BULLETIN: Class-action attorney Robert J. Bonsignore has asked a federal judge for permission to file a third amended consolidated complaint that effectively would sue at least 20,000 “net winners” in the TelexFree scheme shut down by the SEC last year.
The proposal would name alleged TelexFree promoter Daniil Shoyfer the lead class-action defendant, effectively making him the Todd Disner of TelexFree-related court actions. Disner is a Zeek Rewards figure sued by Zeek receiver Kenneth D. Bell in clawback actions aimed at more than 9,000 alleged winners in the Zeek scheme shuttered by the SEC in 2012.
Disner also promoted the AdSurfDaily Ponzi scheme broken up by the U.S. Secret Service in 2008.
The PP Blog reported in June 2015 that Shoyfer also was promoting a scheme known as MyAdvertisingPays — or MAPS, for short.
If the judge approves the proposal by Bonsignore, it would appear to mark the first time alleged TelexFree winners have been targeted en masse for the return of their alleged winnings from a scheme the SEC has described as a massive pyramid- and Ponzi fraud. Up to $1.8 billion flowed through TelexFree, now in the hands of a court-appointed trustee who has called it a pyramid scheme.
Web records showed that Shoyfer also was promoting MAPS alongside MAPS colleagues such as U.K. hucksters Simon Stepsys and Shaun Smith.
Bonsignore’s proposed amended complaint on the TelexFree front may lead to similar questions. At a minimum, the development highlights the dangers of fraud schemes that spread at least in part though the Internet to involve hundreds of thousands of participants. Victims can pile up in extraordinary numbers, and a fraction of participants who emerge as winners can end up confronting lawsuits and expensive, emotionally draining litigation.
MAPS, a purported advertising scheme similar to AdSurfDaily, continues to operate.
BULLETIN: (2nd updated 8:54 p.m. EDT U.S.A.) The office of Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina has published a webpage for victims of the “Achieve Community” scam. Victims are asked to “submit information concerning the amount of your losses to the U.S. Probation Office,” which is compiling a “presentence” report on convicted Achieve Ponzi- and pyramid scammer Kristine Louise Johnson.
Achieve participants know her as Kristi Johnson.
Directions on how to submit information are provided on the victims’ site.
Troy Barnes and Kristine Johnson operated a fraudulent Pyramid/Ponzi scheme through Work With Troy Barnes, Inc. (WWTB), an entity they founded and which did business as “The Achieve Community” (TAC). Between April 2014 and February 2015 TAC generated more than $6.8 million. Through online video blogs and written promotional materials on the website, both Barnes and Johnson enticed victim-investors to buy “positions” in TAC and earn extraordinary investment returns of 700 percent. More than 10,000 people invested. Barnes and Johnson repeatedly assured listeners who bought $50 “positions” that they would “cycle” through the matrix and receive $400 in return for each $50 position. There was no requirement that investors do anything. Success depended entirely on sufficient new investors to “retire” early investors positions. The scheme ended when the SEC executed a temporary restraining order (TRO) on February 13, 2015. When it was forced to cease operations due to the TRO, TAC had $2.6 million on deposit but owed more than $50 million to investors.
The defendant, Kristine Johnson, pled guilty on June 30, 2015 and was released on bail. The case is in the presentence stage of the criminal justice process. The United States Probation Office has been assigned to complete a presentence report.
Achieve was a Ponzi-board scam that also spread on social media. The reach potentially created thousands of victims. When online scams cast a wide net, it potentially can led to sentencing enhancements.
In a letter to a U.S. Magistrate Judge, Troy Barnes of “The Achieve Community” claims he is ignorant and will prove it.
UPDATED 10:10 P.M. EDT U.S.A. His Achieve Community cycler colleague Kristi Johnson now charged both civilly and criminally, Troy A. Barnes is professing ignorance.
In a June 22 letter to U.S. Magistrate Judge Craig B. Shaffer of the District of Colorado, Barnes offered reasons for missing a June 3 conference call with the court. The letter was docketed June 26.
Starting off by advising the judge he “meant no disrespect” by missing the call, Barnes explained that he has a sick child who has been hospitalized since May 4.
Barnes, 52, of Riverview, Mich., went on to explain that he did not have counsel and was “Guilty of being ignorant” in the SEC’s civil case filed in February in which he and Johnson both are charged.
Saying he desired to cooperate, Barnes ventured that “I would prove that I am very guilty of being ignorant but still I want to do the right thing.”
The SEC’s civil case was brought in the District of Colorado. The criminal charges against Johnson are filed in the Western District of North Carolina.
In a 17-page complaint that was filed under seal on Feb. 12, the SEC described the Achieve Community as a “pure Ponzi and pyramid scheme” whose revenue “has consisted entirely of investor-contributed funds.”
“Johnson and Barnes have made no effort to generate profits from any legitimate business operations from which they could repay earlier investors,” the SEC charged. “Instead, the sole source of repayments to earlier investors is funds contributed by newer investors.”
Whether Barnes continues to be a subject of a criminal probe is unclear.
Johnson, 60, of Aurora, Colo., was charged criminally with wire-fraud conspiracy earlier this month and agreed to plead guilty, federal prosecutors in North Carolina said. The investigation was conducted by the U.S. Secret Service, which also is investigating Zeek Rewards.
URGENT >> BULLETIN >> MOVING: (13th Update 1:43 p.m. EDT U.S.A.) After an investigation by the U.S. Secret Service, Kristi Johnson (Kristine Louise Johnson) of the “Achieve Community” has been charged criminally with wire-fraud conspiracy and has agreed to plead guilty, federal prosecutors said.
“By the time the scheme collapsed in February 2015, the conspirators owed victim-investors at least $51 million in purported investment returns, yet Johnson, her conspirators and TAC had available only 4% or approximately $2.6 million,” the office of Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said.
The SEC charged Johnson, 60, civilly in February 2015 with operating a combined Ponzi- and pyramid scheme that allegedly had gathered at least $3.8 million. She resided in Aurora, Colo., the agency said. The securities regulator also charged Troy A. Barnes, 52, of Riverview, Mich.
Barnes disclosed in February that he was a target of a federal criminal investigation. A charge sheet (known as an “information”) filed by prosecutors yesterday against Johnson described an alleged co-conspirator as “CC#1.” The information also suggested there were other co-conspirators “known and unknown to the United States Attorney.”
These individuals were not named.
The conspiracy prosecution brought by the Secret Service and federal prosecutors appears to have upped the Ponzi dollar sum to $6.8 million. Prosecutors said Achieve “defrauded more than 10,000 investor victims” worldwide.
Prosecutors called Achieve a “sham internet company.” The case against Johnson was brought in the venue — the Western District of North Carolina — that is the center of action in the 2012 Zeek Rewards’ Ponzi- and pyramid scheme.
Achieve and Zeek are known to have had promoters in common. Both schemes instructed prospects and recruits not to call the respective programs “investment” programs in bids to skirt securities laws. Such disingenuousness dates back to at least 2008 and the AdSurfDaily Ponzi scheme, also broken up by the Secret Service.
According to court filings, as the scheme grew in size and scope, Johnson and her conspirators concealed the true nature of the scheme through multiple misrepresentations. According to court records, when the conspirators became concerned that the use of the term “investment” would draw scrutiny from regulators, they instructed victim-investors that “We ARE NOT an INVESTMENT program, please don’t use that term when you speak or post about our re-purchase strategy.”
According to court records, Johnson and her conspirators also lied about the company’s “business model” to the third-party payment processors which processed TAC’s money transactions. When one payment processor concluded that TAC was operating a Ponzi scheme and terminated TAC as a client, court records show that Johnson and her conspirators falsely told victim investors that it was because the payment processor was unable to handle the large amount of money TAC paid to its investors.
As indicated in court documents, the investment scheme began to crumble when payment processors stopped processing the Ponzi payments to victim-investors. By the time the scheme collapsed in February 2015, the conspirators owed victim-investors at least $51 million in purported investment returns, yet Johnson, her conspirators and TAC had available only 4% or approximately $2.6 million.
Prosecutors said “a signed plea agreement was also filed [Thursday], and Johnson is expected to appear before a U.S. Magistrate judge in the coming days to formally accept the plea. The wire fraud charge carries a maximum of 20 years in prison and a $250,000 fine. As part of her plea agreement, Johnson has agreed to pay restitution, the amount of which will be determined by the Court.”
In December 2014, the PP Blog reported that Achieve boosters were parroting each other and circulating a promo that read, “We are not investing in a stock or buying shares in a company. We are using our God given universal right to spend our money the way we want. We choose not to sell out to the banking system for their tiny little 1% annual return.”
Prosecutors described Achieve’s purported 700 percent return as “bogus.” The SEC described Achieve as a “pure Ponzi and pyramid scheme” whose revenue “has consisted entirely of investor-contributed funds.”
Claims of that a “triple algorithm” made such outsized returns possible also were bogus, authorities said.
From an Achieve promo playing on YouTube. Masking by PP Blog.
Achieve offered a 700 percent ROI, according to the SEC and federal prosecutors.
EDITOR’S NOTE: Certain reports by the PP Blog that are available to any person with an Internet connection are referenced in a consolidated, amended prospective class-action complaint that makes claims against various defendants with an alleged association with TelexFree. Information from other publicly available sites, including BehindMLM.com, RealScam.com and others, also is referenced.
The purpose of the PP Blog is to make information available to a wide audience interested in Ponzi schemes, pyramid schemes, securities-fraud schemes and concerns about the interconnectivity of such schemes. The Blog was not consulted about the inclusion of its links or quoted material from the Blog. Nor was the Blog compensated. The PP Blog has no association with the class-action attorneys, who obviously are readers of the Blog and the other online publications.
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Still promoting MLM HYIP schemes in the face of evidence they cause intractable financial, legal and emotional pain that sometimes mushrooms to involve hundreds of thousands of people?
On March 9, 2015, the PP Blog reported that the name of “MyAdvertisingPays” was referenced in a TelexFree-related proposed class-action lawsuit filed in U.S. District Court for the Southern District of New York in December 2014.
The filing appeared to mark the first time MyAdvertisingPays, known in shorthand as MAPS, was referenced in a federal-court filing.
History shows that such references are closely watched by law enforcement. Indeed, they sometimes serve as unofficial triggering actions and presage federal regulatory action by civil authorities such as the SEC and even actions by agencies empowered to enforce criminal laws.
When the California Department of Business Oversight was investigating the WCM777 scam in 2013, for instance, TelexFree’s name popped up in the context of the cross-promotion of MLM HYIP schemes.
This was months before it became known that the SEC and the U.S. Department of Homeland Security were investigating TelexFree, alleged to have gathered at least $1.6 billion in a combined pyramid- and Ponzi scheme.
Instead, the complaint alleged that TelexFree huckster Daniil Shoyfer was “the largest single Promoter” of TelexFree “in the greater New York area.” Web records showed that Shoyfer also was promoting MAPS alongside MAPS colleagues such as U.K. hucksters Simon Stepsys and Shaun Smith.
Willfully blind and supremely disingenuous MLM HYIP promoters moving from one cross-border fraud scheme to another has been a longtime problem. Such promoters may have little of their own money invested, but contribute to a condition under which banks and payment processors become warehouses for fraudulent proceeds cycling between and among scams.
New York is the financial center of the United States. The filing of the proposed TelexFree class action there contributed to questions about whether MAPS soon would be on the U.S. regulatory and enforcement radar.
The answer to that question remains unclear. What is clear is that the New York complaint was transferred to Massachusetts, the U.S. home base of TelexFree. And it’s also clear that Shoyfer has been named a defendant in an amended TelexFree class-action complaint filed April 30 in Massachusetts federal court.
Among the allegations against Shoyfer (italics added/light editing performed/formatting not precise):
TelexFree changed its compensation plan on or about March 9, 2014, much to the fury of affiliates, noted below. Shoyfer, however, continued to promote it unremittingly, sending group text messages to his network with such as the following:
Hey..my team Telexfree! ! And here we go again..Come to check out and learn about new compensation plan TF 2.0.. and how to grow it even faster and MUCH more aggressively and efficiently than the one we had before.…Here is this week’s schedule. . Monday 03/24 at Salon Delacqua (2027 86 str) at 8.00 pm (in English) ..Wednesday 03/26 at SOHO launch(2213 65th street) at 7.45 pm ( in Russian) and Thursday 03/27 at 7.30 pm at 63-112 Woodhaven Blvd in a real estate office. In my case, since I have started from absulute zero during this passed week Mon 03/17- Sun 03/23/14 I booked 11,500 from new one and 21,600 still coming from old plan..A total of 31,100 in 7 short days… Go Telex!!!
After the institution of the new TelexFree compensation plan in March 2014, Shoyfer took part in a closed meeting with TelexFree’s directors and owners in Marlborough, Massachusetts, at which Shoyfer was instructed not to discuss the new TelexFree compensation plan with others and non-insiders, as the new compensation plan was detrimental to Promoters and was adopted to forestall [TelexFree] filing bankruptcy.
So, a man who allegedly promoted TelexFree and had inside information detrimental to ordinary TelexFree affiliates allegedly kept it to himself, continued to promote the scheme — and then moved on to MAPS. This naturally leads to questions about whether Shoyfer has kept information from ordinary MAPS members.
Purpose Of The Amended TelexFree Class Action
The complaint is an effort to consolidate for the sake of efficiency various TelexFree-related class actions filed in various courts. Such actions were filed in multiple U.S. states.
But that’s not the only news: The amended complaint also names TelexFree pitchman Scott Miller a defendant alongside Shoyfer and HYIP huckster Faith Sloan. In documents prepared by Zeek receiver Kenneth D. Bell, Miller’s name appears as an alleged winner in the $897 million Zeek scheme.
In 2013, Miller promoted TelexFree through a publication known as Home Business Advertiser. Another advertiser promoted a cash-gifting scheme. A columnist described Jesus Christ as the person who inspired modern network marketers through his recruitment of 12 disciples.
A Semacon cash-counting machine appeared as a stage prop in a cash-gifting video advertised in Home Business Advertiser. The promos appeared after two women in Connecticut were sentenced to federal prison for their roles in a cash-gifting scheme and tax fraud.
Also named promoter-defendants in the amended TelexFree class action are Sanderley Rodrigues de Vasconcelos (Sann Rodrigues), a two-time SEC defendant in pyramid-scheme cases who allegedly also claimed his actions were inspired by a deity; Santiago de la Rosa; and Randy N. Crosby.
How the promoter-defendants will pay for their defenses in the amended class action is an open question. One of the risks of promoting such schemes is to be left totally on your own if the government or class-action attorneys file lawsuits.
Another open question is whether other shoes will drop in the government actions. The government probes are ongoing. Some of the class-action defendants conceivably could become defendants in amended or new actions filed by the SEC or agencies that have criminal enforcement power.
The amended TelexFree class action asserts fraud claims under Massachusetts law against a slew of defendants, including financial vendors and MLM attorney Gerald Nehra, also a figure in the the Zeek scheme and the AdSurfDaily Ponzi-scheme story. ASD was a $119 million Ponzi scheme broken up by the U.S. Secret Service in 2008. ASD operator Andy Bowdoin was sentenced to federal prison in 2012, after authorities tied him to at least two other cross-border fraud schemes: OneX and AdViewGlobal.
ASD’s name is referenced repeatedly in the amended TelexFree complaint, as is the name of Zeek. When the complaint will be heard is anyone’s guess. That’s because there are unresolved criminal matters against alleged TelexFree principals James Merrill and Carlos Wanzeler, both of whom are named defendants in the amended complaint and also are among the subjects of the SEC complaint.
Katia Wanzeler, Wanzeler’s wife, also is named a defendant in the amended complaint. So is TelexFree figure Joe Craft, another defendant in the SEC action. Brazilian TelexFree figure Carlos Costa also is named a defendant in the amended class action.
Also named a defendant in the amended class action is Jason “Jay” Borromei of Laguna Niguel, Calif. Along with a company known as Opt3, he is accused of “intentionally, knowingly, unfairly and deceptively set[ting] up TelexFree’s United States-based servers in Brazil with the intent of directly furthering, aiding or abetting their unlawful and fraudulent operation, including facilitating the placement of evidence of the Pyramid Scheme beyond the jurisdiction of the United States’ courts.”
With TelexFree itself in bankruptcy court, the class-action plaintiffs contend that “Opt3 and Borromei have a history of providing technical services within the multilevel marketing industry and hold themselves out as having related specialized knowledge. For example, Borromei previously served as chief information officer of Joystar, Inc., later renamed Travelstar, a multilevel marketing company that collapsed in approximately late 2008, and subsequently entered involuntary chapter 7 bankruptcy.”
Though not named a defendant in the amended class action, TelexFree and Zeek figure Tom More also is referenced in the 200-page complaint.
‘Private Jet’ Gets A Mention
On March 9, 2014, the PP Blog reported that a person who took the stage at a TelexFree rah-rah fest in Massachusetts asserted that TelexFree had access to a “private jet” that recently had ventured to the Dominican Republic and Haiti.
The “private jet” also was referenced in the class-action complaint. Details about it remain unclear.
At the moment, the April 30, 2015, amended and consolidated complaint is posted here at the website of class-action attorney Robert Bonsignore.
Billing records in the TelexFree bankruptcy case show that advisers to court-appointed Trustee Stephen B. Darr held an hour-long teleconference with McGuireWoods, counsel to Zeek Rewards’ receiver Kenneth D. Bell.
This appears to mark the first time that Zeek’s name has surfaced in TelexFree-related court matters. The two cross-border MLM/network-marketing fraud schemes allegedly gathered a combined sum approaching $3 billion. Each scheme operated for only about two years.
The conference took place on Nov. 6, 2014. Precisely what was discussed was not disclosed, although the records suggest Darr’s advisers were studying the claims form used in the Zeek Ponzi- and pyramid case. Participants included Mesirow Financial Consulting LLC and McGuireWoods.
Mesirow, which provides accounting and financial services, has assisted Darr in the mammoth job of reverse-engineering the alleged $1.8 billion TelexFree cross-border fraud scheme. McGuireWoods has provided litigation counsel to Bell, who has sued Zeek vendors and thousands of individual participants who allegedly profited from the $897 million cross-border scheme shut down by the SEC in August 2012.
McGuireWoods is not providing legal counsel to Darr. That duty has been undertaken by Murphy & King (M&K.) Still, there may be lessons to be learned from the Zeek litigation. On Nov. 7, 2014, a day after the conference, two of Darr’s advisers at Mesirow noted “research regarding MLM payment schemes and Zeek rewards” in billing records.
Such schemes raise the prospect of a black market and back-alley deals infecting the legitimate commerce stream. It has been a concern in the TelexFree, Zeek and ASD cases. The screen shot below is taken from Mesirow’s first interim application for payment for assisting Darr in his TelexFree probe.
Mesirow’s billings notes make several mentions of M&K, Darr’s legal counsel. One of them, dated Jan. 15, 2015, noted a discussion “regarding promoter to promoter payments.”
Billing notes by Mesirow say the firm analyzed “reports related to Colombian investigation” and that Mesirow is aware of a “Colombian creditor claiming $3MM.” In September 2014, the PP Blog reported that TelexFree President James Merrill claimed at a 2013 TelexFree event in California that Colombia “feared” network marketing.
The California TelexFree event may create a tie with Zeek, the Blog reported in April 2014.
In 2010, the U.S. government established ties between a Colombian MLM “program” known as D.M.G. Group to money-laundering in the United States to conceal narcotics profits.
As the PP Blog reported on Nov. 24, 2010 (italics added):
DMG’s membership ranks swelled to more than 400,000, with the scheme capturing hundreds of millions of dollars. The pyramid collapsed in 2008 — but not before [David] Murcia and others had set up an international money-laundering operation that routed narcotics proceeds through Mexico and concealed the criminality in real estate and other holdings in the United States, prosecutors said.
“The so-called ‘Bernie Madoff of Colombia’ now stands convicted of money-laundering in Manhattan federal court,” said U.S. Attorney Preet Bharara” [of the Southern District of New York].
TelexFree In Brazil
Mesirow’s billing notes also reference an ongoing investigation in Brazil into TelexFree activities through an affiliate known as Ympactus.
The shutdown by Brazilian authorities of Ympactus in the summer of 2013 “was the first of many indication that the Debtors were operating an unsustainable pyramid scheme,” Mesirow said.
It noted in the fee application that it has been in “regular contact” with U.S. government officials and “representatives of the Brazilian government.”
In its first billing, Mesirow said it has assisted Darr in recovering more than $17 million since the firm was formally appointed to assist the trustee on July 14, 2014. Mesirow is seeking about $1.6 million in fees for more than 2,962 hours of work, plus reimbursement of expenses of $20,942.
Read the Mesirow application and billing notes, which reference TelexFree figures such as Merrill, Carlos Wanzeler, Carlos Costa, accountant Joe Craft and MLM Attorney Gerald Nehra.
M&K, legal counsel to Darr, also has submitted a billing application with notes that reference Zeek Rewards. M&K, like Mesirow, joined with the trustee in July 2014. M&K is seeking more than $1.3 million, saying it has expended more than 2,784 hours. It also is seeking reimbursement of expenses of $36,116.
One M&K reference to Zeek mentions a “Review [of] Zeek Rewards settlement pleadings with net winners and insiders.” Another references a conference “regarding Zeek Rewards application to TelexFree case and practical implications.” Yet another references a “Review [of] Zeek Rewards docket re: how to treat inter-promoter activity.”
Still another note says this: “Research potential claims against Nehra.”
There are other Zeek references, plus references to other Ponzi cases.
Are “sovereign citizens” immersed in the “SVM Global Initiative” and “UFunClub” cross-border, network-marketing schemes?
“Sovereign citizens” may have an irrational belief that laws do not apply to them. It is not unusual for them to be involved in financial fraud, and some “sovereigns” have been linked to MLM HYIP frauds and securities offering frauds.
Individuals who join such schemes may not understand they have signed on to enterprises engaging in international fraud and that a political agenda or even political extremism may be driving events.
In a conference call Tuesday night for SVM, a man who identified himself as “Nelson” calling from “Saskatchewan, Canada” came on the line. He explained that he’d been with SVM “from the very beginning” and was involved in “world-shaking affairs, including the global currency reset.”
Precisely what constituted the purported “reset” wasn’t explained, but the term has been associated with banking conspiracy theorists and “sovereign citizens.” AdSurfDaily Ponzi story figure Kenneth Wayne Leaming, for instance, allegedly claimed “the Rothschilds” were hiding in a “bunker in India” while controlling the central bank of Iraq, according to a 2011 complaint against Leaming that accused him of filing bogus liens against public officials and other crimes.
The complaint was filed by a member of an FBI Terrorism Task Force operating in Washington state. Leaming, who’d been under federal surveillance, later was convicted on charges of filing false liens, harboring two federal fugitives wanted in a separate home-business caper in Arkansas and being a felon in possession of firearms.
Banking conditions in Iraq were causing the Rothschilds to lose money, and the “inner circle” is “jumping ship,” Leaming allegedly told a colleague, “just like body odor’s inner circle in the White House.”
“Body odor” was a veiled reference to President Obama. ASD was a “program” that claimed a daily payout rate of 1 percent. The $119 million scheme spread over the Internet, creating thousands of victims. ASD was broken up by the U.S. Secret Service in 2008.
A Troubling Narrative: Was A Rallying Cry Of ‘Sovereign Citizens’ Part Of It?
On the call hosted by SVM’s Sheila V. Tabarsi, “Nelson” further ventured that he had “many connections in the international banking arena.
“I have many connections in law; I have many connections in military — on and on and on,” he said.
During his fawning over SVM, “Nelson” went on to make a veiled reference to UFunClub, now the subject of a major investigation in Thailand. This leads to questions about whether he is involved in two separate cross-border schemes and whether other SVM members also are pushing multiple schemes.
“Nelson” said this before he got off the line (italics added):
“And God Bless the Republic of the United States of America.”
Here we’ll point you to BehindMLM.com’s April 13 review of SVM. We’ll note that the Tuesday SVM call more or less was an effort to slime the online publication, which reports on emerging MLM schemes.
SVM appears to operate out of Greater New York City, perhaps from the Bronx and Manhattan — with an arm in Costa Rica.
Prior to “Nelson” coming on the line, Tabarsi asserted BehindMLM.com was a “pawn” and a “coward” that works with an unidentified third party to “bring network-marketing companies down.”
“To me, this is real Illuminati kind of stuff,” Tabarsi said. “Granted, the success of Sheila V and Associates and the SVM Global Initiative could do some devastating things to the network-marketing industry.”
Other MLM schemes have trotted out the theme that dark forces — usually cast as competitors unhappy that downlines are leaving one “program” because another has found the Holy Grail — are controlling things behind the scenes or secretly. It is not unusual for political rhetoric, conspiracy theories or antigovernment sentiment to become part of the narrative, and this may be happening with SVM.
Tabarsi, for example, said during Tuesday’s call that the “Bush administration” was involved in an “effort to dismantle this world economy” and that the effort has been “so concentrated” and “so diligent.”
The aim, she contended, was to concentrate 99 percent of the world’s wealth in the hands of 1 percent of the people.
“We are a threat to that,” she said. “The success of Sheila V and Associates and the SVM Global Initiative is a threat to this establishment that is trying so long and so hard to take everybody down.”
Any number of MLM schemes have advanced forms of this narrative. The $1.8 billion TelexFree scheme broken up by the SEC last year was positioned as a “revolution” that would put wealth in the hands of ordinary people. Though much smaller in scale, the Achieve Community scheme broken up by the SEC earlier this year advanced a similar narrative.
TelexFree and Achieve — like the Zeek Rewards scheme in 2012 — were operating combined Ponzi- and pyramid schemes, the SEC has alleged.
SVM, through Tabarsi, has positioned itself a network-marketing enterprise with three arms. Working together, these three arms — Sheila V. and Associates LLC (New York), The Marketplace at SV&A LLC (Costa Rica) and SVM Redesign Your Life America with an organ called “The Freedom Fund” — purportedly will elevate people out of poverty.
On her website, Tabarsi says she is a “4th Generation Native Cherokee/African American Spiritual Life Coach, Universal Life Church Minister, Business and Medical Intuitive with 17 active years of practice performing Clair-empathic healings and various forms of intuitive readings.”
She also notes she is a “corporate administrative manager, former U.S. Air Force Staff Sergeant and Veteran of the ’91 Gulf War” who established “SVM ReDesign Your Life America, a non-profit organization to convert abandoned military bases into places to end poverty and homelessness.”
In a March conference call, she claimed she was under investigation by a U.S. Attorney’s office and the FBI, among others. She denies she has done anything wrong.
“The FBI is involved only because I have international clients, but not that there’s too much they can really act on,” she said during the call last month.
Because SVM says it has a presence in the Bronx and Manhattan, the PP Blog on Wednesday contacted the office of U.S. Attorney Preet Bharara of the Southern District of New York for comment on SVM, UFunClub and “Nelson’s” line about the “Republic of the United States of America” during the Tuesday SVM call.
IntellaShares, a collapsed “program” with a presence on the Ponzi boards and purportedly prepping for “relaunch,” now is under scrutiny by Save the Children.
Jeremy Soulliere, a spokesman for Save the Children USA, confirmed the inquiry to the PP Blog this morning. Save the Children USA is an arm of Save the Children Federation Inc., the internationally prominent charity.
“We are going to look into this matter further,” Soulliere wrote.
The PP Blog reported yesterday that IntellaShares was publishing a graphic of a check on its website that implied a donation of $478 had been made or will be made to “Save The Children Foundation.” The memo line of the check reads, “Charity Spotlight – Feb/2015.”
Text accompanying the check reads, “The Following Amount Will Be Donated For the Period Feb. 17-28/2015. Thank You To All Members For Making This Possible!”
Another page on the IntellaShares website claims that the “program” donates “20% of Total Collected Membership Fees to THE FEATURED CHARITY.”
This potentially means that Save the Children will not be the sole nonprofit whose name gets dangled by IntellaShares. The site suggests that the Global Music Project was the featured charity last month.
Precisely who controls the purported blacklist wasn’t specified by IntellaShares. The language, however, was menacing.
“So be careful what you do now it could result in loss of ability to become a member of any program in short order,” IntellaShares advised members, according to BehindMLM.
A post on the MoneyMakerGroup Ponzi forum today includes content attributed to IntellaShares. It declares “[t]oday is a beautiful day in the internet world” because “INTELLASHARES WILL BE OPEN FOR NEW SIGN UPS AND FUNDING TODAY!”
This hashtag was attributed to IntellaShares: “#TOOBADABOUT30PEOPLEWEREBLACKLISTED.”
At least one Ponzi-board poster was not amused.
“They think that threatening people can suppress peoples opinion, that doesn’t sound like people that are for the people,” the poster ventured. “Sounds like facism to me. What a joke.”
Scams trading on the Ponzi boards and on social-media sites such as Twitter, Facebook and YouTube are infamous for trying to enforce rigid thinking and mute criticism — sometimes by threat. At the same time, it is not unusual for such schemes to use the names of a famous charity or famous for-profit business as part of a bid to create a veneer of legitimacy.
IntellaShares, which plants the seed “program” participants will receive $3.25 for every $2.50 they send in, appears to have collapsed shortly after launch earlier this year.
Thuggery is not unusual in the HYIP sphere of MLM or network marketing.
In early 2014, a “program” known as Banners Brokers threatened to lock the accounts of members “found to be contributing to the negativity on the Internet.” Participants further were threatened with a forfeiture of earnings and encouraged to report doubters to management.
Banners Broker tried to sugarcoat its thuggery by calling it an effort to implement a “Community Watch” program.
By October 2014, documents filed by the the Royal Canadian Mounted Police in July 2014 surfaced. These documents described Banners Broker as a “pyramid scheme that over time evolved into a straight Ponzi scheme in which new victims were recruited to stave off requests for withdrawals and complaints from older ones.”
Investigative documents in Canada describe Banners Broker as a “criminal enterprise.” The U.S. Secret Service used the same phrase when describing the AdSurfDaily Ponzi scheme.
Like Banners Broker and ASD, IntellaShares purports to be an “advertising” program.
IntellaShares may be trying to skirt securities laws by claiming on its website that “REVENUE SHARING IS NOT GUARANTEED.”
ASD, which once purported to have gifted 100,000 “ad packs” to a charitable venture, made a similar claim in 2008 . So did the Zeek Rewards scheme in 2012.
Both ASD and Zeek collapsed after interventions by law enforcement.
The SEC yesterday declined to comment on IntellaShares.
UPDATED 8:33 P.M. EDT U.S.A. There must be some long faces at the U.S. Drug Enforcement Administration and the U.S. Secret Service today. That’s because two federal agents once assigned to a Task Force investigating the illicit Silk Road marketplace have been charged with federal crimes.
Carl M. Force, 46, of Baltimore, was a DEA special agent who earned a salary of about $150,000 a year, according to a criminal complaint. He was charged with wire fraud, theft of government property, money laundering and conflict of interest.
Shaun W. Bridges, 32, of Laurel, Md., was a special agent for the Secret Service. He was charged with wire fraud and money laundering. His salary was not revealed. He was a member of the Secret Service’s Electronic Crimes Task Force.
The law-enforcement community recoils at this type of thing, because it engenders mistrust and erodes public confidence in the police. Agents who read the narrative in the criminal complaint filed by a special agent for the IRS Criminal Investigations unit are simply going to wince.
One specific allegation against Force is that he sought to extort $250,000 from a subject under investigation by posing as a different person known as “Death From Above.”
Silk Road was the criminal marketplace allegedly operated by Ross Ulbricht, also known as “Dread Pirate Roberts.” Ulbricht was the target of Force’s extortion plot, according to the complaint.
The alleged extortionate scam? Posing as a killer and telling Ulbricht — already under investigation by Force in his official capacity — that he’d be permitted to live and would not be ratted out if he agreed to turn over a quarter of a million dollars.
Force also posed as “French Maid,” allegedly mining cash from Ulbricht by telling him he could keep him informed about the government’s Silk Road probe.
While these things were going on, Force allegedly was communicating with Ulbricht as “bop,” his official undercover name.
Force, a 15-year DEA veteran, allegedly infiltrated Silk Road in his official capacity as an undercover agent. Here is part of what the Justice Department said today (italics/carriage returns added):
According to the complaint, Force was a DEA agent assigned to investigate the Silk Road marketplace. During the investigation, Force engaged in certain authorized undercover operations by, among other things, communicating online with “Dread Pirate Roberts” (Ulbricht), the target of his investigation.
The complaint alleges, however, that Force then, without authority, developed additional online personas and engaged in a broad range of illegal activities calculated to bring him personal financial gain. In doing so, the complaint alleges, Force used fake online personas, and engaged in complex Bitcoin transactions to steal from the government and the targets of the investigation. Specifically, Force allegedly solicited and received digital currency as part of the investigation, but failed to report his receipt of the funds, and instead transferred the currency to his personal account.
In one such transaction, Force allegedly sold information about the government’s investigation to the target of the investigation. The complaint also alleges that Force invested in and worked for a digital currency exchange company while still working for the DEA, and that he directed the company to freeze a customer’s account with no legal basis to do so, then transferred the customer’s funds to his personal account. Further, Force allegedly sent an unauthorized Justice Department subpoena to an online payment service directing that it unfreeze his personal account.
The “digital currency exchange company” at which Force was moonlighting as a “de facto compliance officer” while on the DEA payroll was CoinMKT. He also was a CoinMKT investor — apparently with funds he’d stolen — and even permitted his name and likeness to be used in CoinMKT materials.
Rancid criminality also was alleged against Bridges, a six-year Secret Service veteran. From the Justice Department (italics added):
Bridges allegedly diverted to his personal account over $800,000 in digital currency that he gained control of during the Silk Road investigation. The complaint alleges that Bridges placed the assets into an account at Mt. Gox, the now-defunct digital currency exchange in Japan. He then allegedly wired funds into one of his personal investment accounts in the United States mere days before he sought a $2.1 million seizure warrant for Mt. Gox’s accounts.
9th UPDATE 9:01 P.M. EDT U.S.A. Indianapolis-based USHBB Inc. and three of its principals — James A. Moore, Robert Mecham and Oscar H. Brown — have been sued by the court-appointed receiver in the Zeek Rewards Ponzi- and pyramid-scheme case.
Receiver Kenneth D. Bell alleges USHBB, a producer of videos, also did work for the AdSurfDaily Ponzi scheme “and one or more other failed MLM operations.”
Though not referenced specifically in the complaint, one of those operations was “NarcThatCar,” a bizarre pyramid scheme that collapsed in 2010.
Not only did USHBB and its principals mine $676,848 from Zeek for producing videos and marketing materials that duped vast numbers of Zeek participants, Moore, Mecham and Brown piled up hundreds of thousands of dollars in illicit profits as Zeek affiliates, Bell charged.
Brown, better known as O.H. Brown, used “ushbb” as his Zeek affiliate name and amassed $168,642.70, Bell alleged.
Moore scored $109,130.64 under multiple usernames, including “geniweb” and “ttm,” Bell alleged.
Mecham piled up “at least $868,542.17 through his shell companies Five Star Marketing, LLC and The End Media, LLC, under multiple usernames, including ‘napier2’ and ‘theend,’” Bell alleged.
Moore resides in Indianapolis, according to the complaint. Mecham is a resident of Bountiful, Utah, and Brown lives in Mount Pleasant, S.C.
Mecham and Brown received transfers of $25,000 each from a Zeek “insider” in August 2012, the same month Zeek collapsed, according to the complaint.
Brown, according to the complaint, potentially knew that the SEC was looking at Zeek in June 2012 and dashed off a panicked email to Zeek executive Dawn Wright-Olivares.
What appears to have happened, according to the complaint, was that a technology company with which USHBB did business was contacted by the SEC, prompting Brown to tell Olivares:
“Heads up!!!! Our IT partners, RMR development received a telephone call from the SEC today regarding yougetpaidtoadvertise and what organizations were associated. This was a very short call I am told. Not sure what will come of this but this is an alarm at least that the government is looking. We need to get squeaky clean and quick!”
Olivares, charged civilly by the SEC and criminally by federal prosecutors in the Western District of North Carolina in 2013, allegedly shared inside information with USHBB and Brown.
From the receiver’s complaint (italics added):
Further, the Defendants were involved in the Zeek scheme’s operation and the Insiders’ decisionmaking. For example, in August 2011, ZeekRewards adjusted some of the terminology it used publicly in an attempt to disguise the “Compounder” as a legitimate retail profit sharing mechanism. The Compounder’s name was changed to the “Retail Profit Pool,” but the substance of this investment vehicle did not change. USHBB was or should have been fully aware of this deceitfulness in which it participated.
In a June 24, 2011 email, Dawn Wright-Olivares wrote to O.H. Brown regarding a webinar that USHBB had created for Zeek: “I started to do minor edits . . . ([Y]ou’ll see them where I started to say Retail Profit Pool) lol instead of Compounder . . . . ” She further wrote to Brown: “the silent cap [for bid expiration] reality will be 125% but we can’t SAY it as you know.”
Wright-Olivares pleaded guilty to investment-fraud conspiracy and tax-fraud conspiracy in February 2014.
Consistent with USHBB’s “dubious track record” in ASD and other schemes, the company and its principals “assisted the ZeekRewards scheme by creating multiple videos that served as promotional tools for ZeekRewards,” Bell alleged.
Titles included:
“One Penny Billionaire.”
“You Get Paid to Advertise.”
“Got 20 Seconds.”
“The Dog Gone Truth.”
“Spin the Wheel.”
“The videos were carefully produced to mislead and deceive victims into participating in the scheme, convincing victims that with minimal effort they could earn significant financial returns from the Zeek scheme,” Bell alleged.
And, he alleged, “These videos assisted the Insiders in promoting the alleged ease with which affiliates could earn passive profits by investing in the scheme and selling membership in the scheme to others. Affiliates were told to mention the ZeekRewards program to a prospective affiliate or advertise it on a web page, and then email or otherwise provide them a link to the USHBB videos, which upon information and belief convinced other unwary victims to sign on . . .
“The videos were a key component in proliferating the RVG Ponzi scheme, causing significantly more victims and financial loss than otherwise would have occurred absent Defendants’ actions.”
RVG stands for Rex Venture Group, the alleged operator of Zeek. It was controlled by Paul R. Burks of Lexington, N.C. Burks also has been charged criminally.
ASD was a $119 million Ponzi scheme broken up by the U.S. Secret Service in 2008. NarcThatCar was a “program” that purported to pay MLM “program” members to recruit other members and to record the license-plate numbers of vehicles parked at restaurant chains, big-box retailers, universities, doctors’ offices and throughout neighborhoods from coast to coast.
The information purportedly would be entered into a database that could assist the U.S. Department of Homeland Security locate terrorists and lenders repossess automobiles. The bizarre scheme disappeared after it caught the attention of the Better Business Bureau and investigative journalists.
Bell is seeking treble damages and the return of ill-gotten gains from the USHBB defendants.
“The staff also has recently seen what appears to be an increase in pyramid schemes . . . under the guise of ‘multi-level marketing’ and ‘network marketing’ opportunities . . . These schemes often target the most vulnerable investors, and social media has expanded their reach. The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education. We are also using new analytic techniques to identify patterns and common threads, thereby permitting earlier detection of potential fraudulent schemes.” — Andrew Ceresney, SEC Enforcement Division director, March 19, 2015
3RD UPDATE 6:09 P.M. EDT U.S.A. Bad news for “program” scammers and their willfully blind enablers: Andrew Ceresney, the director of the SEC’s Divison of Enforcement, told lawmakers on Capitol Hill today that scams using an MLM or network-marketing business model are on the radar.
In fact, according to written testimony Ceresney delivered to the House Capital Markets and Government Sponsored Enterprises subcommittee, they are enforcement “priorities” — right up there with insider trading, microcap fraud and other forms of securities fraud.
“The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education,” Ceresney told the panel.
New Jersey Republican Rep. Scott Garrett chairs the panel. Rep. Carolyn B. Maloney, a New York Democrat, is ranking member.
Ceresney didn’t reference the task force in his prepared remarks today. However, the agency already has filed two actions against MLM or network-marketing schemes this year. In February, the agency sued the “Achieve Community,” alleging it was a Ponzi- and pyramid scheme that had gathered about $3.8 million and had spread on social media. One or more criminal probes related to the SEC’s Achieve investigation are believed to be under way, amid concerns Achieve was funneling scam proceeds offshore.
Also in February, the SEC sued a “program” known as Wings Network, alleging it was targeting Latino communities and that its promoters “used Facebook to publicize ‘business meetings’ that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah.
“The promoters also set up storefronts or ‘training centers’ to lure investors into attending Wings Network presentations,” the agency charged. “For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.”
Wings appears to have gathered at least $23.5 million.
In addition to targeting vulnerable population groups, Wings Network tried to sanitize itself by falsely trading on the name of the Direct Selling Association, the SEC said in court filings. Wings has been tied to two companies that used the name Tropikgadget.
Both ostensibly operated from Portugal through business entities set up in Madeira, a Portuguese island in the North Atlantic, and through Sharjah, a city in the United Arab Emirates, the SEC alleged.
Court records suggest Wings had a strong presence in Marlborough, Mass., the town from which the TelexFree MLM scheme was based. In April 2014, the SEC described TelexFree as a massive Ponzi- and pyramid scheme largely targeting immigrant populations. A court-appointed trustee says TelexFree may have gathered $1.8 billion through its pyramid scheme in about two years.
Participants hailed from dozen of countries. A partial list of U.S. participants shows many names that appear to be Latino. Trustee Stephen B. Darr said in court filings that the full list of worldwide participants “contains 1,894,940” names and spans “35,110 pages.”
A list of alleged “winners” in the 2012 Zeek Rewards scheme broken up the SEC and the U.S. Secret Service also appears to include a disproportionate share of Latino names or names from other vulnerable population groups. Zeek is estimated to have rounded up $897 million in less than two years and to have affected on the order of 800,000 victims.
Zeek’s name (through parent Rex Venture Group LLC) was referenced in a footnote and related link in today’s written testimony by Ceresney.
So was the name of CKB168, a “program” that allegedly targeted members of Asian-American communities in New York and California and was taken down by the SEC in 2013. The alleged haul was pegged at at least $20 million.
The footnote pointed to an SEC investor alert dated Oct. 1, 2013, and titled, “Beware of Pyramid Schemes Posing as Multi-Level Marketing Programs.” The alert, which has been translated into Chinese, Spanish, Portuguese, Vietnamese and Creole, has been updated to include information on “programs” such as TelexFree and Wings Network.
Though not referenced specifically in the October 2013 alert, “programs” such as eAdGear, Zhunrize and WCM777 also have encountered SEC actions. All three appear to have affected Asian population groups. WCM777 also clearly affected Latino groups and has emerged as one of the strangest MLM schemes of all time.
Some WCM777 promoters had claimed that $14,000 sent to the California-based “program” returned $500,000 in 52 weeks. WCM777 appears to have gathered more than $80 million in about a year, with the proceeds from the MLM “program” diverted to purchase golf courses, real estate and more. Tens of millions of dollars appear to have been diverted to Hong Kong.
Today’s Congressional testimony took place against the backdrop of continuing clashes between Herbalife and activist investor Bill Ackman, an Herbalife short-seller who has accused the MLM program of being a pyramid scheme that targets Latinos.
Herbalife, which was not referenced in today’s testimony, denies it is a pyramid scheme and says it is proud of its appeal to Latinos and serves the community honorably. (Ackman also isn’t mentioned in the testimony.)
Responding on web forums such as Seeking Alpha, fans of Herbalife have accused Ackman of pandering to enforcement agencies, members of Congress and Latino groups as part of a scheme to inspire investigations that would line his pockets by driving down Herbalife’s stock price.
In media accounts, Ackman has said he won’t keep personal profits if his Herbalife short pays off. At the same time, he asserts he is pursuing profit for his hedge-fund investors through a strategy that also delivers social justice.
Perhaps the only thing clear right now is that MLM, no stranger to controversy, never before has been under a light this intense.
The Capital Markets and Government Sponsored Enterprises subcommittee is under the House Financial Services Committee. The committee is chaired by Rep. Jeb Hensarling, a Texas Republican. Rep. Maxine Waters, a California Democrat, is ranking member.
BULLETIN: Class-action attorney Robert J. Bonsignore has asked a federal judge for permission to file a third amended consolidated complaint that effectively would sue at least 20,000 “net winners” in the TelexFree scheme shut down by the SEC last year.
