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.
For her part, Johnson posted a message to the 12dailypro.com message boards -- from which she is now banned -- saying that she would release "a statement regarding a compromise that has been reached between 12dp with authorities that will lead to the resolution of this matter and the beginnings of an accounting and refund process." No statement has yet been issued.
Earlier, Johnson had blamed 12dailypro.com's troubles on a payment dispute with StormPay, said that the autosurf operation was legitimate, and denied any wrong-doing.
When the FBI announced it had begun its investigation, Johnson had said, "Let me assure you, had they deemed this to be a scam, I would not be chatting with you right now. I would be in custody."
Even now, she remained combative. Once kicked off the 12dailypro.com message forum, she started a blog, and posted an entry Monday criticizing the SEC's move.
"Keep in mind that the SEC never interviewed us, never talked with us, never examined our data, never looked at our bank accounts, and never examined our books before placing this filing," Johnson said on the blog. "All information came from outside sources, primarily StormPay and an ex-convict seeking media exposure."
The ex-con Johnson referred to was Barry Minkow, who served seven years in federal prison for a multi-million dollar fraud committed in the 1980s. Minkow, who has written several books, went straight and now is a recognized fraud expert who works with a firm called Fraud Discovery Institute.