Profit Connect mined crypto for a week before SEC lawsuit
As part of its Ponzi scheme ruse, Profit Connect claimed to “proprietary Ai and Machine Learning Algorithms”.
None of that existed.
Profit Connect also represented to investors that it mined cryptocurrency. As part of those efforts, Profit Connect told investors it had “been mining for years and were very successful”.
Turns out Profit Connect only started mining on or around June 2021, about a week before the SEC shut it down.
As reported by the Profit Connect Receiver in his November 1st First Interim Report;
Profit Connect only made approximately $300 from mining activities up to the start of the permanent receivership, an approximately three-week period of time, before accounting for the cost of computers, labor, or electricity.
Upon factoring in those liabilities, the Receiver concluded;
my team of computer experts, and in-house IT professionals, we were unable to produce a proof-of-concept model that would be able to cool the mining computers in such a way to provide a competitive advantage and ultimately, the crypto currency mining business was deemed non-viable.
As part of his marketing efforts, Brent Kovar once claimed Profit Connect would partner
with casinos by installing cylinders in their pools. These cylinders would house the Supercomputer rigs, heating the pool, and mining cryptocurrency at the same time.
Another of Kovar’s plans was to dangle
installed cylinders with supercomputers from house boats in Lake
Mohave because it is deep and cold.
Neither plan eventuated.
The Receiver’s report also confirms the passing of Eddie Kona, prior to the SEC’s lawsuit;
The late Eddie Kona (also known as Donald Edward Sabisch) and Eric Garrison have been mentioned by Brent Kovar as founders and, in the case of Eddie Kona, an employee of Profit Connect.
Despite Kona being the face of Profit Connect, ‘Brent Kovar was exclusively in charge of running the day-to-day operations of Profit Connect’.
After going over Profit Connect’s business operations and speaking with employees, of which there were twenty-one, the Receiver concluded
there was no viable business to continue operating, the Receiver terminated the employees and closed the offices, retaining a few on a contract basis to assist with the wind-down of operations.
Including frozen cryptocurrency, the Profit Connect Receiver has thus far managed to recover $8.6 million.
Analysis of Profit Connect’s accounting revealed Brent Kovar (right), liked to surround himself with unqualified women and lavish them with gifts.
The Temporary Receiver identified three Profit Connect employees with the responsibilities of administering the financial and personnel operations of Profit Connect: SW, a former pharmacy technician hired as the accounting manager and, as she has stated, a long-term girlfriend of Brent Kovar, RU, a former pharmacy technician hired as an accountant, and JM, with no prior job experience who was hired as the junior accountant and receptionist at the warehouse.
In addition to being relatively overcompensated via payroll for their responsibilities as described below, these three women also received other substantial assets paid for by Profit Connect, including: a fully-paid-for home totaling $387,786.94, a Dodge Ram 1500 truck costing $49,320.35, a 2021 Model Y Tesla lease costing $18,513.16, plastic surgery costing $21,461.24, and profits from the Wealth Services programs of at least $114,100.
The accounting staff could not demonstrate even the most elementary understanding of business accounting best practices, the accounting staff was overcompensated based on their skills and experience, the accounting staff were provided lavish non-cash gifts for their efforts, the accounting staff unquestionably followed Brent Kovar’s every request, and there were unusual and inappropriate relationships with the accounting staff.
As is typical of MLM Ponzi schemes, accounting was virtually non-existent.
Through the Receiver’s interviews with Brent Kovar and the accounting staff, it was determined that no form of record-keeping was being conducted for the cash inflows or outflows of Profit Connect.
The company had no inventory of what had been purchased with funds from Profit Connect.
Profit Connect has never filed taxes nor conducted any of the bookkeeping necessary to do so.
No employees on the accounting staff were qualified to conduct professional business accounting functions.
A full list of Profit Connect victims will likely not be made public,
out of concern for maintaining their privacy and to prevent them from being targeted for fraudulent investment schemes by other parties who may seek to prey upon them.
So to comply with procedural matters, a list consisting of only a first initial and last name will be produced.
In the wake of the SEC’s Profit Connect lawsuit, opportunistic affiliates have proceeded with their own litigation.
On September 30, 2021, Jeffrey Nicholas filed a lawsuit against Troy Sutton, alleging that Mr. Sutton, as a Profit Connect agent, negligently induced Mr. Nicholas and others into making Profit Connect investments.
In a separate November 8th filing requesting the Texas lawsuit be halted, as well as sanctions imposed for violating the injunction order, the Receiver characterized Nicholas’ lawsuit as
nothing more than the investor’s attempt to race the Receiver to the courthouse so that the investor may recover false profits and monies that belong to the receivership estate before the Receiver can.
The Receiver goes on to state he fully intends to pursue clawback litigation against Profit Connect’s net-winners.
During his investigation, the Receiver has uncovered a number of fraudulent transfers from Profit Connect to various persons and entities.
As a result of the Receiver’s review of Profit Connect’s books and records, he has identified approximately 150 sales agents who received commission payments from Profit Connect ranging from $29 to $847,903.
The Receiver intends to claw back and unwind such transfers, and where appropriate, initiate lawsuits against the fraudulent transferees.
The Receiver intends to first send demand letters and will only commence litigation if the matter cannot be resolved consensually.
In the very near future, the Receiver intends to file a lawsuit against a party who received at least $370,000 in fraudulent transfers.
These funds are currently at issue in ongoing divorce proceedings, in which the Receiver also intends to intervene to assert an interest and prevent dissipation of Profit Connect assets.
Stay tuned as we continue to monitor the case docket.
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