Feds Bust $50M Online Ponzi Scheme
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A North Carolina woman and her two companies settled federal charges that she operated a classic Ponzi scheme that generated $50 million on her paid "autosurf" Web site.
Autosurf sites are a form of online advertising that generate revenue by automatically rotating advertised Web sites in a viewer's browser. Advertisers pay the host Web sites, which in turn pay their members to view the rotated Web sites.
According to the Securities and Exchange Commission (SEC), Charis Johnson, 33, and her Web site, 12dailypro.com, moved beyond that business model to sell upgraded site memberships offering $6 "units" with a maximum investment of 1,000 units.
Johnson promised to pay each upgraded member 12 percent of his or her membership fee per day for 12 days. According to the scheme, at the end of 12 days the member would earn 144 percent of the membership fee, 44 percent of which would be profit.
The SEC claims that Johnson's sale of membership units constituted a fraudulent and unregistered sale of securities. In addition, according to the SEC, Johnson used new investor monies to pay promised returns to existing investors -- a typical Ponzi scheme.
Johnson's settlement agreement with the SEC imposes a freeze on her assets and prohibits the destruction of documents. Johnson also accepted a permanent receiver over the assets of 12dailypro.com.
The SEC is also seeking repayment to victims and civil money penalties.
Johnson consented to the order without admitting or denying guilt.