Day After SEC Announces Judgments Totaling $4.2 Million Against Serial HYIP Pitchman, Another Serial Pitchman — ‘Ken Russo’ — Makes ‘I Got Paid’ Post On TalkGold For JSS Tripler/JustBeenPaid; Separately, McAfee’s ‘Site Advisor’ Declares JBP Pages ‘Dangerous’
In a 29-page court order announced yesterday by the SEC, U.S. District Judge George Caram Steeh of the Eastern District of Michigan laid out the case of willful blindness against serial HYIP pitchman Matthew John Gagnon.
That case now has resulted in court-ordered judgments of more than $4.2 million against Gagnon, who also was named in a criminal complaint by the U.S. Secret Service in November 2011.
But in the HYIP sphere, which FINRA described in 2010 as a “bizarre substratum of the Internet,” not even the huge judgment against Gagnon announced yesterday appeared to unnerve the serial scammers on the TalkGold and MoneyMakerGroup Ponzi forums.
Posting as “DRdave” on TalkGold, huckster “Ken Russo” announced he’d received a new payment of $482.08 from JSS Tripler/JustBeenPaid, a “program” whose purported daily payout rate of 2 percent dwarfs the purported payout rate of Legisi, one of the “programs” that led to Gagnon’s demise.
In a March 15 conference call, Frederick Mann, the purported operator of JSS/JBP, told members that the company was making the payouts from money sent in by “new members.” Paying “old” members with money from “new” members is the central element of a Ponzi scheme.
Even as “Ken Russo” was making the announcement, the online security company McAfee was publishing a “Warning: Dangerous Site” message about the JustBeenPaid website.
“We tested this site and found it’s risky to visit,” McAfee’s Site Advisor reported.
In 2010, the SEC declared Gagnon a “danger to the investing public” for his serial promotion of scams. (See paragraph 11 of May 2010 SEC complaint.)
Assessing Gagnon more than $4.2 million in disgorgement, prejudgment interest and penalties, Steeh found that:
- Gagnon promoted the Legisi HYIP online, through emails and through a forum.
- Even though Gagnon promoted the program, he was not associated with a registered broker-dealer and had never been registered with the SEC in any capacity.
- Gagnon understood HYIP frauds and Ponzi schemes, and yet gleaned about $3.6 million from Legisi operator Gregory McKnight and did not disclose details of his agreement with McKnight to solicit investors for Legisi.
- Gagnon helped orchestrate the “massive” Legisi Ponzi scheme and initially had come into contact with McKnight after Gagnon had recruited McKnight into an MLM business that sold dietary supplements.
- Legisi was selling unregistered securities.
- Gagnon was selling unregistered securities.
- Gagnon did not qualify investors in any way. (In essence, the only necessary qualification was to have money to send to Legisi.)
- Gagnon performed no “due diligence” on the profitability of the Legisi program. He did not retain or review trading records, bank or brokerage accounts statements or e-currency account records.
- Gagnon knew or “recklessly disregarded” warnings that Legisi was a scam, did not know where McKnight was keeping the money or how McKnight was calculating profits and losses.
- Eventually Gagnon distanced himself from McKnight (after learning about an SEC probe, according to the agency), but proceeded to pitch other scams touting the illegal sale of securities. A twice-convicted felon was Gagnon’s alleged partner in one of the scams, but Gagnon performed no legwork up front.
- Gagnon eventually learned that a man with the same name as his partner had been convicted of fraud, but “accepted” his partner’s “representation that it was not him.” Gagnon did not investigate his partner’s denials, which were false.
- Gagnon then proceeded to another opportunity touting unregistered securities, effectively using the same blueprint he’d used when touting Legisi and the other scam in which his partner was a convicted felon. As in the other scams, Gagnon did no legwork and “recklessly ignored several warning signs.”
- Even as he touted the third program, Gagnon had received “several” bad checks from the purported “successful” trader. Gagnon continued to tout the program.
- Gagnon then touted a fourth program, apparently one operated by a Ugandan national Gagnon had met on the Internet. (Gagnon stopped promoting this program, according to the SEC, only after the agency subpoenaed his bank records.)
- Gagnon has shown “no remorse” for his conduct “and has tried to downplay his culpability.”
Whether “Ken Russo” has conducted any “due diligence” on JSS/JBP is unknown. Whether “Ken Russo” has any qualifications to sell securities is unknown. Whether “Ken Russo” qualified investors in any way is unknown. Whether “Ken Russo” retained or reviewed JSS/JBP records, bank or brokerage accounts statements or e-currency account records is unknown.
What is known is that “Ken Russo” proceeds from scheme to scheme to scheme.
“I would caution everyone not to listen to anyone who is posting negative comments about this program,” “Ken Russo,” posting as “DRdave” on TalkGold, urged today. “JBP/JSSTripler has changed many lives during the past 13 months and it is one of the best programs I have seen since I first entered the industry back in 1996!”
Here, according to the SEC, is how Gagnon, who’d been pitching programs online “since at least 1997,” described Legisi:
“IN ALL OUR EXPERIENCE IF (sic) HIGH YIELD PROGRAMS THIS IS THE ONLY GENUINE PROGRAM THAT WE HAVE EVER FOUND!”
McKnight, like Gagnon, is facing millions of dollars in civil judgments. And McKnight pleaded guilty last month to a criminal charge of wire fraud.
It turned out that Legisi was not “GENUINE” at all.