Author Archives: ASDUpdates

DOJ Compensates Madoff Victims

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Thursday, November 9, 2017

Department of Justice Compensates Victims of Bernard Madoff Fraud Scheme With Funds Recovered Through Asset Forfeiture

The Department of Justice today announced that on Nov. 9, the Madoff Victim Fund (MVF) began its initial distribution of $772.5 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme.  These funds will be sent to 24,631 victims across the globe. This distribution represents the first in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries. 

These payments mark the single largest distribution of forfeited funds in the history of the Department’s victim compensation program.

Deputy Attorney General Rod J. Rosenstein, Acting U.S. Attorney Joon H. Kim for the Southern District of New York and Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Division made the announcement.

“Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme,” said Deputy Attorney General Rosenstein.  “We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims. This is the largest restoration of forfeited property in history.”

“Bernie Madoff committed one of history’s largest and most devastating frauds,” said Acting U.S. Attorney Kim.  “This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims.  To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.”

“No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike,” Assistant Director in Charge Sweeney.   “But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.

Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or info@madoffvictimfund.com(link sends e-mail).

Component(s): 

Press Release Number:
17-1265

Beware “Paid-to-Click” Scams

If only they told us before ASD, and other similar scams, came along.

11/07/2017 11:25 AM EST

The Securities and Exchange Commission is warning investors to beware online “paid-to-click” scams that promise an easy payday by merely purchasing a membership or an advertising product up front and then clicking on a certain number of online ads each day.

The SEC’s investor alert explains that these online advertising programs may have little to no revenues besides membership fees or sales of “ad packs” and may be nothing more than a Ponzi scheme.  The SEC filed an enforcement case that was unsealed last week in federal court in Florida, alleging that roughly 99 percent of the purported “profits” paid to earlier investors came directly from the buy-in fees collected from newer investors.  Meanwhile, according to the SEC’s complaint, the alleged perpetrator siphoned several million dollars out of investor funds to purchase a luxury home, automobiles, and private plane charters while also using the money to fund his other businesses.

According to the SEC’s investor alert, online advertising programs also can target those with something to advertise, promising to display a company’s ads on their network or guaranteeing traffic to a website by simply paying a membership fee or buying ad packs.

“Be skeptical if you are offered high returns for buying advertising products or clicking on online ads,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Some paid-to-click programs are actually Ponzi schemes.”

According to the SEC’s complaint filed against Miami-based Pedro Fort Berbel and his company Fort Marketing Group, they operated fraudulent internet advertising businesses under such names as Fort Ad Pays, The Business Shop, and MLM Shop.  They allegedly solicited investors through online posts and videos claiming they could share in the companies’ profits and earn investment returns as high as 120 percent by purchasing an ad pack for as little as a dollar and clicking on four banner ads per day.  The SEC alleges that Berbel and Fort Marketing Group raised more than $38 million from at least 150,000 investors.

“As alleged in our complaint, these companies had no viable source of revenue besides income from investor membership fees and the sale of ad packs, so this boiled down to an ad packs Ponzi scheme in which the promised investment returns to earlier investors were not possible without using funds from new investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.

The SEC’s complaint charges Berbel and Fort Marketing Group with violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Securities Exchange Act.  They’re also charged with selling investments that are not registered with the SEC as required under the federal securities laws.  The SEC encourages investors to check the backgrounds of people selling them investments.  A quick search on the SEC’s investor.gov website shows that Berbel and Fort Marketing Group are not registered to sell investments.

The SEC obtained a court-ordered asset freeze against Berbel and his companies.

The SEC’s investigation was conducted by Sajjad Matin, Cecilia Danger, and Margaret Vizzi of the Miami Regional Office and supervised by Jessica Weissman.  The SEC’s litigation will be led by Wilfredo Fernandez and Andrew Schiff.  The SEC appreciates the assistance of the Florida Office of Financial Regulation, Bureau of Financial Investigations.  The investor alert was prepared by M. Owen Donley III and Holly Pal in the SEC’s Office of Investor Education and Advocacy.

TelexFree: SEC Final Judgments Against Merrill and Craft

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23933 / September 12, 2017

Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)

SEC Obtains Final Judgments Against Officers of Pyramid Scheme Targeting Latino Community

The Securities and Exchange Commission announced that it has obtained final judgments in a fraud case against the co-owner and president and the CFO of a pyramid scheme targeting Latino communities.

The final judgments, entered on September 12, 2017 by consent by a federal district court in Boston, Massachusetts, permanently enjoin both James M. Merrill, of Ashland, Massachusetts, and Joseph H. Craft, of Kevil, Kentucky, from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, impose conduct-based injunctions on both men, a permanent officer-and-director bar on Merrill, and a five-year officer-and-director bar on Craft. Merrill’s final judgment deems his liability of approximately $3.6 million in disgorgement and prejudgment interest satisfied by the order of restitution in the related criminal case. Craft’s final judgment to pay $298,708 in disgorgement and prejudgment interest and a $50,000 penalty is deemed satisfied by the order requiring Craft to transfer certain assets to settle an adversary action against Craft and his business filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc. in the bankruptcy case.

In settling the SEC’s charges, Craft admitted to preparing financial statements provided to telecommunications regulators, as well as a financial regulator, materially overstating the pyramid scheme’s income.

Merrill and Carlos N. Wanzeler, the other co-owner and treasurer of TelexFree – were previously charged criminally. Merrill pled guilty to the criminal charges and was sentenced to six years’ imprisonment. Wanzeler is a fugitive from justice. The SEC has previously obtained final judgments by consent against the international sales director and a promoter of TelexFree, who also was ordered to jail for civil contempt arising from his repeated violations of court orders.

The SEC’s litigation continues against TelexFree, Wanzeler, and the remaining promoters of the alleged TelexFree pyramid scheme.

 

https://www.sec.gov/litigation/litreleases/2017/lr23933.htm

Avoid Disaster Frauds

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Wednesday, August 30, 2017

Tips on Avoiding Fraudulent Charitable Contribution Schemes

The National Center for Disaster Fraud reminds the public to be aware of and report any instances of alleged fraudulent activity related to relief operations and funding for victims. Unfortunately, criminals can exploit disasters, such as Hurricane Harvey, for their own gain by sending fraudulent communications through email or social media and by creating phony websites designed to solicit contributions.

Tips should be reported to the National Center for Disaster Fraud at (866) 720-5721. The line is staffed 24 hours a day, seven days a week. Additionally, e-mails can be sent to disaster@leo.gov(link sends e-mail), and information can be faxed to (225) 334-4707.

The U.S. Department of Justice established the National Center for Disaster Fraud to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region. Its mission has expanded to include suspected fraud from any natural or manmade disaster. More than 30 federal, state, and local agencies participate in the National Center for Disaster Fraud, which allows the center to act as a centralized clearinghouse of information related to disaster relief fraud.

The public should remember to perform due diligence before giving contributions to anyone soliciting donations or individuals offering to provide assistance to those affected by the hurricane and tornadoes. Solicitations can originate from social media, e-mails, websites, door-to-door collections, flyers, mailings, telephone calls, and other similar methods.

Before making a donation of any kind, consumers should adhere to certain guidelines, including:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages, because they may contain computer viruses.
  • Be skeptical of individuals representing themselves as members of charitable organizations or officials asking for donations via e-mail or social networking sites.
  • Beware of organizations with copy-cat names similar to but not exactly the same as those of reputable charities.
  • Rather than follow a purported link to a website, verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • To ensure contributions are received and used for intended purposes, make contributions directly to known organizations rather than relying on others to make the donation on your behalf.
  • Do not be pressured into making contributions; reputable charities do not use such tactics.
  • Be aware of whom you are dealing with when providing your personal and financial information. Providing such information may compromise your identity and make you vulnerable to identity theft.
  • Avoid cash donations if possible. Pay by credit card or write a check directly to the charity. Do not make checks payable to individuals.
  • Legitimate charities do not normally solicit donations via money transfer services. Most legitimate charities’ websites end in .org rather than .com.
Component(s):
Press Release Number:
17-953

TelexFree: Final Judgment Against Steven Labriola

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23880 / July 14, 2017

Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)

SEC Obtains Final Judgment Against Officer of Pyramid Scheme Targeting Latino Community

The Securities and Exchange Commission announced today that it has obtained a final judgment in a fraud case against the international sales director of a pyramid scheme targeting Latino communities.

The final judgment, entered on consent by a federal district court in Boston, Massachusetts, permanently enjoins Steven Labriola from violating Section 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, imposes a conduct-based injunction, and orders Labriola to pay approximately $25,000 in disgorgement and prejudgment interest. As part of the settlement, Labriola admitted that he was responsible for TelexFree’s relationships with its promoters, ran numerous training conferences, and that he was one of the main public faces of TelexFree, providing periodic “corporate updates” and appearing in other promotional videos that were posted on YouTube.

The SEC has previously obtained a final judgment by consent against a promoter of TelexFree, who also was ordered to jail for civil contemptarising from his repeated violations of court orders. Two other defendants in the SEC’s action – James M. Merrill, the co-owner and president of TelexFree, and Carlos N. Wanzeler, the co-owner and treasurer of TelexFree – were charged criminally. Merrill pled guilty to the criminal charges and was sentenced to six years’ imprisonment. Wanzeler is a fugitive from justice.

The SEC’s litigation continues against TelexFree, Merrill, Wanzeler, Joseph H. Craft, Telexfree’s CFO, and the remaining promoters of the alleged TelexFree pyramid scheme.

 

https://www.sec.gov/litigation/litreleases/2017/lr23880.htm

TelexFree: SEC Gets Final Judgment Against Sanderley Rodrigues

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23846 / May 25, 2017

Securities and Exchange Commission v. TelexFree, Inc. et al., Civil Action No. 1:14-cv-11858-NMG (United States District Court for the District of Massachusetts)

SEC Obtains Final Judgment Ordering Promoter of Pyramid Scheme to Pay Over $1.8 Million

The Securities and Exchange Commission announced today that on May 25, 2017, the federal court in Boston, Massachusetts entered a final judgment by consent against defendant Sanderley Rodrigues de Vasconcelos (“Rodrigues”) of Davenport, Florida, a defendant in SEC v. TelexFree, Inc., et al. Among other things, the Court’s order holds Rodrigues liable for over $1.83 million, including approximately $1.7 million in disgorgement and prejudgment interest and a $150,000 civil penalty. In April 2014, the Commission charged Massachusetts-based TelexFree, Inc. and TelexFree, LLC (collectively, “TelexFree”), plus four company officers and four promoters of TelexFree, including Rodrigues, with perpetrating an international pyramid scheme targeting Latino communities in the U.S.

In settling the SEC’s charges, Rodrigues admitted that he was a promoter of TelexFree, appearing at TelexFree-sponsored public events and other gatherings at hotels and resorts. He further admitted that he appeared in promotional videos that were posted on YouTube and posted at least one video himself.

Rodrigues consented to the entry of the judgment which permanently restrains and enjoins him from violating the securities offering provisions of Section 5 of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The judgment also permanently restrains and enjoins him from offering, operating, or participating in any marketing or sales program in which a participant is compensated or promised compensation solely or primarily (1) for inducing another person to become a participant in the program, or (2) if such induced person induces another to become a participant in the program.

To satisfy his financial obligation, the judgment orders Rodrigues to transfer certain assets to settle an adversary action against Rodrigues (among others) filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc., entitled Darr v. Carlos Wanzeler et al., Adv. Proc. 16-04032, presently pending in the United States Bankruptcy Court for the District of Massachusetts as part of In re TelexFree, Inc., Case 14-40987 (Bankr. D.Mass.).

The Commission’s litigation in this matter continues against the TelexFree companies, their officers, and the remaining promoters of the alleged TelexFree pyramid scheme.

For further information, see Litigation Release Nos. 22974 (April 17, 2014)(SEC Halts Pyramid Scheme Targeting Dominican and Brazilian Immigrants); 22992 (May 13, 2014) (Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree); 23450 (Jan. 20, 2016) (Florida Resident Ordered to Jail Based On Violating Court Orders Obtained by the SEC); 23678 (Oct. 25, 2016) (TelexFree President Pleads Guilty to Operating Pyramid Scheme in Related Criminal Action); 23788 (March 24, 2017) (Massachusetts-Based TelexFree President Sentenced to 6 Years Imprisonment for Operating Pyramid Scheme).

 

https://www.sec.gov/litigation/litreleases/2017/lr23846.htm


Modified: 05/26/2017

Zeek Rewards: Paul Burks Listed as Federal Inmate

In a February article, the Winston-Salem Journal reported the sentencing for Paul Burks, mastermind behind the $939 million dollar Ponzi scam known as Zeek Rewards. Burks is 70 years old and his sentence would amount to life in prison.

A federal judge Monday handed Paul Burks, founder of ZeekRewards.com, three concurrent prison sentences of 14 years and eight months for his lead role in the Lexington Ponzi scheme.

 

PAUL BURKS
Register Number: 29723-058
Age: 70
Race: White
Sex: Male
Located at: Lexington FMC
Release Date: 02/08/2030

Zeek Rewards: Paul Burks Will Spend His Sentence in Lexington

This comes from the Winston-Salem Journal, an article stating Paul Burks will be housed in Lexington to serve his prison term.

Paul Burks, the founder of ZeekRewards.com, will serve his federal prison term in Lexington, Ky., beginning no later than May 1.

Burks, 70, was sentenced March 8 to three concurrent prison sentences of 14 years and eight months for his lead role in the Lexington, N.C., Ponzi scheme.There is no parole in the federal system for defendants sentenced in the past few decades. Burks could have been sentenced to up to 59 years.

Here is a link to the full article.

 

 

Zeek Rewards: Keith Laggos Sued by SEC

Ah, finally. It looks like they are starting to go after the paid people who pontificate and speciously sanitize these online schemes; couldn’t happen to a more deserving ass-hat. He is described as a “consultant” in the press release; I would have chosen a different descriptor.


U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23787 / March 23, 2017

Securities and Exchange Commission v. Dr. Keith Laggos, No. 3:17-cv-00150 (W.D.N.C. filed Mar. 22, 2017)

SEC Charges former ZeekRewards Promoter and Consultant for Unlawfully Promoting the Scheme

On March 22, 2017, the Securities and Exchange Commission charged Keith Laggos, formerly the publisher of the Network Business Marketing Journal (NMBJ), for his involvement in and unlawful promotion of the ZeekRewards fraudulent scheme.

The SEC alleges that, from at least June 2011 through July 2012, Laggos, through NMBJ and while acting a paid consultant for ZeekRewards, was paid at least $64,000 for publishing several editorials providing crucial publicity to the ZeekRewards scheme. These publications promoted ZeekRewards as the “company of the month” and touted, among other things, the scheme’s supposed record earnings and opportunity to generate income for participants. Laggos failed to disclose the fact that he was paid for the favorable editorial coverage, the amount that he was paid, and that he was a paid consultant for ZeekRewards.

The SEC further alleges that Laggos’s favorable editorials of the scheme contained material misstatements and omissions. Laggos published theses misstatements despite being made aware of their inaccuracy and otherwise being in a position-as a paid consultant for ZeekRewards-to know of their falsity.

The Commission’s complaint, filed on March 22, 2017 in the U.S. District Court for the Western District of North Carolina, charges Laggos with violating Sections 17(a) and 17(b) of the Securities Act of 1933 (“Securities Act”). To settle the matter, Laggos, who previously consented to a permanent injunction against violating Securities Act Section 17(b) in a 2005 case, consented to the entry of a court order ordering: (i) Laggos to pay disgorgement, prejudgment interest, and a civil penalty totaling $79,190.68; and (ii) permanently enjoining Laggos from future violations of Sections 17(a) and 17(b) of the Securities Act, from participating in future securities offerings, and from providing paid publicity to securities.

The SEC’s investigation was conducted by Brian M. Privor, Alfred C. Tierney, John J. Bowers, and Joshua Braunstein. The case was supervised J. Lee Buck, II.

 

https://www.sec.gov/litigation/litreleases/2017/lr23787.htm

1 2 3 124