International Law

Ad Surf Daily Part II

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Auto Surf programs are an odd duck in the scheme of fraud.  

Unlike franchise fraud, biz op fraud, or mlm fraud, a large majority of the individuals involved know that the underlying scheme is a fraud, yet continue to participate.

The AG of Florida claims that the Ad Surf Daily was a fraud because:

"ASD depended upon new victims to turn over cash in order to make promised payments to those who had earlier given money.

The Attorney General believes many of the victims of AdSurfDaily were Floridians who were scammed into handing over thousands of dollars to Bowdoin with promises of big profits that were rarely, if ever, provided."

However, a careful reading of the very lengthy and interesting Civil Forfeiture case reveals that the US is bringing a case against property and money frozen!  The defendants in this civil  forfeiture case are some bank accounts and some property.

So what is a civil fortfeiture in rem case?

"Unlike criminal forfeiture, civil forfeiture proceeds against the property, not the person.  In theory, civil actions are remedial, not punitive like criminal proceedings.  By acting civilly, the government seeks to remedy a harm, through the fiction of the property's "guilt." 

The classic example of a guilty property would be a pirate ship.  The ship itself is the instrument of harm, and without a criminal finding against its owner, the ship can be seized,  sold, and the proceeds returned to those who were harmed.

I suspect that the reason why the United States took this action was a) it is very quick, b) it minimizes the chargeback problem.

Recall that in the 12 DailyPro case, the trustee initially seized around $40 million, which quickly disappeared when the "victims" of the pyramid began instituting chargebacks.  Since they had paid their fees on a charge or credit card, after 12 DailyPro was shut down, the "victims" claimed that the charges on their credit card were frauds, and Visa/Mastercard reached into the "frozen" funds and rebated them to the victims.

Be interesting to see if this happens this go around.

Full post as published by Misleading Advertising Law on August 14, 2008 (boomark / email).