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Home » Hacking News » Two Arrested In Alleged $50 Million Web Fraud

Two Arrested In Alleged $50 Million Web Fraud

by Phiber on September 7th, 2001 Federal law officials say two men they believe helped mastermind a $50 million Ponzi scheme on the Internet have been arrested in Costa Rica. A joint announcement Thursday from the Sacramento office of the U.S. Department of Justice and the FBI said the two were arrested by Costa Rican authorities wielding U.S. warrants following an investigation into an allegedly crooked investment Web site known as the "Tri-West Investment Club."

U.S. Attorney John Vincent and FBI Special Agent Richard Baker said Canadian Alyn Richard Waage, 55, and Californian James Michael Webb, 39, are each charged with mail fraud and securities fraud. They said a third suspect, Lynn Waage Johnson, is still being sought.

Investigators said the trio used the Tri-West Web site to pitch "no-risk" investment schemes they called the "Bank Debenture Trading Program" and the "Prime Bank" note program, guaranteeing returns of 120 percent a year.

The Web site also offered referral fees for those who brought other investors to the club, investigators said.

The authorities claim that a list on the Web site of company principals - including president Jason Kingsley - is fictitious and that the true operator of what amounted to a Ponzi scheme was Waage. Webb is alleged to be the Web-site developer.

"Rather than an international finance expert, Waage allegedly has four prior fraud convictions and is currently wanted on a 44-count real estate fraud case in Canada," a DOJ press release said.

"The complaint alleges that Waage and his operatives ran a vast Ponzi scheme, using more recent investor funds to make 'dividend' payments to earlier investors, to give the false impression of a successful investment program," the statement said.

"Waage allegedly never invested any of the money as promised on the Web site, and instead used the money to purchase millions of dollars worth of real property in Mexico and Costa Rica, a yacht, and a helicopter. Much of the money is also alleged to have been funneled to numerous shell corporations created in Costa Rica."

On the Tri-West Web site today, a post dated July 3 on the club's message board from "Jason Kingsley" reports "technical problems which have suspended our service and delayed the membership payments."

Later, in a post dated July 9, Kingsley writes: "The technical problems with our new software and hardware systems appear to have been overcome." However, he adds, "The temporary closure of our main bank is causing unexpected delays in the full operation of Tri-West Investment Club. We have been advised that this problem is temporary."

The DOJ statement said Costa Rican authorities froze bank accounts allegedly related to the scheme that some $2 million. The same authorities also froze $5 million worth of real estate and impounded a yacht, a helicopter and 10 late-model vehicles.

The DOJ said a mail fraud charge could bring up to five years in jail and a fine of up to twice the scheme's haul. A securities fraud charge could lead to up to 10 years in jail and a fine of up to $1 million.

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