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Tag: U.S. District Judge Thomas W. Thrash Jr.

Is Profitable Sunrise Pyramid Case At Risk? SEC Declines Comment

The SEC this afternoon declined comment on an order by a federal judge in Atlanta that could lead to the dismissal of the agency’s 2013 case against Profitable Sunrise, an alleged international pyramid scheme and offering fraud targeted at U.S. residents by one or more murky figures.

Such a dismissal almost certainly would embolden overseas HYIP scammers who reach into the United States over the Internet to steal hundreds of millions of dollars. Profitable Sunrise targeted Christians.

In April 2013, the PP Blog reported that the SEC alleged the “program” was using a “mail drop” in England and that “Profitable Sunrise operates for the benefit of unknown individuals and/or organizations doing businesses through companies formed in the Czech Republic and using bank accounts in the Czech Republic, Hungary, Latvia, and China, among other places.”

Two days ago, on Jan. 19, Judge Thomas W. Thrash Jr. ordered the SEC to show cause within 21 days why the case should not be dismissed — apparently for lack of prosecution.

“Decline comment beyond what we say in court filings,” the agency told the PP Blog today.

How the agency would proceed in the next three weeks was unclear.

Thrash’s order says there has been no action in the case since July 15, 2015, a period of more than six months.

From the judge’s order (italics added):

The above complaint was filed on April 4, 2013, on April 4, 2013 the Court granted plaintiff’s Motion for Temporary Restraining Order; on April 15, 2013 the Court granted plaintiff’s Motion for Preliminary Injunction; Clerk’s Entries of Default have been entered as to various defendants; on July 15, 2015 the Court directed the Clerk of Court to Receive Repatriated Funds. Since that date no further action has occurred; IS THEREFORE ORDERED that the plaintiff show cause in writing within twenty (21) days why the case should not be dismissed. The Clerk is DIRECTED to submit the case to the Court for further action at the expiration of the 21 days. SO ORDERED, this 19th day of January 2016.

One of the claimed “plans” of Profitable Sunrise was bizarrely dubbed the “Long Haul” and purported to pay 2.7 percent a day. At least 34 U.S. states and provinces in Canada issued Investor Alerts or cease-and-desist orders against Profitable Sunrise.

Among other things, the scheme demonstrated the dangers of doing business with exceptionally murky enterprises making claims that fabulous wealth would flow to investors. U.S. promoters working for commissions apparently believed the “program” was operated by “Roman Novak” and his brother “Radoslav,” a purported attorney.

Whether the brothers actually exist is unclear. So is the final sum gathered by the “program,” which had a presence on well-known Ponzi-scheme forums such as TalkGold and MoneyMakerGroup.

No receiver has been appointed to date in the Profitable Sunrise case. How victims would go about filing claims is unclear. So, too, is the amount of money available to victims from actions such as asset freezes.

Hungary is reported to have suspected Profitable Sunrise of money-laundering.

In May 2013, the PP Blog reported a Virginia man had petitioned the U.S. court for return of more than $57,000 wired to Profitable Sunrise. The SEC later objected to the petition, arguing it could open the floodgates to similar petitions while the agency was working to repatriate assets that one day could be distributed to victims.

Christian author James Paris has said he feared for his safety and the safety of his family when writing about Profitable Sunrise. (See PP Blog October 2013 comment on the matter at the RealScam.com antiscam forum.)

See PP Blog’s tag archive on references to Profitable Sunrise or use the Blog’s search function near the upper-right corner.

NOTE: Our thanks to the ASD Updates Blog.

Jan 21, 2016
YouTube Video Pitchmen For Profitable Sunrise Hit By Subpoenas From SEC

John Schepcoff says on YouTube that he potentially lost more than $193,000 in Profitable Sunrise but that a new “program” operating from Hong Kong is “1,000 percent” better.

EDITOR’S NOTE: Much remains murky about Profitable Sunrise, the alleged purveyor of five HYIP “plans,” including one bizarrely dubbed the “Long Haul” that purported to pay a preposterous 2.7 percent a day. The “Long Haul” payoff was dubbed the “Easter Gift.” Investors were told it would arrive April 1 — but it never materialized.

One thing that is abundantly clear is that Profitable Sunrise potentially has created legal exposure and inconvenience for individual pitchmen, even though purported operator “Roman Novak” appears to be gone like a thief in the night.

Still pushing HYIP schemes?

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At least three Profitable Sunrise pitchmen — including at least two who pushed the “program” on YouTube — have been subpoenaed by the SEC to appear at depositions this month. The agency’s move is occurring in the aftermath of the depositions of at least two other Profitable Sunrise figures in Florida and Utah in April.

In July 2010, the PP Blog reported that the Financial Industry Regulatory Authority (FINRA) warned investors worldwide “to stay away from HYIPs,” saying that they use social-media sites such as YouTube, Twitter, Facebook and online forums and “rating” sites to spread Ponzi misery globally.

At least two of the men named in the new round of subpoenas went on to push other purported “opportunities” after the SEC described Profitable Sunrise in April as a murky HYIP that had used a “mail drop” in England and a series of offshore bank accounts in multiple countries to scam investors potentially of tens of millions of dollars.

A subpoena was docketed yesterday in federal court in Atlanta for John Schepcoff of Carmichael, Calif. Schepcoff also is known as James Schepcoff, according to the SEC. His deposition has been scheduled for June 12 at 10 a.m. in San Francisco.

After pitching Profitable Sunrise on YouTube prior to its March collapse amid especially murky circumstances, Schepcoff returned to YouTube in late April and began pitching yet another murky “program” purportedly operating from Hong Kong. Although the identity of the Hong Kong “program” was unclear, records suggest it was a Zeek Rewards-like “opportunity” known as “Better-Living Global Marketing.”

In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme that had pushed unregistered securities on hundreds of thousands of people and duped them into believing they were receiving a legitimate return of about 1.5 percent a day. The U.S. Secret Service also said it was investigating Zeek.

A subpoena also was docketed in Atlanta yesterday for video pitchman Melton McClanahan of Fairfield, Calif. McClanahan was identified in a March order by the Alabama Securities Commission (ASC) as a Profitable Sunrise agent. McClanahan then posted a YouTube video denying he was an agent and yet claiming the information he passed along to lure prospects “was given to me.”

McClanahan’s deposition is scheduled for June 11 at 10 a.m. in San Francisco.

An SEC subpoena also was docketed yesterday in Atlanta for Don Gillette of Miami. Gillette reportedly told members of his Profitable Sunrise downline that he was turning to a new “program” that “must have a realistic earning potential of at least $500 a day or more,” according to a post at the RealScam.com antiscam forum.

Details about the scheduling of Gillette’s deposition are unclear.

As part of its ongoing Profitable Sunrise probe, the SEC also has subpoenaed records at PayPal and at Societe Generale in New York, according to the docket of U.S. District Judge Thomas W. Thrash Jr. in Atlanta. Whether Profitable Sunrise or its members were using the companies to move money is unclear.

One of the problems with HYIP schemes is that they may cause laundered funds or proceeds of criminal enterprises to pass through or be placed on deposit at legitimate financial institutions.

News of the new round of Profitable Sunrise subpoenas follows on the heels of the takedown last month of Liberty Reserve, amid allegations it had orchestrated a $6 billion money-laundering conspiracy. Liberty Reserve was popular with HYIP scammers and other criminals.

NOTE: Thanks to the ASD Updates Blog.

Jun 5, 2013
BULLETIN: SEC Moves To Block Virginia Man From Intervening In Profitable Sunrise Case; Appointment Of Receiver Will Depend On Success Of Efforts To Repatriate Assets To United States

BULLETIN: The SEC has asked a federal judge not to permit a Virginia man to intervene in the Profitable Sunrise HYIP fraud case, saying that the man’s self-filed pleading “would open the floodgates for other investors to file similar motions.”

In late April, James Paul Schilling of Mechanicsville effectively asked U.S. District Judge Thomas W. Thrash Jr. of the Northern District of Georgia to unfreeze $57,300 sent to Profitable Sunrise via wire in a series of transfers in January and February. In early April, the SEC described Profitable Sunrise as a pyramid scheme that may have collected tens of millions of dollars while operating through a “mail drop” in England and using other companies to gather the funds.

Money from the scheme was directed at entities in several countries, the SEC said.

Profitable Sunrise was targeted at U.S. residents, the SEC said in April. One of the claimed “plans” of Profitable Sunrise was bizarrely dubbed the “Long Haul” and purported to pay 2.7 percent a day.

“In this case, permitting S[c]hilling to intervene and retrieve money commingled with funds deposited by thousands of other investors would open the floodgates for other investors to file similar motions, which would create an unnecessary strain on this Court’s resources thereby delaying the proceedings and, ultimately, any distribution of funds to investors,” the SEC argued.

The agency said in its opposition to Schilling’s motion that it was contemplating asking the court to appoint a receiver, but any decision to ask for the appointment would depend on whether the SEC’s “efforts to repatriate funds are successful.

“A Receiver could best administer a process to return funds to defrauded investors pursuant to a plan of distribution approved by the Court,” the SEC said.

In April, the SEC said that “Hungarian law enforcement authorities” had frozen an account holding $11.3 million connected to the scheme as part of an “investigation of suspected money laundering.”

Whether that money will be returned to the United States is unclear. Also unclear is whether Profitable Sunrise funds that may be held in other countries ever will be returned. Among other things, the Profitable Sunrise case demonstrates the dangers of doing business with murky enterprises, regardless of where an investor lives. Investors by the thousands could be left holding the bag.

Profitable Sunrise was promoted on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup. Although promoters claimed “Roman Novak” was running Profitable Sunrise, it remains unclear whether he actually exists. The scheme spread through an MLM-style network of promoters hoping to glean commissions.

The SEC is asking Thrash to summarily deny Schilling’s motion or “in the alternative, order that Shilling support the motion with admissible evidence and provide citation to the legal authorities that he claims support his motion.”

Despite the murkiness of Profitable Sunrise, former pitchman John Schepcoff is telling YouTube viewers that he’s identified another venture that is “1,000 percent better” than Profitable Sunrise and Zeek Rewards. In August, the SEC described Zeek as a $600 million Ponzi and pyramid scheme, saying it duped people into believing a return of about 1.5 percent a day was legitimate.

The Profitable Sunrise “Long Haul” plan offered about double the purported returns of Zeek.

NOTE: Our thanks to the ASD Updates Blog.

May 13, 2013
Virginia Man Asks For The Return Of More Than $57,000 Wired To Profitable Sunrise In Series Of Transactions
UPDATED 8:52 P.M. EDT (U.S.A.) A Virginia man has asked for the return of $57,300 wired to Profitable Sunrise in a series of transfers from Bank of America between Jan. 17 and Feb 28. It was unclear from the filing whether the man was a simple investor in Profitable Sunrise, an individual who also was promoting the scheme for commissions or an interested party of a different sort.

The request was made in the form of a self-filed petition to U.S. District Judge Thomas W. Thrash Jr. in Atlanta. Thrash is overseeing the SEC’s April 4 fraud action against Profitable Sunrise.

Two of the transfers appeared to have occurred on Feb. 28. Just a day earlier, the state of North Carolina filed a cease-and-desist order against the Profitable Sunrise “program” and purported operators Roman and Radoslav Novak. One of the Feb. 28 transactions was for $18,000 and marked the largest sum among the series of transfers, based on the Virginia’s man’s motion for the court to release the funds.

The document did not say which of the five Profitable Sunrise “plans” to which the money was directed. Although the SEC obtained an asset freeze after accusing Profitable Sunrise of fraud last month, it is far from clear whether Thrash can order the money returned consistent with the man’s wishes. No receiver has been appointed in the Profitable Sunrise case, and the investigations of the purported “opportunity” by the SEC and other regulators continue.

One of the five Profitable Sunrise “plans” was known as the “Long Haul,” which had a purported deadline of March 1 for accepting deposits and purported to pay an absurd 2.7 percent daily.

Based on the man’s filing, it appears as though all of the transfers were directed at entities named relief defendants in the SEC’s action, including Melland Company SRO, Color Shock SRO and Fortuna-K SRO. These Czech entities apparently were receiving money for Profitable Sunrise, which operated through a British entity known as Inter Reef LTD and was conducting an offering fraud through a “mail drop,” according to the SEC’s Profitable Sunrise complaint.

Like other HYIPs, Profitable Sunrise was flogged online, a situation that potentially puts pitchmen in legal jeopardy. Profitable Sunrise has been accused of selling unregistered securities as investment contracts. The SEC said the Profitable Sunrise referral program operated as a “pyramid scheme” and raised questions about whether the purported Novak brothers actually exist.

Here are the amounts and dates of the wire transfers, according to the man’s filing:
- $1,500 on Jan. 17.
- $6,300 on Feb. 1. (Two transactions; one for $1,800 and another for $4,500.)
- $9,000 on Feb. 12. (Two transactions; one for $3,000 and another for $6,000.)
- $8,500 on Feb. 15. (Two transactions; one for $1,000 and another for $7,500.)
- $10,000 on Feb. 20.
- $18,000 on Feb. 28.
- $4,000 on Feb. 28.
Profitable Sunrise may have gathered tens of millions of dollars, the SEC said last month.
May 1, 2013
BULLETIN: NOT JUST EUROPE: Court Filings In Profitable Sunrise Fraud Case Say Some Of The Money Went To Entities In Australia And Panama
UPDATED 9:11 P.M. EDT (APRIL 17, U.S.A.) Some Profitable Sunrise investors wired money to entities in Australia and Panama, according to new filings in the SEC’s pyramid-scheme and fraud case.

The new filings, dated today, identify those entities as Technocash Limited of Sydney and Trackford Business Corp. of Panama City. Earlier filings named four other entities that the SEC says received funds from Profitable Sunrise investors: Melland Company SRO of the Czech Republic; Color Shock SRO of the Czech Republic; Solutions Company SRO of the Czech Republic; and Fortuna-K SRO of the Czech Republic.

Melland, Color Shock, Solutions and Fortuna-K all have been named relief defendants. How the SEC intends to proceed against Technocash and Trackford was not immediately clear today. Various state regulators in the United States have said that Profitable Sunrise traded on Bible verse.

Profitable Sunrise operated as Inter Reef LTD through a “mail drop” in England, and its director, Agnes Jouaneau, “is a resident of the Seychelles. She is director of several dozen other UK companies,” according to court filings.

“Having heard from witnesses, examined documents, considered the legal precedents and the arguments of counsel, the Court finds that the SEC has established a prima facie case that Inter Reef violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (‘Securities Act’) [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (‘Exchange Act’) [15 U.S.C. § 78j(b)], and Exchange Act Rule 10b-5 [17 C.F.R. § 240.10b-5],” wrote U.S. District Judge Thomas W. Thrash Jr.

Thrash has approved a preliminary injunction and continued an asset freeze in the Profitable Sunrise case.

A proceeding was held in open court today, according to the new filings. At that 20-minute proceeding, “no one” appeared for Profitable Sunrise or the relief defendants.

Evidence entered by the SEC, according to Thrash, supports findings that Profitable Sunrise:
- “offered a series of passive investments with low minimum investments claiming to pay interest rates varying between 1.6 percent and 2.7 percent per business day . . .”
- Sold “securities” as defined under federal securities law . . .
- “failed to register those securities with the SEC, and no exemption from registration has been proven . . .”
- Sold “unregistered securities through misrepresentations and omissions of material fact” and that the sale of those securities “constitutes a device, scheme and artifice to defraud.”
A minute entry from today’s proceeding before Thash suggests that the SEC has deposed Profitable Sunrise pitchman Anthony M. Infante of Florida and that at least a portion of his deposition was read into the record today.

Read SEC statement issued April 16.

The ASD Updates Blog is maintaining an archive of Profitable Sunrise-related court filings.
Apr 15, 2013
URGENT >> BULLETIN >> MOVING: SEC Files Complaint Against Profitable Sunrise; Purported ‘Opportunity’ Called An International ‘Pyramid Scheme’

URGENT >> BULLETIN >> MOVING: (17th update 4:02 p.m.) The SEC has filed a complaint against the ProfitableSunrise HYIP “program” in federal court in Atlanta. The story first was reported by CourthouseNewsService this morning.

At the same time, the PP Blog has learned that the agency applied for an emergency asset freeze, explaining that Profitable Sunrise was using a “mail drop” in England and that “Hungarian law enforcement authorities” had had frozen an account holding $11.3 million connected to the scheme as part of an “investigation of suspected money laundering.” U.S. District Judge Thomas W. Thrash Jr. granted the freeze, which applies to multiple bank accounts.

The Profitable Sunrise “referral program” operated as a “pyramid scheme,” the SEC said in its filings. Moreover, the SEC charged, Profitable Sunrise was conducting an “offering fraud” targeted at U.S. citizens and selling unregistered securities.

And people pushing the “program” for commissions may not even know who they’re working for, the SEC said.

“Profitable Sunrise operates for the benefit of unknown individuals and/or organizations doing businesses through companies formed in the Czech Republic and using bank accounts in the Czech Republic, Hungary, Latvia, and China, among other places,” the SEC alleged.

The complaint names Inter Reef Ltd. (DBA Profitable Sunrise) as defendants. Four relief defendants also are named:

Melland Company SRO, Color Shock SRO, Solutions Company SRO, and Fortuna-K SRO.

Absent from the list of defendants are both “Roman Novak” and “Radoslav Novak.” Although many Profitable Sunrise pitchmen have claimed that “Roman Novak” operates the company and that “Roman’s” brother “Radoslav” is its attorney, that information has not been confirmed.

“There is more than a slight possibility, as with many offering frauds, that the people described in the website, including the Novak brothers, do not exist,” the SEC said.

InterReef’s registered agent is based in Seychelles, an island chain in the western Indian Ocean, the SEC said.

“Tens of thousands of investors” may have invested “at least tens of millions of dollars in Profitable Sunrise,” the SEC said.

At least 34 U.S. states and provinces in Canada have issued Investor Alerts or cease-and-desist orders against Profitable Sunrise.

Assertions online that Profitable Sunrise “generates profits by making loans to businesses at higher rates” are “false,” the SEC charged.

The scheme spread in part through “social media” and “numerous promoters in the United States,” the SEC said in its complaint.

Incongruities dotted Profitable Sunrise, the SEC alleged.

Although Profitable Sunrise claimed it had been operating for six years, “the United Kingdom Companies House reports that Inter Reef has been in existence for only 19 months,” the SEC alleged.

Meanwhile, the SEC said, a YouTube promo for Profitable Sunrise positioned the “opportunity” as a “ministry” and included a discussion of why Profitable Sunrise “is not a Ponzi or pyramid scheme.”

From the SEC complaint filed in federal court in Atlanta April 4.

From the SEC complaint.

See filings courtesy of the ASDUpdates Blog.

Apr 5, 2013