Court Enters Final Judgment Against Tropikgadget In Pyramid Scheme
On November 12, 2015, a federal court in Boston, Massachusetts, entered a final judgment against Tropikgadget FZE and Tropikgadget Unipessoal LDA (collectively, “Tropikgadget”) of Portugal, defendants in a previously-filed enforcement action. In February 2015, the SEC charged Tropikgadget operating under the name Wings Network, plus three company officers and 12 promoters, with operating an international pyramid scheme targeting Latino communities in the U.S.
The judgment enjoins Tropikgadget from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b 5 thereunder. The Court also ordered Tropikgadget to pay disgorgement of $25,213,990, representing profits gained as a result of the operation of the pyramid scheme, plus prejudgment interest of $961,742, and a third-tier civil penalty of $725,000.
The court also entered judgments by default against Compasswinner LDA (“Compasswinner”) and Happy SGPS SA (“Happy”), also of Portugal, relief defendants in the previously-filed enforcement action. The judgments held Compasswinner liable for $8,125,235 and Happy liable for $1,102,711, representing the receipt or benefit from the use of the proceeds of violations of the federal securities laws without legitimate claim to the funds.
The SEC’s complaint alleged that Tropikgadget claimed to run a multi-level marketing company that offered digital and mobile solutions to customers, including apps and cloud storage. However, as alleged, Wings Network’s revenues actually came solely from selling memberships to investors, not from the sale of any products. The SEC alleged that the company relied upon the recruitment of new members, and commissions were paid to earlier investors with money received from later investors. According to the SEC’s complaint, the scheme raised at least $23.5 million from thousands of investors, including many in Brazilian and Dominican immigrant communities in Massachusetts.
The SEC’s litigation in this matter continues against the principals of Tropikgadget, the remaining promoters of the Wings Network pyramid scheme, and the other relief defendants.
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