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, E 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. |
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. |
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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