International Pyramid Scheme Gouges Investors Through Use of Social Media

Anyone who pays attention to financial news should have a fair understanding of what a pyramid scheme is and how one operates. Even if the intricacies of the sham are unclear, it is common knowledge that the words “pyramid scheme” are synonymous with fraud and financial losses. Since social media has become so pervasive in our everyday lives, it should come as no surprise that it is often used as a tool to perpetuate fraud. Individuals or companies can create profiles that vary from truthful to completely dishonest. The ability to give the appearance of being someone or something that you are not provides complete anonymity, making it the perfect medium for companies to manipulate those forms of media to dupe anyone who happens upon their website.

This type of shady behavior was the impetus for the Securities and Exchange Commission’s (SEC) recent emergency enforcement action against a pyramid scheme which is being perpetrated by Mutual Wealth, a spurious company which disguised itself as a genuine multi-national investment firm. The SEC allegations include the solicitation of investors by Mutual Wealth by means of fraudulent claims. The company uses Facebook and Twitter to redirect to its website, which then targets new investors. Some of the company’s so-called advisors use those or other forms of social media to continue to entice more investors.

It was also through these social media sites that Mutual Wealth made outlandish claims such as “HFT portfolios with ROI of up to 250% per annum. Income yield up to 8% per week.” One such Facebook post in August, 2013 claimed “$1000 investment into the Growth and Income Portfolio made on April 8th, 2013 is now worth $2,112.77.” Additionally, it was common practice for Mutual Wealth to fill the comments section of its Facebook page with bogus solicitations by their “accredited advisors.”

These practices were exposed by the SEC investigation into Fleet Mutual Wealth Limited and MWF Financial – conjointly referred to as Mutual Wealth. The SEC acquired a court order to freeze funds that it believes Mutual Wealth stole from U.S. investors through the use of social media accounts it had established on both Facebook and Twitter. Mutual Wealth made unscrupulous claims to investors that they would receive returns of two to three percent each week. The company claimed that it invested client monies by using a trading strategy that permits “capital to be invested into securities for no more than a few minutes.” Once the company had its investors, in true pyramid style, Mutual Wealth enticed those investors into becoming “accredited advisors” for the purpose of recruiting new investors, baiting them with referral fees or commissions.

The SEC’s complaint stated that there was virtually no truth to what Mutual Wealth told its investors. Instead of purchasing or selling securities for their investors, they simply diverted those funds to offshore bank accounts that are held by shell companies. Not only do they not invest the funds that they glean from the social media investors, their headquarters in Hong Kong does not exist, and it’s New York “data-centre” is fictitious, as well. The complaint also points out that the so-called executives on the company’s website do not exist and that they have made false claims about being registered with the SEC. In spite of all of its falsehoods and misrepresentations, Mutual Wealth had managed to bilk about 150 U.S. investors out of at least $300,000.

SEC’s Division of Enforcement associate director, Gerald W. Hodgkins, stated, “Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money. Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”

The complaint continues on to point out that Mutual Wealth was able to pull off much of its deception by using entities in the U.K. and Panama. The company also used offshore bank accounts in Cypress and Latvia and foreign “payment processors” to redirect the funds gained from investors. This was accomplished by the use of forged and stolen passports by Mutual Wealth’s sole director. He also provided a false address to foreign government officials and payment processors.

In an effort to try to help investors regain their divested funds, the SEC has named several other relief defendants that it believes were involved in the diversion of funds to offshore accounts. These include: Risort Partners Inc., Hullstar Capital LLP, Camber Alliance LLP, Kimrod Estate LLP, and Midlcorp Trade LTD.

This is the type of scheme that generally goes after novice investors. They prey upon the trust of those visiting their website and count upon being involved with social media as lending credibility to their scams. Whether the fraud is committed by a wolf on Wall Street or some caricature of an investment firm created online, I am here to protect those investors who simply want to make an honest investment with honest advisors. If you feel that you have been taken advantage of by Mutual Wealth or any other investment advisor, call the Blum Law Group at 1-877-STOCK-LAW for a free consultation.