An Illinois man hawking a Yukon gold-mining venture via postal mail and email has pleaded guilty to selling unregistered securities, federal prosecutors said.
Jeremiah D. Jacob, 32, of Columbia, faces up to five years in federal prison, a fine of $10,000 and three years’ supervised release, the office of U.S. Attorney Stephen R. Wigginton of the Southern District of Illinois said.
The office also brought the criminal prosecution against alleged Pathway To Prosperity HYIP operator Nicholas Smirnow in 2010. Like the Smirnow case, the case against Jacob began with a probe by the U.S. Postal Inspection Service.
State and federal investigators, including the Illinois Securities Department and the IRS, worked with postal inspectors in the Jacob probe, prosecutors said.
“In selling and offering for sale the security, Jeremiah D. Jacob made use of the United States mail service and email communications in interstate commerce,” Wigginton’s office said.
The company Jacob was pitching “was, in fact, dissolved,” prosecutors said.
Even so, Jacob tapped an investor for $200,000 with the promise of an annual return of 15 percent, prosecutors said.
Some HYIP schemes tout unregistered securities and advertise returns that dwarf the returns Jacob purported to offer.
In the HYIP sphere, securities-registration violations are common, as are the sale of unregistered securities by MLM-style hucksters who troll the Internet in search of marks from whom they can “earn” commissions.
Some of the purported HYIP “opportunities” have been linked to companies that are dissolved or exist in a shell form to disguise tentacles of a financial-fraud scheme. Some of the “companies” do not exist in any real-world sense.
Although Jacob’s company was not an HYIP in the usual sense of the term, HYIP operators and purveyors are subject to the same securities laws that led to the prosecution of Jacob.
A week after CONSOB, the Italian securities regulator, announced it was opening a probe into the activities of JSS Tripler promoters amid claims the absurd “program” advertised returns that would make Bernard Madoff blush, a new “press release” ignores the CONSOB development, calls participants “investors” (eight times) and suggests the U.S. government has approved the JSS Tripler “program.”
The issues in the Italian probe are whether JSS Tripler and promoters are selling unregistered securities as investment contracts unlawfully as part of a multilevel online scheme that offers preposterous returns that compute to an annualized rate of 730 percent — with compounding “bonuses” and two-tier downline commissions totaling 15 percent on top of the advertised returns.
Madoff, jailed for 150 years in the aftermath of the collapse of his massive Ponzi scheme, generally offered annualized returns between 48 and 73 times lower than the advertised JSS Tripler returns.
Dated today, the “press release” appears to have been issued by a JSS Tripler affiliate and is available through Google News. The release does not mention the week-old CONSOB probe. Nor does it identify either the affiliate or the purported company as individuals or entities authorized in any jurisdiction to sell securities.
Moreover, the release does not seek to qualify customers in any way. The only apparent customer qualification is access to a bank or payment account to send money to JSS Tripler and wait for ludicrous profits in return.
A Patent Absurdity
“Thousands of high return programs on the internet have been created for people who want to work from home,” the release begins. “However, the majority of these fast money work home (sic) programs are not sustainable. Frederick Mann solved this problem with his recently US patented system JustBeenPaid! and its subprogram JSS Tripler.”
“JustBeenPaid” (JBP), an exceptionally murky entity, is the purported operator of JSS Tripler. Frederick Mann, JBP’s purported operator, once advertised that he was a promoter for AdSurfDaily, which the U.S. Secret Service has described as an online Ponzi scheme involving at least $110 million.
JBP itself is advertising a U.S. patent, a specious and hollow claim. Regardless of whether a patent exists as part of JBP’s purported software platform, the U.S. Patent and Trademark Office does not regulate securities markets or approve the issuance of securities.
Those responsibilities rest with the world’s securities-regulatory bodies, including — for just two examples — CONSOB in Italy and the SEC in the United States. Virtually all developed countries have such regulatory bodies. In the United States and Canada, individual states and provinces also have regulatory responsibility over securities.
Scams routinely make specious claims and divine a connection to government as a means of disarming doubting prospects. The relatively new “patent” claim in the context of JSS Tripler, however, could be a sign that the “program” is becoming increasingly desperate to raise cash and has dialed up its deception to achieve that end.
The nationality of the press-release author was not immediately clear. But he is using a Google Gmail address and appears also to be presenting the release in U.S. English, based on the spelling of the word “program” (as opposed to the chiefly British “programme”) and certain elements of punctuation associated with U.S. English.
The release, which is accessible from the United States, has five embedded JustBeenPaid affiliate links, each of which rotates to a pitch page with a signup prompt page that asks investors to register using a Gmail address.
Among the incongruities about JBP/JSS Tripler is that the purported opportunity continued to solicit customers to register with Gmail addresses — even after Google-owned YouTube deleted promos for the “opportunity” last year.
“No sweat, I own over 500 Youtube accounts, so I’ll just keep making videos like normal, plus I can always use Viddler and Windows movie maker and facebook video as well,” MoneyMakerGroup poster “gtprosperity” claimed.
Apparently oblivious to the CONSOB probe, the serious concerns about the unlawful sale of securities and the bizarre JBP/JSS Tripler developments over many months, the author of the news release asserts that the “program currently has over 125,000 members, and over 2,000 new investors join each day.
“Investors can earn a 2 percent daily, with over 60 percent earned in a month,” the release claims. “Investors earn 2 percent daily on each position they purchase. New positions can be bought with money or earnings. Daily earnings can also be cashed out by sending them to one’s JSS account for withdrawal. Withdrawals take 24 hours to process.”
“Work Home Fast Money Making System To Earn Extra Income Recently US Patented,” the release headline reads.
Among the potential problems with the claim is that it likely demonstrates that JBP/JSS Tripler is selling unregistered securities as investment contacts to U.S. citizens — even as it is doing the same thing in Italy and other countries.
“Irony, thy name is John F. Langford.”— Texas State Securities Board, July 28, 2011
An Amarillo man whose firm fleeced senior citizens by telling them it couldn’t promise to make them rich — but guaranteed it wouldn’t make them poor — has received what might amount to a life sentence behind bars for bringing destruction to their doors.
John F. Langford, 77, pleaded guilty in July to securities fraud, selling unregistered securities and dealing in securities without proper registration with the state. The case was prosecuted by the office of Potter County District Attorney Randall Sims, and Langford effectively was sentenced yesterday to remain behind bars until he turns 92 — and then some.
At least one of his victims was “incapacitated,” according to the 15-count indictment handed up against Langford in 2009.
Yesterday Langford received seven concurrent sentences of 15 years for fraud, four concurrent sentences of 10 years for selling unregistered securities and four more concurrent sentences of 10 years for not being a registered securities dealer.
It was a promissory notes and annuities caper in which seniors and others did not get their money, according to the state.
“Irony, thy name is John F. Langford,” the Texas State Securities Board said in July, after Langford’s guilty plea. “In radio advertising spots a few years ago, Langford’s insurance agency in Amarillo said, ‘At Langford & Associates, we don’t promise to make you rich, but we guarantee not to make you poor.’”
The PP Blog became aware last night that CONSOB, Italy’s equivalent of the U.S. Securities and Exchange Commission (SEC), had issued a new order on Monday in its investigation into certain claims made online in Italy about the purported Club Asteria business “opportunity.”
Club Asteria has been widely promoted online as a “passive” investment program that provides a weekly return that projects to yearly gains in the hundreds of percentage points. The firm, which claims to be a revenue-sharing program, is based in Virginia. Its offer is targeted at the world’s poor.
The CONSOB order, which addresses concerns first raised by the agency during the spring about how citizens of Italy were approached in online solicitations to join Club Asteria, was signed by CONSOB President Giuseppe Vegas on Aug. 22 and announced yesterday.
The PP Blog has a copy of the order. What it does not have is a reliable translation from Italian to English.
Italy first raised issues about Club Asteria in May. It is believed to be the first nation to have done so publicly, and Club Asteria may have sales affiliates in 150 or more countries worldwide. The Italian probe — coupled with claims about Club Asteria in other languages or in butchered or even highly polished, stylized English — led to questions about whether Club Asteria and tens of thousands of affiliates were selling unregistered securities on a global scale — with Club Asteria being the beneficiary of an unlawful offering.
Because Google’s translation tool leaves a lot to be desired — and because the CONSOB order potentially affects thousands of Club Asteria members and was released in Italian — the PP Blog contacted CONSOB by email at 5:49 a.m. (EDT, U.S.A.) today to see if an official English translation was available and to clarify certain CONSOB findings. The Blog addressed CONSOB in English — and is uncertain if its email was received in Italy and understood.
It’s easy to imagine an Italian reporter who did not speak English and needed the SEC to provide a document in Italian or an SEC employee to answer questions in Italian encountering the same information hurdles.
At 1:08 p.m. (EDT, U.S.A.) today — approximately seven hours after asking CONSOB for assistance and lacking confidence that its email to CONSOB in Italy had been received and understood — the PP Blog contacted Italy’s U.S. Embassy in Washington by phone. The Blog asked the Embassy’s assistance in translating the new CONSOB order from Italian to English, and the Embassy provided an email address through which the Blog could submit a request for journalistic assistance through the Embassy. At 1:55 p.m. (EDT, U.S.A.), the Blog emailed the Embassy with the CONSOB order as it exists in Italian, and also supplied a link to the CONSOB webpage at which the agency’s order is published. The Blog is awaiting the Embassy’s response.
An English translation by Google of the CONSOB order is available, but it is highly confusing, if not tortured. CONSOB, for instance, is described in the translation as “THE NATIONAL COMMISSION FOR THE SOCIETY AND THE BAG.” A translation available through Yahoo is no better; it refers to Club Asteria as “Club Starfish.”
Club Asteria, which trades on the name of the World Bank and has blamed members for its PR problems and a freeze of its PayPal account, has not updated its news webpage since July 21. Members across the globe have been left in an information vacuum for weeks, while the firm directs attention to its glossy “e-Magazine” and asks members to “Imagine the Possibilities with Club Asteria.”
The PP Blog hopes to publish a comprehensive report about CONSOB’s findings after it hears back from the Embassy.
For now, the Blog is reporting that suspension orders against two websites CONSOB identified in May as Club Asteria troublespots apparently continue to be in effect and that the sites are serving PDFs in Italian of the Italian allegations.
Posters on Ponzi scheme forums well-known to U.S. law enforcement claim that Club Asteria has more than 300,000 members globally — and Club Asteria sales pitches on the Ponzi forums and websites independent of the forums are almost incomprehensibly reckless.
Some members have claimed that a monthly payment of $19.95 to Club Asteria produces a “passive” income of $20,800 a year. In other words, more or less pay Club Asteria a yearly total of $240 in 12 easy installments of $20 a month. Do nothing else unless you want to sponsor new members to make even more money. Receive nearly $21,000 annually — forever.
The offers are targeted at the world’s poor.
Whether the impoverished people of the world made any meaningful money after becoming pitchmen for Club Asteria remains far from clear. What is clear — if the “I Got Paid” posts on Ponzi forums are reliable — is that well-known Ponzi pitchmen cleaned up by recruiting members for Club Asteria.
In July 2010, the Financial Industry Regulatory Authority (FINRA) issued a warning about HYIP schemes popularized in web forums and through social-media outlets. FINRA called the HYIP sphere a “bizarre substratum of the Internet.”
Just a month before, in June 2010, the United States and six other member-nations of the International Mass Marketing Fraud Working Group (IMMFWG) issued a warning about global marketing fraud.
It is known that some promoters race from online scheme to online scheme.
A photograph of Hank Needham, a Club Asteria principal, appears online in a 2008 sales pitch for the alleged $110 million AdSurfDaily Ponzi scheme. Like Club Asteria, ASD was based in the United States — and also was promoted on the Ponzi boards.
ASD President Andy Bowdoin was arrested by the U.S. Secret Service in December 2010 after his indictment on felony charges of wire fraud, securities fraud and selling unregistered securities online.
Screen shot from a PowerPoint presentation on Club Asteria. The presentation is attributed to Andrea Lucas and is accessible online. (White highlights in screen shot added by PP Blog.)
UPDATED 9:09 A.M. EDT (June 14, U.S.A.) A PowerPoint pitch titled “Asteria Corporation” raises serious questions about the nature of the business “opportunity” and may undermine Club Asteria’s own claims that members alone are to blame for the company’s apparent troubles.
The document is slugged “[ClubAsteriaPresentation]” and attributed to Asteria Corp. and Andrea Lucas. It describes the “program” as one that enables “passive” income and provides a “25% Matching Bonus” — and claims Gold and Silver members are “100% GUARANTEED to Make Money.”
Screen shot: The "Properties" of this Club Asteria PowerPoint pitch identifies Andrea R. Lucas as the author.
The PowerPoint presentation leads to questions about whether Club Asteria is selling unregistered securities as investment contracts. Meanwhile, it casts doubt on Club Asteria’s claim that members are uniquely responsible for positioning the program as a passive investment opportunity with guaranteed earnings.
Virginia-based Club Asteria identifies Andrea Lucas as its managing director. The program, which members say has slashed payouts and sends money via wire from a Hong Kong company known as Asteria Holdings Limited, is being investigated by Italian authorities. Club Asteria acknowledged last month that its access to PayPal had been blocked, blaming the development on misrepresentations made by members. Member payouts plunged after the PayPal development.
Promoters of Club Asteria routinely trade on the name of the World Bank.
Separately, promoter “Ken Russo” — posting on the TalkGold Ponzi scheme and criminals’ forum as “DRdave” weeks after the PayPal freeze and the developments in Italy — noted he has received by wire $1,632 from Club Asteria since June 2. In separate posts, “Ken Russo” claimed to have received $1,311 on June 2 and $321 on June 12. Both payments came from “Asteria Holdings Limited (Hong Kong),” according to the posts.
Other Ponzi-forum posters claim they were less fortunate than “Ken Russo.” A poster on MoneyMakerGroup, for example, lamented a payment this week of only 30 cents.
“my astrios (sic) stand at almost 1000 and you will be shocked to know that i earned only 30 cents this week, thats (sic) like 4 cents per day for an investment of $1000,” the poster complained.
Another MoneyMakerGroup poster said this: “I made 80 cents from my 2,500 asterios.”
Even TalkGold, which provides the cyberspace criminals and hucksters use to fleece hundreds of thousands of people globally in one Ponzi or fraud scheme after another, is questioning why Russo appears to be doing so well while others have been left holding the bag.
“Something unreal compare[d] to others cashouts amount (sic),” a TalkGold Mod wrote on June 10 about “Ken Russo’s” June 2 claim of a $1,311 Club Asteria payout.
Other forum posters say they plan to retaliate against Club Asteria by filing disputes with Alert Pay, an offshore processor used by Club Asteria.
“This worked for me with genius funds,” wrote one TalkGold promoter, referring to Genius Funds, an international scam promoted on the Ponzi boards that the Financial Industry Regulatory Authority (FINRA) said last year stole $400 million.
And the TalkGold poster who’d previously been ripped off in the Genius Funds scam and filed an Alert Pay dispute said he’d do the same thing with Club Asteria — and encouraged others to do the same.
“Yesterday I filed 3 complaints for myself and family and if enough people do it, maybe they will block their alertpay account and share it out to us,” the poster claimed.
He found a receptive audience, and a TalkGold poster who responded to his plea to contact Alert Pay suggested Andrea Lucas was trying to stop members from filing disputes.
“I have contacted to Alertpay too just some days ago,” the TalkGold poster wrote. “Andrea Lucas contacted to me and started whine. Whaiting (sic) message from Alertpay.
“I think their PayPal account was blocked in the same way as it’s going to be with their Alertpay account,” the poster wrote. “Some smart guys did it before us.”
Some Club Asteria members have offered inducements for prospects to join the program, including partial reimbursements of monthly fees. Such members now potentially find themselves in the position of having locked in their own losses by bribing prospects up front and expecting to recapture the expense as the program expanded.
In 2010, “Ken Russo” — while promoting the MPB Today “grocery” program on the Ponzi boards — said one of his downline members was offering up-front payments to incoming prospects to drive business to MPB Today.
Club Asteria members now say the firm, which trades on the name of the World Bank, suddenly threatened recruits for making false claims about the program.
The PP Blog reported on April 4 that the program, which is being pumped on the Ponzi boards and the personal websites of thousands of Club Asteria members, was routinely being positioned as a “passive” investment opportunity. Some affiliates have tried to plant the seed that Google, Yahoo, MSN and America Online endorsed the program.
Such claims not only raise questions about whether Club Asteria is selling unregistered securities as investment contracts, but also raise questions about how much revenue the Virginia-based firm has raised based on the lies and misrepresentations of its own members.
Liars’ accounts will be terminated, the company reportedly advised members in recent days. What prompted Club Asteria to issue the warning was unclear. Also unclear is whether the firm has any means of determining how much revenue it has generated based on the false, misleading or dubious claims of its membership base, which is worldwide in scope.
The company provided no guidance to members on how they could be certain the money they received from Club Asteria was clean. Some of the forums from which the “opportunity” is being promoted are referenced in federal court filings as places from which Ponzi schemes are promoted.
“YOU MUST REMOVE THIS MATERIAL IMMEDIATELY AND CEASE THESE ACTIVITIES OR YOUR ACCOUNT WILL BE SUSPENDED AND/OR TERMINATED AND POSSIBLE LEGAL ACTION AGAINST YOU WILL BE INITITATED (sic),” the firm reportedly warned in all-caps.
Club Asteria did not specify what form any legal action against its members would take or how many members received the warning. Nor did the firm say who would pay for any litigation that ensued or how international members would be served process. International litigation can be extremely costly and time-consuming.
Also unclear was whether Club Asteria planned to file police reports or notify agencies such as the Federal Trade Commission about the problems it claims its members are creating.
“YOU HAVE 72 HOURS TO RESPOND TO THE EMAIL ADDRESS WITH LINKS OR OTHER DOCUMENTATION SHOWING YOUR SITE IS IN COMPLIANCE,” Club Asteria reportedly continued.
Promoters claimed that Club Asteria specifically warned members that they:
[C]annot say or imply that a Club-Asteria member can earn money without working for it.
[C]annot say or imply that there is some minimum guarantee of how much money you will earn every week.
[C]annot make or imply income projections of ANY type. Only income examples found on the Club-Asteria site and in official member materials may be used at any time.
[C]annot say or imply that Club-Asteria membership is a passive investment or imply that this is an investment of any type.
[C]annot say or imply that someone should join if they have no interest in the benefits of our products, programs and services.
[C]annot invite, solicit or encourage others to join just because of our rewards program.
[C]annot create your own website and say anything you want about Club-Asteria.
Research suggests, however, that thousands of websites globally have positioned Club Asteria as a “passive” investment program and published earnings suggestions, promises or guarantees. Each and every claim puts the enterprise at risk, and unringing the bell after months and months of dubious claims may be a tall order.
The screen shots below are just a small sampling of the kinds of claims that appear online about Club Asteria. Each of the sites was active as of this morning, despite the purported warning Club Asteria issued last week.
Purportedly quoting an upline sponsor, this Club Asteria pitch talks about the great expansion of the program and claims "completely passive members make very good money." The program is designed, according to the pitch, to deliver "returns" of $400 a week — or "about $20,000 per year." Opening a second account in the household "will simply double" the $20,000, according to the promo.This pitch urges prospects to create income for life and earn "$400 Every Week."This YouTube pitch for Club Asteria claims the opportunity pays "$400 USD EVERY WEEK" and suggests PayPal can help members fund their accounts. YouTube appears to have removed the soundtrack from the promo because it violated the copyright of Warner Music Group (WMG).This Facebook promo advertises a "minimum of about $1,600 per month forever."Club Asteria, according to this promo, enables members to "Earn 100% Passive." It also claims "80% is reinvested." Another pitch that highlights the purportedly "passive" nature of Club Asteria. This promo references the name of the World Bank and claims the program is "Real, Safe and Legal." Meanwhile, the promo makes the preemptive claim Club Asteria is not a "Ponzi." Many promoters preemptively have claimed the firm is not operating a Ponzi. Club Asteria does not publish verifiable financial data.This promo declares that Club Asteria "is not just a passive income."Club Asteria advertised in "Jobs" listings in Germany. The ad claims members are "guaranteed to earn $400 a week without much effort."
Want to mess with Alabamans in the securities fraud era? Don’t do it in Coffee County. A jury there took just 28 minutes to convict Scott Frye on five counts of selling unregistered securities or causing them to be sold.
That’s an average of 5.6 minutes of deliberations per count. The case was prosecuted by Coffee County District Attorney Tom Anderson and the Alabama Securities Commission.
Frye, who faces court action elsewhere in Alabama, initially avoided prosecution by fleeing to the Philippines. But he was arrested there after the United States revoked his passport and he became an undocumented alien on foreign soil, and Coffee County — which has a population of less than 47,000 — sent an investigator to bring him back from the Western Pacific to face trial.
Enterprise, the small Alabama city in which Frye’s two-day trial was conducted, is nearly 9,000 miles away from Manila, where Frye was arrested in 2009.
The Dothan Eagle reported on the 28-minute verdict. Other local media outlets such as WDHN have kept communities informed about the Frye case and have shown Frye being led from the courthouse in handcuffs.
Frye has been dubbed “the father of Internet fraud” — and it may be a richly deserved title. Though only in his early 40s upon his Alabama conviction this week, Frye’s name surfaces in SEC records dating back to 1995, when he was just 27.
One of the early pioneers of online fraud, Frye initially hatched a scheme that promised “riskless profits” from “investments in two Costa Rican enterprises,” the SEC said 16 years ago. The scam proved to involve what has been described as “coconut chips.”
Frye also was linked by Pennsylvania authorities to a securities scheme involving a device that purportedly would permit jewelers “to determine the exact quality and value of any gemstone.”
The Internet was so new back then that law enforcement felt the need to explain to judges what it was, and there was no general agreement about how the word best was presented in court documents. The SEC initially used an uppercase “N” in the third syllable.
“Frye has posted numerous messages on the InterNet, a decentralized web of computers, accessible to millions of potential investors across the country and world-wide, in which Frye has solicited funds from investors,” the SEC wrote in the 1995 Frye case.
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.
History was made yesterday. “Wink-nod” marketing deceptions — the use of disingenuous language supplemented by willful blindness in the cancerous autosurf and HYIP trades to create plausible deniability — were pronounced dead by a grand jury sitting in the District of Columbia.
Members of the insidious trade can thank ASD President Andy Bowdoin for the much-anticipated pronouncement.
The grand jury, which began meeting in May 2009 and returned an indictment against Bowdoin that was unsealed yesterday, repeatedly referred to Bowdoin’s alleged wink-nod wordplay and incongruous claims to hide his massive international Ponzi scheme.
Want to position yourself as a man of God from a stage in Las Vegas (or in any city or home office) and tell your audience that you are a “money magnet” — and then plant the seed that audience members can become “money magnets” just like you if they turn over their cash to you?
It’s time for autosurf purveyors to anticipate that a grand jury just might have something to say about it on a time and date uncertain. Bowdoin’s grand jury handed him back his “money-magnet” line repeatedly. Federal agents arrested Bowdoin yesterday in Florida. His booking and bail status still are unclear hours after his arrest. The government previously argued that Bowdoin was a flight risk who had moved money offshore and now says he faces up to 125 years in federal prison.
And what if you’re an autosurf aficionado and want to use wordplay to tell the troops that they’re not purchasing an investment in the form of an unregistered security — but instead are purchasing “advertising” in the form of “ad packages” (or a similar phrase) you’ve concocted to mask the nature of your “program?”
Well, the grand jury had an answer for that one, too: Charge the fraudster with felonies.
Want to tell the troops that your “program” has passed muster with the SEC and does not need to concern itself with registering when the claims are untrue? The grand jury had an answer for that one, too: Charge the fraudster with felonies.
Among the grand jury’s conclusions was that Bowdoin, who’d previously been charged twice with securities offenses and modeled ASD after the 12DailyPro securities, fraud and Ponzi scheme, was blowing smoke to tens of thousands of people at a time.
KABOOM! “Wink-nod” was blown to bits yesterday.
Want to create an incongruous condition in which people are standing in line for hours at “rallies” to purchase “ad packages” that pay “rebates” of up to 150 percent and an “instant bonus” on top of the “rebates” just for signing up?
The grand jury had an answer for that one, too: Charge the fraudster with felonies.
Want to counsel members on how they should refer to the “program” and what words to avoid when presenting the “program” to others? Want to be like Bowdoin and send an email that says, “[L]et’s don’t (sic) use the words investment and returns. Instead, lets (sic) use ad sales and surfing commissions. The Attorney Generals in the U.S. don’t like for us to use these words in our program?”
The grand jury had an answer for that one, too: Charge the fraudster with felonies.
KABOOM! “Wink-nod” was blown to bits yesterday.
Will autosurf forum life ever be the same? Not a chance, except among a core group of serial criminals. The grand jury signed off on a document that neatly exposes “wink-nod.” The next time a forum “expert” cautions posters not to call a surf program an investment, autosurf critics can point out that Bowdoin said the same thing — and that his words got him indicted.
At the very same Saturday “rally” in Las Vegas at which Bowdoin called himself a “money magnet” and encouraged others to become “money magnets” by giving him their cash, Bowdoin implored members not to miss a fabulous opportunity to hand him a virtually unlimited sum in the final hours before the company would enforce a $50,000 “cap” beginning on Monday, according to the grand jury.
Handing him any more than $50,000 beyond Monday might bring out the regulators, Bowdoin ventured, pointing out that “there are so many people that want to come in now and want to purchase two hundred thousand, three hundred thousand, half a million and a million dollars . . .”
The grand jury pointed out that Bowdoin, incongruously, was selling advertising to people who did not even own businesses to advertise in the ASD “rotator.”
After observing any number of incongruities associated with ASD and its use of wordplay to skirt securities laws, the grand jury had a message for the whole of the autosurf and HYIP worlds: Charge the fraudsters will felonies.
It was the beginning of the end for wink-nod promoters — and it occurred in no small measure due to the efforts of the U.S. Secret Service, an agency Bowdoin and his apologists compared to “Nazis” and “Satan” after telling a Las Vegas crowd to plunk down unlimited sums on Saturday because he was lowering the limit to $50,000 on Monday.
Bowdoin’s theory behind enforcing a cap was that $50,000 might be a low enough sum to keep ASD under the radar, according to the grand jury.
Only in the incongruous world of the autosurf could someone sell himself on the notion that limiting purchases to $50,000 on Monday somehow created a safety buffer for others who plunked down higher sums two days earlier. Only in the incongruous world of the autosurf could someone instruct members to “act fast” and plunk down more than $50,000 on Saturday because the safety buffer would be enforced two days later.
And wink-nod also began its race to the Internet graveyard in no small measure due to the efforts of William Cowden, now in private practice — but once a federal prosecutor and the chief of the Asset Forfeiture Division in the U.S. Attorney’s Office in the District of Columbia.
Cowden was the man some ASD members loved to hate. They called him “Gomer Pyle” on the pro-ASD Surf’s Up forum. They called him a “goon.” They called him “Crowden.” They called him “Cow-dung.” They called for a “militia” to storm Washington. They said Cowden should be placed in a torture rack. They “prayed” for God to strike Cowden and other federal prosecutors dead.
And then they called themselves Christians.
In the months that followed, the Secret Service, Cowden and others at the Justice Department set the stage for the complicated nature of autosurfs and HYIPs to be both understood and rejected by a grand jury that assessed ASD’s wordplay and the sea of incongruities and decided that felonious self-indulgence needed to be dealt with by returning felony indictments and destroying wink-nod.
Indeed, history was made yesterday. It was the day “wink-nod” died, the day the music died for “money magnets” and autosurf scammers on stage and in home offices and online forums everywhere.
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.”
A mysterious, upstart company registered as a corporation in Ocala, Fla., has been ordered by the attorney general of South Carolina to stop selling securities and collecting money in the state.
Attorney General Henry McMaster ordered the company — PPE-Life Inc. (PPE) — to “cease and desist” after the state’s Securities Division opened a probe May 14 amid reports the company was holding recruitment meetings in Sumter, S.C. Sumter, a military town, is home to Shaw Air Force Base.
PPE held a meeting at a hotel about 5 miles away from the base May 20, according to records. It was unclear if members of the military were in attendance, but South Carolina has had a problem with fraud schemes targeted at military members and churchgoers.
Two PPE representatives were named in the cease-and-desist order: John Barter, who is listed as an officer of the firm in Florida records, and Rick Crocker. Barter’s address was listed as Ocala, and Crocker’s was listed as Wilmington, N.C.
Investigators said people who attended the May 20 meeting were told that PPE was the marketing arm of an unspecified “international bank.” When asked to identify the bank, Barter allegedly responded that “I am the bank.”
Attendees also were kept in the dark about other details, which were dismissed as unimportant for the purposes of the meeting.
Barter and Crocker “refused to respond to questions from attendees regarding the method by which PPE would make money or extend loans, or the products that PPE would invest in,” authorities said.
The purpose of the meeting was to “sign up.” Details would be “sorted out at a later time,” authorities said attendees were told.
Attendees were asked to pay $599 as an “initial membership fee” and a $50 per month “maintenance fee” thereafter and advised that returns of “up to $440,000 per year” could be earned through PPE. Â Attendees further were told they’d become eligible for loans at a “significant discount” and that funds collected from participants would be used to purchase “debentures earning 40% to 50% interest.”
People who signed up were told they could earn “1.5% of loan payments on loans made to any members who subsequently join[ed] PPE” and also would receive a “free” credit card with a $1,000 limit, authorities said.
Meanwhile, attendees were told that PPE had spent “at least $1.5 million to ensure that the federal government would not shut down PPE” and that “older” members would benefit as “new members were recruited,” authorities said.
At the May 20 meeting, someone raised a concern that the government could shut down the program, authorities said.
In response to the concern, Barter said, “the Feds love us,” authorities said.
They added that attendees were told that meetings had been held in Sumter for “at least six weeks.”
Neither Barter nor Crocker is licensed to sell securities in South Carolina, authorties said.
An Illinois man hawking a Yukon gold-mining venture via postal mail and email has pleaded guilty to selling unregistered securities, federal prosecutors said.
