Action Against Prime Bank
Scam Investment Fraud Scheme Pertaining to Garry W. Stroud Offering
High-Yield Instruments
Excerpt of SEC Complaint which was so artfully written that very
little editing was required to make this remarkable tale into an
enjoyable read.
On June 28, 2001 the SEC filed this complaint against Garry
W. Stroud, of British Columbia, Canada, individually and doing
business as Angelic International, Euro Credit and Exchange
Bank, Ltd. and Diamond Global Holding Trust, and relief
defendant Adele Louros seeking to put an end to his
ongoing fraudulent securities offerings targeted at U.S. residents.
Using the Internet, the U.S. mail and telephone
he has managed, since at least mid-1998 through the filing of this
Complaint, to receive approximately $1 million dollars of investor
funds from over 2,200 investors based on false and truly fantastic
claims of extraordinary investment returns.
He has lured his investors with promises of rich
rewards in such exotic investment opportunities as gold mines in
China and Mexico and the opportunity to participate in bank debentures
and "Morgenthau Gold Bond Certificates." These exotic
sounding investments are, in every case, pure shams he has used and
continues to use to dupe his unsuspecting yet trusting investors.
He has recently taken his audacious conduct to a
new level under the guise of his most recent offering, Angelic
International. This offering, previously sold as Prelaunch42001, is nothing more than Stroud’s attempt to exploit the misfortunes
of another group of investors that were defrauded by Donald Allen
English, d/b/a E-Biz Ventures.com.
E-Biz involved an Internet ponzi scheme that has
ostensibly cost over 22,000 investors approximately $8.8 million.
With the assistance and encouragement of English and others, He has
solicited former E-Biz members to invest in Angelic International
with virtually the same promise as that made by E-Biz: in 22 days,
each Angelic International investor is to receive a 100% return on
their investment. Stroud has managed to convince over 1,000 investors
to invest approximately $300,000 in this offering since April 2001.
To pacify his victims, he claims to "own" a "merchant/commercial
bank" known as Euro Credit and Exchange Bank, Ltd. Euro Credit
is purportedly a Swiss bank upon which he has been known to write
checks drawn against this alleged bank. On fanciful letterhead, and
upon at least one check known to the Commission, he lists an address,
telephone number and "secured fax" telephone number in
Switzerland.
Through a website operated as www.eurocredit.ws,
he has lulled his victims into believing that he has fully refunded
their losses in the E-Biz venture and falsely shows balances in their
Euro Credit accounts. Unfortunately, the Swiss addresses and telephone
numbers he uses are merely answering services and mail drops. There
is no bank in Switzerland, or Canada for that matter, and the "balances" his
victims see in their Internet "Euro Credit account" are
illusory.
He has not paid a single investor the promised returns
in any of his programs. Although he has not paid any of his investors,
he has taken control of the Angelic International monies and caused
them to become co-mingled with his own. From these co-mingled funds,
he has, among other things, apparently caused $50,000 to be transferred
to lawyers representing Donald Allen English in the Commission’s case against him.
The Commission, in the interest of protecting the
public from any further unscrupulous and illegal activity, brings
this action against Garry W. Stroud seeking emergency, preliminary
and permanent injunctive relief, disgorgement of all illicit profits
and benefits he has received plus accrued prejudgment interest and
a civil monetary penalty. The Commission also seeks an asset freeze
against Stroud, as well as the appointment of a receiver to take
possession of Stroud’s assets, a repatriation order, an accounting,
and other incidental relief.
In addition, the Commission seeks disgorgement of
the investor monies the relief defendant received from Stroud’s
schemes. The Commission seeks a freeze of the relief defendant’s
accounts into which investor funds were transferred as well as any
asset acquired with such funds, an accounting and other incidental
relief.
ORIGINATION OF THE SCHEME
On January 31, 2001, the staff filed an emergency
action in the Western District of Oklahoma against Donald Allen English
d/b/a E-Biz Ventures.com and EE-Biz Ventures.com, alleging that the
venture was an $8.8 million Internet offering fraud with over 26,000
investors. Shortly after the case was filed, English traveled to
Aldergrove, British Columbia to meet with Stroud, a business acquaintance.
At this meeting, English and Stroud, among other
things, discussed the creation of a new version of the E-Biz model
that could be placed upon a foreign Internet server to continue the
same basic type of operation as that implemented by English. Among
other things, Stroud agreed to make available for English’s
use the money needed to cover the losses incurred by English’s
victims.
Upon English’s return from British Columbia,
he delivered to English a check drawn upon an alleged Swiss bank
named Euro Credit and Exchange Bank, Ltd., in the amount of $9 million
dollars, to be deposited into the registry of the Court. English
tendered the check for deposit into the Court’s registry, and
the Court’s clerk, in turn, deposited the check with its financial
institution. The check bounced.
Following the dishonor of the $9 million check,
he falsely claimed that he had "withdrawn" the offer of
the check because he had concluded that the Securities and Exchange
Commission and the Court intended to "steal" approximately
$2 million of the funds he had allegedly tendered for the E-Biz investors.
Thereafter, he began to take steps to acquire the
names of all of the E-Biz investors by falsely promising that if
these individuals would establish accounts with Euro Credit, he would
refund their losses directly into their Euro Credit accounts.
In response to skeptical inquiries about his willingness
to "refund" over $9 million dollars in investor losses,
he responded to potential investors by stating that he was motivated
by two primary factors: first, his humanitarian nature caused him
to make the funds available, and second, and the real reason behind
his ruse, he would obtain a customer base for other offerings he
desired to promote to the E-Biz victims. Stroud’s victims are
located in virtually every state in the United States as well as
the Western District of Oklahoma.
The more the SEC examined Mr. Stroud, the more uncomfortable
investigators became. The primary financial asset he listed was a
half interest in a purported Peruvian debt, which he said was now
an obligation of the American government for more than $1 trillion.
The half interest was granted to him by one purported financier who
claims to be in radio contact with a 9-foot-6 extraterrestrial circling
the earth in a spaceship.
Already, he has informed EE-Biz investors that he deposited money they
lost in accounts at Euro Credit. And while the investors can see the
money in their name at the Euro Credit Web site, they cannot take any
out. To do that, they have to send more money to Mr. Stroud, who says
he will then provide a bank card that will allow withdrawals from any
A.T.M. On top of that, he is offering the investors an opportunity to
participate in yet another program to double their money.
The EE-Biz Venture Connection
07/03/01 - An unemployed single father, Donald
Allen English, 53, decided to start his own dot-com and established
one of history's fastest frauds, conning tens of thousands of small
investors out of as much as $50 million in a matter of weeks until
the scheme collapsed.
His enterprise, EE-Biz Ventures, was believed by legions of the
gullible who were convinced of
nonexistent "digital" certificates of deposit, illusory trillion-dollar
government obligations and bogus business deals to "lease" millions of
dollars in cash.
Investors who signed up opened an account with a legitimate company that
functioned like a bank, using an Internet currency known as e-gold. Then,
they transferred dollars in e-gold - a transaction known as a spend,
involving as little as $20 or as much as several thousand - to an e-gold
account, controlled by someone else.
The early investors received double their money
back, with no explanation of how it was done. As word spread of the
payouts, investors flocked to the site to participate.
It was, they say, a simple Ponzi scheme, in which early investors are
paid bogus profits with money from new investors. Eventually, as new
cash stops coming in, the latest investors end up with huge losses as
some early investors, but mainly the principals, walk away with fortunes.
Mr. English took the title of chief financial officer
while five others, who were mostly unemployed and with little experience
in the business world, were each named president.
According to one other founder, English was the only one who knew how
the money was being made. "He refused to tell us but assured us
that he had done massive work with his legal team to ensure that everything
was legal, moral and had the blessings of all of the applicable regulatory
agencies."
EE-Biz was also dressed up in the garb of a quasi-charitable organization
to attract religious investors. He held the company out as a humanitarian
group helping families with their finances.
He assured his webmaster that EE-Biz Ventures was not a Ponzi scheme
and that he was legitimately investing the funds offshore. He then
recruited promoters for the site who were compensated for chatting up
EE-Biz in cyberspace.
Although money initially poured in, problems soon cropped up. Demand
for EE-Biz was so strong that the computer systems crashed, stopping
not only the payouts but also the influx of new money. Then in December,
investors, tight for Christmas cash, slowed their contributions. Payouts
stopped completely, and complaints began.
As the pleas for returned money came in, he sent an e-mail to investors,
asking for financial support. Then, he sent another one saying that if
everyone did not put in more money, their initial investments would be
lost.
Many victims have still not accepted that they were cheated and send
e-mails regularly to the S.E.C. and other officials, demanding the release
of the man who promised to lead them to financial prosperity.
But with a list of as many as 56,000 gullible investors,
EE-Biz attracted other get-rich-quick schemers. That
is when Garry Stroud entered the picture.
His Original Schemes
Since at least 1998, he has made, and continues
to make, a number of patently fraudulent offerings through his Euro
Credit and Diamond Global websites and through e-mail promotions.
These offerings, which are not registered with the Commission, promise
investors phenomenal returns by promoting interests in foreign gold-mining
projects, "prime-bank" trading programs, and most recently,
a scheme involving bogus "U.S. Morgenthau gold bonds."
Stroud’s mining and prime-bank offerings are
being offered over a password-protected website he controls known
as www.diamondglobal.org. There, investors may invest as little as
$100 or as much as they are willing. Before investing, they must
sign a "non-circumvention/non-disclosure" agreement, promising
not to provide information about the programs to governmental regulatory
agencies.
Investors then either mail funds to Stroud’s
Lynden, Washington, address, or they send money to Stroud using an
Internet based form of currency known as E-gold. His Morgenthau Gold
Bond Offering is offered through Euro Credit and Exchange Bank, Ltd.
at a website address of www.eurocredit.ws.
A. The Morgenthau Gold Bond Offering
Stroud, operating as Euro Credit, is currently soliciting
investors in what is described as a new "high yield investment
program" involving trillion-dollar, gold-bond certificates purportedly
issued by the United States government. In an e-mail recently directed
to Euro Credit "clients," he identifies himself as a "merchant/commercial" banker
offering an investment opportunity issued by Euro Credit in Morgenthau
gold bond certificates.
He claims that another one of Euro Credit’s
purported clients, the Diamond Global Corporation of Dominica, West
Indies ("Diamond Global Dominica"), plans to purchase United
States Treasury bond certificates that were issued in 1934 and have,
according to Stroud, a purported current value of as much as $600
trillion.
He claims that Diamond Global Dominica, with funding
from Euro Credit, will soon obtain an undisclosed number of "boxes," each
containing 250 Morgenthau gold bond certificates, "worth USD
$25 billion face value per box." He further claims that Diamond
Global Dominica intends to sell the certificates back to the federal
government at a profit, sharing a "piece of the pie" with
Euro Credit and its investors.
He claims that investors "participating" in
the Morgenthau bond offering "can net a return of as much as
5:1 on your invested capital over 60 to 90 days." He further
claims that if "you leave your money with [Euro Credit] for
one year and fifteen days, the return on your capital investment
will be as much as 50:1 which will be backed by a Euro Credit Certificates
[sic] of Deposit (CD’s) for the full return amount."
The e-mail promoting the Morgenthau offering also
instructs investors to open an account at the Euro Credit bank by
following instructions on the Euro Credit website. There, Euro Credit
instructs investors to send an "encrypted" e-mail message
describing the amount they want to invest and stating that they want
to invest in Morgenthau. Euro Credit then sends the investor instructions
to either wire funds or send a check to Euro Credit for the investment.
He is targeting this offering to E-Biz investors and generally to "clients" of
Euro Credit.
The Morgenthau offering is fraudulent on its face.
The United States government never issued the Morgenthau bonds and
Diamond Global Dominica is simply another of Stroud’s nonexistent,
sham business entities. Furthermore, Euro Credit’s guarantee
to refund any amount invested is worthless because Euro Credit is
not a real bank.
B. "100 Years of Gold:" - The China Project
Stroud represents through his Diamond Global website
and in e-mails to his investors that the "China Project" is
an existing mining operation that is in the process of extracting
gold "tailings" from previously inoperative Chinese gold
mines.
In particular, he claims that China lacks the technology
to extract the gold from the tailings and therefore has given Diamond
Global the right to mine the gold. The website further represents
that the project is currently under way, presents a once-in-a-lifetime
opportunity, and "will make a lot of money for all participating
[Diamond Global] members."
Investors are to provide "loans" to Diamond
Global in increments of $1,000 to reach the necessary total of $650,000
to fund the project. The website states: "There is no way of
knowing the exact amount of return. Our research team has estimated
that it will exceed $1,000,000,000 to be shared with all participating
Members. So if the participating members share in 5% to 10% of just
the gold side of the China Project, that in itself is significant,
to be sure." He has raised over $90,000 through the China Project
offering.
The Diamond Global website makes a number of representations
concerning the China Project that demonstrate its fraudulent nature.
These unsupported, contradictory claims include the following:
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The
project presents "NO risks" to investor funds; |
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The
project has guaranteed estimated returns exceeding $1 billion; |
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The
Bank of China has extended a line of credit to Diamond Global
for financing of the project; |
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The
project will yield "100 years of gold;" |
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The
project is a "MULTI-TRILLION US DOLLAR OPPORTUNITY THAT
WE MAY NEVER SEE THE EQUIVALENT OF AGAIN IN OUR LIFETIME;" |
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Silica
incidental to the mining operations of the project has been "pre-sold
for a 100 years;" |
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The
project presents "safe, secure and fast returns" for
participating Diamond Global members; and |
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Euro
Credit Bank will fund the project. |
The foregoing claims concerning the China Project
are patently fraudulent. In addition, despite Stroud’s persistent
efforts to lull investors with claims of imminent payouts, there
is no evidence that he has paid any of his investors any of the
promised returns.
C. Drilling for Gold: The Mexicali Project
The Diamond Global website also promotes an offering
that Stroud describes as the Mexicali Project. Since at least September
1999, Diamond Global has claimed that it is the holder of rights
to develop several of the largest "placer" mines in Mexico.
To participate in the offering, Diamond Global
claims that it is accepting "private party loans" from
investors to raise $100 million to cover the "combined project
cost" of the mining operation. The website further represents
that one of the mines in the project has "proven" gold
reserves of between $10 billion and $15 billion.
According to the Diamond Global website, the
Mexicali Project is an "ongoing operation which can supply
gold for sale to world banks, etc." and for the personal benefit
of Diamond Global members. Additional claims concerning the Mexicali
Project include the following:
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The project is currently producing gold
reserves;
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As of July 1999, the project has "been
drilled, blocked and proven by assay;" and
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As of September 1999, Diamond Global has
established "depositories" in various locations
for the purpose of storing and securing the billions of dollars
in gold produced by the project.
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All of the foregoing representations appear to
be either false or misleading. Despite claims that the project
has been "producing" since at least September 1999, none
of the Diamond Global investors in the Mexicali Project interviewed
by the Commission have received any returns on their investments.
Furthermore, he fails to provide any verifiable
information concerning the specifics of the Mexicali mining project,
including its purported geographical location, mining methods utilized
on the project, support for his claim of gold reserves worth between
$10 and $15 billion, or the source of information concerning reserves
he claims are "proven" and currently in the possession
of the project.
Finally, as with his other offerings, he omits
any risk disclosures associated with investing in the project.
D. Diamond Global’s Prime Bank Offerings
The Diamond Global website also makes a number
of prime-bank offerings that contain either materially misleading
or outright false information. He labels these offerings the Evergreen
II, Destiny, and Omega projects.
Although the website does not contain beginning
or closing dates for any of these offerings, it appears from certain
statements on the website and e-mails that certain of these offerings
were initially offered as early as 1998. None of the investors
interviewed by the Commission have received their promised investment
return.
He continues to post information concerning these
offerings on the Diamond Global website and to lull investors with
promises of imminent payment.
The Evergreen II and Destiny projects consist
of purported foreign bank trading programs. Diamond Global created
Evergreen II when the project’s predecessor, Evergreen I,
allegedly failed to yield the returns promised to its investors.
Using classic prime-bank language, a posting on the website dated
September 1999 states that Evergreen II investor funds will be
entered into "the next big trade within two to four weeks
and that the first payments to Evergreen II investors will begin
within 48 hours of placing the ‘trade.’"
A recording available on the site indicates that
Destiny "trades" will soon pay out returns. The site
also claims that Diamond Global has a "firm contract" for
the placement of the Evergreen II trade with some undisclosed foreign "trader." The website further states that investor funds are not at risk of being
lost and that, upon placement of the trade, Diamond Global will "hypothecate
the debt through Euro Credit and Exchange Bank."
He makes similar false and misleading claims on
the Diamond Global website with respect to the other prime-bank
offerings listed on the site, the Destiny and Omega projects. For
example, the site makes the following claims:
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"Pay-outs" on the Destiny Project
investments would begin no later than September 1999, and
then no later than mid-July 2000;
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The price of "units" of the Omega
Project, purchased by investors for $100 each, could reach
$750,000 per unit;
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The Omega Project is a "Delayed Roll-Over
Program" offered to its investors at "no risk";
and
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Euro Credit bank will pay to its members
the face value of any Omega Project units in their possession.
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The Evergreen II, Destiny, and Omega offerings
are complete shams. Moreover, Diamond Global’s claims that
Euro Credit will pay the face value of the Omega Project units
and will "hypothecate" Evergreen II’s debt are
false, given that Euro Credit does not exist.
According to Diamond Global investors interviewed
by the Commission, none of these offerings has made the promised
payments to investors. And, in a remarkably similar fashion, in
connection with the Omega offering, Stroud approached Omega investors after the main promoters of the sham Omega offering were indicted in Urbana,
Illinois.
In approximately August 2000, the United States
Attorney’s Office in Urbana, Illinois, indicted several prime-bank
scam artists who operated under the name Omega Trust & Trading,
Ltd. The Omega offering involved over 10,000 investors who invested
at least $20 million.
E-mails he sent claimed that Hood and his associates
were being wrongfully prosecuted by the federal government for
foreign-bank debenture trading programs that they were involved
in and that the criminal charges brought against them were groundless.
Stroud indicated that he could purchase the Omega units at a discount
and then trade them at a very large profit, which would then be
shared with the investors within a month or so of investing.
He is known to have sold shares for $100 each
which would purchase "units" of the Omega program from Clyde Hood
and others. As with other offerings he asked that funds had
to be sent to him either by money order or in cash.
After the participants were indicted, he began
placating the Omega investors with claims of imminent payouts and
promised returns.
He even solicited funds for an "Omega legal
defense fund" that he created, purportedly for the benefit
of the Omega defendants, most of whom have now entered guilty pleas.
Using conduct he would repeat in trying to defraud Donald English’s
victims, Stroud encouraged Omega investors not to cooperate with
the government, lulled them into believing that their original
investments were legitimate, and hawked his own fraudulent, unregistered
offerings.
E. Angelic International f/k/a Prelaunch42001
Stroud’s most recent fraudulent offering
is a bogus high yield investment program that he refers to as the "Angelic
International Program." This offering is currently being targeted
specifically to former E-Biz investors as well as others through
e-mail, Internet chat rooms, and a website he caused to be registered,
www.angelic-international.com.
The Angelic International offering is very similar
to the E-Biz offering in that investor funds are purportedly to
be invested in "international high yield trading" programs
in which the investment will purportedly double every 22 day trading "cycle." Investors
may invest as little as $100 or as much as $10,000. Angelic International
has purportedly completed four or five investment cycles but has
not, to date, produced any returns to its investors.
Records from E-Gold Ltd., the Internet payment
service, reflect that he has raised approximately $300,000 from
over 1,000 investors in the Angelic offering since April 2001.
To invest in the Angelic International program, an investor deposits
money via a credit-card transaction or wire transfer into accounts
opened in their names at E-Gold.
E-Gold then transfers E-Gold "currency" (in
U.S. dollar denominated amounts) via the Internet, from the investor’s
account to one of three Angelic International accounts held at
E-Gold. Any investment returns from the trading program are to
be transferred back to the investor’s E-Gold account.
Unlike the E-Gold accounts utilized in Stroud’s
other offerings, the Angelic International accounts are in the
name of relief defendant Adele Louros. She is generally described
as the program administrator of Prelaunch42001, now known as Angelic
International, but Stroud is the person behind the offering.
The Angelic International E-Gold records show
that the bulk of the money raised by this offering was transferred
to E-Gold accounts owned and controlled by Stroud. The Angelic
International investor funds were co-mingled with Stroud’s
and from these accounts, Stroud has made a number of expenditures.
Amazingly, $50,000 of the money co-mingled in Stroud’s E-Gold
account was given to lawyers representing Donald Allen English
in May 2001.
Other expenditures appear to include placing
$20,000 "in trust" with a real estate company near Vancouver,
British Columbia, as well as apparently paying debts owed by Nancy
Stroud, Garry Stroud’s spouse.
In addition, however, one expense that shows
the continuing nature of Stroud’s lulling activities and
his continued fraudulent conduct is the transfer of $9,750 to a "currency
market maker" for the purpose of obtaining debit cards on
another Internet currency program known as Standard Reserve.
Stroud, in his effort to convince the E-Biz members
that he claims to have refunded, is supposedly working on a deal
that will allow the "refunded E-Biz members" to access
their Euro Credit monies through this debit card. Stroud’s
use of the Angelic International investor funds for this purpose
is clearly at odds with his representations to the E-Biz victims.
Like the E-Biz offering, and other prime-bank
related schemes involving international trades, Stroud’s
Angelic offering is a complete scam. There is absolutely no evidence
of any trading program that would generate the phenomenal promised
returns. It is clear that he has merely preyed on the desperation
of the defrauded E-Biz investors to perpetuate his own fraudulent
securities offering.
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