BULLETIN: U.S. Bankruptcy Judge Melvin S. Hoffman has certified a defendant class-action lawsuit brought by TelexFree Trustee Stephen B. Darr against about 15,000 alleged TelexFree “net winners” in the United States.
Hoffman appointed alleged winner Frantz Balan as the putative class representative. The law firm of Milligan Rona Duran & King LLC will be class counsel. Class counsel will be paid with funds from the Trustee estate: up to $225,000 for legal fees and costs, and up to $87,500 for a class expert.
Balaan was a net winner of $516,875.00 and received $315,572.00 in net preference payments from TelexFree, Darr alleged. Balaan disputes those numbers, according to counsel.
Darr also is suing tens of thousands of alleged TelexFree international winners in a proposed class action. The international case hasn’t yet proceeded to the certification phase.
TelexFree created more than $3 billion in illicit transactions and hundreds of thousands of net losers, Darr has contended.
James Merrill, the alleged president of TelexFree, is scheduled to go on trial on 17 criminal counts next month. The trial initially had been set for October.
If you were a claimant in Zeek Rewards — and if you did not submit the required OFAC certification and release — you are at risk of not receiving a payment from the court-appointed receiver.
United States law makes it illegal to transact business with, or send money to, certain persons or entities. We have received more than 170,000 Claims from Claimants in 157 countries. We are requesting this information so we can ensure that distributions made to Claimants are legally permitted to receive distributions under applicable law. The OFAC Certification we are requesting is a form certifying that neither you nor any person or entity for whom you may be acting is a person or entity with whom it is illegal for a United States entity to transact business because (a) of sanctions administered by the Office of Foreign Assets Control, (b) the person or entity is listed on or is included in a category enumerated on the list of Specially Designated Nationals and Blocked Persons, or (c) other applicable regulations prohibit such transactions. Information on the Office of Foreign Asset Control may be found by clicking the following link: http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx. Information on the list of the Specially Designated Nationals and Blocked Persons may be found by clicking the following link: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx.
In an announcement dated Oct. 5, 2016, Bell said more than 41,000 claimants had not filed the required certification and release.
And, he noted, “The ZeekRewards Receivership cannot pay a claimant with a recognized claim unless the claimant submits an OFAC certification and release. Failure to submit an OFAC certification and release may result in these claims being forfeited.
“The Receiver anticipates filing a motion to obtain confirmation from the Court that, subject to certain limited exceptions, any claimant that has not electronically submitted its OFAC certification and release by December 31, 2016 will be deemed to forfeit his/her claim in the ZeekRewards Receivership. Once approved by the Court, the funds held in reserve for the forfeited claims will be released from the reserve for payments to claimants with allowed claims in this case.
“The Receiver has and will continue to contact all claimants that hold one of these more than 41,000 claims regarding the forfeiture of their claim.”
BULLETIN: Dawn Wright-Olivares, the former COO of Zeek Rewards, has been sentenced to seven and one-half years in federal prison. The sentence was imposed by U.S. District Judge Max O. Cogburn Jr. of the Western District of North Carolina. The office of U.S. Attorney Jill Westmoreland Rose prosecuted Wright-Olivares for investment- and tax-fraud conspiracy.
Daniel Olivares, the stepson of Wright-Olivares and Zeek’s key programmer, also was sentenced today. Cogburn imposed a two-year prison term against Olivares, who was charged with investment-fraud conspiracy.
Both defendants had agreements with prosecutors and pleaded guilty in February 2014, more than two years in advance of the trial of Zeek operator Paul Burks. Burks, 69, was convicted by a jury in July 2016 on charges of mail fraud, wire fraud, conspiracy to commit both and tax-fraud conspiracy. No sentence date has been set.
Prosecutors said Zeek was a cross-border fraud that had gathered hundreds of millions of dollars operating over the Internet. Hundreds of thousands of victims were defrauded. Only TelexFree, another cross-border MLM “program,” may be larger when measured by the number of persons fleeced.
In addition to the criminal charges, Wright-Olivares, 48, and Olivares, 34, both of Clarksville, Ark., faced serious civil litigation from the SEC and from the court-appointed receiver in the Zeek case. The SEC accused them of keeping Zeek participants in the dark about a federal investigation and Zeek’s “imminent collapse” while accepting “substantial sums of money from the scheme.”
In the end, Wright-Olivares and Olivares ended up with nothing.
Before its August 2012 collapse in a pile of Ponzi rubble, Zeek tried to dupe people into believing they were not making an investment. Any number of current schemes are doing the same thing.
Among other things, the Zeek case shows that key executives aren’t the only people who risk prosecution for pushing online fraud schemes. In December 2015, the SEC charged alleged Zeek promoter Trudy Gilmond with fraud.
Separately, Kenneth D. Bell, the Zeek receiver, has been pursuing hundreds of millions of dollars in clawback claims against alleged net winners globally. Bell said he’d be in court today to present the sentencing judge letters from Zeek victims.
Screen shot from federal court files. Masking by PP Blog.
On Oct. 14, 2015, the federal court clerk for the Western District of North Carolina signed a judgment of $104,743.55 against Adrian John Hibbert of Sully, United Kingdom. The judgment was in favor of Zeek Rewards’ receiver Kenneth D. Bell, records show.
Bell had sued Hibbert and other U.K. residents in March 2015 for return of their alleged Ponzi scheme winnings, plus interest. The SEC shut down Zeek in August 2012, alleging a massive cross-border fraud that had gathered hundreds of millions of dollars.
Hibbert appears not to have entered a defense to Bell’s claims that he had received more than $82,000 from Zeek and that those winnings constituted Ponzi proceeds that must be returned to victims.
Instead, he pushed other cross-border, online schemes such as Traffic Monsoon, shut down by the SEC in July after allegedly gathering more than $207 million. With Traffic Monsoon facing a Sept. 23 hearing in Utah, Hibbert has turned his attention to Traffic Powerline, according to promos on YouTube.
The development shows that money tainted by fraud may be flowing between and among schemes.
Bell has raised the issue of MLMers moving from one fraud scheme to another.
“The threat did not explain now a negative review on BehindMLM could be any worse than a fawning sales pitch on MoneyMakerGroup. ‘Programs’ that have appeared on that forum have caused billions of dollars in losses globally.” — PP Blog, Sept. 5, 2016
TrafficPowerline, a “program” whose thread-starter at the MoneyMakerGroup Ponzi forum has more than 4,700 posts, reportedly is threatening BehindMLM.com because of a negative review. (More on the bizarre and sinister threat to artificially link BehindMLM to malware and porn below.)
The mere presence of TrafficPowerline on MoneyMakerGroup suggests tainted proceeds from any number of scams could be flowing to the emerging program. “proReflex” is the starter in a thread dated July 23. The post begins with the classic line of “I am not the Admin.”
MoneyMakerGroup is listed in U.S. federal court files as a place from which Ponzi schemes are promoted. Infamous schemes such as Zeek Rewards, AdSurfDaily, TelexFree and many others were listed there, contributing to a condition under which polluted money flows from scheme to scheme to scheme.
Donnelly, according to BehindMLM, demanded the review be taken down within 72 hours or else a “negative SEO” campaign against BehindMLM would begin.
Tools used against the well-known review site would include “SGA, Xrummer, Scrape BoX, SeNuke and other SEO tools at our disposal or from service providers to create thousands of low PR, PBN, PN, Porn, Link Farms and Malware site backlinks to your site along with teen-girl 10% free sex online 9% harmful for your computer 8% do not open this link 8% porn 8% adult content harmful 8% computer virus 8% dangerous 8%.”
The apparent TrafficPowerline aim is to artificially damage BehindMLM’s worth with Google and other search engines through fraudulently placed links.
Despite bizarrely claiming he was “nicely” requesting BehindMLM to kill the review and not issuing a threat. Donnelly reportedly went on to write that “I am fucking serious OZ do not fuck with me take down the fucking pages or I will make it my little project to fuck your site up.”
The threat did not explain now a negative review on BehindMLM could be any worse than a fawning sales pitch on MoneyMakerGroup. “Programs” that have appeared on that forum have caused billions of dollars in losses globally.
Sites sometimes have been known to overplay their hands when trying to bludgeon critics. KlearGear.com allegedly once threatened negative reviewers with a fine of $3,500. The site ended up getting sued by a public advocacy group.
Because the PP Blog today was able to access the TrafficPowerline website, it means the site is accessible in the United States — after the TrafficMonsoon case and the allegations of securities fraud and after California passed a law that backs consumers if companies try to strongarm consumers by limiting speech through nondisparagement clauses.
2ND UPDATE 12:53 P.M. EDT U.S.A. With sentence court set next month for Zeek Rewards’ figures Dawn Wright-Olivares and Daniel Olivares, Zeek receiver Kenneth D. Bell has established an email address for victims who wish to tell their story to the court.
“Victims of these offenses are entitled to be heard at sentencing,” Bell wrote in an Aug. 29 announcement on the receivership website. “If a victim would like to have a letter describing the impact that ZeekRewards had on them submitted to the Court please send an email to HearingLetter@zeekrewardsreceivership.com. I will be attending the hearings on behalf of all ZeekRewards victims and will present your letters to the Court.”
Sentencing is set for 9:30 a.m. on Sept. 13, Bell wrote.
Under the terms of her plea agreement, Wright-Olivares faces a maximum of 10 years for investment-fraud conspiracy and tax-fraud conspiracy. Olivares face a maximum of five years for investment-fraud conspiracy.
Bell wrote that “the Court would like to hear about any of the below circumstances”:
Becoming insolvent;
Filing for bankruptcy under the Bankruptcy Code;
Suffering substantial loss of a retirement, education, or other savings or investment fund;
Making substantial changes to his or her employment, such as postponing his or her retirement plans;
Making substantial changes to his or her living arrangements, such as relocating to a less expensive home; and
Suffering substantial harm to his or her ability to obtain credit.
Burks potentially faces 65 years in federal prison.
Traffic Monsoon pitchman Sunil Patel has promised “security” at a “Revolution Day” rally Saturday in the area of Brighton Beach/Brighton Pier in England to advocate for the alleged Ponzi scheme.
In a video post today on Facebook, Patel claimed the SEC has contacted him about the event.
The SEC this afternoon declined to comment on Patel’s claims and his public efforts to get Traffic Monsoon participants to sign a sworn “affidavit” that declares the agency a “third-party interloper.” The Sussex Police did not immediately respond to a PP Blog inquiry about the event. There may be scores of Traffic Monsoon victims in England, potentially setting the stage for trouble between supporters of the SEC’s action and supporters of the “program.”
Last month the SEC alleged that “more than 99% of Traffic Monsoon’s revenue is derived from new investor funds, making claims that it is a successful advertising business merely an illusion.” A federal judge imposed an asset freeze.
The SEC’s action against Traffic Monsoon and alleged operator Charles Scoville of Utah is the most recent of several major cases the agency has brought against “programs” that operate across borders. Others include TelexFree, Zeek Rewards and WCM777.
Combined, the schemes are alleged to have resulted in billions of dollars of illicit business. Some of the funds were fraudulently moved to the far corners of the world.
On Tuesday from Washington, the Justice Department announced that a money-mover in the Zeek case had been sentenced to 15 months in federal prison for obstruction of justice for fraudulently moving a pile of cash offshore. Jaymes Meyer, the operator of Preferred Merchant Solutions, was convicted on charges of trying to hide millions of Zeek dollars from the SEC, the court-appointed receiver and government investigators.
The SEC charged Zeek in August 2012.
Patel says that Traffic Monsoon participants from all over the world will attend Saturday’s Brighton event. How many of them will consult legal counsel before signing affidavits is unknown.
Many people in the antiscam community applauded Kenneth D. Bell, the receiver for Zeek Rewards, when he sued more than 9,000 individuals more than two years ago for return of their gains from the scheme. Those gains — more than $200 million — came from Ponzi proceeds, Bell alleged.
And he pointed out that the money rightfully should go to the hundreds of thousands of Zeekers globally who were “affiliate victims.” Court filings later would show that Zeek gathered on the order of $940 million in less than two years. Only TelexFree, another MLM HYIP scheme that was disintegrating when Bell announced his lawsuit against the Zeek “winners” in March 2014, may be bigger.
Thanks to the willful blindness and serial disingenuousness brought to you by serial MLM HYIPers such as Todd Disner, T. LeMont Silver and “Ken Russo,” huge class-action cases in which “winning” promoters of MLM securities schemes are named defendants now are a reality.
Bell, unfairly maligned among some MLM HYIPers and even some apparent “sovereign citizens,” deserves a lot of credit for trying to bring a measure of financial justice to the hundreds of thousands of individuals ripped off by Zeek and for establishing a sort of blueprint for how Darr could proceed.
This blueprint also is there in case the Traffic Monsoon receiver needs it. Traffic Monsoon, an alleged $207 million scheme, was broken up by the SEC last month. There already is evidence that Traffic Monsoon had promoters in common with TelexFree.
It is true that the number of potential defendants across the HYIP sphere is staggering. But it is equally true that the number of victims of these cross-border schemes is even more staggering. This number is in the millions. The global losses are in the billions. Absent actions such as those brought by Bell and Darr, however, there would be virtually no financial accountability. Society would be saying that it’s OK to profit through the promotion of online Ponzi schemes.
For years, the PP Blog has raised questions about the national-security implications of cross-border HYIP schemes. The narratives surrounding such schemes typically are bizarre, with anonymous Ponzi-board pitchmen typically beginning with “I am not the admin” of the “program.” It all goes recklessly downhill from there.
To those who feel a chill every time one of these schemes gains a head of steam, it came as no surprise that the alleged Zeek “winners” are arguing they should get to keep their hauls. It is simply the natural progression of the HYIP narrative.
Bell, a former federal prosecutor, is having none of this. Indeed, his is the voice of common sense.
From his argument (italics/bolding added):
Defendants still act as if Zeek was a legitimate business and Defendants were “internet marketing specialists” entitled to be paid as employees rather than investors in the scheme, all of which is of course pure fiction.
Specifically, Defendants ask the Court to absolve the scheme’s net winners from their obligation to repay the victims’ money because of an alleged “limitation” on the timing of future claims included in the scheme’s website’s “Terms of Service” (or “TOS”), which in any event do not limit the Receiver’s claims against Defendants. The Court should resist Defendants’ invitation to create the dangerous loophole of allowing a fraudster to use the terms implementing a Ponzi scheme to limit the right of a subsequently appointed Receiver to recover funds paid to the winners of the fraudulent scheme. While such a rule would be a great recruiting tool for future Ponzi scheme operators, it is surely an unacceptable legal rule and public policy.
Also, Defendants urge the Court to rule that by purchasing bids, posting online advertisements (which Zeek boasted would take only three to five minutes a day), and recruiting thousands of victims to the scheme, they provided “reasonably equivalent value” to ZeekRewards such that they get to keep the victims’ money that they won in the scheme. In other words, Defendants claim that those Defendants who spent the most time successfully promoting the scheme and multiplying the number of its victims should be given the most credit against the Receiver’s claims to recover their fraudulently transferred winnings. In fact, in arguing that they were supposedly rightly paid for their “services,” Defendants stretch to compare themselves to the utility company, which among many other differences does not invest money in their customers’ businesses hoping to share in compounding profits of 125% every ninety days.
UPDATED 1:15 P.M. EDT U.S.A. It has happened in previous cases involving alleged violations of federal securities laws, and now it’s happening with Traffic Monsoon.
“The Peiffer Rosca Wolf law firm is investigating Traffic Monsoon, LLC and Charles Scoville’s alleged Ponzi scheme on behalf of investors – whom Traffic Monsoon called ‘members,'” the firm said in a PR release today.
How the firm would proceed is unclear. The announcement, however, potentially means Traffic Monsoon and Scoville will be facing litigation on a front separate from the Ponzi case filed by the SEC on July 26.
Class-action attorneys also filed complaints in the TelexFree and Zeek Ponzi- and pyramid cases. Certain TelexFree-related actions alleged racketeering and referenced a “program” similar to Traffic Monsoon: My AdvertisingPays. There also were counts of fraud against TelexFree principals and some individual promoters.
Even if they don’t result in a recovery, the actions filed by private individuals — as opposed to government plaintiffs — force defendants to confront litigation on multiple fronts. Defense costs may soar.
“The Peiffer Rosca Wolf lawyers are preparing to take action and seek compensation on behalf of those who invested in the alleged Ponzi scheme orchestrated by Traffic Monsoon and Scoville,” the firm said.
Traffic Monsoon gathered at least $207 million, according to the SEC.
UPDATED 11:51 A.M. EDT U.S.A. Zeek Rewards’ receiver Kenneth D. Bell had no comment this morning on reports that some Zeek clawback defendants also were participants in Traffic Monsoon, alleged last week by the SEC to have been a Ponzi scheme that had gathered at least $207 million.
The reports appeared on RealScam.com.
In March 2015, Bell sued Adrian Hibbert of the United Kingdom, alleging he had received more than $82,000 in Ponzi proceeds from Zeek. Zeek was charged with fraud by the SEC in August 2012.
“Winnings” from MLM or direct-sales fraud schemes may be subject to return through clawback litigation.
Both Zeek and Traffic Monsoon were purported “revenue sharing” programs. Paul Burks, the operator of Zeek Rewards, potentially faces a long prison term after his conviction earlier this month on multiple fraud counts.
On July 26, the SEC civilly charged alleged Traffic Monsoon operator Charles Scoville of Utah with fraud. He has not been charged criminally and is believed to be residing overseas.
Peggy Hunt of the Salt Lake City office of the Dorsey & Whitney law firm has been appointed receiver over Traffic Monsoon. Neither she nor the firm responded immediately this morning to a request for comment on the issue of common promoters between Traffic Monsoon and Zeek.
The law firm confirmed to the PP Blog last week that there would be a receivership website for Traffic Monsoon, but the site was not yet live. The URL has not been released.
Some Zeek clawback defendants also were participants in the AdSurfDaily Ponzi scheme. ASD was a “program” similar to Traffic Monsoon broken up by the U.S. Secret Service in 2008 in a highly publicized action.
In U.S. domestic clawback litigation and in cases filed against non-U.S. residents, Bell has sued thousands of alleged Zeek winners for return of their gains and interest.
TelexFree and Zeek may be the two largest combined Ponzi- and pyramid schemes in history, generating on the order of $4 billion in illicit, cross-border business and affecting hundreds and hundreds of thousands of people.
The MAPS’ page attributed to Hibbert claims that MAPs operator Mike Deese “has been in the trenches with Zeek, ASD, Banners Broker, Ad Hit Profits, and many other advertising revenue sharing companies some of which continue to thrive and some that are not.”
AdHitProfits also was a Scoville scheme. BannersBroker was a cross-border fraud that led to arrests in Canada.
Separately, the Zeek page attributed to Hibbert claims, “If you want to make money and get paid everyday, you have to look at Zeek Rewards and understand how it works.”
The SEC and federal prosecutors in the Western District of North Carolina said Zeek worked as a Ponzi scheme.
News came early this morning that the SEC had moved against Traffic Monsoon, calling it a Ponzi scheme. Both the “program” and alleged operator Charles Scoville were charged civilly yesterday in Utah federal court with securities fraud and selling unregistered securities to unaccredited investors.
Scoville also was the braintrust behind AdHitProfits, a Ponzi-board “program” in part targeted at people who also were targeted in the egregious 2013 Profitable Sunrise cross-border scam in which millions of dollars appear to have vanished overseas.
As the PP Blog reported on June 2, 2013 (italics added):
A spammer hit a Profitable Sunrise Facebook site yesterday with five drive-by offers for “AdHitProfits.” All five of the machine-gunned theft bids claimed the same thing: “make money every half an hour…100% commission let your money grow for you at high speed.”
The AHP “program” also is being pitched on the Ponzi boards, with the thread-starter at MoneyMakerGroup bragging that “Payza, []STP & Liberty Reserve Accepted !!”
LibertyReserve was described last week by federal prosecutors in New York as a criminal enterprise that had laundered more than $6 billion for Ponzi schemers, credit-card fraudsters, identity thieves, investment fraudsters, computer hackers, child pornographers and narcotics traffickers.
In its complaint against Traffic Monsoon and Scoville, the SEC says PayPal restricted Traffic Monsoon during the winter, in January 2016.
Our research shows that Scoville then turned to Payza for the heavy lifting and that Payza attended a Traffic Monsoon event in May 2016, during the spring and while funds in PayPal had been frozen by PayPal.
From the SEC complaint (italics added):
After the PayPal freeze, Scoville began using other payment processors more extensively: Solid Trust Pay, headquartered in Ontario, and Payza, headquartered in London with offices in New York. He has also used an account at JPMorgan Chase to receive investor funds.
Zeek used both SolidTrustPay and Payza, as did the AdSurfDaily Ponzi scheme before it.
Traffic Monsoon’s haul appears to have exceeded $200 million, potentially making it one of the largest advertising “revshare” schemes of all time. As things stand, it is larger than other well-known revshare frauds such as AdSurfDaily ($119 million) and Banners Broker ($156 million). Some of the Banners Broker cash reportedly ended up in KulClub, yet another Ponzi-board MLM scheme.
Ponzi-board schemes are eviscerating wealth globally. It is not unusual for such schemes to use multiple payment processors and to target vulnerable population groups. Agencies from the U.S. Department of Homeland Security have been involved in a number of major investigations of Ponzi-board “programs.”
It is unclear if DHS or other U.S. agencies with the power of arrest are involved in a Traffic Monsoon probe. History has shown, however, that when the SEC brings a civil case, other agencies sometimes carry out criminal investigations on a parallel track.
BULLETIN: U.S. Bankruptcy Judge Melvin S. Hoffman has certified a defendant class-action lawsuit brought by TelexFree Trustee Stephen B. Darr against about 15,000 alleged TelexFree “net winners” in the United States.
TrafficPowerline, a “program” whose thread-starter at the MoneyMakerGroup Ponzi forum has more than 4,700 posts, reportedly is threatening BehindMLM.com because of a negative review. (More on the bizarre and sinister threat to artificially link BehindMLM to malware and porn below.)
UPDATED 11:51 A.M. EDT U.S.A. Zeek Rewards’ receiver Kenneth D. Bell had no comment this morning on reports that some Zeek clawback defendants also were participants in Traffic Monsoon, 
News came