Traffic Monsoon investor Paypal case stayed
Kingsley Ezeude and Chukwuka Obi respectively invested $2216 and $2238 into the Traffic Monsoon Ponzi scheme.
Back in May the pair sued PayPal, alleging PayPal
as aware that Traffic Monsoon was operating a Ponzi/pyramid scheme and that Traffic Monsoon was commingling investor money and paying existing investors with new investors’ money, in obvious Ponzi/pyramid scheme fashion.
In response to the lawsuit PayPal filed both a Motion to Dismiss and Motion to Stay.
On November 15th Judge Koh ruled to stay the case, effectively stopping it in its tracks.
The SEC allege Traffic Monsoon is a $237 million dollar Ponzi scheme and shut it down in June last year.
After the SEC was granted a preliminary injunction against Traffic Monsoon and owner Charles Scoville, Scoville appealed.
A decision on the appeal has yet to be reached.
Judge Koh’s ruling is based on a “stay of litigation” ordered in the SEC’s parallel proceedings.
The Court hereby orders a stay of all litigation in any court against Traffic Monsoon, LLC or Charles Scoville where
(1) the Securities and Exchange Commission is not a party or privy to a party in the lawsuit and
(2) the lawsuit involves or seeks to recover the assets frozen by this Order.
The parties to any such litigation are enjoined from taking any action in connection with the lawsuit, including, but not limited to, the issuance or employment of process.
All courts presiding over any such litigation are also enjoined from taking or permitting any action in the lawsuit until further order of this Court.
Ezeude and Obi’s PayPal lawsuit both does not involve the SEC and seeks to recover frozen assets (stolen investor funds).
Furthermore with the SEC’s case against Traffic Monsoon not yet resolved, Judge Koh remarked;
Ezeude and Obi allege that PayPal aided and abetted Traffic
Monsoon and Scoville’s fraud by serving as the payment processor for Traffic Monsoon and Scoville’s Ponzi scheme.
If Traffic Monsoon and Scoville are not liable for fraud, then PayPal cannot be liable for aiding and abetting Traffic Monsoon and Scoville’s commission of fraud.
Thus, necessarily Traffic Monsoon and Scoville’s liability should be determined first.
Emails between PayPal and the SEC were also cited, showing the SEC’s intent to object to discovery requests should they be made (as per the Utah Court stay order).
The Court STAYS the proceedings in this case until the Tenth Circuit resolves the interlocutory appeal in the Traffic Monsoon case and the Utah Court’s stay order is lifted.
The case hasn’t been dismissed. However with Ezeude and Obi likely to recover funds through the Receivership in the event Scoville’s appeal fails, I’m not really seeing how the case will proceed.
I suppose PayPal could be held liable for facilitating fraud, however I’d then expect the Receiver to go after them for any profit made. Which would again nullify separate proceedings against PayPal.
I’m not a lawyer though so I guess we’ll have to keep track of this one once a decision on the appeal is reached (expected early next year).
Update 23rd February 2020 – Checked this case docket today and there are no updates since the December 2017 stay.
The Utah case has been reopened so either there’s some judicial lag in reopening this case, or some other legal process trigger that hasn’t been met.
Will check the docket again in another six months.
Update 20th June 2021 – Out of curiosity I checked the Traffic Monsoon PayPal docket today.
The only updates since February 2020 is a chance in counsel notice filed in October 2020.
The SEC secured default judgement against Traffic Monsoon and Charles Scoville in January 2021.
This case should have been reopened when the SEC’s survived Scoville’s dismissal attempts.
The PayPal case seems to have been forgotten about by both the parties and the court.
Kingsley Ezeude and Chukwuka Obi respectively invested $2216 and $2238
So they are trying to get 100% refunded and bypass waiting on getting recovery by the receiver.
This question will be will they still get 100% refunded or just partial?
My guess would be partial. They aren’t going to be prioritized against any other Traffic Monsoon victims.
After Scoville loses his appeal PayPal’s Motion to Dismiss will likely prevail IMO.
Does this mean that there’s a chance that all of us who lost money might be able to get it back, either from the receiver or the payment processor we used?
I guess we couldn’t get back what we earned, but maybe we could get back all the extra funds we added at the beginning and along the way? I thought all the money had disappeared.
That was always the case. Frozen funds are to be distributed to victims through the Receivership ($60 mill or so seized IIRC, minus a few mill in fees).
You wouldn’t get back all your losses but you’d get a decent percentage back.
Scoville and the net-winners are fighting to keep their ill-gotten gains, and so we have the current situation.
If Paypal complied with it’s statutory requirements under the Bank Secrecy Act (and evidence presented in court indicates it did) then it cannot be held liable, either for not revealing it knew of the Scoville / Traffic Monsoon fraud or any losses incurred by their victims.
Those who have been around a long time may remember when StormPay was the hot processor used by most or all of the programs out there.
At some time, StormPay decided to stop accepting payments for these questionable programs, and when that happened many of these programs immediately crashed and burned. And StormPay went down with them.
I thought at the time they were dumb to stop accepting these payments, because they were making MILLIONS on the fees alone, from people pouring money into these programs.
When one of the big ones went down (I’m sorry I can’t recall the name of it), I thought there might be a chance of recouping the couple thousand dollars I put into it, so I considered my options.
I called VISA, because I had used my VISA card to put funds into StormPay so I could put them into this program.
VISA hates internet fraud with a passion, and got me all my money back in just a few days. Nobody wants to mess with VISA or MASTERCARD, these are among the most powerful companies in the universe.
If people used either of these to fund their PayPal account so they could then fund TrafficMonsoon ….. I wonder.
Although PayPal has quite a short period of time during which we can try to get money back. I’m sure that limit has passed as far as TrafficMonsoon is concerned.
12DailyPro. (Cheris Johnson presiding from her apartment in Charlotte, North Carolina).
So, you’re a Ponzi player and you think you deserve all your money back?!
Your TM money should be donated to a fund to fight this kind of fraud AND you should be fined additionally for being a multiple offender and have at least a misdemeanor on record.
What the hell is wrong with people – and the system?
So that is your escape plan when you join all of your ponzi schemes?
IF it doesn’t work out for your just run to VISA and get them to bail you out of your money you feel cheated out of?
Kinda sounds like double dipping. As you could have earned as well on the money and still request to be refunded as well.
Only imagine the 1000’s of people doing that daily for various reasons.
This explains why fees on chargebacks are so high along with interest.
Yet you did and probably still do – lets see how many times they allow you to keep doing that in the future.
Gee, I just wanted to pass along some information that might help some people, I never thought I’d get blasted for it.
That one program I talked about was a long long time ago, when I was just starting to work on the web. I didn’t even know what a ponzi was at that time, but I learned my lesson and never did another one.
I never took any money out, like a lot of people in those days, we didn’t know any better and just kept reinvesting every penny and watched out balances grow and grow.
So when these things folded, we lost all our earnings as well as our seed money, and we were left with nothing.
It was only the collapsing of StormPay at that same time that allowed a lot of people to get their money back, and only those who funded their StormPay accounts with VISA — we wouldn’t have been able to get anything back just from the program itself.
This wasn’t my idea, but when I saw others getting their money back through VISA, I figured I’d try it too.
Except that you asked this about Traffic Monsoon:
Sounds like you didn’t learn your lesson which is what prompted my post.
Article update recording Paypal case hasn’t been reopened yet.
This case seems to have been completely forgotten about by the court and parties involved.
It never reopened after the SEC’s case resumed.