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Thread: SEC moves against Zhunrise MLM / ponzi scheme

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    littleroundman is offline Administrator
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    SEC moves against Zhunrise MLM / ponzi scheme

    The only thing necessary for the triumph of evil is for good men to do nothing

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    scratchycat's Avatar
    scratchycat is offline Elite Scambuster
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    Re: SEC closes second HYIP ponzi - eAdGear

    U.S. SECURITIES AND EXCHANGE COMMISSION

    Litigation Release No. 23091 / September 23, 2014

    Securities and Exchange Commission v. Zhunrize, Inc., Civil Action No. 1:14-cv-3030-RWS

    Litigation Release No. 23091 / September 23, 2014

    Securities and Exchange Commission v. Zhunrize, Inc., Civil Action No. 1:14-cv-3030-RWS

    SEC Obtains a TRO and Asset Freeze to Stop an Ongoing Pyramid Scheme

    On September 22, 2014, the Securities and Exchange Commission filed a civil injunctive action in the Northern District of Georgia against Zhunrize, Inc. ("Zhunrize") and its CEO, Jeff Pan ("Pan"). In connection with the filing of this action, the Commission obtained a temporary restraining order against the defendants and an order freezing all of defendants' assets. The Commission alleges that Zhunrize, an Atlanta-based multi-level marketing company, and Pan have been operating a fraudulent pyramid scheme that has raised over $100 million from investors worldwide.

    According to the Commission's complaint, Zhunrize purports to be a legitimate multi-level marketing business by which members purchase online stores and then sell merchandise through them, while earning commissions on products purchased by their customers and through store sales to other members and hosting fees paid by those members. In fact, the company is operating as a pyramid scheme because its commission structure is based on the continual recruitment of new members, with the most lucrative returns dependent on the downline recruitment of other members through store sales irrespective of any product sales. To date, the company has taken in approximately $105 million from approximately 77,000 investors since 2012.

    The Commission's complaint further alleges that in its promotional materials, Zhunrize touts the ability to earn commissions from the sale of products, both through the owner's store and through downstream owners' stores. For example, a Zhunrize promotional video differentiates Zhunrize from other on-line multi-level marketing plans, claiming that Zhunrize has "sustainability." According to the video, the Zhunrize "model will sustain itself because we will have millions more customers than distributors." Later, the narrator in the video claims "we have the Vendor Relationships, the Logistics, the Payment Gateways to reach millions of new customers each month."

    The Commission's complaint also alleges that Zhunrize does not disclose, however, that to date substantially all of its revenue has comes from the sale of memberships (referred to as stores) and the corresponding monthly internet hosting fees associated with operating those stores, rather than the sale of products. Indeed, both Pan and a Zhunrize vice-president testified that the company currently derives 80-90% of its revenue from selling online stores and the monthly internet hosting fees for them, as opposed to actual products from these stores. Thus, contrary to the representations to potential investors, Zhunrize is actually a fraudulent pyramid scheme.

    The Commission's complaint, filed in the United States District Court for the Northern District of Georgia, alleges that each defendant violated Sections 5(a), (c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 thereunder, and seeks against each defendant permanent injunctions, disgorgement with prejudgment interest and civil monetary penalties pursuant to Section 21A of the Exchange Act.

    SEC Complaint

    I found a Google search to be of interest.

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    Char's Avatar
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    Re: SEC closes second HYIP ponzi - eAdGear

    I particularly like this sentence:

    "The Commission alleges that Zhunrize, an Atlanta-based multi-level marketing company, and Pan have been operating a fraudulent pyramid scheme that has raised over $100 million from investors worldwide."

    Got to thinking. I wonder if the SEC has an ongoing list of participants so they can cross reference habitual players? Imagine all the names from schemes like ASD, Zeek, TelexFree, eAdgear, Zhunrize, et al. that have been investigated and shut down. Would be interesting to see how many names would come up more than once?

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    littleroundman is offline Administrator
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    Re: SEC moves against Zhunrise MLM / ponzi scheme

    The injunction has been made permanent



    SEC litigation release

    Interesting that the SEC nailed this one as a pyramid scheme, not the usual ponzi scheme charges we've become used to lately
    The only thing necessary for the triumph of evil is for good men to do nothing

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    NikSam is offline AntiCon Artist
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    Re: SEC moves against Zhunrise MLM / ponzi scheme

    Quote Originally Posted by littleroundman View Post
    ...
    Interesting that the SEC nailed this one as a pyramid scheme, not the usual ponzi scheme charges we've become used to lately
    FTC has their hands full, SEC helps the brothers out :)

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    littleroundman is offline Administrator
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    Re: SEC moves against Zhunrise MLM / ponzi scheme

    Quote Originally Posted by NikSam View Post
    FTC has their hands full, SEC helps the brothers out :)
    There are still a lot of people who don't realize the US Financial Fraud Enforcement Task Force is very real and consists of a lot of heavy hitters who really don't mind "helping a brother out"
    The only thing necessary for the triumph of evil is for good men to do nothing

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    littleroundman is offline Administrator
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    Re: SEC moves against Zhunrise MLM / ponzi scheme

    Michael Fuqua has been appointed as the Zhunrise receiver and has established the Zhunrise Receivership.com website





    Zhunrize Receivership.com
    The only thing necessary for the triumph of evil is for good men to do nothing

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