Travis J. Iles, the Texas Securities commissioner, entered an emergency cease and desist order against 911MoneyStore Inc., a security fraud run by Frank Dalotto and partnered with convicted felon Mark J. Moncher just yesterday.
According to the securities board, sufficient evidence was found against the felon in offering investments of an unregistered cryptocurrency trading program claiming to deliver returns of 8% per week.
This however is no ordinary case as there is a lot more to the story than a typical security fraud.
According to the order – Moncher, controller of Financial Freedom Club Inc., is concealing from potential investors that on December 2009 he w as convicted on charges of mail and wire fraud in U.S. District Court in Orlando, Fla.
In 2010 Moncher was sentenced to serve 57 months in a federal prison, followed by three years of supervised release. He was also ordered to pay $2 million in restitution.
The order accuses Dalotto of telling potential investors that in order to avoid securities laws, he and 911MoneyStore want to hide the fact is it an investment in cryptocryptocurrency by referring to the profit payments as a commissions.
What is especially interesting in this case is that Dalotto, Moncher, and their companies are also encouraging investors to commit felony offenses in connection with an initial $2,000 investment in the trading program.
According to the filing investors are told that after making their initial investment, they will receive an invoice for the purchase of “a gold Seiko watch which you’ll never get.” This means they are blatantly telling their investors they are committing fraud.
They further go on to tell their investors that they can claim they never received the watch and request a refund from the financial institution that issued their credit or debit cards – a complete and blatant fraud.
They are encouraging investors to file a false or misleading written statement with a financial institution which is a state criminal offense in Texas as well as most other states.
Financial Freedom Club and Moncher together with Capital Cash are also selling unregistered promissory notes in a completely different scam – a marijuana growing operation in California. As with the first scam not disclosing their cryptocurrency trader, the location of the marijuana farm also is not disclosed.
The notes are claimed to be issued by Estrada Trucking Inc. based in Palmdale, Calif. through its CEO, Caleb Estrada Vasquez.
The Enforcement Division claims that Financial Freedom Club and Capital Cash are soliciting residents of Texas to invest in Estrada-issued promissory notes promising “100% guaranteed” returns from the sale of marijuana to legal dispensaries of marijuana.
They are also providing potential investors with a partnership agreement between Estrada and a Federal Express office in Plano, however there is no mention about how the partnership relates to the promissory notes or the marijuana investment.
The marijuana investment is structured as an unsecured loan to Estrada Trucking, which promises that an initial $10,000 investment will generate a 50% every four weeks for a profit of $5,000.
They state to investors:
The medical marijuana industry is racking [sic] in BILLIONS of dollars a year and as new states start to legalize it, it’s just going to get bigger.
None of the companies selling the Estrada notes are disclosing to investors any risks involved with investing in marijuana operations. This includes risks of adoption of state laws and regulations governing such operations.
None of the individuals or companies named in the entire order are registered to sell securities in Texas nor are any of the investments registered.
This may be one of the most elaborate scams in all of cryptocurrency involving ponzi schemes, unregistered securities, encouraging investors to commit fraud, involving a second ponzi scheme of marijuana ponzi schemes and what appears to be not just one but three different companies working together to commit these frauds.
It is highly likely that if this fraud continues, it will come to involve California as well as the federal SEC.