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Tag: securities fraud

  • ‘TEXT CASH NETWORK’: RED FLAGS GALORE: New ‘Opportunity’ Linked To Ponzi Boards And To Phil Piccolo-Associated ‘Firms’: Hype, Vapid Claims, Alexa Charts, Launch Countdown Timer, Brand Leeching — And Possible Ties To Long-Running SEC Case

    Until four days ago, the OWOW website associated with Florida-based huckster Phil Piccolo shared this message about Text Cash Network (TCN) with visitors. Joe Reid, a Piccolo associate, is leading conference call-cheerleading for TCN. Reid previously led cheers for Data Network Affiliates, another business linked to Piccolo.

    EDITOR’S NOTE: A “program” known as Text Cash Network (TCN) that purports to share “advertising” revenue from text messages is spreading virally on the Internet. This column includes information prospective TCN members might want to consider before joining and asking others to join. There are red flags galore. Last week, the PP Blog compiled some research and sought comment from the SEC about the emerging program because the name of Brett Hudson, billed in TCN promos as the firm’s “president,” appears in a 2005 “press release” that quotes Hudson and Richard A. Altomare. The SEC acknowledged receipt of the Blog’s inquiries, but did not comment.

    Altomare, of Boca Raton, Fla., was sued in this 2004 SEC action amid allegations of penny-stock fraud coupled with bogus press releases. The case, which involved an Altomare company known as Universal Express Inc., evolved to become an exceptionally ugly one. Altomare ultimately was found in contempt of court for flouting judicial orders and ordered jailed in New York. The court-appointed receiver in the case allegedly received threatening emails from individuals unhappy about the SEC’s action and follow-up events.

    Here are quotes from two of the threatening emails, which allegedly were sent by investors. The quotes appear in an exhibit filed in federal court in the Southern District of New York:

    1.) ” . . . you are going to be hit with a shit load of lawsuits, and if justice doesn’t prevail the good old American way then I will make it my personal duty to enforce the justice and I along with others will come and beat your ass to a bloody pulp, along with Judge (jackass) Lynch . . .”

    2.) . . . you fu[!!!!!] slut . . . don’t get smart . . . you have no idea what could happen to you . . .”

    Hudson, who has not been accused of wrongdoing, was not named a defendant in the SEC case. TCN promoters have identified him as president of Universal Cash Express, a company with a name similar to Altomare’s Universal Express Inc. entity. The 2005 “press release” that quotes Hudson and Altomare also identifies Hudson as the president of Universal Cash Express. Altomare’s title was not listed in the 2005 release, but the document was issued under the name of Altomare’s Universal Express entity ensnared in the SEC probe.

    Until a few days ago, TCN was prominently featured on the website of OWOW (OneWorld, One Website), a site linked to Data Network Affiliates (DNA) and serial MLM scammer Phil Piccolo. Piccolo is known online as the “one-man Internet crime wave.”

    Like Altomare’s Universal Express Inc. entity, DNA was registered as a Nevada company. DNA, like  Universal Express Inc., also conducted business from Boca Raton. (See the Better Business Bureau listing for DNA, which purported to be in the business of helping the AMBER Alert program rescue abducted children — while also purporting to be in the cell-phone, mortgage-reduction and “resorts” businesses. Although DNA appears to be defunct, it maintains a website — one that once redirected to the OWOW website. While actively conducting its purported business, DNA made bizarre claims about “going public.” Such claims have been associated with penny-stock scams and securities fraud.)

    Joe Reid, a Piccolo business associate who helped DNA flog its mind-numbing mess to the international masses, was one of the speakers on a Nov. 11 TCN conference call. TCN is proceeding out of the gate in largely the same fashion DNA came out of the gate: conference calls featuring Reid, claims of rapid expansion involving tens of thousands of new recruits in days, a launch-countdown timer (now removed), suggestions of incredible earnings potential 10 levels deep, Blog and website posts, YouTube videos.

    Here, now, a list of  additional red flags and some additional background . . .

    RED FLAG: Piccolo has a history of threatening to sue critics and of planting the seed that, if lawsuits do not work, he knows people who can cause critics to experience physical pain. He is known to operate in the area of Boca Raton, although Piccolo also has been known to operate in California.

    RED FLAG: DNA promos in 2010 referenced a purported texting and data expert by the name of Anthony Sasso. Sasso, a convicted felon arrested in a 2005 racketeering case in Broward County, Fla.,  was described in DNA promos as “The King Of Data For Dollars” and was said to be the “owner of the largest database of text numbers in the world.” Although Sasso appears not to have been referenced in the context of TCN, both DNA and TCN purport to be in businesses that involve texting.

    RED FLAG: Early affiliates of TCN have identified Brett Hudson as the president of Text Cash Network Inc. Records in Wyoming show a company by that name was registered in the state on Nov. 8, 2011 — just days ago. Affiliates also have vaguely described Text Cash Network Inc. as “a new division of a five year old communications company owned 100% by The Johnson Group.” No state of registration was listed in promos that referenced The Johnson Group, and the “communications company” and the “division” under which Text Cash Network Inc. purportedly operates are far from clear.

    Wyoming records show a company by the name of The Johnson Group Inc., but it is unclear if it is the same company referenced by TCN affiliates. The Wyoming records of The Johnson Group entity contain this notation: “Standing – Tax: Delinquent.” The firm appears to have used a residential dwelling in New Jersey as the address of its corporate headquarters.

    RED FLAG: TCN’s website design and “prelaunch” approach are similar in a number of key ways to the tactics employed by DNA, which planted the seed last year that it could help the AMBER Alert program rescue abducted children by paying DNA members to record the license-plate numbers of automobiles for entry in a purported database. (Some of these commonalities are referenced lower in this story.)

    Until four days ago, a promo for TCN appeared on the website of OWOW, a site linked to Piccolo. (Referenced in Editor’s Note above.) The TCN promo then vanished mysteriously, possibly because Ponzi forum posters were questioning whether Piccolo was involved with TCN. The OWOW website previously was linked to the DNA scam, and also was linked to purported cancer cures.

    DNA — as is a Piccolo signature — sold the purported tax benefits of joining the DNA “program,” which traded on the names of Oprah Winfrey and Donald Trump and also purported to offer a “free” cell phone with “unlimited” talk and text for $10 a month. The purported cell-phone “program” used the intellectual property of Apple Inc., claiming that DNA had a “branding” relationship with the company led by the late Steve Jobs. No DNA cell phone appears to have emerged in the marketplace. No branding deal with Apple appears to have existed.

    RED FLAG: On its pitch page, TCN currently is publishing the logos of Groupon, Google Offers and Bing Shopping, among others. Last year — in addition to using the intellectual property of Apple and the images of Winfrey and Trump — DNA  used email pitches to compare itself to “FACEBOOK, GOOGLE & WALMART…” It is common for hucksters to tie an upstart business to an established business as a means of creating the appearance of legitimacy. Brand leeching is common in the worlds of MLM scams and securities swindles.

    RED FLAG: Joe Reid, the Piccolo business associate, has led the conference-call hype for TCN and has suggested TCN is the next Groupon, which recently conducted an IPO.  Reid also led the conference-call cheerleading last year for DNA, which purported to be “going public”  while making a bizarre reference to Martha Stewart. DNA appears never to have gone “public.” Some members said the firm never paid them, but continued to charge them — and at least one website is claiming that Piccolo (aka “Mr. P.”)  stiffed it on orders for bottled water in the OWOW program.

    Things got so strange at DNA that the firm asked members to imagine that an earlier “launch” (March 2010) had not occurred and to reimagine a relaunch that occurred last summer (July 2010) as the only time the company had launched.

    DNA members were told it was the “MORAL OBLIGATION” of churches to pitch the firm’s purported “program.” Some DNA promos accented DNA commissions purportedly paid 10 levels deep. TCN also is accenting a 10-level payment plan.

    RED FLAG: In November 2010, the PP Blog published a story about the FBI foiling a Thanksgiving holiday bombing plot at a Christmas tree lighting ceremony in Portland, Ore. The Blog’s report was wholly unrelated to DNA or OWOW.

    An OWOW/DNA/Piccolo apologist who identified himself to the PP Blog as “John” took great exception to the Blog’s report on the Portland plot, despite the fact the Blog’s report did not reference OWOW, DNA or Piccolo in any way.

    RED FLAG: Like DNA, TCN also is being promoted on Ponzi scheme forums such as MoneyMakerGroup.

    When things went south at DNA last year, the DNA site began to redirect to the OWOW site, which was hawking products linked to Piccolo, including a purported “magnetic” product that prevented leg amputations while also helping garden vegetables grow to twice their normal size.. The DNA site then mysteriously stopped redirecting to the OWOW site — on a date uncertain, but after Piccolo started promoting OWOW products as cancer cures or treatments. At least one OWOW affiliate was trading on the name of the National Institutes of Health.

    RED FLAG: Both the TCN site and the DNA site are using Alexa charts that provide viewers the same sort of fundamentally meaningless comparisons — while the sites accent the word “free.”

    RED FLAG: Like the DNA site, there is no obvious way on the TCN site for prospects to contact Support.

    RED FLAG: Like the DNA site, the TCN site is using Google Translate. The use of the Google service — along with other commonalities on both sites — leads to questions about whether TCN and DNA are using the same designer.

    DNA, like TCN, is using an Alexa chart. Both sites use Google Translate software.
    TCN, like DNA, is using an Alexa chart. Both sites use Google Translate software.

     

  • DEVELOPING STORY: Awaiting Trial, Accused AdSurfDaily Schemer Andy Bowdoin Resurfaces As Pitchman For OneX, ‘Opportunity’ Flogged On Ponzi Forums; ‘I Believe That God Has Brought Us OneX To Provide The Necessary Funds To Win This Case,’ Indicted ASD Patriarch Claims; ‘This Program Can Provide You With Earnings Beyond Your Wildest Imagination . . .’

    AdSurfDaily President Andy Bowdoin told members yesterday that they could "earn $99,000 very quickly" in a program known as OneX. The Florida-based ASD patriarch claimed to hope he could fund his defense to U.S. securities-related charges through OneX, which appears to be tied to a Panamanian firm that uses a domain name with a Montenegro extension and may operate from Isle of Man in the Irish Sea.

    EDITOR’S NOTE: The PP Blog may have more on this developing story in the coming days.

    In a bizarre development, accused Ponzi schemer Andy Bowdoin of AdSurfDaily told webinar listeners yesterday that he intended to fund his criminal defense to charges of wire fraud, securities fraud and selling unregistered securities through a purported business opportunity known as OneX, the PP Blog has learned.

    OneX, which uses a domain extension assigned to the European country of Montenegro and a webserver apparently positioned in the Irish Sea nation of Isle of Man, is described in MLM-style web promos as a 4X4 matrix feeder program for a Panamanian investment firm and commodities enterprise known as QLxchange.

    Whether OneX or QLxchange have any securities or commodities registrations in the United States or other countries was not immediately clear.

    Serving as the webinar host, ASD figure Tari Steward, who is helping Bowdoin raise funds for Bowdoin’s criminal defense and is listed in Bowdoin court filings as a potential ASD witness, described OneX as a winner while introducing Bowdoin.

    OneX has “already proven to be hugely successful here in the U.S.A. and all around the world,” Steward said.

    Mixing commentary on his Ponzi case with his OneX sales pitch, Bowdoin, 76, managed to work in a dig against the federal judge presiding over the criminal case against him. Bowdoin also chided federal prosecutors in the District of Columbia.

    Saying he was pleased that his trial date had been set nearly a year from now in September 2012 and describing it as an act of divine providence made possible after prayerful introspection, Bowdoin suggested the judge and prosecutors were disappointed that Collyer’s busy scheduled did not permit an earlier trial date.

    Both “Judge Collyer and the prosecution was wanting the closest time possible because they didn’t want to give us much time to prepare,” Bowdoin claimed, shortly after greeting webinar listeners with a “Hi, Folks.”

    Isle of Man highlighted in red: Source: Wikipedia.

    And Bowdoin, who did not identify the operators of OneX or speak to whether the purported program was required to be registered to market securities and commodities to U.S. inhabitants, sang the praises of the firm.

    “This program can provide you with earnings beyond your wildest imagination . . .” he claimed.

    Bowdoin further ventured that OneX “will produce the legal fees we need and make each one of you a ton of money.”

    “Now, when you finish this webinar,” he continued, “you’ll be so excited that you won’t be able to stop thinking about it.”

    ASD members will “wake up in the morning thinking about [OneX],” Bowdoin claimed. “For the next three days, you’ll be thinking about it constantly.”

    At a May 2008 ASD “rally” in Las Vegas prior to the seizure of tens of millions of dollars from his personal bank accounts, Bowdoin — describing himself as a Christian “money magnet” — urged members to imagine payments from ASD flowing to them “constantly.”

    Federal prosecutions referenced Bowdoin’s Las Vegas remarks in the Ponzi indictment announced against him in December 2010. He has been free awaiting trial since his arrest.

    Bowdoin went on to claim in yesterday’s OneX pitch that “you’ll soon see how you can earn $99,000 very quickly.”

    As part of his OneX pitch, Bowdoin described the firm as “one of the greatest financial vehicles on the Internet today” and asked a series of questions:

    • “Do you want to get out of debt?”
    • Do you need to catch up on some house payments?”
    • “Do you want to pay cash in the next 90 days for a new automobile . . .”

    Bowdoin’s pitch also mixed in quotations from scripture.

    Based on its research, the PP Blog is reporting today that members of the purported Club Asteria business opportunity and the purported JustBeenPaid opportunity also have promoted OneX. An image of Club Asteria principal Hank Needham appeared in an ad for ASD in 2008. Meanwhile, web records show that Frederick Mann, the purported operator of JustBeenPaid, also was an ASD pitchman.

    Among the Club Asteria pitchmen who turned their attentions to OneX are “strosdegoz.” Club Asteria-related claims came under fire from CONSOB, the Italian securities regulator, in May.

    Also participating in Bowdoin’s webinar was Rayda Roundy, whom Bowdoin described as a former ASD “trainer.”

    Roundy told listeners that a “pay it forward” strategy with OneX will help participants make money and help Bowdoin raise defense funds.

    OneX participants could create their own “bailout” program, Roundy claimed.

    After Bowdoin took back the webinar helm from Roundy, the ASD patriarch reminded members to send questions about OneX to a Gmail email address.

    And then Bowdoin said this:

    “Now, from time to time, people ask me, ‘Andy, how do you remain so peaceful?’ My answer is God.”

    He went on to claim that God had led him to his strategy of using OneX to raise defense funds.

    “I believe that God has brought us OneX to provide the necessary funds to win this case,” Bowdoin said.

     

  • BULLETIN: Barry Minkow, Ponzi Fraudster Turned Pastor And Investigator After 7 Years In Slammer, Charged Criminally In Stock-Manipulation Scheme

    Barry Minkow, who presided over a colossal Ponzi scheme as a young man, spent seven years in federal prison and emerged to become a church pastor and tell the world he no longer was a criminal, has been charged criminally in Florida in a stock-manipulation scheme.

    Minkow, 44, allegedly induced law enforcement to open a probe into Lennar Corp., a homebuilder, by lying and then putting himself into position to profit from his lies by “trading Lennar securities for his own personal benefit,” federal prosecutors said.

    He was charged with conspiracy to commit securities fraud that involved his misuse of “material nonpublic information,” prosecutors said, saying Minkow had advanced a “shared unlawful plan” to hurt Lennar.

    Minkow is expected to plead guilty. He faces a maximum of five years in prison.

    After being convicted of operating the ZZZZ Best Ponzi scheme, one of the most notorious fraud cases of the 1980s, Minkow entered prison. He turned to the ministry after his release, and also founded the Fraud Discovery Institute in San Diego.

    Cultivating relationships with both the media and law enforcement, he told the world he now was wearing the hat of the fraud-busters, not the hucksters.

    Court documents identify him as a confidential FBI informant. But prosecutors now say he orchestrated a slime campaign against Lennar in 2009 with the intent of helping a co-conspirator who claimed he was owed money squeeze cash and stock out of the company.

    “When false statements are disseminated to deceive the investing public, whether they’re designed to prop up a company or tear it down, the FBI will dedicate all available resources to bring disseminators of such falsehoods to justice,” said William J. Maddalena, acting special agent in charge of the FBI’s Miami office

    As part of the plan, Minkow authored “false and misleading statements” about Lennar, creating news releases, emails and YouTube videos to allege “widespread improprieties in Lennar’s financial reporting and business structure,” prosecutors said.

    The false reports artificially depressed Lennar’s stock price, prosecutors said.

    Minkow, according to prosecutors, contacted the FBI, the SEC and the IRS in January 2009 with allegations of Lennar’s purported fraud. His acts induced the government to open an investigation.

    On March 13, 2009, Minkow contacted the FBI and IRS, confirming to agents that he knew he was “precluded . . . from shorting Lennar stock,” according to the federal complaint, which was filed in the form of an information.

    Three days later,  Minkow “misappropriated material nonpublic information” about Lennar and used it to purchase Lennar options through a nominee trading account, prosecutors said.

  • PROSECUTION BOMBSHELL: Accused Ponzi Schemer Andy Bowdoin Traveled To Costa Rica In 2008 To Explore Option For Offshore ‘Autosurf’ Firm; AdSurfDaily’s Internal Software System Identified Member Payouts As ‘ROI,’ Despite ASD Claim It Was Not Offering Investments

    Andy Bowdoin

    BULLETIN: UPDATED 9:29 P.M. ET (U.S.A.) Prosecutors have advised a federal judge that AdSurfDaily President Andy Bowdoin and unnamed “others” traveled to Costa Rica in the spring of 2008 to get the lay of the land for an offshore autosurf that would be “another version” of ASD.

    The alleged trip occurred less than two years after the SEC accused 12DailyPro, an autosurf based in North Carolina, of selling unregistered securities in the form of investment contracts, prosecutors said.

    The explosive claim Bowdoin ventured offshore to pursue the creation of an ASD satellite may signal that the government views ASD not only as a Ponzi scheme, but as a business that deliberately sought to dial up its efforts to circumvent U.S. laws and create an even greater Ponzi war chest by establishing a footprint outside the United States.

    Since at least February 2006, the SEC has described the autosurf business model as anathema and a form of obvious securities fraud. Bowdoin was well aware of the SEC lawsuits and scrutiny domestic autosurfs such as 12DailyPro, PhoenixSurf and CEP had sparked in 2006 and 2007, prosecutors said.

    Meanwhile, investigators have evidence that shows ASD’s internal software system described payments to members as “ROI,” an acronym that that means “return on investment,” prosecutors said.

    The assertions by prosecutors — if proven true — may undermine ASD’s defense strategy of arguing it was an “advertising” program, not an “investment” program.

    Prosecutors did not identify by name the surf allegedly contemplated for Costa Rica. In late 2008 and early 2009, a surf with close ASD ties known as AdViewGlobal (AVG) debuted. The launch occurred about four to five months after the U.S. Secret Service seized $65.8 million from the personal bank accounts of Bowdoin in August 2008.

    Bowdoin’s trip to Costa Rica occurred before the ASD seizure, prosecutors said. If true, the claim could be used to prove ASD was seeking an exit plan even before the Secret Service raid. In 2008, prosecutors asserted that Bowdoin had moved millions of dollars offshore and talked about purchasing a home in another country.

    AVG purported to operate from Uruguay, but had servers that resolved to Panama. Some ASD members have said Bowdoin was a silent partner in AVG.

    Prosecutors described the “ROI” development as just another ASD incongruity, advising U.S. District Judge Rosemary Collyer that Bowdoin was well aware that a serious securities challenge could be made against his firm and chose to ignore the risk and misinform members.

    Beginning as early as January 2007, “[O]thers warned Bowdoin that ASD was nothing more than an investment scheme and that the program needed to be changed if it were to operate legally,” prosecutors argued in a brief to Collyer. “Bowdoin did not heed that advice and continued unabated in offering members higher returns than banks or brokerage firms. Moreover, based on his prior criminal experience, Bowdoin was well aware of the securities regulations and knew he was offering a security.”

    Any argument that ASD was not offering “investment contracts” as defined under the Howey Test should be dismissed, prosecutors said, arguing that ASD meets all three prongs of the Howey Test.

    Bowdoin sought about three weeks ago to have the criminal charges filed against him dismissed, arguing that ASD met none of the three Howey prongs.

    Nonsense, prosecutors said.

    ASD’s advertising was “merely a cover for Bowdoin’s sale of a get rich quick scheme,” prosecutors said.

    And prosecutors also cited other alleged proof that ASD was running an investment program — namely that some employees were being paid in ASD “ad packs.”

    “Bowdoin and the employees of ASD treated the ‘ad packages’ as shares from which they could expect to earn returns,” prosecutors argued.

    Prosecutors also pointed out a section of ASD’s Terms of Service that stated the firm “will” pay members 125 percent of the money they paid in. At the same time, prosecutors quoted video evidence of Bowdoin wooing members by focusing on ASD as a money-making opportunity.

    Bowdoin, prosecutors said, eventually limited the amount of money investors could pay ASD “because he did not want any one member dominating the return pool.”

    The prosecution’s assertions occurred against the backdrop of dozens of competing claims by ASD members who filed pro-se pleadings in the civil portion of the case that asserted the government had no “EVIDENCE.”

    Members made the claim despite the fact that some of the evidence against ASD had been part of the public record for more than a year at the time the claims were made in 2009.

    In a footnote to Collyer, prosecutors said they’d be happy to present the actual video of Bowdoin making various claims instead of simply quoting from a transcript.

    “[T]he government’s review of ASD’s bank records revealed that of the approximately $31 million ASD paid out to early members, more than 98% of that money came from monies paid to ASD by other members,” prosecutors said.

    Although ASD claimed to have funding sources beyond advertising payments made by members  — things such as banner ad sales and ebooks  — those outlets provided only de minimis revenue, prosecutors argued.

    “Each night, there was nothing more than new members funds to divide among existing members,” prosecutors argued. “Moreover, Bowdoin himself admitted, on video, that members funds are pooled and they will share in the profits and losses equally.

    “Specifically, Bowdoin, in the ‘New Member Success Video,’ claimed that “[w]hen sales increase, the rebates increase. When sales decrease the rebates decrease . . .”

    “Clearly Bowdoin, through ASD, was pooling all of the member’s funds which allowed him to make the requisite return payments,” prosecutors said.

    Prosecutors also argued that the ASD case should remain in Collyer’s courtroom in the District of Columbia. Bowdoin argued that the case should be transferred to Florida, in part because he and many witness live there.

    Although prosecutors agreed that many prospective witnesses live in Florida, they argued that witnesses reside in multiple jurisdictions because of the national and international scope of the case.

    In addition to Floridians, witnesses the government may present hail from the District of Columbia, North Carolina, Nevada, Oklahoma, Iowa and  elsewhere, prosecutors asserted.

    ASD also had members from at least 18 countries, and conducted “rallies”  in Illinois and Minnesota, among other states, prosecutors said.

    Read Bowdoin’s claims that the charges against him should be dismissed and that ASD did not meet any of the three Howey Test prongs.

  • DELAWARE: Woman Bilked In Investment Scam Later Bilked In ‘Investment Recovery Scam,’ AG Biden Says; Patrick A. Wiley Indicted On Racketeering, Securities-Fraud Charges

    EDITOR’S NOTE: The indictment in Delaware against Patrick A. Wiley of Detroit illustrates the dangers of entrusting money to a person who claims he can help you recover money lost in a securities swindle. It also illustrates that a person who claims he can help you recover money lost to a securities swindle — and then strings you along — can be charged with serious crimes.

    A Detroit man has been indicted for racketeering in Delaware amid allegations he swindled at least $276,000 from a woman in an “investment recovery scam,” prosecutors said.

    Patrick A. Wiley, 42, also was charged with securities fraud, selling unregistered securities and theft, Delaware Attorney General Beau Biden said. The prosecution was brought by Biden’s Securities Unit.

    All in all, the victim in the case lost more than $300,000, including $45,000 in the original swindle.

    Wiley’s investment-recovery scam grew out of an earlier fraud scheme in which the victim was persuaded by another man to invest in a “joint trading venture” that purportedly involved “several wealthy persons in London, England” and would fetch a return of $10 million on an outlay of $50,000 in only months, Biden’s office said.

    “With deep sympathies for her loss, we remind all Delawareans that any deal that sounds too good to be true, probably is,” Biden said.

    The victim was recruited into the investment scheme in early 2005 by Darren Dobson, 45, of Charlotte, N.C., Biden’s office said. After a state probe, Dobson was indicted in Delaware earlier this year on charges of securities fraud, selling unregistered securities and transacting business as an unregistered agent.

    Investigators said the victim sent $45,000 to a Tampa company known as VFG Management
    LLC based on Dobson’s claim “that a $50,000 investment would yield a return of $10 million by June 2005.”

    VFG Management was “the entity through which the London partners were supposedly operating the joint trading venture,” Biden’s office said.

    When no returns materialized, the victim contacted Wiley based on her belief he had been an investor in the same scam, authorities said.

    “Wiley claimed he had information regarding the principals involved and that he would pursue them to obtain the victim’s promised investment return,” Biden’s office said. “On numerous occasions between October 2005 and November 2007, Wiley solicited funds from the victim to defray the cost of his efforts, including trips that he was supposedly taking abroad for meetings with the London trading partners and their attorney. During that time period, the victim wired more than $276,000 to Wiley on sixty-one separate occasions. The victim never received the promised investment return or the investment principal.”

    Biden described the alleged scam as a “con game.”

    “We are particularly disturbed by crimes that use trust and confidence as a means to an
    illegitimate end,” Biden said. “The victim in this case has lost over $300,000 in a con game.”

  • Paul Greenwood To Forfeit $331 Million; Pleads Guilty In Massive Fraud Scheme That Put Public Pension Funds At Risk While He Collected Teddy Bears

    Perhaps he’ll be remembered best for his collection of Steiff teddy bears paid for by investors, but there now are other reasons to remember Paul Greenwood.

    Greenwood has pleaded guilty to swindling institutional investors, universities and pension funds in a Ponzi-like scheme. He is believed to be cooperating with prosecutors in the ongoing probe of WG Trading Co. — and has agreed to forfeit “at least” $331 million.

    Prosecutors called the sum “the amount of funds that Greenwood and others personally misappropriated and diverted . . .” Greenwood, who potentially faces decades in prison, pleaded guilty to a total of six charges: conspiracy, securities fraud, commodities fraud, wire fraud (two counts), and money-laundering.

    His business partner, Stephen Walsh, also is charged in the criminal case, which was brought by the FBI. The SEC and the CFTC filed civil actions.

    The CFTC described the case as a “$1.3 billion investment scam.”

    “Greenwood and others caused companies that he ran to divert approximately $80 million to Greenwood for his benefit,” the agency said.

    Greenwood, who claimed to own 1,350 collectible teddy bears, is the former town supervisor of North Salem, N.Y.  The CFTC said he and Walsh “misappropriated at least $553 million from commodity pool participants.”

    For its part, the SEC called the scheme “brazen.”

    “[S]ince at least 1996, Greenwood and Walsh promised investors that their money would be invested in a stock index arbitrage strategy,” the SEC said. “Instead, Greenwood and Walsh essentially treated their clients’ investments as their personal piggy bank to purchase multi-million dollar homes, a horse farm and horses, luxury cars, and rare collectibles such as Steiff teddy bears.”

    Federal prosecutors said Greenwood and others told investors they employed a strategy known as “equity index arbitrage,” defining it as “conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years.”

  • BULLETIN: Charges Upgraded Against Nevin Shapiro In Alleged $880 Million Ponzi Scheme; Prosecutors Say He Used Investors’ Money To Make Illegal Sports Bets And Enjoy Lavish Lifestyle

    Charges against a Florida man accused of running a Ponzi scheme through a bogus wholesale grocery business known as Capitol Investments USA Inc. have been upgraded, U.S. Attorney Paul J. Fishman of the District of New Jersey said.

    Nevin J. Shapiro, 41, of Miami Beach, originally was charged via criminal complaint in April with one count of securities fraud and one count of money-laundering. A grand jury now has returned an indictment charging Shapiro with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, two counts of wire fraud and two counts of money-laundering.

    Three unindicted co-conspirators are identified in the indictment by numbers, as opposed to names. “UC 1” was described as Capitol’s chief financial officer; “UC 2” was described as a Capitol “accountant”; and “UC 3” was described as a Capitol “bookkeeper.”

    Unnamed “others” also are referenced in the indictment, which also seeks forfeiture of criminal proceeds.

    When the Ponzi was collapsing in 2009, Shapiro offered a series of explanations about why payments to investors were delayed, prosecutors said.

    “Shapiro told investors, among other things, that the payments were not being made because Capitol’s vendors were late in making payments, Capitol was suffering from cash flow problems, and that Shapiro’s accountant was on vacation,” prosecutors said.

    In reality, prosecutors said, “Shapiro misappropriated approximately $35 million in investor funds for his personal use, including paying millions of dollars in debts resulting from illegal gambling on sporting events.

    “Using investor money, he also spent, at various times, more than $400,000 for floor seats
    to watch the Miami Heat professional basketball team; approximately $26,000 per month for mortgage payments on his residence in Miami Beach, recently appraised at approximately $5.3 million; approximately $7,250 per month for payments on a $1.5 million dollar Riviera yacht; and approximately $4,700 per month for the lease of a Mercedes-Benz automobile.”

    And, prosecutors charged, “Shapiro also used stolen funds to purchase a pair of diamond-studded handcuffs, which he gave as a gift to a prominent professional athlete, as well as to make $150,000 in donations to the athletic program of a local university in the Miami area. As a result of a 10-year gift to the university, the Nevin Shapiro Student-Athlete Lounge at the university was named for the defendant. Shapiro and Capitol were forced into bankruptcy in November 2009. At that time, they owed more than $100 million to victim investors.”

    Shapiro has been jailed since his arrest in April. He potentially faces decades in prison and millions of dollars in fines if convicted on all counts.

    Court filings suggest the scheme gathered as much as $900 million.

  • BULLETIN: Yet Another Florida Ponzi Scheme; SEC Accuses Luis Felipe Perez Of Operating $40 Million Fraud Backed By Fake Diamonds And Bogus ‘Pawn Shops’

    EDITOR’S NOTE: Here’s one for your Bubba Blue notebook on the various ways to have a Ponzi scheme, as opposed to shrimp.

    UPDATED 5:50 P.M. EDT (U.S.A.) A Miami man has been charged by the SEC with gathering $40 million in a Ponzi scheme, pocketing $6 million for himself and telling investors they were helping him finance his Florida jewelry businesses and pawn shops in New York.

    Investors believed their money was safe because it was backed by the man’s jewelry operations, diamonds and life insurance, the SEC said.

    The trouble with the claims of Luis Felipe Perez, according to the SEC, was that he “had no dealings with pawn shops and never provided financing to them.”

    UPDATE 5:50 P.M: Perez also has been charged criminally by federal prosecutors with six counts of securities fraud, after a probe by the U.S. Secret Service and U.S. Immigration and Customs Enforcement, according to U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

    The criminal case is part of an ongoing series of actions by the interagency Financial Fraud Enforcement Task Force, which President Obama established in November 2009, according to Ferrer’s office.

    At the same time, the SEC said, two “purported” jewelry businesses owned by Perez — Lucky Star Diamonds Inc. and Luis Felipe Jewelry Design Corp. — “did not generate sufficient revenue to pay investors’ principal and interest payments.”

    Clients did not know that “his primary source of money to pay investor returns was from new investors,” the SEC said.

    Although Perez said his offering was backed by “diamonds” in a bank safety-deposit box, the purported diamonds in the box “were fake,” the SEC said.

    Meanwhile, investors’ funds were not protected by a life-insurance policy as Perez had claimed because he had “defaulted on the policy premium” and allowed it to lapse, the SEC said.

    “Perez created an aura of success around him to lure old and new acquaintances into investing substantial sums of money,” said John C. Mattimore, associate regional director of the SEC’s Miami Regional Office. “Behind the luster of diamonds and jewelry, Perez told outright lies and made promises he couldn’t possibly keep.”

    While investors were imagining “guaranteed annual returns of 18 percent to 120 percent through monthly interest payments,” the SEC said, Perez spent $3.2 million of their money on a home, $1 million on jewelry for himself and his wife, $400,000 to lease luxury cars, $300,000 on clothing for his wife, $300,000 for travel by private jet and $100,000 on artwork.

    In addition, Perez paid himself a salary of $250,000, gave away more than $1 million to family members and made $100,000 in political contributions, the SEC said.

    The scheme collapsed in June 2009, when Perez “was no longer able to recruit new investors,” the SEC said.

    Because the scheme largely targeted Hispanics, it also had an element of affinity fraud, the SEC said. About 35 investors were affected.

    The U.S. Secret Service, U.S. Immigration and Customs Enforcement and the Miami Police Department assisted in the probe, the SEC said.

  • BULLETIN: Another Spectacular Florida Ponzi Case Emerging; Nevin K. Shapiro Charged Criminally, Civilly In Alleged $900 Million Fraud

    BULLETIN: Nevin K. Shapiro, the founder and president of Capitol Investments USA Inc., surrendered to authorities this morning after being charged both criminally and civilly in an alleged $900 million Ponzi and fraud scheme in south Florida and elsewhere, the SEC said.

    Shapiro, 41, is a prominent Miami Beach businessman and philanthropist in the wholesale grocery business. He is expected to make a court appearance in New Jersey today.

    Most of Shapiro’s investors live in Florida or Indiana, according to the SEC complaint. Some diverted funds from their IRA’s to earn profits by investing with the grocery company, but Shapiro conducted virtually no meaningful business after 2004 and simply propped up his grocery business with a shell game that raised $880 million from investors between 2005 and 2009 before the scheme collapsed, the SEC charged.

    “Capitol’s sales were less than $300,000 in 2005 and 2006, and it had no sales from 2007 through 2009,” the SEC charged.

    “Shapiro lured investors by falsely touting Capitol’s securities as a risk-free investment with extraordinarily high returns,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “He used his prominence and prestige to gain investors’ trust in funding Capitol’s grocery diverting business, but behind their backs he diverted their money to enrich himself.”

    Grocery-diverters buy merchandise in one market and sell it in another at a higher price. Shapiro’s company, however, began operating a Ponzi scheme in 2005 after operating at a loss in 2004, the SEC charged.

    The SEC said Shapiro diverted $38 million “to enrich himself and finance outside business activities unrelated to the grocery business, including a sport representation business and real estate ventures.

    “His lavish lifestyle includes a $5 million home in Miami Beach, a $1 million boat, luxury cars, expensive clothes, high-stakes gambling, and season tickets to premium sporting events,” the SEC said. “Shapiro additionally tapped approximately $13 million of investor funds to pay large undisclosed commissions to individuals who attracted other investors.”

    A girlfriend received goods totaling $116,000 that were charged to Capitol’s American Express Black Card, and Shapiro himself made personal purchases of about $524,000 on the card, the SEC charged.

    All in all, the SEC said, the scheme was “a $900 million offering fraud and Ponzi scheme.” Investors were offered returns of 26 percent annually, backed by bogus claims that “Capitol’s purchase contracts and accounts receivable secured their investments.”

    Earlier this year, U.S. Attorney General Eric Holder said south Florida was “ground zero” for Ponzi schemes, noting that many of Bernard Madoff’s victims lived in the region. The government still is in the process of unwinding Madoff’s $65 billion fraud and Scott Rothstein’s $1.2 billion fraud.

    Smaller — though still massive Ponzi frauds — recently have occurred in the state, and Shapiro’s alleged $900 million fraud now is included among them.

    “To those who see the victimization of others as an avenue to wealth, take notice,” Holder warned in a January speech in Florida. “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.”

    The FBI and IRS also are involved in the Shapiro probe, the SEC said.

    “By late 2004, Capitol was operating at a loss,” the SEC charged. “From 2005 though late 2009, Capitol had almost no business operations. To hide this from investors, Shapiro merely repaid earlier investors with approximately $769 million collected from new investors in typical Ponzi scheme fashion.”

    The agency said “Capitol has never registered an offering or class of securities under the Securities Act or the Exchange Act,” and Shapiro was charged with securities fraud.

    In the past 48 hours, law enforcement and regulators have filed complaints in cases in Florida and New York that allege frauds totaling about $1 billion.

  • ANOTHER FLORIDA FRAUD CONVICTION: Michael J. Muzio Ran ‘Pump-And-Dump’ Scheme In Case Tied To Ponzi And Affinity-Fraud Scheme Targeting Haitian-Americans

    A Florida man implicated in a pump-and-dump scheme tied to a Ponzi- and affinity-fraud scheme has been convicted and faces decades in federal prison.

    Michael J. Muzio, 46, of Tampa, was convicted on six counts of securities fraud, two counts of substantive wire fraud, two counts of lying to the SEC and the FBI and one count of conspiring to commit wire fraud.

    Muzio’s pump-and-dump scheme is linked to the alleged Home Pals Investment Club Ponzi and affinity-fraud scheme involving Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.

    Bass, Alabre and Taglieri were accused civilly and criminally of targeting Haitian-Americans in a $14.3 million scheme.

    Alabre, 33, of Miramar, Fla., and Taglieri, 39, of Jupiter, Fla., already have pleaded guilty to criminal charges, which were brought in October 2009. Bass and Alabre were accused by the SEC of fooling investors by saying Taglieri was Home Pals’ attorney, but Taglieri is not an attorney, according to records.

    Muzio defrauded Haitian-American and other investors in South Florida and elsewhere “by manipulating” the stock price of International Business Ventures Group (IBVG), a Florida shell company “with no assets and virtually no business activities,” prosecutors said.

    IBVG purportedly was operated from Palm Beach Gardens. Last month, U.S. Attorney General Eric Holder described the Palm Beach area as the “ground zero” of financial fraud. Holder ventured to Palm Beach to make a speech and introduce the Obama administration’s Financial Fraud Enforcement Task Force.

    The manipulation scheme was carried out through “coordinated stock purchases and sales designed to artificially impact share prices,” the FBI said.

    “To induce investors to purchase the stock, [Muzio] created a false impression that an active market for the stock existed by engaging in illegal ‘wash trades’ in which he simultaneously entered buy orders through one brokerage account under his control and offsetting sell orders at the same price through another brokerage account under his control.

    “These trades had no real economic effect, but the defendant’s brokers unwittingly reported the trading activity and potential investors who saw the online reports were misled into believing that the stock was actively traded at the quoted prices,” the FBI said.

    As often is the case in pump-and-dump schemes, Muzio “issued false and misleading press releases” claiming that the company had profitable business dealings.

    Muzio claimed IBVG “had deals to provide and offer prepaid debit cards in Haiti,” as well as prepaid calling cards and “exclusive rights to market prepaid electric meters in Haiti,” the FBI said.

    “Investors were offered the chance to purchase free-trading shares of stock, but then received certificates for restricted shares which could not be traded and ultimately proved to be worthless,” the FBI said.

    Home Pals advised website viewers that the company was “honest” and adhered to “uncompromising ethics,” the SEC said.

  • Former Attorney Sentenced To 99 Years In Prison For Ponzi Scheme; Edward S. Digges Jr. Was Recidivist Offender

    The Texas State Securities Board and the district attorney's office of Collin County, Texas, prosecuted Edward Digges Jr. A jury imposed a 99-year-prison sentence.

    A Texas jury has thrown the book at Edward S. Digges Jr., sentencing the Collin County man to 99 years in prison for fleecing 130 investors in a securities-fraud and Ponzi scheme.

    Digges, 63, formerly was an attorney in Annapolis, Md. He was disbarred in an overbilling scheme, convicted of mail fraud in 1990 and spent two years in federal prison. After his release from prison, he continued to clash with law-enforcement agencies, including the SEC, regulators in Maryland, Ohio and Pennsylvania, and the Texas State Securities Board (TSSB).

    Most of Digges’ victims were “elderly,” prosecutors said.

    The 99-year sentenced imposed in Texas evolved from Digges’ operation of an entity known as the Millennium Terminal Investment Program, which sold securities that purportedly generated profits from point-of-sale terminals used by merchants to process credit and debit transactions.

    In truth, investigators said, Millennium operated in the red out of the gate, was in deep “financial turmoil” not disclosed to investors, was making payments to old investors with money from new investors and lied about having a “reserve fund” to shore up the program.

    Digges collected at least $10 million in the scheme by promising investors annual returns of 12 percent, prosecutors said.

    “Edward Digges has a long history of defrauding some of our most vulnerable citizens, and this sentence ensures he will never again do so,” said Texas Securities Commissioner Denise Voigt Crawford.

    She noted that victims will not be made whole.

    “The conviction will not return money to investors,”  she said. “This case highlights the importance of checking the background of any financial professional you choose to do business with, and the importance of obtaining full disclosure before investing.”

    Digges deliberately targeted senior citizens in newspaper ads, prosecutors said. At the same time, he did not disclose his criminal conviction and did not tell clients about a $3.6 million civil judgment against him in the overbilling case.

    TSSB and the district attorney’s office of Collin County prosecuted Digges on the criminal charges. Collin County is a suburban county in the Dallas/Fort Worth metropolitan area.

    SEC civil charges against Digges were brought in Florida.