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How two Indians made SEC see red

Invest $ 3,500 and reap $ 8,400 in 120 days! This was what a website called ‘profitsparadise’ claimed to have offered investors in the US between April, 2013 and February, 2014. However, if you search for this address now, the current webpage says “This domain may be for sale.”

The masterminds of this scam were Paul Allen and Nathan Jones. But neither are real names, according to US securities market regulator, the Securities and Exchange Commission (SEC), which has sought the help of the Securities and Exchange Board of India.

Both are Indian software engineers who concealed their identities under foreign names to make a quick buck. While the real name of Allen, says SEC on its website, is Pankaj Kumar Srivastava, a resident of Mumbai, Jones’real name is Nataraj Kavuri from Hyderabad. Srivastava disguised his association with Profits Paradise with an email address unitedforex47@gmail.com while Kavuri used coolblu49@gmail.com.

Together, they operated the online high-yield securities offering through their website www.profitsparadise.com to cheat US-based investors, SEC says. The offering was structured in a way that, under certain conditions, investors could never recover their principal investments.

The website, which hit the World Wide Web in April of last year, had three investment plan details each with a term of 120 business days. The first purportedly yielded 1.5 per cent daily interest on investments of $ 10 to $ 749, the second 1.75 per cent daily interest on investment of $ 750 to $ 3,499 and the third 2 per cent daily interest on investments of $ 3,500 and above.

Investors were invited to deposit funds that would supposedly be pooled with other investors’ fund to make ‘huge profits’ in forex, stocks and commodity trading. The website’s Facebook page advertised 5 per cent referral commission for members. Within nine months of its existence, its Facebook page gained traction and gathered more than 3000 likes. By this time, the website became quite popular among internet surfers and started attracting more than 4000 visitors on a daily basis – 200 from the US, itself.

However, little did the duo know that before their plans could get further hits from investors, their high returns claims would come under the scanner of the SEC with which they never registered or filed anything.

SEC says in order to go ahead with his plan, Srivastava directed a web-designing company’s Uttar Pradesh-based office to register the domain name www.profitsparadise.com and provided detailed explanation of the concept of Profits Paradise. Within a day in February last year, the domain name was registered through GoDaddy.com, LLC with Jane Roe (a fictitious name) as its registrant and address given was some 300 Boylston Ave, Seattle, Washington – provided by Kavuri.

It’s a different matter that the Internet Protocol or IP addresses were located in India and not Seattle, as was filed. The domain name registration to Jane Roe at a Seattle address was meant to attract American investors. This way, the two tech geeks made sure that members of the public are prevented from discovering who was behind the website’s operations.

At least three payment processors – Liberty Reserve, Perfect Money and EgoPay – were integrated with the Profits Paradise website to receive investors’ funds.

It did not stop here. Further, to create the illusion that mainly Americans were visiting the Profits Paradise Website, Srivastava instructed web designer to ensure that the “Alexa Detail” showed the website’s rank in the US rather than its rank in India. Alexa refers to a website www.alexa.com that ranks other websites, by country, based on the amount of internet traffic directed to the website.

Kavuri, on Srivastava’s request, played a leading role in designing and marketing the Profits Paradise website, taking the website on social networking sites. A video of the website was also uploaded on YouTube. The plan was to reach as many investors in the shortest possible time. Interestingly, the Profits Paradise’s pages on all these social networking sites did not include either a mailing address or a telephone number or for that matter name of any individuals associated with Profits Paradise.

However, the two appears to have got a whiff of the SEC’s Enforcement Division’s investigation in February this year and allowed the domain name registration for the website to expire, removing publication of the website from the internet.

In its order, SEC also said that the investment offered by Srivastava and Kavuri on their website was never legitimate and is a classic example of a high-yield investment program. “The investment returns promised by Profits Paradise were extraordinary – 180 per cent, 210 per cent or 240 per cent in 120 business days – and far exceeded the returns investors could reasonably expect on legitimate investments,” it added.

Though the extent of damage and fund raising is not yet known, the Commission has ordered Srivastava and Kavuri to file an answer to the allegations within 20 days.

The duo were previously employed at one of India’s largest software companies where they became friends. In 2005, Srivastava began a career as an affiliate marketer and worked for www.quixtar.com in Minneapolis, Minnesota. He returned to India in 2007 and became a full time internet marketer. By late 2012, he was conducting his own internet marketing business, called United Paycheck through the website www.unitedpaycheck.com.

His friend Kavuri assisted in conducting United Paycheck’s business. However, the business failed by early 2013 and Srivastava jumped to create other internet-based businesses. Profits Paradise was one of them.

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