Tracking Down the Real Internet Crooks Capital Enhancement Club (CEC) Pt1

These are real criminals. They are pocketing real millions and never getting arrested. I guarantee that after you finish reading the final article in this series on CEC, your jaw will drop and you will say out loud, "Wow".

Peeling an onion, much like uncovering a scam, is never a pleasant experience and can bring tears to your eyes. Sometimes, as in the case of CEC, after all the scam layers are gone and you pull aside the curtain to see who is really operating the scheme...the answer might just surprise you!

Securities and Exchange Commission v. David Tanner, individually and d/b/a Capital Enhancement Club, Rocky D. Spencer, Marroc Corp. and Richard P. Kringen, Defendants, and, Omnibus, LLC, Vectra Resources, LLC and Dynamic Environmental Solutions, Inc., Relief Defendants, Civil Action No. 05-4057-SAC

This SEC document identifies, three civil defendants, David Tanner an unknown, Rocky D. Spencer, a convicted felon and recidivist fraudster, and Richard P. Kringen ("Kringen"), one of CEC's salesmen.*ceclubreceiver

When you first look at this SEC Document, Civil Action No. 05-4057-SAC, it is not possible to fully understand the events and people involved by reading only the header as shown here. It displays only names and often dates.

Let's peel away a layer and look deeper.

Please Remember - This is just a civil action and no criminal charges have been filed. Also in the interest of fairness, please note that Rocky Spencer and his mother Margaret without admitting or denying the allegations in the Commission's Complaint have both reached a mutual settlement with the SEC. The settlement between the SEC and Rocky (Defendant) required him to return $454,158.54, representing profits gained as a result of the conduct alleged in the Complaint. The receiver tells me that they no longer have an interest in or the authority to investigate Spencer's current activities. Just in case you want to take a look, here are some of the web businesses he currently operates......

• http://www.instantgold.net (Instant Gold Exchange)
• http://www.igecard.com (IGE Card)
• http://www.progressivegoldcasino.com [offshore Internet gambling]
• http://www.ultimategoldgoldcasino.com [offshore Internet gambling]
• http://dwgcard.com (dwgcard)
• http://allmenformen.com (gay men's forum)
  

Background on Defendants and the case

Richard P. Kringen - On December 16, 1994, the Securities Commissioner of the State of Kansas filed a cease and desist order, showing that through Diversified Consultants, Richard P. Kringen around 68 years of age at the time, solicited the Kansas Public Employees Retirement System to invest in a transactions involving Prime Bank Guarantees with the "top fifty World Banks" and promised his investors an annual return of 50%. Docket No. 95E042 *ceclubreceiver (.pdf) The SEC has repeatedly deemed prime bank schemes a security in enforcement actions, and high yield investment schemes are so similar to prime bank schemes that they should be treated the same. Richard's final judgment in the CEC scam shows he was ordered to disgorge the amount of $226,113.30 representing his 'cut' plus an additional interest amount of $17,410.66.

Rocky D. Spencer - On July 22, 1994 Rocky D. Spencer (Instantgold.net) plead guilty to conspiracy to defraud the Unites States, money laundering, wire fraud and structuring transactions to evade reporting requirements. Spencer served 60 months in prison. This conviction was the result of an successful investigation and prosecution by the Criminal Investigation Division of the Internal Revenue Service. The Marroc Corp. is a Virginia corporation, controlled by Spencer with its principal place of business at Spencer's residence in Newport News, Virginia. He is listed as president and secretary.

David Tanner - This is an alias and he is considered a recidivist securities law violator. His background requires much more than just a paragraph so please keep reading and you will eventually come to his 'resume'.

May 2005

The SEC filed an emergency civil enforcement action [SEC Complaint] on May 4, 2005 in the United States federal court in the District of Kansas. On that same day, United States District Court Judge Sam A. Crow issued an order [SEC Memorandum In Support of TRO] temporarily restraining defendants David Tanner, individually and doing business as Capital Enhancement Club ("CEC"), Rocky D. Spencer, Marroc Corp. ("Marroc") and Richard P. Kringen from violating the antifraud provisions of the U.S. federal securities laws. *ceclubreceiver.com

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....

Sources:

1. DigitalMoneyWorld
2. ceclubreceiver.com...SuppOfPlaintiffsAppForExParteTempRestrainOrder.pdf
3. ceclubreceiver.com...DavidTannerAnswertoComplaint.pdf
4. ceclubreceiver.com/...ModifyTannerJudgment.pdf