TelexFree, an alleged $1.2 billion Ponzi- and pyramid scheme targeted at immigrants, is an exceptionally dangerous MLM malignancy and criminal enterprise. The SEC, the Massachusetts Securities Division and the U.S. Department of Justice have an obligation to society at large to treat TelexFree with maximum legal prejudice and to annihilate it.
This, we believe, is happening.
MSD has filed an action. The SEC has filed an action. The office of the U.S. Trustee, the Justice Department’s watchdog arm in bankruptcy petitions, is seeking to intervene in TelexFree’s Chapter 11 case in Nevada. On Friday, Jordan Maglich of PonziTracker.com reported that the SEC asserted at a key bankruptcy hearing that federal prosecutors also have entered the TelexFree fray through the filing of forfeiture actions.
TelexFree, it seems, finds itself the target of a richly deserved paper-nuking by a government righteously angered by the preposterous “opportunity” and its gaggle of reliably felonious pitchmen.
Regardless, the process of killing TelexFree dead and delivering it to the judiciary for final pronouncement inevitably will create an opportunity for MLM’s criminal wing and robotic Stepfordians to serve up a vomitous spectacle. Members of the public at large should pay close attention to this spectacle and use it to inform their thinking.
EXTREME CAUTION WARRANTED: Watch the rancid TelexFree spectacle from a distance: If you get too close to the ever-hurling Stepfordians and their upstream programmers who load the vomit-inducing talking points, you might find yourself suddenly wondering why your fellow man ever questioned the beauty of Soviet propaganda night at Jonestown. You even could find yourself waxing nostalgically for the Peoples Temple itself.
Like Zeek Rewards and AdSurfDaily before it, TelexFree was a vessel created to divert the wages of the MLM proletariat to the MLM Politburo, known in HYIP scam circles as the “leaders.” Some of those “leaders” have Ferraris and Hummers and BMWs and blue-chip investment accounts that reportedly contained millions and millions of dollars.
Little wonder some angry affiliates showed up at TelexFree’s broom closet office in Massachusetts to voice their displeasure a mere 12 days before TelexFree filed for bankruptcy protection in Nevada, a state from which TelexFree operated a billion-dollar business through a mailbox.
Merriam-Webster.com defines “rabbit hole” as a “bizarre or difficult state or situation — usually used in the phrase down the rabbit hole.”
In the hours leading up to last week’s key hearing for TelexFree in bankruptcy court, the U.S. Department of Justice saw fit to recommend looking down the TelexFree “rabbit hole.” Based on the Merriam-Webster definition, our take is that the take of the Justice Department — through U.S. Trustee Tracy Hope Davis — was practically perfect.
We believe the Justice Department, the SEC and MSD will find Chernobyl, Bhopal and Love Canal down that hole. There’s also a fair chance they’ll find Al Capone wearing an Easter Bunny suit.
TelexFree provided the financial world with a glimpse into what an Extinction Level Event driven by hapless MLM buffoons and their Stepfordian followers might look like. TelexFree was an attack on free enterprise, not an innocent expression of the same.
EDITOR’S NOTE: KrebsOnSecurity is written by Brian Krebs, who worked as a reporter for the Washington Post from 1995 to 2009. Our thanks to a PP Blog reader who brought our attention to information highlighted in the story below. Although the PP Blog is focusing on the TalkGold angle, the KrebsOnSecurity report covers much more, including how a U.S. credit-reporting agency potentially was doing business with a credit-card scammer and forum huckster hiding behind a proxy and wiring money from Singapore. It is highly recommended reading. Two links to the report appear in the story below.
An individual who used the handle “hieupc” on the “scammer-friendly” TalkGold forum may have peddled stolen Social Security numbers at the forum and appears also to have been in the business of defacing websites and “even attacking the Web site of his former university in New Zealand after the school kicked him out for alleged credit card fraud,” KrebsOnSecurity reports.
Hieu Minh Ngo, 24, a Vietnamese national, now is jailed in the United States. He was charged in a sealed, 15-count indictment in November 2012 with conspiracy to commit wire fraud, substantive wire fraud, conspiracy to commit identity fraud, substantive identity fraud, aggravated identity theft, conspiracy to commit access device fraud, and substantive access device fraud, the U.S. Department of Justice said on Oct. 18.
It may be a case of an offshore fraudster who erroneously believed that U.S. agents and prosecutors couldn’t touch him and grew increasingly confident that oceans and land masses that separated him from the United States would insulate him from arrest. In its remarkable story, however, KrebsOnSecurity is reporting that U.S. federal agents “set up a phony business deal to lure Ngo out of Vietnam and into Guam, an unincorporated territory of the United States in the western Pacific Ocean.”
Citing the indictment, the Justice Department said, “[F]om 2007 through 2012, Ngo and other members of the conspiracy acquired, offered for sale, sold, and/or transferred to others packages of [Personally Identifiable Information] for more than 500,000 individuals.” (Bolding added by PP Blog.)
The User ID of “hieupc” appears to have been formed at TalkGold in June 2007. (See screen shot above.) In October 2010, a TalkGold post attributed to “hieupc” offered for sale the Social Security numbers and dates of birth (at least) of Americans.
If “hieupc” is Ngo, it could mean he was trawling TalkGold as a teen-ager and seeking to recruit HYIP scammers as customers for his identity-theft ring. Such an approach conceivably could enable fellow criminals to join HYIP scams under assumed names while providing them a means of accessing U.S. bank accounts, potentially setting the stage for them to steal money from the accounts and even pass tax liabilities for HYIP program “earnings” to unknowing victims. TalkGold is populated by serial HYIP fraudsters and willfully blind promoters of online fraud schemes. Over the years, such schemes have led to DDoS attacks on the sites of fraud schemes (and sites that report on them) and repeated claims of account hackings.
Here is part of the “hieupc” TalkGold pitch (italics added):
OUR PLANS
Plan For Tester – 6 Credits – $4
Plan $10 = 15 credits
Plan $20 = 35 credits
Plan $30 = 60 credits
Plan $50 = 110 credits
Plan $100 = 230 credits
Reseller Plan $500 – 2000 Credits
Reseller Plan $1000 – 5000 Credits
No Hit = No Lost Your Credit.
SSN US: 3 credits, DOB US: 3 credits Please register an account to buy credits. Thanks
Such packages of Personally Identifiable Information, the Justice Department said, are known as “fullz” and “typically included a person’s name, date of birth, social security number, bank account number and bank routing number.”
And Ngo had at least one co-conspirator, according to the now-unsealed grand-jury indictment filed in U.S. District Court for the District of New Hampshire. In the indictment, the co-conspirator is identified as “JOHN DOE ONE,” also known as “rr2518” and “Wan Bai.”
Here is the first paragraph from the indictment, which is available through a link at the KrebsOnSecurity website:
Defendant HIEU MINH NGO (“NGO”), also known by online monikers that include “hieupc” and “traztaz659,” resided in New Zealand and Vietnam. He is one of the control persons and administrators for the websites “findget.me” and “superget.info,” and its associated data.
During the 2007-2012 time period, “Ngo and other members of the conspiracy acquired, offered for sale, sold, and/or transferred to others stolen payment card data, which typically included the victim account holder’s payment card number, expiration date, card verification value number, account holder name, account holder address and phone number,” the Justice Department said in its Oct. 18 statement.
Meanwhile, the indictment notes that an “undercover agent located in New Hampshire” was involved in the probe that led to Ngo’s arrest and that the agent was instructed by scammers “to open an account with ‘Liberty Reserve’ in order to engage in any financial transactions with them.”
In May 2013, federal prosecutors in New York alleged that Liberty Reserve had engaged in a $6 billion money-laundering conspiracy. The U.S. Secret Service is known to be involved in both the Liberty Reserve and Ngo identity-theft probes. Liberty Reserve was popular among HYIP fraudsters and other scammers.
TalkGold is not referenced in the Ngo indictment. But the forum’s name appears in other court filings as a place from which online Ponzi and fraud schemes are promoted. Just five of the hundreds of recent (or relatively recent) scams promoted at the forum — Zeek Rewards, Profitable Sunrise, AdSurfDaily, PathwayToProsperity and Legisi — are believed to have generated receipts approaching or exceeding $1 billion. (Zeek Rewards = $600 million; ProfitableSunrise = unknown tens of millions; AdSurfDaily = $119 million; PathwayToProsperity = $70 million; Legisi = $72 million.)
URGENT >> BULLETIN >> MOVING: (UPDATED 5:20 P.M ON SEPT 4.) AdSurfDaily President Andy Bowdoin has been sentenced to the maximum term in federal prison under his plea agreement: 78 months.
The sentence was handed down minutes ago by U.S. District Judge Rosemary Collyer of the District of Columbia. ASD was a $119 million Ponzi scheme operating over the Internet between 2006 and 2008 and creating thousands of victims.
Separately, Collyer issued an order that authorized the U.S. Department of Justice to reopen remissions, meaning that ASD victims who missed the January 2011 filing deadline will have an opportunity to gain a pro rata share of the remainder of ASD proceeds seized by the U.S. Secret Service in 2008.
“Thomas Bowdoin was a master of fraud and deception, cheating victims out of their hard-earned money and savings with his get-rich scheme,” said U.S. Attorney Ronald C. Machen Jr. of the District of Columbia. “His actions cost his victims millions of dollars and now they will cost him his freedom. This sentence will protect the public from Mr. Bowdoin’s scams and hold him accountable for his crimes.”
A top U.S. Secret Service official said the agency is using a variety of tools to bring scammers to justice.
“Capitalizing on the strength of our financial task force partnerships, we aggressively pursue criminals using computer experts, forensic specialists, investigative experts and intelligence analysts,” said Dennis Ramos Martinez, special agent in charge of the Orlando Secret Service office.
Machen’s office declined to comment today on whether the ASD probe was ongoing.
Bowdoin is 77.
In November 2011, ASD figure Kenneth Wayne Leaming was arrested by the FBI on charges of filing false liens against at least five public officials involved in the ASD case. Two of the officials were federal prosecutors. One was the lead Secret Service investigator.
Machen’s office — without referencing the FBI allegations against Leaming — today praised the work of former Assistant U.S. Attorneys William Cowden and Vasu B. Muthyala. And Machen’s office also praised U.S. Secret Service agent Roy Dotson. All three men allegedly were targeted with false liens from Leaming, a purported “sovereign citizen.”
Leaming, 56, is jailed near Seattle.
Bowdoin’s sentencing today occurred against the backdrop of the collapse of Zeek Rewards, which was accused by the SEC Aug. 17 of operating a $600 million Ponzi- and pyramid scheme that potentially affects more than 1 million people. Zeek’s business model was similar to ASD’s business model. The U.S. Secret Service also is investigating Zeek.
Here’s what prosecutors in the District of Columbia said today about ASD’s business model (italics added):
ASD’s business model promised members the opportunity to earn 125 percent (initially 150 percent) on each dollar paid into ASD, as long as the members viewed other members’ websites for a few minutes each day on ASD’s Internet page, commonly referred to as the ASD “rotator.” Bowdoin also promised members commissions for recruiting other members into the program.
While a small percentage of ASD members who invested early in the program could earn the extraordinary rates of return, the promised opportunity was illusory for the vast majority of ASD members. Indeed, due to the fact that ASD’s pyramid-style business model relied entirely on an ever increasing influx of new money to fund the debt owed to earlier members, the vast majority of members could never earn the promised rates of return, making the promised opportunity fraudulent.
URGENT >> BULLETIN >> MOVING: Federal prosecutors have asked U.S. District Judge Rosemary Collyer for an order that would reopen the remissions process in the AdSurfDaily Ponzi case, potentially giving victims who missed the January 2011 filing deadline a chance to gain a pro rata share of the balance of seized assets.
The U.S. Secret Service seized about $80 million in the case. To date, the government has returned about $58.8 million to about 9,000 victims. Other victims might have missed the January 2011 filing deadline because ASD’s records were a mess, prosecutors asserted.
“The victims in this case include thousands of domestic and possibly international individuals and entities who provided funds directly to ASD,” prosecutors advised Collyer. “Although the government obtained the ASD member database, which contained the names of approximately 97,000 ASD members, it is entirely possible that this database does not contain all of the ASD victims.”
Separately, the U.S. Department of Justice said it did not oppose a reopening of remissions.
“Although the previous remission process was open for an extended period of time, [the Asset Forfeiture and Money Laundering Section] intends to administer a final remission process, whereby those who missed the original deadlines would be able to submit a petition for remission,” the Justice Department said in a letter to one of the federal prosecutors in the District of Columbia who is handling the ASD case.
“While the final details are still being determined, we envision that process starting shortly after the sentencing in this case, and providing approximately 45 days from the beginning of that process for individuals to file petitions. Petitioners who satisfy the requirements of 28 C.F.R: § 9.8 would be eligible for remission, and the granted petitioners would receive a pro-rata share of the remaining forfeited proceeds. The details of this process will be posted on the Ad Surf Daily page on website of the United States Attorney for the District of Columbia.”
Eligible claimants, according to the government’s filing, must demonstrate (italics added):
(1) he or she incurred pecuniary loss of a specific amount; (2) the pecuniary loss was a direct result of the illegal act; (3) the victim did not knowingly contribute in, participate in, or benefit from, or act in a wilfully blind manner toward the commission of the offense; (4) the victim has not been compensated for the loss; and (5) the victim does not have recourse to other assets to obtain compensation.
The PP Blog will update this information as needed.
In other ASD news, prosecutors have formally put the total amount ASD gathered at $119 million, up from a preliminary figure of $110 million.
And prosecutors noted that “less than $50,000 came from sources other than ASD members.”
Last week, the SEC filed charges against an ASD-like “opportunity” known as Zeek Rewards. In case filings, the agency asserted that only 2 percent of Zeek’s revenue was external to the membership, making Zeek a “classic” Ponzi scheme.
Former ASD President Andy Bowdoin is scheduled to be sentenced Aug. 29.
This PP Blog post is No. 1,500 since we switched to the WordPress platform in December 2008. Two years later, in December 2010, we commemorated our 1,000th post in this letter to readers, which rued the lionization of fools and hucksters on the Internet and questioned whether criminals and anarchists hold the upper hand.
God help us if they do.
Our concern that they might only was heightened last week with the DDoS attacks in which electronic data cannons were aimed at the websites of the U.S. Department of Justice, other U.S. government agencies and well-known recording-business entities after an indictment was unsealed in the Megaupload racketeering and copyright conspiracy case. There now are reports that a government site in Brazil was targeted, as well as the site of a Brazilian entertainer and other U.S. sites.
Yes, electronic cannons — specifically Low Orbit Ion Cannons that had been fired from secret bedroom and home-office bunkers in a contemptible display of criminality that had been trained on sites paid for by taxpayers and legitimate business entities and designed to knock them offline.
There are reports that Anonymous, the hacker’s collective that took credit for firing the electronic cannons, duped people who did not want to fire cannons at sites paid for by taxpayers and consumers into firing those cannons. Otherwise law-abiding folks reportedly were drafted into a conspiracy to attack government property, also known as taxpayer property, by computer code placed by Anonymous that turned their machines into information-killing weapons.
Putting it another way, Anonymous reportedly orchestrated an attack on U.S. government servers and conscripted unwitting participants to fire electronic weapons at websites operated by agencies whose mission is to keep the public safe from criminals: alleged would-be presidential assassins such as Oscar Ramiro Ortega-Hernandez of Idaho; Ponzi schemers and six-time felons such as Anthony Ray of Georgia; securities schemers such as Jenifer Devine of New Jersey; scammers who target seniors internationally such as Dennis Bolze of Tennessee; alleged con men such as Andy Bowdoin of Florida; purported “sovereign citizens” such as Kenneth Wayne Leaming of Washington state.
Read more about Megaupload’s Kim Dotcom in the DailyMail. Anonymous apparently is putting him forth as a role model.
The attacks in which unwitting participants reportedly found themselves unwillingly married to committed anarchists occurred within hours of Wednesday’s civil protests of the SOPA and PIPA antipiracy bills by Google, Wikipedia and others.
‘Anonymous’ Rains On Google’s Civics Parade
Neither Google nor Wikipedia got much of a chance to take a victory lap and marvel in their abilities to enlist the public to cow lawmakers and stop legislation in its tracks. That’s because the Justice Department announced the Megaupload copyright prosecutions under existing law on Thursday, a day after Google used the “c” word (censor) and Wikipedia staged its blackout. The Anonymous cannon attacks on public and private websites soon began, and the attacks quickly darkened and short-circuited the afterglow and PR bonanzas Google and Wikipedia had enjoyed during the 24 hours in which their presumptively utopian protests unfolded.
After being shown by Google and Wikipedia that Internet users practicing viral civics can freeze politicians during a U.S. Presidential election year in which 33 Senate seats and all 435 House seats also will be up for grabs, some lawmakers did manage to scrape up enough courage to allow that something specific needed to be done about online piracy.
But whatever needed to be done could be done later, the cowed politicians ventured, apparently after even more jobs, wealth and creativity get stolen by pirates who know that law enforcement’s battle against piracy is constrained by budgets, Congressional disputes, international borders, masked IPs and unthinking or downright criminal consumers who buy stolen property from pirates whose sympathizers include the anarchists who wield Low Orbit Ion Cannons.
Although Google and Wikipedia were hardly alone in their negative views about the proposed legislation, the opportunistic cannon attack by Anonymous that followed provided a stark reminder that extremists can hijack a presumptively well-meaning online civics lesson in a heartbeat and turn it into an international-security drama.
And because Anonymous is a loose coalition, the opportunity for “lone wolves” with their own destructive agendas to emerge from within the ranks of Anonymous is high. If someone in Anonymous decides he or she is opposed to, say, Sunday church picnics, then any church that hosts such an event and promotes it on the Internet could have its website targeted by Low Orbit Icon Cannons.
The PP Blog is feeling less free today on the Internet, the purported last bastion of freedom of expression. Although this Blog champions the First Amendment, its does not champion instances in which criminals hide behind the First Amendment to cover up or rationalize their crimes as a lawful expression of protected speech.
We wonder if our advocacy for law enforcement and content creators could invite Low Orbit Cannon-firers to train their sights anew on us, thus subjecting us to the mercies of a mob that empowers itself to silence our voice while it champions its own with the conscription of a viral mob. At the same time, we wonder if our publication of certain court documents could cause cannons to be trained on judges and prosecutors and investigators and crime victims, thus delaying or derailing prosecutions and putting the government and individual officers on the defense against criminals.
What happens, say, if an autosurf or HYIP with 500,000 members who purport to be Christians spreading the word that Jesus wants them to be rich decides the best way to derail a prosecution is to share a Low Orbit Ion Cannon among all members of the enterprise — or to create tens of thousands of websites designed to obscure or bury government and consumer-reporter warnings about international mass-marketing fraud?
And what happens of Congress decides to author specific legislation against HYIPs and autosurfs after learning that the largest sports stadiums may not be big enough to accommodate all the victims of a single scam — and an army of Bible-toting scammers start crashing servers or waging a disingenuous PR war against public servants and calling it free speech or an exercise in civics or civil disobedience?
This is not the America we knew in the first 20 years of our journalism career. Something has gone horribly wrong in the past four or five years — and much of what has gone horribly wrong is attributable to viral criminals and their disingenuous cheerleaders and abettors on the Internet.
A PP Blog companion site that featured news about Ponzi schemes was destroyed by pirates hiding behind servers on the other side of the world. The site’s content was scraped 100 percent and monetized. The thieves used us as their free labor force. It killed our site and our desire to keep it online.
The PP Blog itself has survived DDoS attacks and has received a claim of responsibility — not from Anonymous, but from a purported advocate for HYIPs and online money schemes. It’s hard to count all the threats or bids to chill us that we’ve received, and we long ago reached the point that only a machine can count the bids to spam the Blog with offers for obvious scams or solicitations to visit piracy sites.
For each published post, the Blog — on average — has received 100.09 spam communications. Looking at it another way, 100 scammers (or perhaps a smaller number with the ability to create the impression of scale) try to take advantage of the Blog’s work and ride its bandwidth and brand for every post we publish. Their business model is to flood antiscam sites with advertisements for individual scams.
At the moment, the scammers appear to be concentrating on PP Blog stories involving the emerging OneX scheme.
We are doing our best to keep you informed and are trying to out-think the scammers and criminals. Please help keep us around for Post 2,000.
Andy Bowdoin: Is ASD's patriarch now accusing the government of subornation of perjury?
UPDATED 3:44 P.M. EDT (U.S.A.) Facing felony charges of wire fraud, securities fraud and selling unregistered securities and the potential of 125 years in prison, accused Ponzi schemer Andy Bowdoin has responded by accusing federal prosecutors in the District of Columbia of forcing members to lie to qualify for compensation from a victims’ fund in the AdSurfDaily case, according to an email ASD members have received.
Last week, the government released $55 million seized in the ASD case and began to distribute it through Rust Consulting Inc., the remissions claims administrator approved by the U.S. Department of Justice and the U.S. Secret Service. Members began to receive payments Friday. About 8,400 ASD members filed approved claims, according to the government.
In an email to ASD members yesterday in which Bowdoin continued his efforts to solicit $500,000 to pay for his criminal defense, the ASD patriarch suggested prosecutors had set up the remissions program to dupe them into identifying themselves as crime victims. (Emphasis added.)
“We need the legal defense funds now more than ever to combat this great injustice where the government forced members to sign the untrue statement to get a refund of their monies,” Bowdoin claimed in the email.
The remissions money was not the proceeds of a Ponzi scheme, Bowdoin claimed. Rather, the money members received constituted a return of their “advertising expenses.”
Bowdoin did not explain in the email what he intended to do if the government produced evidence that people were advertising nonexistent businesses on ASD’s closed network. Nor did he explain what he would do if the government produced evidence that the sums sent to ASD for individual advertising purchases bore no connection to the real world: a sole proprietor of an MLM sideline business hawking fruit juice who historically posted $5,000 in gross revenue suddenly spending three times that amount to advertise on ASD, for example.
Bowdoin himself was accused in 2008 of advertising a failed, dissolved business in his own advertising “rotator” to generate purported “rebates.” In making the assertion, the government effectively was claiming that even a nonexistent business — or perhaps even a blank page or a page that promoted a personal Facebook site — could generate a return on investment if inserted in ASD’s rotator.
“To secure some of ASD’s rebates himself, Bowdoin promoted a bogus website through ASD,” prosecutors claimed on Aug. 25, 2008. “Bowdoin explained to the Secret Service that he used the ‘advertising’ he secured from ASD to promote GPS Tech, an unsuccessful business endeavor that had already been dissolved.”
In a footnote within the three-year-old filing, prosecutors claimed “Bowdoin also acknowledged that he modeled ASD after12dailypro, that ASD had no significant income (except maybe a couple thousand dollars) other than what its members paid in (and expected back as rebates). Bowdoin said he was not sure how ASD differed from 12dailypro except, he said, ASD did not guarantee a particular percentage, and its payments were only based on its sales. Bowdoin acknowledged that representations that he had met with the Securities and Exchange Commission (SEC) in Washington, DC, and representations that a team of SEC attorneys that he hired had approved of his operation were made up, as was ASD’s representation that Bowdoin had been awarded a Medal of Distinction by President Bush for business acumen.”
12DailyPro was an autosurf successfully sued by the SEC in 2006 amid allegations it was operating a massive online Ponzi scheme. Prosecutors said later that Bowdoin had a “silent partner” in ASD — and that the silent partner had been Bowdoin’s 12DailyPro sponsor. The government has said all along that ASD falsely traded on Bush’s name to sanitize a fraud that gathered tens of millions of dollars.
The U.S. Secret Service and prosecutors said in August 2008 that Bowdoin had disguised his securities venture as an advertising company that paid “rebates” of 125 percent. They later said that ASD’s internal computer systems described payouts to members as “ROI” — for “return on investment.”
Bowdoin, though, claimed yesterday that ASD, “by definition,” was not a Ponzi scheme. He did not addresses the government’s contention about the “ROI” reference, instead insisting that ASD offered “no guarantees” that members would receive payouts. In August 2008, the government claimed that ASD’s Terms of Service included these words:
“Advertisers will be paid rebates until they receive 125% of their ad purchases.”
An expert witness hired by ASD acknowledged in 2008 under cross-examination that the words had appeared in ASD’s TOS. Despite the fact that the TOS document has been a matter of public record for more than three years, some ASD members claimed that the government has produced no evidence and that ASD members who agreed that they are victims of a massive financial crime will be “torn apart” on the witness stand by ASD’s lawyers.
The “torn apart” claim was made on Jan. 17, 2011, two days before the deadline for ASD members to file a remissions claim with Rust in the case. The claim followed previous claims that a “group” of ASD members might sue persons who identified themselves as victims.
Bowdoin, 76, further claimed in yesterday’s email that, at his upcoming trial, the government will use claims forms signed by members to prove “they were ‘investors’ and therefore victims” of a Ponzi scheme.
On Jan. 23, 2009 — just 10 days after Bowdoin withdrew his claims to the seized money “with prejudice” and just one day after a federal judge memorialized Bowdoin’s withdrawal and consent to forfeit the seized money — federal prosecutors explained the law to ASD victims and said the compensation program would be governed by these federal regulations. (Emphasis added in next paragraph.)
“Under Section 9.8(a)(1) and (2) of Title 28 of the Code of Federal Regulations, in a petition for remission or mitigation of forfeiture a non-owner victim must demonstrate that it suffered a pecuniary loss of a specific amount directly caused by the criminal offense(s) underlying the forfeiture, or a related offense, and that the loss is the direct result of the criminal acts,” the government said in explaining remissions regulations.
A month later — in February 2009 — Bowdoin reentered the case as a pro se litigant and sought to rescind his decision to submit to the forfeiture. That effort failed after months of legal wrangling, and U.S. District Judge Rosemary Collyer issued a final order of forfeiture for the lion’s share of the seized funds in January 2010.
Bowdoin appealed that order and a separate forfeiture order issued by Collyer, but lost both cases in the U.S. Court of Appeals.
In April 2009, in response to Bowdoin’s pro se pleadings, prosecutors revealed that Bowdoin had signed a proffer letter in the case and acknowledged that the government’s material allegations were all true. Bowdoin later revealed in his own court filings that he had met with prosecutors over a period of at least for days in late 2008 and early 2009 and had given information against his interests.
In yesterday’s email, Bowdoin did not address the proffer issue and his own acknowledgment that he’d provided information against his interest in the hopes of receiving a sentencing reduction. Instead, he asserted that he had “very strong feelings about what the govt. is really doing.
“[B]ut due to my court case and upcoming trial, I can only pass on a statement made by one of the attorneys on my Legal Defense Team, in response to the govt. media press release issued on Monday, Sept. 26th, with the headline – “$55 MILLION BEING RETURNED TO VICTIMS OF INTERNET FRAUD – Victims Receive Forfeited Ponzi Scheme Proceeds,” Bowdoin continued.
“I am in full agreement with what my attorney had to say about this govt. press release, which is in ‘quotation marks’ as follows:
‘The release is a gross distortion of the facts. There are no ‘victims.’ Not a single person lost a dime until the government shut down the business. These customers bought advertising on the net. They were not investors.’”
Bowdoin did not say whether the email he sent to members yesterday in which he claimed the government “forced” members “to sign the untrue statement” to qualify for remissions was approved by his attorney.
Bowdoin fired his original attorneys in 2009, after he had submitted to the forfeiture and agreed to cooperate in the investigation. He later hired replacement attorneys.
Prior to Bowdoin’s email, an ASD members who identified herself as “Sara” claimed in an email that some ASD members had received amounts like “$50,000 and $60,000” back through the remissions program.
The email attributed to “Sara” painted a picture of a government conspiracy.
One apparent ASD member posting on Bowdoin’s Facebook fundraising site claimed last week that he received back $27,690 through the remissions program. The person did not say whether the business he had advertised on ASD had posted revenue that would justify such an advertising purchase, and the government had no comment on the Facebook assertion.
“Thousands” of AdSurfDaily Ponzi victims with approved claims will receive remissions payments of “100 percent” in the coming days, a source familiar with the process tells the PP Blog.
It is quite rare “to have a remissions program that comes back with 100 percent,” the source said.
The claims process was administered by Rust Consulting Inc. of Minnesota. The process was coordinated by the U.S. Department of Justice, the U.S. Secret Service and the office of U.S. Attorney Ronald C. Machen Jr. in the District of Columbia.
After three long years waiting for the process to be finalized after two forfeiture appeals by ASD President Andy Bowdoin and attempted pro se interventions by dozens of members who claimed the government was the bad guy, ASD members who stuck with the process expressed joy.
“YAYAYAYAY!” exclaimed one. Another characterized the news as “amazing.”
A small percentage of ASD members who filed claims will not receive compensation because they failed to demonstrate a loss, the source said.
An “overwhelming majority” of claims were granted, the source said. Court records show that about 11,000 people filed claims.
Payments are expected to begin within 15 days. The money will be deposited electronically into the accounts of ASD members whose claims were granted.
In 2008, Bowdoin compared the prosecutors in the case to “Satan.” Other ASD members described the U.S. Secret Service as “Nazis” and “goons.” A poster on the now-defunct Surf’s Up forum said that the lead prosecutor in the case should be placed in a medieval torture rack and that ASD members should draw straws to determine who received the honor of carrying out the torture.
A federal judge was called “brain dead” if she did not agree with ASD’s side of the case, and a purported “prayer” was circulated among ASD members calling for the prosecutors to be struck dead. One prosecutor was described derisively as “Gomer Pyle,” and rumors were unleashed on the Surf’s Up forum that the government had admitted secretly that ASD was not a Ponzi scheme.
Some ASD members encouraged others not to file for remissions. Those who ignored the advice and were able to demonstrate a loss now will receive back 100 cents on the dollar.
Remissions payments will be made from funds seized by the U.S. Secret Service in the earliest days of the ASD probe more than three years ago.
Bowdoin filed appeals in the forfeiture cases, but lost. He is now soliciting funds to pay for his criminal defense to charges of wire fraud, securities fraud and selling unregistered securities.
Some ASD members ignored the seizure and a parallel criminal investigation. They immediately joined other autosurfs, HYIPs and cash-gifting programs, claiming they were excellent ways to make up their ASD losses.
In a March 2009 letter to ASD members on the Surf’s Up forum, Bowdoin chided prosecutors and the Secret Service, claiming his pro se filings in the civil portion of the case “should really get their attention.”
A month later — in April 2009 — prosecutors revealed in a final response to a series of pro se pleadings by Bowdoin that Bowdoin had signed a proffer letter in the case and acknowledged that the government’s material allegations were all true.
Bowdoin acknowledged in his own court filings that he had given information against his interests and had met with prosecutors over a period of at least four days in late 2008 and early 2009. In January 2009, he abandoned the forfeiture cases, releasing his claims to the seized money “with prejudice.”
By the end of February 2009, however, Bowdoin reentered the case as a pro se litigant, claiming later that his decision was driven by a “group” of ASD members. He did not identify members of the group.
ASD is known to have so-called “sovereign citizens” in its ranks.
Bowdoin has not referenced the proffer letter in his fundraising bid. Nor has he referenced a racketeering lawsuit filed against him in January 2009 by some members.
It was not immediately clear how many members destroyed their chances to receive remissions after coming under the influence of various crackpot theories spun by certain ASD members. One of the theories held that all commerce is lawful if a contract exists. Another held that members should include notes on the claims forms that explained Bowdoin was conducting business lawfully.
Another theory held that the government had invested approximately $80 million seized in the case, had earned a return in excess of $1 billion — and that prosecutors were partying with the money. Still another held that a federal judge was conspiring with another federal judge to deny ASD justice and that at least one of the judges was guilty of 60 felonies.
Yet another theory held that ASD members should not cooperate with investigators and should not file remissions forms.
EDITOR’S NOTE: Having experienced DDoS attacks that crippled our ability to publish and inform readers, researchers and victims of Ponzi schemes, pyramid schemes and other forms of fraud about investigations, arrests and court cases, the PP Blog is not sympathetic to the points of view of the attackers and their apologists.
Readers and researchers have come to rely on the PP Blog as an important information source. Victims and persons affected by various schemes visit the Blog daily, as do financial institutions performing research on potential trouble spots and law-enforcement agencies at the local, regional, national and international levels.
The PP Blog, whose monthly costs have increased more than tenfold owing to sustained DDoS attacks beginning last fall, frequently writes about the incongruities that often accompany Ponzi and other fraud schemes. Hackers, DDoSers and cyber bullies use the same type of illogical and incongruous “explanations” to rationalize their particular brand of crime.
DDoS attacks, cyber intrusions and cyber bullying chill speech and threaten domestic and international security, thus putting both commerce and the free marketplace of ideas at risk. Period.
It is simply untrue that hackers, cyber bullies and DDoSers are the modern-day equivalent of freedom fighters. Simply put, they are anarchists who do not respect private and public property, rules of decorum, the rights of sovereign nations and the rights of people living free or yearning to live free. Nor do they respect the rights of merchants, information purveyors and their customers, clients and readers to have access to the marketplace of commerce and ideas.
Many of the attackers and cyber bullies, though, would have you believe the opposite — that they’re serving a higher good by bringing down a server, by harassing people and companies on the Internet and even cackling about it, by subjecting their targets to economic and potentially even physical danger, by forcing their will on individuals and entities with whom they have political or philosophical disagreements.
Here, now, the story of yesterday’s arrests . . .
The FBI arrested 16 individuals and executed more than 35 search warrants “throughout the United States” yesterday in a coordinated response to cyber attacks, including last year’s DDos attack on PayPal and intrusion attacks on AT&T and on InfraGard in Tampa Bay.
InfraGard is an FBI-led, public-private partnership that shares information on terrorism, intelligence, criminal and security matters.
Separately, authorities in Europe rounded up five more individuals for alleged cyber crimes.
Although some of the alleged attackers apparently see themselves as advocates for a free exchange of ideas and modern avengers for societal injustices, the U.S. Department of Justice described them as free-wheeling marauders who attacked two famous companies and the FBI-led public-private partnership.
After WikiLeaks “released a large amount of classified U.S. State Department cables on its website” last year, members of the Anonymous hacking group retaliated by executing a “coordinated” DDoS attack on PayPal, which had blocked WikiLeaks’ ability to collect donations for a Terms of Service violation, U.S. officials said.
Anonymous, according to the Justice Department, even had a name for its PayPal assault: “Operation Avenge Assange.” Beyond that, WikiLeaks itself declared that PayPal was trying “to economically strangle WikiLeaks,” the Justice Department said.
Julian Assange, who is under investigation in Sweden for alleged sexual assaults, is the founder of WikiLeaks. He has denied wrongdoing.
In bringing the attacks, members of Anonymous compromised the ability of legitimate PayPal users to access the PayPay website, the Justice Department said. Fourteen people were charged in a federal indictment brought in San Jose, Calif., that alleges a conspiracy to damage protected computers at PayPal.
Named in the San Jose indictment were Christopher Wayne Cooper, 23, aka “Anthrophobic”; Joshua John Covelli, 26, aka “Absolem” and “Toxic”; Keith Wilson Downey, 26; Mercedes Renee Haefer, 20, aka “No” and “MMMM”; Donald Husband, 29, aka “Ananon”; Vincent Charles Kershaw, 27, aka “Trivette,” “Triv” and “Reaper”; Ethan Miles, 33; James C. Murphy, 36; Drew Alan Phillips, 26, aka “Drew010”; Jeffrey Puglisi, 28, aka “Jeffer,” “Jefferp” and “Ji”; Daniel Sullivan, 22; Tracy Ann Valenzuela, 42; and Christopher Quang Vo, 22.
One individual’s name was withheld by the court, the agency said. The reason was unclear.
Charged in the Middle District of Florida in the alleged InfraGard attack was Scott Matthew Arciszewski, 21. The Justice Department described him as a hacker who uploaded files without authorization and provided instructions “on how to exploit the Tampa InfraGard website.”
Meanwhile, in a complaint in federal court in New Jersey, Lance Moore, 21, of Las Cruces, N.M., was charged with stealing information from AT&T and posting it on a public file-sharing site.
The Metropolitan Police Service in the United Kingdom also made a cyber-crime arrest yesterday, and the Dutch National Police Agency made four arrests, the Justice Department said.
DISCLOSURE: Until Jan. 9 of this year, the PP Blog displayed Google ads. See this post.
BULLETIN: Google disclosed in a regulatory filing yesterday that its advertising program was under investigation by the U.S. Department of Justice. The company announced that it has taken a charge of $500 million “in connection with a potential resolution.”
The Mountain View, Calif.-based firm provided few details of the probe, and did not say whether the investigation was targeting AdWords, AdSense or another facet of its advertising platform. The charge reduced Google’s first-quarter net income to about $1.8 billion.
AdWords is an auction-based system that enables advertisers to place ads on the Google network; AdSense is a program that distributes the ads. AdSense publishers earn fees when website visitors click on the ads.
This ambiguous note appeared in the filing:
“In May 2011, in connection with a potential resolution of an investigation by the United States Department of Justice into the use of Google advertising by certain advertisers, we accrued $500 million for the three month period ended March 31, 2011. Although we cannot predict the ultimate outcome of this matter, we believe it will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows.”
Google did not identify the “certain” advertisers, say whether the advertisers also were under scrutiny or were viewed by the government as potential victims. Nor did the firm say when it had come under investigation or how long it had known about the probe.
UPDATED 1:14 P.M. EDT (U.S.A.) A Florida man who allegedly received $1.5 million from an international Forex fraudster now jailed in the United States has been arrested on charges of bankruptcy fraud, federal prosecutors said.
The three-count indictment against Jon Jerald Hammill, 39, of St. Petersburg, was unsealed yesterday. It marked the fourth major Ponzi-related event in Florida in recent days. The state is the site of some of the most complex fraud investigations in the nation, and the case against David R. Lewalski — from whom Hammill and his company allegedly received money — is no exception.
Hammill, whose arrest was announced in Washington yesterday by Assistant Attorney General Lanny A. Breuer, was accused of failing “to disclose that he had received more than $100,000″ from Lewalski’s company prior to the filing of his bankruptcy petition” in February 2009. He is further accused of not disclosing his ownership of a shell company into which payments from Lewalski’s Ponzi scheme were routed and not disclosing his business relationship with Lewalski.
Although Hammill’s Chapter 7 bankruptcy initially was granted in July 2009, U.S. Bankruptcy Trustee Donald F. Walton later reopened the case and sought to revoke Hammill’s discharge for fraud. In court filings, Walton said Hammill invoked his 5th Amendment right against self-incrimination when questioned about his dealings with Lewalkski’s company, which was known as Botfly LLC.
Breuer is the head of the Criminal Division of the U.S. Department of Justice. The federal probe into the alleged $29 million Botfly Forex caper is being led by U.S. Attorney Robert O’Neill of the Middle District of Florida, with the U.S. Postal Inspection Service in Washington as the lead agency. O’Neill and his predecessor — former U.S. Attorney A. Brian Albritton — have squared off against against a series of spectacular fraud schemes operating in the region.
Among the cases are the Beau Diamond Ponzi scheme, the David Merrick Ponzi scheme known as TIRN, the $220 million Forex Ponzi scheme of Jamaican David A. Smith and the alleged EMG/Finanzas Forex fraud. Investigators say they have traced proceeds from the EMG/Finanzas fraud to the international narcotics trade. A task force working in the region also did investigative legwork in the alleged AdSurfDaily Ponzi scheme.
Some of the cases have elements that only can be described as bizarre and deeply disturbing. In the Lewalski case, for instance, it is alleged that Lewalski discussed a plan by which he’d divert blame to the government for his legal predicament in a bid to get his victims to pay for his defense.
By making the government the bogeyman, Lewalski hoped victims would come to believe that he — as opposed to investigators — offered the best shot of getting back their money, according to court filings.
At least one person gave Lewalski $50,000 to pay for a lawyer — and this occurred after Lewalski had chartered a private Gulfstream IV jet at a cost of $172,744 to fly from the United States to Belgium one day after he was charged civilly in Florida, according to court filings.
One women — an attorney for the court-appointed receiver in Florida’s civil case — was made the subject of misogynistic rants by Lewalski, according to court filings. The rants were cited by federal prosecutors who argued successfully that Lewalski should not be released on bond.
Prosecutors also argued that Lewalski had spent astronomical sums of investors’ money on luxuries in the United States and Europe and advised investors to take the 5th Amendment when questioned. In court filings, prosecutors argued that Lewalski also sought to tamper with witnesses.
Lewalkski, prosecutors said, told “family members and other potential witnesses to stay quiet and not cooperate with law enforcement.”
The receiver’s attorney was called a “c[$%!]” and a “Nazi,” according to court filings. In one rant, Lewalski allegedly said, “So f[$%!] her what a bitch.” Court documents also allude to a woman who allegedly was called an “FDLE chick” and described by Lewalski as “nuts” and a “bitch.”
It was not immediately clear if Lewalski was talking about the receiver’s attorney or a different woman employed by the Florida Department of Law Enforcement when making the alleged “FDLE chick” remark. In the context of the remark, however, Lewalski is alleged to have discussed a “nuclear option.”
Separately, the U.S. Postal Inspection Service alleged that Lewalski complained to investors he defrauded about “recent ‘Orwellian’ totalitarian tactics” employed by U.S. investigators in Ponzi scheme cases, instead of accepting accountability for his fraud.
But even as Lewalski was grumbling that his U.S. assets had been frozen, he allegedly did not tell his investors what had happened to their money and why they had not been paid as promised prior to the seizure. Instead, according to the investigating postal inspector, he talked about money he was able to access in Europe after he left the United States hastily, saying he had as many as six offshore accounts.
Among Lewalski’s other claims was that he had been “investigated and cleared by the Securities and Exchange Commission,” according to court filings. Members of ASD also have claimed that ASD, which was accused of orchestrating a $110 million international fraud from Florida, was given the green light by the SEC.
No evidence has surfaced in either the ASD case or the Botfly case that the SEC approved of the companies’ operations. Meanwhile, ASD members also have directed rants at prosecutors and investigators, describing them as “goons,” “Nazis,” merchants of “Satan” and criminals. One ASD member proposed that a federal prosecutor be placed in a medieval torture rack, with ASD members at large drawing straws to determine who got the honor of turning the torture wheel.
Another ASD member proposed that a “milita” storm Washington in defense of ASD. Still another said that the company’s critics consisted of “Rats, Bed Bugs, Maggots, Cockroaches And Everything Else.”
Lewalski, 47, operated Botfly from his mother’s home in Bayonet Point, Fla., according to court records.
After being charged civilly by the state of Florida in April 2010, Lewalski immediately left the United States, spending the next seven months in Europe, according to court filings.
He is believed to have returned to the United States in October 2010, but investigators said he pretended still to be in Europe. Lewalski was arrested in New York on November 4, 2010. Prosecutors said he was staying in a luxury suite atop the Mandarin Oriental Hotel for which he had paid $143,000 in advance with investors’ money.
The Mandarin bills itself “the most breathtaking luxury hotel in New York,” and Lewalski’s suite overlooked Central Park, according to court records.
SEC Chairman Mary Schapiro alluded to the agency’s investigation of the alleged Imperia Invest IBC scam in testimony before Congress this morning, a development that may signal more bad news is in the offing for serial scammers online.
Without mentioning Imperia by name, Schapiro told members of the House Subcommittee on Financial Services and General Government that the agency, which is a member of the Financial Fraud Enforcement Task Force, participated in “Operation Broken Trust.”
In December, the U.S. Department of Justice noted that the Imperia case brought by the SEC in October was part of the operation. Imperia was promoted on Ponzi and criminals’ forums such as TalkGold and MoneyMakerGroup, both of which have been identified in federal court filings as places from which family-destroying international Ponzi and HYIP fraud schemes are promoted.
Schapiro said today that the SEC has been aggressively pursuing “Ponzi scheme operators and perpetrators of offering frauds.” The Imperia case, which the SEC brought in Utah, is an example of an Internet-based offering fraud, as are many of the “programs” pitched on the Ponzi boards.
In December, members of the Financial Fraud Enforcement Task Force identified Ponzi Scheme "hot spots" in the United States. Pictured here are FBI Executive Assistant Director Shawn Henry (foreground), with Attorney General Eric Holder (right) and Chief Postal Inspector Guy Cottrell. The Task Force specifically warned investors to be wary of social-networking sites and chat forums. And officials noted that "we continue to use sophisticated investigative techniques—like undercover operations and court-authorized electronic surveillance—to collect evidence in ongoing cases and to identify and stop criminals before they prey on others."
Salt Lake City was identified in December by the Task Force as one of the “top five Ponzi scheme hot spots in the country.” Other Ponzi hot spots include Los Angeles, New York, Dallas and San Francisco, the Task Force said, cautioning Americans that the fraud hardly was limited to those cities.
“Be wary of people you meet on social networking sites and in chat rooms, where investment fraud criminals have been known to troll for victims,” the Task Force urged.
In June 2010, the Justice Department used its Justice Blog to create awareness about the emerging threat of mass-marketing fraud, specifically referencing the alleged Pathway To Prosperity Ponzi scheme. Pathway To Prosperity, which the U.S. Postal Inspection Service said created tens of thousands of victims from virtually all corners of the world, also was promoted on TalkGold and MoneyMakerGroup.
In October, before the public knew Operation Broken Trust was under way, the SEC said Imperia had stolen millions of dollars from thousands of Americans with hearing impairments. The firm used a payment processor known as Perfect Money, a favorite among international scammers who populate the Ponzi boards. Imperia also purported to have a relationship with Visa, but was using the name “without authorization” to disarm skeptical investors, the agency said.
Not a “single penny” was paid to Imperia investors, the SEC said.
Money from the Imperia scheme is believed to have been funneled into accounts in Cyprus and New Zealand. Imperia purported to have operated from the Bahamas and Vanuatu, but the business addresses were “fake,” the SEC said.
The Justice Department said Imperia used “a series of offshore PayPal style bank accounts to raise “in excess of $7 million from at least 14,000 investors worldwide, including 6,000 investors in the U.S. who have invested in excess of $4 million.”
Earlier this year, the CFTC turned its attention to purported Forex programs that were promoted on TalkGold and MoneyMakerGroup. Some of those programs also used PerfectMoney. Like the SEC, the CFTC is part of the Financial Fraud Enforcement Task Force.
Tips From The Task Force
Be careful of any investment opportunity that makes exaggerated earnings claims, especially during a short period of time.
Ask for written information about the investment, such as a prospectus, recent quarterly or annual reports, or an offering memorandum.
Consult an unbiased third party, like an unconnected broker or licensed financial adviser, before investing.
Don’t be fooled into believing an investment is safe just because someone you know is recommending it. So-called “affinity scams” are one of the favorite methods used to lure people in.
If you feel you are being pressured into investing, don’t do it.
Be wary of people you meet on social networking sites and in chat rooms, where investment fraud criminals have been known to troll for victims.
URGENT >> BULLETIN >> MOVING: Federal prosecutors have asked U.S. District Judge Rosemary Collyer for an order that would reopen the remissions process in the AdSurfDaily Ponzi case, potentially giving victims who missed the January 2011 filing deadline a chance to gain a pro rata share of the balance of seized assets.
EDITOR’S NOTE: Having experienced DDoS attacks that crippled our ability to publish and inform readers, researchers and victims of Ponzi schemes, pyramid schemes and other forms of fraud about investigations, arrests and court cases, the PP Blog is not sympathetic to the points of view of the attackers and their apologists.
