On May 4, 2005, the United States Securities and Exchange Commission issued a Temporary Restraining Order and froze the assets of Capital Enhancement Club (CEC) based upon a preliminary showing of securities fraud (complaint). Larry E. Cook was appointed the Receiver and the site www.ceclubreceiver.com was set up as a reference for investors.

Two and a half years after the initial filing of the Civil Action, less than half of the alleged $22 million that was defrauded from investors has been recovered by the receivership and distributed to the claimants. Some interesting details and facts were found during the investigation and discovery of this case that should provide a lesson for any one looking into investing in HYIPs.

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

The information presented below is gathered from the public records and you can follow the timeline here.

David Tanner aka James Tucker are aliases for Scott Fraiser Klion, formerly of Copperas Cove, Texas and he is considered a recidivist securities law violator. Klion has been involved in at least three cases initiated by the Commission. Currently an expat living on St. Maartens where he fled to after being named as the primary defendant in SEC v. Scott Klion, d/b/a Cen-Tex Alchemy Guild, et al. No. 6:98-CV-186, USDC. Another civil case. Unless he gets charged and convicted via absenteeism and extradited, he will never set foot back on U.S. soil. Defrauded investors will never see justice done.

Rocky Spencer – served 5 years in prison for a conviction related to Instantgold back in 1994 for conspiracy to defraud the United States, money laundering, wire fraud and structuring transactions to evade reporting requirements. Yet after this conviction he gets involved with CEC. Once a criminal, always a criminal. Spencer and his mother, Margaret settled with the SEC regarding this complaint and is no longer being pursued, however, he still currently operates a number of online websites. Ask yourself if you can you trust this guy.

• 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)

Richard P. Kringen - was issued a cease and desist order by the Kansas State Securities Commision on December 16, 1994 for running a “prime bank” scam (Docket No. 95E042). At the age of 79, he gets involved with CEC. It goes to show that even senior citizens can be scammers too. In this case, he was ordered to disgorge $226,113.30 and $17,410.66 in interest for his share of ill gotten gains.

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.

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 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.

Let this be a lesson about “HYIPs” promising a high rate of return for your invested money. If in your due diligence, you find they want to stress anonymity – remember, it may be for a criminal reason. If you decide to throw in a significant amount of money, spend a few extra dollars to do a background check on the admin if you are lucky enough to get a name. Background checks are inexpensive and can end up preventing you from losing your hard earned money.

Take note that if an investment asks you to send money overseas to banks in Seychelles or Latvia you should be aware that these places are hotbeds for fraud and money laundering.

Bank counter deposits directly into a program offer no receipt or proof that it was your money that was deposited. This will make it difficult to make a claim to recover money once a fraud is committed.

Remember to do your due, unless you want some guy to be living the good life with your money on some tropical island, sipping cocktails.