SEC Shuts Down $50 Million Autosurf Ponzi Scam - InformationWeek

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2/28/2006
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SEC Shuts Down $50 Million Autosurf Ponzi Scam

The Securities and Exchange Commission has filed fraud charges against the owner of an Autosurf site who it accused of running a $50 million Ponzi scam and pocketing nearly $2 million.

The Securities and Exchange Commission (SEC) Monday announced it had filed fraud charges against the owner of an Autosurf site who it accused of running a $50 million Ponzi scam and pocketing nearly $2 million herself.

Papers were filed last week in a Los Angeles federal court alleging that Charis Johnson, 33, of Charlotte, N.C., ran a Ponzi scheme using her 12dailypro.com Web site. As a result, Johnson has agreed to cease solicitation of new members, and her assets have been frozen.

Less than two weeks ago, the FBI opened an investigation into 12dailypro.com's promises of large returns on members' investments. In exchange for buying $6 units -- up to a maximum of $6,000 worth -- 12dailypro.com members were promised a 144 percent return within 12 days simply for viewing a dozen Web ads daily.

The SEC dubbed 12dailypro.com a "paid autosurf program" but said it was in reality an illegal Ponzi, a scam where income from incoming members is used to pay existing members' returns.

"The defendants falsely represented that upgraded membersSMQ-8217-SMQ earnings 'are financed not only [by] incoming member fees, but also with multiple income streams including advertising, and off-site investments,'" the SEC said in a statement issued Monday. "In fact, at least 95 percent of revenues have come from new investments in the form of membership fees from new or existing members. The other 'multiple income streams' from advertising revenues or off-site investments were either negligible or non-existent."

Johnson's scheme, said the SEC's complaint, had raised more than $50 million from over 300,000 members since mid-2005. Johnson, meanwhile, had transferred about $1.9 million from 12dailypro.com to her personal bank account, the SEC alleged.

The SEC asked the court to freeze Johnson's and 12dailypro.com's assets, as well as those of her payment providers, which included StormPay, an online payment service based in Tennessee that is under investigation by state authorities.

12dailypro essentially shut down after StormPay, which said it suspected an illegal scheme, turned off the payment spigot in late January. In less than two weeks, StormPay was hit with a denial-of-service (DoS) attack that knocked it offline for two days. The DoS attacker has not been identified.

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