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Tag: U.S. Postal Inspection Service

  • ‘SURF/HYIP HELPERS BEWARE: Woman Who Helped Tennessee Ponzi Schemer Cover Up Fraud Sentenced To 6 Years In Federal Prison; Donna Jones’ Role In $12.3 Million Caper Outlined By Jailed Boss In Court After Investigators ‘Follow The Paper Trail’

    EDITOR’S NOTE: Although Donna Jones did not run an autosurf or online HYIP fraud, the case against her is instructive. Indeed, prosecutors said, Jones was an insider who was aware of the Ponzi scheme being conducted by her boss, Michael J. Park. And Jones took an active role in the scheme, encouraging customers to invest, hustling cash even as the scheme was unraveling, creating bogus “spreadsheets” and fabricating information given to investors.

    It is common for autosurf and HYIP insiders to solicit funds for fraud schemes, use spreadsheets with bogus or illusory information to reel in and (later) lull prospects, siphon investor funds and simply lie to maintain their ability to keep drinking from a criminal well.

    At least seven federal, state and local agencies became part of an intense probe to reverse-engineer the Park scheme. In the end, Park himself testified against his former employee.

    UPDATED 9:58 A.M. EDT (U.S.A.) A woman employed by a Tennessee Ponzi schemer added $19,000 in new clothes to her wardrobe, withdrew $225,000 in cash and spent more than $300,000 on home renovations, federal prosecutors said.

    Now, Donna Jones has been sentenced to 72 months in federal prison. Jones, 37, of Dickson, Tenn., also was ordered to pay nearly $8.2 million in restitution to victims.

    Jones was the office manager of Park Capital Management Group (PCMG), a Brentwood, Tenn.-based business operated by Michael J. Park. Park, who is serving a 96-month prison sentence, testified about Jones’ knowledge of the scheme at her sentencing hearing, prosecutors said.

    Federal, state and local law-enforcement agencies worked together to expose the fraud, prosecutors said.

    Among the agencies working the criminal probe were the U.S. Attorney’s Office, the FBI, the U.S. Postal Inspection Service, the IRS, the Tennessee Bureau of Investigation and the Brentwood (Tenn.) Police Department. The SEC sued Park in a civil case.

    “Jones repeatedly encouraged people to invest by falsely promising security, growth and inflated returns on their money, but instead the investors lost their savings as part of an elaborate Ponzi scheme,” said U.S. Attorney Jerry E. Martin of the Middle District of Tennessee.

    Park advised U.S. District Judge Aleta Trauger that Jones used a “spreadsheet” to keep track of “fictitious” PCMG accounts and that he and Jones “pooled” investor funds and used them as “their own personal bank account,” prosecutors said.

    “This case further demonstrates how effectively IRS Criminal Investigation agents work jointly with our federal and state law enforcement partners in investigating complex financial crimes,” said Darryl Williams, acting special agent in charge of the IRS Criminal Investigation unit in Nashville.

    “IRS Criminal Investigation agents were able to use their expertise to conduct a complex financial investigation, follow the paper trail, and unravel violations of federal law,” Williams said.

    It also was Jones’ idea to use the seal of the Securities Investor Protection Corp. (SIPC) to create the illusion that investing with PCMG was safe, according to Park’s testimony.

    But “PCMG was not a member of the SIPC, and the SIPC provided no protection for PCMG investors,” prosecutors said.

    Jones, who also was accused of concealing the scheme by fabricating documents and soliciting funds to cover shortfalls, pleaded guilty to mail fraud and money-laundering in January.

    Among the documents were IRS 1099 forms, but “none of the funds listed in PCMG investment accounts were ever invested,” according to Park’s testimony.

    It is common in the autosurf and HYIP spheres for purveyors to claim an “opportunity” is legitimate because the company gathers tax information and sends 1099 forms.

    Park also was the subject of a 2008 complaint filed by the SEC, bringing the number of state and federal agencies involved in PCMG-related litigation to at least seven.

    “Park used investor funds, among other things, to help purchase a $1 7 million home, pay for expensive golf memberships, to purchase a Porsche automobile and to purchase a Mercedes Benz sedan worth more than $90,000,” the SEC said in September 2008.

  • A PONZI QUANDARY: Convicted And Jailed, 61-Year-Old Schemer May Have Enough Life Insurance To Make Victims Whole. Case May Pose Unique Challenges To Court-Appointed Receiver And Victims Of William Huber’s Massive Fraud

    EDITOR’S NOTE: The Ponzi world is infamous for serving up long-term, dark skies and odd stories. Here is a new weather report and entry for the Ponzi Strange-O-Meter.

    By some accounts, the best definition of financial success is written by CPAs on the Last Great Day of a client’s life. When the final beans are counted, if the bean-counters determine  that the newly deceased had more cash and cash-convertibles than the sum of his debts and insurance holdings, it means that the departed was worth more money alive than dead.

    This will not be the case for convicted swindler William Huber — not that catastrophic insolvency that engulfs both perpetrators and many of their individual victims is news in Ponzi Land.

    What is news is that Huber, who fleeced 300 investors out of $15 million in a multistate scheme known as Hubadex, potentially has enough life insurance to make victims largely whole and perhaps even pay the costs of unraveling the litigation mess he created in 2009.

    But the money is not available now and Huber is still a relatively young man. Although the victims’ group as a whole possibly could gain the highest number of restitution dollars by waiting years for him to die and then recovering their losses by splitting pro rata shares of an insurance cashout, waiting may not be the best option from the standpoint of both fairness to individual victims and judicial economy.

    What to do in the here and now — and how best to wrap up Huber’s bizarre Ponzi affair — are questions to which the court-appointed receiver in the case has been seeking answers since the fall of 2009. So far, receiver Kevin Duff has rounded up more than $6.5 million by selling Ponzi properties in California and Florida, filing clawback actions and marshaling other assets while working on a victims’ distribution plan.

    Huber, 61, of La Jolla, Calif., pleaded guilty in Illinois last year and was sentenced to 20 years in federal prison. The SEC also filed an action against Huber, and the case is being unraveled by Duff, who has made clawback demands against 39 individuals and sued six winners.

    Duff, according to court filings, advised a federal judge that Huber had life-insurance policies that potentially would pay $19.25 million upon the fraudster’s death, depending on variables. The receivership estate has been paying the premiums on the polices while it seeks guidance and comes up with a final plan on how best to proceed. With the cooperation of Huber’s family, Duff has arranged to make the receivership estate and Huber’s former company the beneficiaries of the policies.

    The problem, however, is that paying the costly premiums indefinitely may create a drain on the receivership estate while providing no near-term benefit and keeping the case on the taxpayer-funded court docket for years. And what would happen if future litigation created an even greater strain on the estate?

    Indeed, according to court filings, the still-intact insurance policies come with premiums that currently cost the estate nearly $92,000 a year. Huber had four polices: one for $12 million, one for $5 million, one for $1.25 million and one for $1 million. Some or all of them may have to go.

    There also is no guarantee that the premiums will not increase. Hikes could create an even-greater strain on the receivership estate. And arranging a life-settlement offer beneficial to the estate has proven difficult, according to court filings.

    As things stand — assuming the premiums remain the same, the receivership remains intact, no beneficial life-settlement offer is made, no challenges are filed by the insurance carriers and Huber lives for another 20 years — the cost of paying for the insurance could exceed $1.84 million. An initial distribution to the victims could be lower because the $6.5 million estate potentially would have to set aside a large sum just to pay the premiums — and the estate would have to remain intact under court supervision indefinitely

    In a report to a federal judge in February 2010, Duff noted the presence of the policies and their costs. In May 2010, Duff noted that no life-settlement offers had been forthcoming. An October 2010 report noted largely the same thing. So did a report Duff filed with the court in February 2011.

    When the scheme was collapsing, according to the SEC, Huber advised his investors that he was no Bernard Madoff. But an accounting showed that he was a mini-Madoff who claimed to have $40 million under management when he had only $3 million, according to court records.

    Huber later blamed the SEC for his inability to honor redemption requests, but the real reason investors were denied access to their money was that Huber had systematically defrauded them while showing them fictitious paper profits, according to court filings.

    At least $1.7 million went to pay for Huber’s personal expenses, including the acquisition and maintenance of Ponzi properties. In fact, the SEC said, he’d spent more than $800,000 on his California Ponzi palace, nearly $100,000 to keep his Florida condo in Naples in fine fettle and $331,000 on life-insurance premiums.

    “Huber recently sent letters and e-mail messages to certain investors telling them that they cannot add or withdraw funds from their accounts (even though the private placement memoranda allow them to do so at the end of each quarter), because Hubadex is undergoing an ‘audit and review by the SEC,’” the SEC said in September 2009. “In reality, Huber and Hubadex cannot meet all of the possible redemption requests from investors because the actual Fund balances are less than 10% of what Huber and Hubadex have represented to investors in their detailed monthly account statements.”

    Huber bought the Ponzi properties in the name of Hubadex, the SEC said, noting that he had been sanctioned and fined $50,000 by the state of Illinois in 2005 for his business practices.

    “On December 17, 2008, one week after Bernard Madoff was arrested for perpetrating a massive Ponzi scheme, Huber sent an e-mail message to investors reassuring them that the Funds had nothing in common with Madoffs scheme,” the SEC said in September 2009. “In the message, Huber misled investors about the Symmetry Fund’s non-existent hedge fund investments, claiming ‘[w]e just received the last of the assurances from Symmetry’s sub-funds which confirms the Symmetry Fund, L.P. has no exposure whatsoever to Bernard Madoffs firm or investment funds.’”

    “Huber also lied to investors about the amounts of liquid assets in the Quarter Funds and Trimester Fund, telling them that the total assets in each Fund were ‘equal to the value of the Funds’ limited partnership interests less any incentive management fee,’ when in reality the Funds held far less money than Huber and Hubadex claimed. Huber further lied about the success of the Funds and his own honesty, claiming that the enormity of Madoffs crime also damages the credibility of ‘honest operators of successful alternative investment funds, such as ours, in the process and without foundation … We wonder if our funds were down 30 to 50% this year, would we be subject to the same Madoff cloud of misgiving?’”

    Huber no longer has to wonder about the Madoff cloud. Indeed, he created his own cloud — and the receivership estate now is trying to find the best way to make the dark Ponzi skies that enveloped his victims at least partly sunny.

  • SPECIAL REPORT: Investor In Alleged Florida Forex Caper Arrested For Bankruptcy Fraud; Botfly LLC Ponzi Case Reminiscent Of ASD Case; Female Investigator Called Vile Names; Accused Schemer David Lewalski Shifted Blame To Government, Feds Say

    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.

    Visit the site of the court-appointed receiver in the Lewalski Forex Ponzi case.

  • PRIMING THE PUMP: TalkGold, MoneyMakerGroup Publish String Of ‘I Got Paid’ Posts From Club Asteria Members; ‘It’s No Scam Now,’ Poster Declares

    Two forums listed in federal court documents as places from which Ponzi schemes are promoted have published a series of “I got paid” posts from commentators who say they are members of Club Asteria (CA).

    The “I got paid” posts on MoneyMakerGroup and TalkGold appeared after CA members had complained publicly about not getting paid and fretted about the firm’s slow-loading website.

    Both the complaints and the “I got paid” posts lead to questions about whether CA’s revenue stream is polluted by Ponzi proceeds.

    “It’s no scam now,” a poster on MoneyMakerGroup confidently opined after the “I got paid” posts began to appear. A link under the comment led to the affiliate’s CA registration page,  which implied prospects were receiving guidance from an “Investment” company or professional financial adviser.

    This Club Asteria affiliate's sign-up page is accessible from a link on the MoneyMakerGroup Ponzi forum. The registration page implies that CA prospects are receiving guidance from a professional "Investment" company or adviser. In May 2010, the U.S. Postal Inspection Service identified MoneyMaker group as a site from which the alleged Pathway To Prosperity Ponzi scheme was pushed. Pathway To Prosperity gathered more than $70 million, creating about 40,000 victims from "all of the permanently inhabited continents of the world," according to federal court filings in the Southern District of Illinois.

    Separately on MoneyMakerGroup, another CA poster declared, “I am in over 35 forums and everyone is posting paid.”

    In July 2010, the Financial Industry Regulatory Authority (FINRA) issued an alert about investment scams and how they spread on the Internet.  Separately, court filings from May 2008 in the SEC’s case against an alleged $70 million Ponzi scheme known as Legisi include a handwritten note from a Legisi enrollee.

    “Money Maker Group.com,” the note read in part. The note was part of a 267-page evidence exhibit the SEC presented a federal judge. The SEC alleged that Legisi created thousands of victims.

    On both MoneyMakerGroup and TalkGold, posters have repeatedly noted that CA payments come from “Asteria Holdings Limited (Hong Kong).”

    CA says it accepts money through SolidTrustPay and AlertPay, both of which are Canada-based payment processors. Both companies are referenced in federal court filings in the alleged AdSurfDaily Ponzi scheme, which the U.S. Secret Service said gathered at least $110 million and created as many as 40,000 victims.

    ASD also was promoted on MoneyMakerGroup and TalkGold. Solid Trust Pay and AlertPay also are referenced in court filings in the Pathway To Prosperity Ponzi case.

    CA also notes that it conducts business with CashX, another Canadian firm. When the ASAMonitor Ponzi scheme and criminals’ forum mysteriously vanished in October 2010, the site’s landing page initially redirected to CashX.

    Some CA members are selling the “program” by describing what it is not. It is not a Ponzi scheme, and it is not an investment, they claim.

  • SEC Chief Makes Veiled Reference To Imperia Invest Case In Congressional Testimony: Will Ongoing Law-Enforcement Initiatives Spell More Trouble For Serial Online Scammers And Their Enablers?

    SEC Chairman Mary Schapiro

    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.

  • KABOOM! SEC, Feds Target Alleged Money-Laundering Operation In Costa Rica; 6 People From Various Countries Charged Criminally; 7 Charged Civilly In Coordinated Probe Of ‘Pump And Dump’ Schemes

    BULLETIN: Two days after Southern Florida’s top federal prosecutor warned that offshore fraudsters who targeted Americans had no safe haven, six people from various parts of the world who allegedly ran or contributed to a pump-and-dump scheme that used the services of a  money-laundering operation in Costa Rica have been charged criminally, authorities said.

    The SEC, meanwhile, charged seven people civilly. An attorney has been charged both criminally and civilly, the SEC said. The cases were brought in the Southern District of Florida, which has been a hotbed of financial crime.

    Defendants in the cases hail from Costa Rica, Great Britain, Canada, Israel and the United States, according to the SEC. The criminal charges include conspiracy to commit securities, mail and wire fraud; wire fraud; mail fraud; violating the securities regulation laws and obstruction of justice.

    Jonathan R. Curshen, a convicted felon awaiting sentencing in an earlier securities and bribery scheme, has been charged both criminally and civilly in the new case. Curshen, 46, a dual U.S. and British citizen and the one-time “honorary counsel” of St. Kitts-Nevis to Costa Rica, presided over a Costa Rican company known as Red Sea Management Ltd.

    Red Sea “effected fraudulent pump-and-dump schemes on behalf of its clients and laundered millions of dollars in illegal trading proceeds out of the United States to its clients overseas,” the SEC charged.

    Also charged criminally and civilly were attorney Michael S. Krome, 49, of Lake Grove, N.Y; Ariav “Eric” Weinbaum, 37, of an unspecified city in Israel; Yitzchak Zigdon, 47, of Tel Aviv; Ronny Morales Salazar, 39, of San Jose, Costa Rica; and Robert L. Weidenbaum, 44, of Coral Gables, Fla.

    Krome and Weidenbaum (as distinct from Weinbaum) are Americans.

    Weinbaum, according to records, has dual U.S. and Israeli citizenship. He previously lived in Boca Raton, Fla., but now is living in Israel, the SEC said. The SEC alleged that Weinbaum has a “network of operatives he uses to perpetrate pump-and-dump stock manipulations.”

    Zigdon is an “Israeli accountant and the business partner of Weinbaum,” the SEC said.

    David C. Ricci of San Jose, Costa Rica, was charged civilly, and already has settled with the SEC. Ricci is a citizen of Canada who was living in Costa Rica, according to the SEC charging documents.

    “This group of illicit stock promoters sought to hide their scheme behind offshore entities, but their misconduct was exposed by the excellent cooperation of law enforcement agencies here and abroad,” said Cheryl Scarboro, associate director in the SEC’s Division of Enforcement.

    On Feb. 16, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida warned offshore scammers and criminals that the United States would not tolerate crime aimed from abroad at its citizens.

    “International law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas,” Ferrer said.

    “Curshen directed Red Sea to open numerous nominee brokerage accounts with U.S. and Canadian broker-dealers to enable the firm to engage in coordinated manipulative trading and conceal its illegal activity,” the SEC charged, alleging that Ricci and Salazar had trading authority over the nominee accounts.

    The scheme for which the charges were brought centered on a “sham” company known as CO2 Tech Ltd., which purported to be in the business of reversing global warming, the SEC said.

    Purportedly based in London, the company claimed to have a relationship with Boeing, the aircraft-maker, and traded on the Pink Sheets.

    “There were no communications, correspondence or understandings between CO2 Tech and Boeing,” the SEC said flatly, alleging that CO2 Tech was a “sham” that had no “significant assets or operations.”

    Krome, the lawyer, “issued a fraudulent opinion letter” to enable Weinbaum and Zigdon to advance the scheme, and “Weinbaum hired Weidenbaum” to distribute false information through websites, spam e-mails and fax blasts, the SEC charged.

    “Weidenbaum enlisted a group of stock promoters who then executed illegal ‘matched orders’ with Red Sea’s nominee brokerage accounts in order to ‘jump-start’ the market and increase the price of the stock,” the SEC charged. “As a result of the false media campaign and the illegal matched orders, the market price of CO2 Tech stock increased 81 percent increase in one day and trading volume increased 1,573 percent.”

    Ricci and Salazar sold the stock through Red Sea, and the “coordinated misconduct enabled stock sales at artificially inflated prices for profits of more than $7 million at the expense of unsuspecting investors,” the SEC charged.

    Cooperating in the case were the U.S. Department of Justice, the FBI, and the U.S. Postal Inspection Service, FINRA, the Costa Rican Police, the British Columbia Securities Commission, the Israel Securities Authority, the United Kingdom Financial Services Authority and The City of London Police Department, the SEC said.

    In recent days, federal prosecutors also have filed charges against more than 100 people associated with Armenian Power, an international organized-crime group with ties to Russia and Armenia.

  • Southern Florida’s Top Federal Prosecutor Says Offshore Biz-Op Fraudsters Have No Safe Havens; United States Throws Down Gauntlet To Criminal Hucksters

    A top federal prosecutor said today that the United States would vigorously investigate and prosecute “business opportunity” fraudsters who target Americans.

    “This is true even if they operate from outside of the United States,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida.  “International law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas.”

    Ferrer’s remarks came in response to guilty pleas entered by Silvio Carrano and Gregory Britt Fleming after an intense investigation by the U.S. Postal Inspection Service.

    And Ferrer’s words were backed up by the head of the civil division of the U.S. Department of Justice.

    The United States “will continue to aggressively prosecute those who defraud Americans in an effort to make a quick buck,” said Assistant Attorney General Tony West.

    Carrano and Fleming were among a group of defendants who tricked customers into believing the “opportunities” they presented were based entirely in the United States. The businesses actually were operating from Costa Rica and were criminal scams that resulted in multiple prosecutions against multiple people peddling everything from vending machines and coffee to greeting cards and bogus claims of assistance, prosecutors said.

    Customers paid thousands of dollars each to join the programs based on profitability lies and tales of financial success told by the schemers. Shills helped sell the schemes, prosecutors said.

    Carrano and Fleming pleaded guilty to conspiracy to commit mail and wire fraud for their roles in the schemes, which operated for months, prosecutors said.

    “After one company closed, the next opened,” prosecutors said, identifying the businesses as Apex Management Group Inc., USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc. and Nation West Distribution Co.

    Also recently pleading guilty to conspiracy to commit mail and wire fraud was Donald Williams, who was sentenced to 78 months in federal prison. Co-defendant Patrick Williams, meanwhile, pleaded guilty to conspiracy to commit mail and wire fraud, 10 counts of mail fraud and three counts of wire fraud.

    Sentencing for Patrick Williams is scheduled for March 30. Sentencing for Carrano and Fleming is scheduled for April 20.

    Read the statement by Ferrer, West  and Henry Gutierrez, the top postal inspector in Miami.

  • EDITORIAL: On Club Asteria, FxPowerPro And DisasterClub — And What The U.S. State Department Could Do To Contain The Danger Posed By The Talk Gold Ponzi And Criminals’ Forum And Others Of Its Ilk Worldwide

    Let’s start with the chaos in Egypt this week. Protesters have streamed into the streets to demand that President Hosni Mubarak step down after three decades of autocratic rule. The government initially reacted by shutting down the Internet. As tensions rose, protesters, activists and journalists covering the events were beaten. Some of the protesters were killed.

    When a government shuts down the Internet and starts chilling its people and journalists, it’s for a reason: It does not want the world to witness events, and it wants journalists to know they’ll pay a price for trying to report anything other than the government line to the masses. State-run TV beamed images of tranquility, not images of unrest. When the chaos became impossible to sanitize or ignore, the government blamed events on impure thinkers and their media lackeys, planting the seed that “foreign agendas” were at work.

    It was the cue the loyalists needed to start threatening journalists with death by beheading. Fearing for their safety, the journalists abandoned the immediate turf — but not the story. They started reporting from “undisclosed locations.” The word was still getting out, just not the pictures in the degree desired.

    The immediate events in Egypt, of course, are much more serious than, say, the immediate events at the TalkGold Ponzi scheme and criminals’ forum. Even so, some of the parallels are striking.

    The Egyptian government, for example, is trying to control the message. So is the TalkGold forum, which wants the Ponzi shills and criminals who’ve involved the worldwide masses in one catastrophic fraud scheme after another to know they have a safe haven. TalkGold also wants the critics to know the Mods regard them as naysayers and trolls who can be “banned” without notice, rather like the Mubarak regime regards those muckraking reporters and their “foreign agendas.”

    It won’t work at TalkGold for the same reason it won’t work in Egypt: People still have eyes and ears and the ability to be discerning. There may be only one Tahrir Square in central Cairo to control, but “undisclosed locations,” voices, cell phones, cameras and reporters’ pads and tape recorders are in plentiful supply. They can’t be controlled.

    Egypt’s bid to control the message has resulted in a catastrophic PR problem on top of a political crisis. Meanwhile, TalkGold’s ineptitude, ham-handedness and arrogance has set the stage for its own PR disaster. You can read about it on RealScam.com, which sides with the afflicted masses, not the people who’d afflict the masses.

    While state-run TV in Egypt is airbrushing the dangers of autocratic rule and beaming images of tranquility as the country’s inhabitants try to figure out how they’ll get by for yet-another year on the wages of poverty, TalkGold is airbrushing the economic and security dangers of viral criminality and seeking to tranquilize (and recruit) the masses by using flowery language and even flattery to tell them that opening an account with an offshore payment processor and sending money to any one of hundreds of schemes is their ticket out of the ranks of hopelessness.

    Poster “Ken Russo,” for example, would have the people of Egypt — and the poverty-stricken people of the United States and other countries  — know that the latest “program” he is promoting is one of the “best” he has ever seen.

    One of “Ken Russo’s” current favorites is Club Asteria, which claims to “care” and contends that its “100,000 PLUS MEMBERS CAN’T BE WRONG.” Meanwhile, Club Asteria further claims to “Empower our Members” and to “help expatriates and immigrants to become more successful in their personal and professional lives and enable them to send money home to their loved ones.”

    Tugging at heartstrings, Club Asteria further claims that “[t]hrough our philanthropic efforts we make an immediate difference for struggling individuals, families and communities by focusing on improving nutrition, housing, health care and education.”

    That performing legitimate due diligence on Club Asteria is virtually impossible doesn’t seem to compute with “Ken Russo” and other affiliates. The mere fact the “program” is being promoted on TalkGold is reason enough to avoid it. Any business the company generates from TalkGold likely is radioactive. Club Asteria, for example, could find itself in possession of money that has flowed from fraud scheme to fraud scheme. Even if Club Asteria were legitimate, the fact it is being promoted on TalkGold puts it at one of the principal intersections of crime and fraud.

    About the only good thing about the Internet being down in Egypt this week while its people took to the streets was that “Ken Russo” and his fellow promoters couldn’t sell Club Asteria and other highly questionable “programs” to the disaffected Egyptian masses. (On a side note, one of the companies named in a Forex lawsuit by the U.S. Commodity Futures Trading Commission(CFTC)  just days ago announced on TalkGold that the shutdown of the Internet in Egypt had disrupted its ability to interact with Egyptian clients and other clients in the region. A poster purporting to represent FXOpen — under an underlined  heading of “Arabic Live Chat Disruption” — noted that “[o]ur hopes and prayers go out to the Egyptian people.”)

    And even as the Egyptian government is inciting violence against journalists — to the degree that the U.S. Department of State issued a special statement on the matter — the TalkGold forum is banning posters who speak ill of Ponzi and fraud schemes that are gathering untold sums of money, channeling cash to some of the darkest corners of the Internet and keeping people in financial bondage.

    Here is an idea for the Department of State and Secretary Hillary Clinton: Warn Americans — and other peoples of the world — about sites such as TalkGold. Mention them at a Congressional hearing. Instruct U.S. diplomats the world over to inform their host governments about the security and economic dangers posed by TalkGold and a sea of similar sites. Tell elected officials that the State Department is serious about monitoring sites that are keeping people in human bondage by spreading financial misery globally. Define Talk Gold as a global pariah, an enterprise without a state that would be proud to claim it. Inform the world regularly that the only form of diplomacy on TalkGold is robbery without a gun.

    TalkGold has been named repeatedly in court filings that identify it as a place from which fraud schemes are openly pushed. The ink on recent CFTC lawsuits that identify two of TalkGold’s paid Forex advertisers as the purveyors of unregistered offerings targeted at U.S. citizens is barely dry, and yet the unabashed cheerleading continues.

    The alleged AdSurfDaily Ponzi scheme, which also was pushed from TalkGold, gathered at least $110 million. It caught the attention of the U.S. Secret Service and resulted in civil and criminal probes that could put people in prison for decades, and yet the unabashed cheerleading continues.

    All the autosurfs prominently touted on TalkGold are just recycled forms of ASD, which itself allegedly was a recycled form of 12DailyPro, which the SEC smashed five years ago this month.

    It’s the same thing with Pathway To Prosperity, yet-another alleged scheme promoted on TalkGold that gathered tens of millions of dollars and could put people in jail for decades. All of the HYIPs promoted on TalkGold are just recycled forms of Pathway to Prosperity, which was busted by the U.S. Postal Inspection Service, and Legisi, which was busted by the SEC after the U.S. Secret Service infiltrated its operations by using an undercover operative. The state of Michigan also used an undercover operative in the Legisi probe.

    The best way to deal with TalkGold and similar sites is to tell the world that they promote global criminality and rank illicit profits above human rights and common human decency.

    Like Egypt in its current state, TalkGold is not about freedom — financial or political. It is about the institutionalization of corruption. If TalkGold were an oncological hospital, its doctors would be cheerleading for the cancer to spread and its nurses would be rooting for the highest death rate because intervening to cure the disease and comfort the afflicted would be bad for institutional and personal profits.

    A purported Forex program known as FxPowerPro currently has a 20-page thread on TalkGold. Among other things, FxPowerPro is claiming that “YOUR STABILITY IS OUR PURPOSE.” Its website appears to come from an editable script kit used by hundreds of sites globally, and it says it will accept any sum between $5 and $20,000. FxPowerPro proudly displays a link the the TalkGold forum.

    A few days ago an eagle-eyed PP Blog reader passed along some information about yet-another incongruous program known as “Disaster Club.” Disaster Club appears to be a new wrinkle on cash-gifting schemes. It purports to arrange member-to-member “grants,” asking visitors if they’d like to turn a “One-Time $100 into $17,700.”

    Bizarrely, Disaster Club uses a presentation by which it names four hypothetical members: “Job,” and “Cain, Abel and Eve.”

    “After joining the Club you will receive the name of your assigned member, and each week on Monday you are to send a grant in the amount shown in the grant schedule directly to that assigned member,” Disaster Club says.

    “Should you join the Club between Tuesday and Sunday, send your grant as soon as you receive your assigned name, do not wait until Monday,” Disaster Club coaxes. “Every grant thereafter will be sent according to the Monday schedule. To create a cash explosion from your home three members will each be given your name to send their $100 grants to ($100 X 3 = $300) and each stage you will keep the stated amount shown from the amount you received from the 3 members $100 + $100 + $100 = $300 you keep $50. Then according to the grant schedule shown, you are to send your grant directly to the same member (Job), and the same three members (Cain, Abel and Eve) will each send their grants directly to you.”

    Disaster Club purports to be headquartered in Florida and claims to be a “club that allows like minded members to pool their resources together to help the hurting and homeless victims of any Disaster in any State, or even help others anywhere in the world.”

    The “opportunity” does not appear to have its own thread at TalkGold yet, but there are plenty of disasters already waiting there for its readers. Just don’t expect to get a warm reception if you have a “foreign agenda” — you know, like those muckraking enemies of the Mubarak regime in Egypt.

    Although it’s not likely you’ll be threatened with beheading at TalkGold, you might get deleted if you tangle with “Ken Russo” and others and challenge readers to use their heads for something other than a hat rack.

    There is nothing decent about Talk Gold and its cancer-spreading cousins worldwide. Only the broadest public-awareness campaign can succeed against the threats they pose to the governments of the world and billions of Internet users globally — and the U.S. State Department could make a difference by describing the criminal forums as places from which human rights are set up to be trampled 24/7/365.

    Any true diplomat from any country worldwide who spent so much as 15 minutes on TalkGold could see the danger to countries, governments and citizens worldwide. The world’s diplomatic corps are uniquely positioned to do something the world’s law-enforcement corps cannot do: be at all places at all times.

    A sustained effort by the world’s diplomats to identify and monitor the fraud sites — and openly share the information with the people of the world — could go a long way toward containing a plague that only will mushroom into a catastrophe if left alone.

  • Judge Effectively Orders Treble Financial Penalty By Imposing $64.8 Civil Fine Against Ponzi Swindler Already Convicted In Criminal Case; Scammer Charles E. Hays Also Ordered To Disgorge $19.9 Million In Illicit Profits And Banned From Trade For Life

    UPDATED 2:37 P.M. ET (U.S.A.) If you’re a modern-day commodities fraudster and Ponzi schemer, be prepared to have massive criminal and civil exposure. The recent cases against Charles E. “Chuck” Hays of Minnesota tell a tale of significant prison time, a huge criminal restitution order and civil fines that effectively exposed him to treble damages while also holding him accountable for his ill-gotten gains. Indeed, his legal problems didn’t end even after he was sentenced to jail in May 2010.

    Here is some of the notable math from the criminal case against Hays, who pleaded guilty in April 2009 to running a commodity-pool Ponzi scheme.

    Jail sentence ordered by U.S. District Judge Donovan Frank: 117 months.

    Restitution ordered by Frank in criminal case: $21.6 million.

    The criminal case against Hays, who operated a company known as Crossfire Trading LLC, was brought by federal prosecutors and the U.S. Postal Inspection Service.

    Now, the math of the civil side of the Hays’ prosecution has been released:

    Civil fine against Hays ordered by Frank: nearly $64.8 million. (The amount was arrived at by totaling the proceeds of the Ponzi scheme ($40.4 million) and subtracting the Ponzi payments to victims ($18.8 million) to arrive at the figure of $21.6 million — and then trebling that number to determine the fine.)

    Disgorgement of ill-gotten gains ordered by Frank: $19.9 million. (The amount is a bit less than the $21.6 million figure noted above because Hays was given credit for slightly more than $1.6 million he lost while trading. Even so, the full amount of $21.6 million is due in the judgment in the criminal case.)

    Additional penalty imposed by Frank in civil case: lifetime ban from trading.

    Although Hays argued he didn’t deserve a lifetime ban after running a Ponzi scheme that gathered more than $40 million and issuing false statements to investors, the judge didn’t buy it.

    “Hays’ activities justify a permanent trading ban because Hays has shown himself to represent an inherent threat to the integrity of the futures market,” Frank wrote.

    The CFTC brought the civil case and persuaded Frank the steep fine and disgorgement order were warranted.

    “In light of the egregiousness and continuing nature of the fraud in this case, which spanned over eight years, such an assessment is appropriate,” Frank wrote. He also left the door open for victims to sue Hays, meaning that the orders in the federal cases did not bar private litigants from seeking their own remedies against Hays.

    Fraudsters could take a clue from the federal litigation and severe penalties against Hays, Frank suggested.

    “Given that Hays must repay his criminal penalty before turning to his civil penalty, the imposition of a civil monetary fine (or for that matter, disgorgement) is largely academic,” he noted in his order. “Nonetheless, the Court was persuaded by the CFTC’s comments at the motion hearing that this action is necessary to adequately address Defendants’ violations and deter against future violations while the events leading to this lawsuit are fresh in people’s minds.”

  • EDITORIAL: ASD By The Numbers: Why America And The World Should Be Shocked — And Why Serial Autosurf And HYIP Promoters Should Be Prosecuted

    ASD's Andy Bowdoin.

    UPDATED 12:04 P.M. ET (U.S.A.) In court filings this week in the AdSurfDaily autosurf Ponzi scheme case, federal prosecutors in the District of Columbia revealed a series of jaw-dropping numbers. The biggest of these is 500,000 — the number of pages of emails gleaned so far in the investigation, which began in July 2008.

    Because prosecutors put the qualifier “at least” on the already-staggering number, it is clear the number actually could increase. Each of the pages is subject to the discovery process, meaning that attorneys from both sides and perhaps the court itself faces the monumental challenge of sifting through at least half a million pages of scheme-related correspondence.

    Other big numbers in the alleged $110 million ASD Ponzi include 100,000, the number of pages of bank records, and 5,000, the number of pages of documents that emerged after the U.S. Secret Service searched ASD’s office in Quincy, Fla., and the home of company president Andy Bowdoin.

    To date, investigators have identified 40,000 potential ASD victims. This number also could grow because there is reason to believe that “there may be members who provided funds to ASD but whose information ASD did not enter into its database,” according to prosecutors.

    ASD’s database included information on 97,000 members. Some participants have claimed ASD actually had 120,000 members. Regardless of the final number that emerges, ASD created victims by the tens of thousands, including victims who do not live in the United States, prosecutors said.

    The import — and the danger of these numbers — is that ASD is only one autosurf. There may be hundreds if not thousands of autosurfs operating in the world at any one time, along with hundreds or thousands of HYIPs. Like other autosurfs and HYIPs, ASD was promoted on Ponzi forums such as TalkGold, MoneyMakerGroup and ASA Monitor. The Ponzi pitchmen love American money, and commission-grubbing American salespeople and serial promoters who play dumb to line their pockets at the expense of their fellow countrymen specialize in spreading the misery globally.

    In May, the PP Blog reported on criminal charges filed against Nicholas Smirnow, the alleged operator of the Pathway to Prosperity (P2P) Ponzi and HYIP scheme. The numbers that have emerged from that alleged scheme are equally stunning: $70 million fleeced from 40,000 victims in 120 countries from “all of the permanently inhabited continents of the world,” according to the U.S. Postal Inspection Service.

    The criminal complaint filed against Smirnow specifically references the TalkGold, MoneyMakerGroup and ASA Monitor Ponzi forums — the same forums from which ASD and countless other schemes have been promoted.

    Legisi, yet another alleged scheme pitched at the forums, also produced some big numbers. Among them are $72.6 million fleeced from at least 3,000 victims. Matthew Gagnon, one Legisi pitchman, netted $3.8 million alone from the scheme, according to the SEC.

    So, in just the three alleged schemes referenced in this column — ASD, P2P and Legisi — the numbers shape up like this: at least $252.6 million gathered from at least 83,000 victims. If the P2P and Legisi cases are shaping up like the ASD case from the standpoint of paper production, investigators, attorneys from both sides and the courts may have to go through more than a million pages of documents and corresponding bank records to make sense of it all.

    Meanwhile, the wink-nod, serial promoters continue to ply their trade on the Ponzi boards — all while the U.S. and world economies are trying to navigate the choppiest waters since the Great Depression. While the serial promoters are lining their pockets at the expense of Moms and Pops from virtually every corner of the earth, they are anticipating the danger signs consistent with the implosion of their currently favorite Ponzi — and they are preparing their next round of lies to protect their illicit profit pipeline and explain away the problems that inevitably will emerge.

    Some of the professional criminals will tell their marks that it is their duty to be patient when Ponzi payments slow down. They’ll add that problems affect all enterprises regardless of size, and that it’s not unusual for payment bottlenecks to occur. They’ll explain that it likely is a problem with software or the need to acquire a new server to accommodate traffic. After all, they’ll say, “growing pains” are something to celebrate because they signal the success of the enterprise.

    And the serial criminals also will talk about a doubting recruit’s duty to be loyal to the enterprise. After all, they’ll explain, the company is doing the right thing by acquiring the equipment and manpower needed to streamline operations and thus return to a normal payout schedule.

    While the professional Ponzi criminals are explaining all of this, investors will become further separated from their money before the final round of excuse-making begins. Investors will be cautioned not to contact the authorities and told not to contact the payment processors. After all, the serial pitchmen will explain, if the authorities seize the cash or if the payment processors freeze the accounts, no one will get paid.

    When the scheme ultimately collapses, some of the serial criminals will shrug their shoulders and feign surprise. They’ll explain why they had every reason to believe that this one was different, that they’d been assured by the Christian operator it was different. No matter, they’ll say, perhaps positioning themselves as people of faith. Recruits who invested more than they could afford to lose have only themselves to blame, they’ll claim. (This is if they call it “investing” at all; many serial criminals avoid that word like the plague. After all of these years and all of this Bible-thumping, they still apparently believe that it’s possible to skirt securities laws by avoiding the word “investment” and calling it something else.)

    Then they’ll unapologetically move on to the next scam. After all, they’ll explain, they have a right to make a living. Some of them will explain that the government, which refuses to see the beauty of the autosurf and HYIP models, is to blame. Along the way they’ll create some clone promoters, and the clones will multiply. The clones will add to the purported, pro-Bible (and antigovernment chorus) — and before long, investigators trying to reverse-engineer a single case will be sifting through 500,000 pages of emails, 100,000 pages of bank records and 5,000 pages of records created as the result of the execution of a search warrant or as a result of actual documents seized.

    Agents then will begin the mind-numbing and time-consuming process of identifying victims by the tens of thousands.

    Some of the victims will lose their homes because they borrowed against their equity to take advantage of “bonus” ad packs and to maximize their “earnings” through “compounding.” Others will have lost savings set aside to educate their children. Still others will have lost their life savings and money set aside for retirement.

    Many of the people who created all the pain will sprint back to the Ponzi forums — and the government will be left to clean up the colossal mess. The Ponzi pitchfest is in constant motion as property values decline in neighborhood after neighborhood, driven by the foreclosures glut. The Stepfords among the promoters will write their Congressman or Senator or perhaps the Inspector General at the Justice Department.

    They’ll more or less say that it would be in the interests of America if the Congressman or Senator or Inspector General would see fit to fire all the prosecutors and agents who made these unseemly events occur.

    And then they’ll gather up their lists of suckers and try to recruit them into yet-another MLM, autosurf or HYIP nightmare. This they will call “freedom.” Some of them will be angry. Some of them will write rambling diatribes on forums. Invective will be part of the diatribes. Some of them will call public officials “Nazis” and “Socialists,” perhaps even in the same fractured paragraph. Some of them even will try to sue the government or have the prosecutors and judges charged with crimes. They’ll talk about “treason” and high crimes against the Constitution.

    What they will never do is make any sense.

    It is impossible to imagine that any government agency has the resources to take down all of the corrupt MLMs, autosurfs and HYIPs. But one can imagine a systematic process by which the government identifies the serial promoters and plans a litigation strategy from which will emerge the “shot heard round the world” of corrupt online investment “opportunities.”

    That day cannot come soon enough — and the numbers demand it: more than $250 million gathered from victims of just the three alleged schemes referenced on this page, perhaps 1 million or more emails and other documents produced by the investigations, at least 83,000 victims from virtually all corners of the earth, an untold number of agents/investigators from multiple government entities forced to sift though monumental piles of evidence.

    It is clear that wealth is being drained by the billions. It is equally clear that vast sums of money have gone missing in the Age of Terrorism.

    Clearest of all, however, is that the corrupt MLMs, autosurfs and HYIPs cannot thrive without their greedy and dangerous promoters — and that highly public lawsuits and early morning raids designed to hold the wink-nod Ponzi pitchmen accountable would send an unmistakable message that pain is in your future if you promote these criminally toxic businesses. Serial promoters deserve the same treatment as mid-level drug dealers.

    No economy can thrive if a single case among thousands of potential cases is producing 500,000 pages of emails and creating 40,000 victims while consuming tens of millions of dollars — and if “shell companies,” the “shadow banking system” and wink-nod, serial promoters are driving the wanton criminality and letting the cancers metastasize globally.

    Here’s hoping such an operation aimed specifically at corrupt MLMs, autosurfs and HYIPs already is under way.

  • LETTER TO READERS: Reflections On 1,000 PP Blog Posts, The Lionization Of Fools And An Unprecedented Crime Wave That Threatens National Security And Is Filling Stadiums With Victims

    Dear Readers,

    This is actually Post No. 1,007 since the PP Blog switched to the WordPress platform two years ago this month. We’d hoped to commemorate our 1,000th WordPress post in the actual 1,000th post, but missed the chance because of Breaking News concerning the Financial Fraud Enforcement Task Force’s Operation Broken Trust.

    The PP Blog's Breaking News graphic was stolen and used in a promotion for Data Network Affiliates (DNA) earlier this year. DNA, which purports to be in the business of helping the AMBER Alert prohram rescue abducted children, now apparently has morphed into a company known as OWOW, which has instructed members to advertise a secret cure for cancer.

    Several hours after we reported that the Task Force now was counting investment-fraud victims by the tens of thousands and noting that even deaf people had been targeted in massive scams, we reported that Walmart had joined the “If you see something, say something” terrorism-awareness campaign operated by the Department of Homeland Security (DHS).

    Walmart was instantly and savagely pilloried on YouTube, apparently for holding the view that DHS deserved private-sector help in its work to keep America safe. On. Dec. 6, when the PP Blog first observed the DHS video on YouTube announcing the Walmart partnership, the video had received only 310 views. That number now has shot up to 289,657. YouTube posters called DHS Secretary Janet Napolitano names that could peel paint. We’ll leave it at that, except to say that scores of Americans appear to have emerged as kneejerk critics and appear unwilling to view America’s economic well-being within the lens of national security.

    Indeed, how safe is America — and the world at large — if fraud victims are being counted in numbers that would fill stadiums and vast sums of wealth are being consumed and disappearing down ratholes? In the Task Force announcement, Attorney General Eric Holder said that, since Aug. 16 alone, cases investigated by the Task Force have uncovered losses of more than $10.4 billion. The schemes affected at least 120,000 victims.

    The victims’ count in just this relatively small cluster of cases is more than enough to fill the Rose Bowl in Pasadena or Michigan Stadium in Ann Arbor, America’s largest college-football stadium.

    Just prior to our Operation Broken Trust post — in Post No. 999 — we reported that the AdPayDaily autosurf, which has promoters and members in common with both AdSurfDaily and AdViewGlobal, was showing signs of collapse. Flash forward to Post No. 1,002: In this post, we reported that a New York Internet Marketer had been arrested by the U.S. Postal Inspection Service for cyberstalking.

    Vitaly Borker apparently believed it prudent to use the Internet to threaten to rape women who had received what investigators described as bogus and inferior-quality goods from him. A fair reading of the complaint against Borker shows that he used the same type of gutter language directed at Napolitano on YouTube — you know, for her apparent High Crime of asking Walmart shoppers to be aware of their surroundings in the Age of Terrorism.

    We next reported on a 54-year prison sentence handed down to a former Indiana pastor who duped Christian investors in a Ponzi scheme. After that, we reported that a company that once did business with Steve Renner’s Cash Cards International had been implicated in a massive Forex scheme that affected at least 800 investors.

    Renner was the operator of the INetGlobal autosurf, which the U.S. Secret Service said in February was operating a Ponzi scheme affecting thousands of people, including victims of Chinese descent who may have limited ability to understand English. The Secret Service said an undercover agent had been introduced to INetGlobal by an AdSurfDaily member.

    On Dec. 8, we reported that a Maryland man had been arrested after the FBI intercepted his plot to detonate a car bomb at a military-recruitment center. A similar plot had been unmasked by the FBI in Portand, Ore., on the day after Thanksgiving. It was aimed at a Christmas tree lighting ceremony, meaning it was aimed at children and families.

    Here is one way to look at the alleged Thanksgiving plot: The arrest was announced on Nov. 26. By Dec. 6, crackpots were flooding YouTube with paint-peeling comments about Napolitano and the terrorism-awareness campaign. Two days after that, on Dec. 8, a man was arrested in the Maryland plot. He allegedly also talked about blowing up Andrews Air Force Base, which happens to be the home base of Air Force One, which happens to be the aircraft used by the President of the United States.

    We haven’t even written about Wikileaks and the arrest in Britian of Julian Assange. Wikileaks’ sympathizers reacted by bringing DDoS attacks, apparently based on the belief that the best way to show support for Assange was to send out an army of bots to disrupt the websites of businesses that did not support Assange.

    By week’s end, Prince Charles and Camilla, the Duchess of Cornwall, were surrounded by a mob unhappy about the skyrocketing costs of getting a college education in the United Kingdom. Civility, it seems, can be cast out the door in a country minute and replaced by the taunts of a mob.

    Yesterday, as we again sought to commemorate our 1,000 post, word arrived about the apparent suicide of Bernard Madoff’s son on the second anniversary of his father’s arrest.

    There is no doubt — none whatsoever — that Ponzi = Pain. There also is no doubt that the Internet has ushered in an era of unprecedented, mass-produced, viral crime. Criminals have been aided in their nefarious pursuits by crackpots who employ no editorial filters and simply create or repeat lies that institutionalize crime as an occupation and even celebrate it.

    At the precise moment in time in which Americans and other citizens of the world could benefit most from serious words and serious research backing those words, some of the world’s great publishing companies are struggling to make ends meet. Print circulation is down. Journalists are losing jobs. Designers and salespeople are losing jobs.

    The switch to electronic publishing platforms has been accompanied by piracy, wanton theft and trademark infringement that further erodes the value of words and intellectual property, undermines the economy and adds to concerns about national and international security. People, including well-intentioned people, simply copy-and-paste entire editorial wells from one site to another. The public becomes confused about the original source of material, which often is shoe-horned to fit a specific agenda.

    If former President Bill Clinton, for example, hands out an award for commitment to the environment, it gets spun by alleged scammers as an endorsement of their company. Images of Walmart, Warren Buffet, Donald Trump and Oprah Winfrey frequently are used in promos for multilevel-marketing (MLM) and direct-sales companies to which they have no ties.

    Earlier this year, the PP Blog’s Breaking News graphic was stolen by a member of Data Network Affiliates (DNA), an MLM company that routinely targets promos at Christians and, among other things, has claimed it is helping the AMBER Alert program rescue abducted children. DNA now apparently has morphed into a company known as OWOW, which is asking members to suggest that a product known as TurboMune cures cancer.

    For months, members of an MLM company known as MPB Today have helped themselves to Walmart’s name and branding materials, claiming that a $200, one-time purchase can result in free groceries and gasoline for life. One MPB Today member apparently believed it prudent to drive business to the firm by depicting the President of the United States and the U.S. Secretary of State, a former member of Walmart’s board of directors, as Nazis.

    This is not “freedom,” as the scammers would have you believe; it is theft and piracy on the high electronic seas, plain and simple. It also often is the case that this specific brand of theft also gets mixed with appeals to faith, meaning the scammers are seeking to pluck heartstrings and separate Believers from their money.

    There simply is no way that any government or branch of government can be at all places at all times. Although it is fashionable to describe efforts to battle crime in the Age of the Internet and the Age of Terrorism as an effort by Big Brother to assign each individual citizen his or her own bureaucrat to bring commerce and freedom to a screeching halt, such opinions often are simple rants that lack any real-world context.

    Within hours of the PP Blog’s publication of a story about the alleged Portland plot, the Blog was bizarrely assailed by an MLM aficionado for DNA/OWOW as a tool for Israel. Michael Chertoff, a former federal judge, federal prosecutor and DHS secretary, was described as a “suspect” in the 9/11 attacks, which the poster blamed on Israel while calling Chertoff an Israeli scum bag.

    As noted above, when Janet Napolitano announced a simple partnership with Walmart to encourage citizens to be aware of their surroundings, she encountered vicious name-calling — and it all happened during the same week yet-another bombing plot was unmasked, the Task Force was noting that America’s largest stadiums were not large enough to accommodate recent victims of financial fraud, DDoS attacks were aimed at companies deemed by third parties to be unfriendly to Wikileaks and the future king of England and his wife were surrounded by an angry mob.

    Even if one is willing to assume that Wikileaks seeks to serve a higher, noble purpose, directing DDoS attacks at businesses and government sites hardly helps Assange elicit sympathy or understanding. He lost an important round in the PR war last week, as did the unthinking crowd that assailed Napolitano and the mob that heckled Prince Charles and the Duchess.

    The lionization of crackpots of all stripes is rapidly emerging as a dangerous, unintended consequence of the Internet — as are all the tortured claims that MLM products treat or cure cancer, create vast sums of wealth for ordinary participants and the tortured claim that appropriating the names of Walmart and Winfrey and Trump and Buffet and Clinton is just another word for freedom.

    Far from promoting freedom, the crackpots and criminals are promoting anarchy. They do not seek to compete in either a free marketplace of commerce or a free marketplace of ideas. Rather, they seek to commit crimes on a global scale and to fill entire stadiums with victims — even as would-be terrorists speculate about throwing cocktail bombs into military-recruitment centers and shooting soldiers and staff as they flee the flames through the doors.

    In Portland, meanwhile, the idea was to kill wide-eyed children contemplating the miracles of Christmas and Santa Claus with a fireball that also would consume their parents.

    We conclude this 1,000 post commemoration with a simple thought: Death and taxes are not the only two certainties of life. It is equally certain that law enforcement needs the proactive participation of the public more than ever. It is one thing to direct reasonable criticism at agencies and public officials; it is quite another to cheer against the people who are responding to unprecedented security challenges while trying to make sure the stadiums fill up with football fans, not victims.