Tracking Down The Real Internet Crooks Capital Enhancement Club (CEC) pt2

CEC was a Ponzi scheme, centered around the offer and sale of fraudulent “units of beneficial interest”. The scam collected more than $19 million from thousands of investors and some of it flowing through bank and e-currency accounts controlled by Rocky Spencer.

Tanner and others falsely claimed that CEC would pay monthly interest of approximately 7% to 11% (120% to 260% annually) Just as the HYIPs you will find today on the Internet, these defendants claimed that the income on the investments came from ‘trading international markets’. This is a common thread among Internet Investments accepting digital currency.

In reality, CEC had NO trading program and the investor funds were misappropriated, laundered and stolen by the Defendants through several offshore institutions. Throughout the scam, the defendants made misrepresentations about the High Yield Investment Program (HYIP) primarily through Internet newsletters which were saturated with outrageous claims, misrepresentations and bold lies regarding the projected returns. The net amount that the Receiver can account for totals $19,800,974. ($19mil)

The Receiver uncovered a list from the SafeMail.net e-mail address being used by Tanner, who was the obvious mastermind of the scam, which included approximately 10,000 CEC investors and 93% of the email addresses were still working. These participants had been receiving the phony newsletter and were solicited to send funds.

In his declaration, the Receiver stated his work included analysis of fifty foreign and domestic bank accounts, thousands of fraudulent CEC transactions and six digital currency providers. However, only 1146 completed and verified claim forms have been accepted from investors.

Documents showed that at least $1.5 million was misappropriated by defendants Rocky Spencer and Richard P. Kringen. CEC’s website listed Marroc’s bank account as an option for funding a CEC investment and Marroc received at least $5 million from CEC investors.

Margaret F. Spencer is Rocky’s mother and resides at the same address as Rocky in Newport News, Virginia. During January and February of 2005, she received at least $68,000 of CEC investor funds for no apparent consideration. Margaret Spencer was also listed as a signatory on the Morroc bank accounts.

How did the ‘investment’ dollars move?

Once an ‘investor’ was hooked, he or she established a CEC account and was provided three options for funding. Investors could wire transfer funds directly to CEC’s offshore account in Riga, Lativa and with that option, they avoided any service fees. Next, investors could open an e-currency account, in this case it was e-gold, and transfer their hard earned dollars into Morroc’s e-currency account controlled by Rocky Spencer. Finally, if an investor could not wire or pay with digital currency, they could send in a cashier’s check or MO to Rocky’s home in Newport News, Virginia where he still lives with him mother today.

Before transferring any e-currency or sending any paper funding to Rocky/Morroc, CEC investors were required to send an email to Rocky at sales@instantgold.net indicating their CEC number and the amount of the deposit. Instantgold is still in operation today and still operated by Rocky Spencer.

What did the SEC allege took place to con all those victims?

Defendants, in furtherance of their scheme to defraud, made numerous misrepresentation and omissions of material facts including but not limited to all of these lies:

• That CEC generates returns from a secret trading program run by the United States Federal Reserve
• That CEC has been successful in this type of secret trading for the past 8.5 years.
• Monies invested in CEC are earning approximately 7% to 11% monthly (120% to 260% annually).
• Non-affiliated investors were made right[rich] by CEC’s secret trading activity.
• Defendants fail to disclose to investors that their funds will not be used in a secret trading program, but rather will be misappropriated by Rocky Spencer and the other defendants then used to pay Ponzi-type payments to earlier investors.
• Defendants fail to disclose to investors that monies sent to Marroc are under the control of Rocky Spencer, a convicted felon and recidivist fraudster who, in 2002, filed for bankruptcy protection.
• Defendants fail to disclose that the Latvian bank to which they wire funds was designated by the United States Treasury Department as primary money laundering concern.

In this scam, both of the e-gold accounts and the bank account records showed that incoming funds were routinely paid out as ‘monthly interest earnings’ to investors immediately following deposits received from later investors. The bank account particularly identified over $1.1 million newly deposited investor fund which were used to make payments to older previous investors. CEC had all the markings of a classic fraudulent Ponzi scheme.

From investor funds deposited into the Marroc bank account under Rocky’s ownership and control, he misappropriated over $350,000 of funds for his personal use, including $170,000 in cash, $69,000 to his brokerage account, $21,000 to purchase a car, and even $6,100 for plastic surgery.

When this series in continued tomorrow, I’ll provide a time line begin to explain who David Tanner really is….

Parts 1, 2, 3, 4