson was “wiring stolen funds out of Life’s Good bank accounts to other accounts,” federal prosecutors said.

    That act alone led to criminal charges of obstruction of justice. In a 26-count indictment in an alleged Ponzi scheme in which Stinson was accused of stealing more than $17 million from more than 260 investors, Stinson also was charged with wire fraud, mail fraud, money-laundering, bank fraud, filing false tax returns and making false statements to federal agents.

    At 12:06 p.m. on June 29 — the date of the raid and while federal agents were executing search warrants — Stinson began a series of wire transactions in which he moved at least $225,000 to prevent the cash from being seized, according to the indictment.

    Two of the transactions occurred during the same minute and involved two separate banks, according to the indictment.

    The scam involved promises of fixed returns of between 8 and 16 percent in four bogus real-estate hedge funds, prosecutors said. They added that Stinson was not a graduate of the Massachusetts Institute of Technology or Pennsylvania State University, as he had claimed.

    Although Stinson, 55, of Berwyn, Pa., told a tale of fabulous business success, he actually was a recidivist securities offender and had multiple fraud convictions. Part of his most recent fraud involved and online “webinar” and a PowerPoint presentation, according to the indictment.

    Stinson claimed to have “funded millions of dollars in real estate rehab and improvements as well as saved over 1,500 families from foreclosure free of charge,” according to the indictment.

    “Advisors” who drove business to the criminal firm were paid commissions of between 5 percent and 10 percent of the money they brought in.

    In 1986, he was convicted of wire fraud and larceny in U.S. Court in Delaware, according to records. In 1987, he was convicted of forgery and larceny in New Jersey state court. During the same year, he was convicted of mail fraud in U.S. District Court for the Eastern District of Pennsylvania.

    Meanwhile, in 1996, he was convicted of criminal conspiracy in state court in Pennsylvania. In 2001, he was convicted of bank fraud in U.S. District Court for the Eastern District of Pennsylvania.

    Stinson filed two bankruptcy petitions in 1999, one in October and another in December, according to records.

    Nine years earlier, in 1990, he was charged with fraud by the SEC. He was ordered to pay a judgment of $7,680, but the judgment remains unpaid, according to court filings.

    The SEC sued Stinson in June. The criminal probe was conducted by the FBI, the IRS and the U.S. Postal Inspection Service.

    If convicted on all counts, Stinson faces a maximum sentence of 329 years in federal prison and a fine of $6.8 million.

  • BULLETIN: Woman Who Did Not Report Ponzi Schemer Richard Piccoli Sentenced To 18 Months In Federal Prison For ‘Misprision Of Felony’ And Tax Charge; Kathleen Fuoco Turned ‘Blind Eye’ To Fraud, Prosecutors Say

    BULLETIN: In a case that could send shockwaves across the culture of promoting scams and accepting payments from scams, a New York woman who turned a blind eye to Richard Piccoli’s long-running Ponzi scheme in New York state has been sentenced to 18 months in federal prison for misprision of a felony and willful failure to file tax returns.

    Kathleen Fuoco, 60, of West Seneca, N.Y., pleaded guilty to the charges in June. She was sentenced today in Buffalo. Piccoli, 83, was sentenced to 20 years in prison last year. He became infamous in the Buffalo region for targeting people of faith in the scheme.

    Fuoco knew Piccoli was operating a scam, but did not report him, prosecutors said in June. Her failure to report the scheme brought about the misprision charge and also resulted in an agreement with prosecutors in which a financial judgment of $25 million would be placed against Fuoco, the total amount of restitution due victims.

    Piccoli operated a firm known as Gen-See Capital Corp., and directly targeted Christians and senior citizens.

    “Our seniors and clergy are absolutely pleased with Gen-See’s Re-Investment Program,” Piccoli said, according to marketing materials gathered by investigators as evidence in the case.

    The Piccoli prosecution was brought after an undercover sting by the U.S. Postal Inspection Service and the IRS.

    After Fuoco’s guilty plea in June,  U.S. Attorney William J. Hochul said “the public should know that if you attempt to defraud any hard working citizen or turn a blind eye while someone else is committing fraud, you will be caught and prosecuted to the fullest extent of the law.”

    Hochul built on his earlier remarks after Fuoco’s sentencing today.

    “The best defense for investors is to conduct your own due diligence and research,” he said. “When unscrupulous defendants take advantage of others through fraud, however, my office stands ready to bring the full force of law to punish the crime.”

    Misprision of felony is a charge that serial promoters of online scams such as autosurfs, HYIPs and 2×2 matrix cyclers potentially could face. The schemes proliferate in no small measure because promoters who play dumb to the fraud create the conditions that make it possible for the “programs” to go “viral” on the Internet.

    Some promoters help fuel scheme after scheme after scheme, perhaps saying later that they were surprised the programs proved to be fraudulent.

    Such bids to create plausible deniability have been unmasked by the U.S. Secret Service in a number of investigations since 2008. In some cases, the agency has used undercover identities to join the schemes and later advised federal judges that the agents were instructed by members of the schemes to avoid using certain phrases in sales pitches to minimize the chance of getting caught.

    In certain undercover operations, the Secret Service revealed it had agents in rooms or venues from which scammers were delivering sales pitches to an audience. Some schemers have been kept under surveillance for weeks by agents.

    Court documents in the alleged AdSurfDaily (Florida) and INetGlobal (Minnesota) Ponzi schemes — and in the alleged Regenesis 2×2 (Washington state) Ponzi scheme — show that agents moved from location to location and even city to city to build evidence against Ponzi schemers.

    Meanwhile, court documents show that undercover Secret Service operatives and their state law-enforcement colleagues even have posed as interested investors and walked right through the front doors of offices operated by suspected fraudsters.

    Court filings in the alleged Legisi Ponzi scheme brought by the SEC show that the behavior of the alleged schemer changed after he came to understand he was under investigation — a development that allegedly led to even greater chicanery to hide the scheme.

  • KABOOM! Florida — Again: Palm Beach Operators, Firms Charged With Running Scheme-Within-Scheme In Tom Petters’ Ponzi; More Than $1 Billion Plowed Into Rathole, SEC Says

    EDITOR’S NOTE: The SEC has been particularly active in Florida in recent weeks. Now, the agency once again has gone to federal court to allege a spectacular fraud involving people and companies in the Sunshine State. This one involves more than $1 billion and is linked to the Tom Petters’ Ponzi case in Minnesota.

    Two Florida men and their companies assisted convicted Ponzi schemer Tom Petters in keeping his $3.65 billion fraud afloat by hatching a scheme-within-a-scheme that assured hedge-fund investors that their money was safe, the SEC said in a lawsuit.

    The scheme occurred prior to the filing of criminal charges against Petters in 2008, according to court documents. Petters, who also faces an SEC lawsuit, was convicted of running the Ponzi scheme last year. In April, he was sentenced to 50 years in federal prison.

    SEC investigators now say Bruce F. Prévost, 50, of Palm Beach Gardens, and David W. Harrold, 51, of Del Ray Beach “falsely assured their investors and potential investors that the flow of their money would be safeguarded by collateral accounts and described a phony process for protecting their assets.

    “When Petters was unable to make payments on investments held by the funds they managed, Prévost, Harrold, and their firms concealed it from investors by concocting sham note exchange transactions with Petters,” the SEC said.

    Calling it a “betrayal” that had cost investors more than $1 billion, Robert Khuzami, director of the SEC’s Division of Enforcement, said the Florida men parlayed the losses of others into gains for themselves.

    “Prévost and Harrold portrayed themselves as guardians of their hedge fund investors while in fact they facilitated Tom Petters’s fraudulent scheme through lies and deceit,” Khuzami said.

    The case was filed in Minnesota.

    Prévost, Harrold and their companies — Palm Beach Capital Management LP and Palm Beach Capital Management LLC — pocketed more than $58 million in fees from the scheme, the SEC charged.

    At the same time, they raised additional money to plow into the scheme “by borrowing money from two Cayman Islands funds that were also established by Prévost and Harrold,” the SEC charged. The agency identified the offshore funds as Palm Beach Offshore Ltd. and Palm Beach Offshore II Ltd.

    “From 2004 through at least as late June 2008, the defendants funneled money into the Petters Ponzi scheme by selling interests in the Palm Beach Funds to investors throughout the United States,” the SEC charged. “Investors in the Palm Beach Funds included individuals, foundations, family trusts and other hedge funds. The Funds invested all investor contributions into the Petters Ponzi scheme. Of the approximately $3.65 billion invested in the Petters Ponzi scheme at the time of its collapse, the Palm Beach Funds accounted for more than $1 billion.”

    Florida has been plagued by Ponzi schemes and fraud schemes. In January, U.S. Attorney General Eric Holder ventured to the state to introduce President Obama’s Financial Fraud Enforcement Task Force.

    Holder announced the Task Force at a speech in the Palm Beach area, using the event at the Forum Club of the Palm Beaches to drive home the message that Ponzi schemers, mortgage fraudsters and financial criminals are going to have many sleepless nights in the months ahead.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned. “If you fabricate a financial statement, if you propagate an investment scheme, if you are complicit in an act of financial fraud, you are writing your ticket to jail.”

  • KABOOM! More Bad News For Fraudsters: ‘FBI Undercover Operation’ Leads To Florida Fraud Busts; 20 Charged In Alleged Schemes, Including ‘CHiPs’ Actor

    An undercover sting conducted by the FBI has resulted in fraud charges being filed against 20 individuals or companies. The sting was centered in southern Florida. Among those charged was Larry Wilcox, one of the stars of the long-running television program “CHiPs” in which Wilcox played the role of a California police officer, the SEC said.

    Records suggest Wilcox agreed to become a government informant after becoming implicated in the probe.

    Wilcox, 63, of West Hills, Calif., was among a group charged both civilly and criminally. The case was brought after the FBI conducted an undercover probe into penny-stock schemes.

    “Securities fraud is an equal opportunity crime — it runs the gamut from very large to very small publicly traded companies,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

    Ferrer noted that “even microcap companies are plagued by fraudsters who seek to manipulate the stock market to line their own pockets.”

    Separately, the SEC said the sting was conducted “in such a way that no investors suffered harm” — an announcement that could send shockwaves across the fraud universe because it demonstrates that investigators are infiltrating schemes and relying on informants to unmask the schemers.

    Wilcox, for example, believed he was doing business with a “corrupt trustee,” according to court filings. Records suggest that Wilcox entered a deal with the government in July in which he would cooperate in an ongoing probe.

    “These corrupt promoters meticulously planned their schemes down to the last detail, except for the possibility that they were walking into an undercover operation,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “This joint law enforcement effort is a stark warning to those who embark on securities fraud schemes that we may be listening and we may be watching.”

    Whether the SEC and FBI were performing similar stings in the corrupt worlds of HYIPs, autosurfs and 2×2 matrix cyclers as promoted on Ponzi forums was not immediately clear. The Justice Department, however, has made it clear in court filings that it is infiltrating criminal forums and is using undercover operatives.

    The U.S. Secret Service also has made it clear that it is using undercover operatives in its investigations of corrupt enterprises such as HYIPs, autosurfs and 2×2 matrix cyclers.

    Read the SEC’s statement:

    Read the statement of U.S. Attorney Ferrer and remarks from the FBI:

    Read a story about a Secret Service probe in which undercover operatives were used to infiltrate criminal forums:

  • Another MPB Today Site Uses Walmart’s Name In Domain Name; Positions ‘Grocery’ Biz As ‘Freedom Club’ In Domain Hidden Behind Proxy; Uses Images Of Buffet, Trump And Late Sam Walton

    This pitch for MPB Today positions it as the Walmart Freedom Club. The pitch misspells the word "prosper" as "prospour." The website registration is hidden behind a proxy, and uses Walmart's name in the domain name. It is unclear if Walmart authorized the domain name or the use of its intellectual property in the MPB Today promo.

    Yet-another domain linked to the purported MPB Today “grocery” program is using Walmart’s name in its domain name. The domain name is registered behind a proxy and uses images of Warren Buffet, Donald Trump and Sam Walton to position the opportunity as a “Freedom Club.”

    Sam Walton is the late founder of Walmart. It is unclear if the owners of the website have Walmart’s permission to use its name and the likeness of Sam Walton in a pitch for the MPB Today program. Also unclear is whether the website owners have the permission of Trump and Buffet to use their images in promos for MPB Today.

    Separately, yet another pitch for MPB Today features a narrator who notes that food is necessary to stay “alive” and laments, “I wish we could sell air too.” The “air” video is on a restricted YouTube site maked as “unlisted.” An unlisted video “means that only people who know the link to the video can view it (such as friends or family to whom you send the link,” according to YouTube.

    MPB Today is a multilevel-marketing (MLM) program based in Pensacola, Fla. The “opportunity” is tied to a grocery business in Pensacola known as Southeastern Delivery. Both companies are linked to Gary Calhoun, who has a poor track record with the Better Business Bureau and was the recipient of a warning letter from the Food and Drug Administration for his marketing of a product that purported to be a treatment for Lou Gehrig’s disease, Herpes and Alzheimer’s, among others.

    The new domain that uses Walmart’s name is at least the third linked to the MPB Today program — and the second to position MPB Today as a “club” tied to Walmart.  The domain was registered Sept. 9, after MPB Today itself removed images of Walmart, Buffet and Trump from the homepage of its website.

    Other MPB Today-linked websites branded with Walmart’s name imply the retail giant offers free groceries or that Walmart is partnered with MPB Today.

    Meanwhile, still-other websites linked to the MPB Today program position it as a “Grocery Assistance” program and a program linked to the Food Stamp program administered by the U.S. Department of Agriculture. MPB Today also is being pitched from known Ponzi and criminals’ forums such as ASA Monitor, TalkGold and MoneyMakerGroup.

    On Wednesday, the SEC filed an emergency action in federal court in Utah to stop a program known as Imperia Invest IBC dead in its tracks, amid allegations it had fleeced millions of dollars from thousands of Americans with hearing impairments. Like MPB Today, Imperia was promoted on the Ponzi forums.

    Among the allegations in the Imperia case were that the operators were using trademarks and the intellectual property of a major company — Visa Inc. — without the company’s authorization. All in all, more than 14,000 Imperia investors were fleeced, the SEC said.

    In this separate promo for MPB Today, a narrator notes that food is necessary to stay "alive" and laments that he wishes members also could sell "air" through the MPB Today MLM program.

  • BULLETIN: SEC Gains Asset Freeze, Seeks Shutdown Of Imperia Invest In Emergency Action; Program Pitched On Same Ponzi Forums Promoting MPB Today; Agency Says Imperia Defrauded Thousands Of Deaf Americans

    BULLETIN UPDATED 5:02 P.M. EDT (U.S.A.): The SEC has gone to federal court in Utah to halt the operations of Imperia Invest IBC, alleging a spectacular fraud that fleeced money from thousands of Americans with hearing impairments.

    Imperia was promoted from the MoneyMakerGroup Ponzi forum — one of the Ponzi forums promoting the MPB Today “grocery” MLM. Imperia also was the topic of discussion and defenses on TalkGold and ASAMonitor, two other forums that are pitching MPB Today.

    The SEC’s allegations against Imperia are stunning. More than 14,000 investors were defrauded worldwide, the agency said.

    Among the victims were thousands of deaf investors in the United States, the SEC said.

    Imperia gathered relatively small sums from thousands of people, the SEC charged, noting that “no evidence has been found that any of the investors have received a single payment.”

    “Imperia Invest IBC is a web-based entity that claimed, until late 2009, to be located in the Bahamas,” the SEC charged. “The Bahamian address listed by Imperia is fictitious. Imperia now claims to be located in Vanuatu. However, Imperia is not registered to do business in Vanuatu and the address listed on its website appears also to be fictitious. Neither Imperia nor its securities are registered with the Securities and Exchange Commission. Imperia is not licensed or registered with the Commission, with any state, or with any Self Regulatory Organization.”

    Categorically absurd representations of earnings and the program’s potential were made to investors, the SEC said.

    “Investors were promised eye-popping amounts of money in return for a simple $50 or $100 investment, and Imperia has made numerous excuses on its website about why these returns haven’t been paid,” said Ken Israel, director of the SEC’s Salt Lake Regional office.

    “The Imperia website shows an example of such earnings in which a $50 investment will return $134,000 to the investor in six months,” the SEC charged. At the same time, the agency said some investors were told that spectacular sums were due them for doing business with Imperia.

    “Imperia represented to one investor who invested $150.00 with Imperia that Imperia owed him $36,610,755.20 within a two year time frame,” the SEC charged. “Another individual’s account statement who invested $500 in July 2007 showed he is owed $43,907,652.20 as of May 2010.”

    It was not immediately clear how so many deaf investors became involved in Imperia. A federal judge has approved an asset freeze.

    Imperia called its product Traded Endowment Policies (TEP), which the SEC described as “the British term for viatical settlements.”

    “A TEP or viatical settlement involves the sale of an insurance policy by the policy owner before the policy matures, and policies are sold at a discount from face value in an amount greater than the current cash surrender value,” the SEC said.

    “There are at least 14,000 [Imperia] investors worldwide with a total investment exceeding $7 million,” the SEC said. “In the United States, there appear to be approximately 6,000 investors, most of whom belong the hearing impaired community, who have invested in excess of $4 million with Imperia.”

    Imperia used offshore payment processors such as “Liberty Reserve, located in Costa Rica; Perfect Money, located in Panama; and Procurrex, located in the British Virgin Islands,” the SEC charged. “Once Imperia received funds from Investors, it appears that Imperia then transferred amounts from these accounts to foreign bank accounts, including but not limited to accounts located in Cyprus and New Zealand.”

    Even as Imperia was ripping off investors, it also was infringing trademarks and the intellectual property of Visa, the credit-card service, the SEC charged..

    “Imperia also requires that investors purchase a Visa debit card to access their investment proceeds,” the SEC said. “Imperia charges customers a fee to purchase the Visa debit card ranging from $145 to $450.

    “Visa has not authorized Imperia to use its name or trademarks and has sent Imperia a cease-and-desist letter to halt its unauthorized use of the Visa name and logo,” the SEC said. “There is no evidence that any investor who has ordered a Visa debit card from Imperia has actually received such a card.”

    One poster on the MoneyMakerGroup forum advised prospects that he would keep an “open mind” about Imperia, according to web records.

    “Anyway, in the final analysis each person must make their own decision,” the poster said in 2007.

    While the MoneyMakerGroup poster was holding forth about keeping an “open mind,” Imperia was cloaking itself to siphon millions of dollars, according to web records and court records.

    “Imperia took proactive steps to conceal the identity of its control persons by using an anonymous browser to host its website, by communicating with all investors via email without disclosing the identity of any control persons and by establishing off-shore Paypal-style bank accounts to conceal the recipient of the investment proceeds,” the SEC charged.

    In July, the Financial Industry Regulatory Authority issued a warning about HYIP schemes pitched online. In May, the U.S. Postal Inspection Service accused an HYIP known as Pathway To Prosperity of defrauding more than 40,000 people in a scheme that took in about $70 million.

    Pathway To Prosperity also was promoted on the Ponzi and criminals’ forums. ASAMonitor, TalkGold and MoneyMakerGroup are specifically referenced in court filings in the Pathway to Prosperity case.

    MoneyMakerGroup is specifically referenced in court documents in the alleged Legisi HYIP and Ponzi scheme, a fraud that allegedly gathered more than $70 million.

    Read the SEC complaint against Imperia.