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"Founded November, 2002, Xango is a fast growing new
company that is "the first company to harness the real power
of the exotic Garcinia mangostana, XanGo not only leads
the mangosteen based dietary supplement market—it created it.
Based in Lehi, Utah, XanGo operates in the USA, Canada, Japan,
the UK, Australia, New Zealand, Trinidad & Tobago and México."
--Xango web site 12/2004
The U.S. Securities and Exchange Commission alleged that
Charis F. Johnson of Charlotte, North Carolina, 33, raised
more than $50 million from more than 340,000 investors
worldwide by convincing visitors to the Web site that they
could earn a 44% return on their investments in 12 days by
looking at Internet advertisements.
Auto-surf 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 (pronounced Sha-reese) Johnson 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% 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% of
the membership fee, 44% of which would be profit.
To qualify for the payment, members would have to view at
least 12 Web pages a day during the 12 day period. However,
the amount paid out to investors was related only to the
amount of each member's total investment, not to the number
of Web pages they viewed or other services they performed...
The SEC claims that Johnson's sale of membership units
constituted a fraudulent and unregistered sale of
securities. In addition, while investors were led to believe
that their returns would be generated by advertising
revenue, payments were made almost entirely from cash
generated by other unit buyers in a classic Ponzi scheme,
the SEC alleged.
Johnson and her companies, 12daily Pro (12dp) and LifeClicks
LLC, agreed to settle the charges without admitting or
denying guilt.
As part of the settlement, Johnson and her companies agreed
to stop seeking further investors, to freeze assets and to
accept a court appointed receiver over corporate assets.
Federal District Court Judge Nora Manella assigned Tom
Lennon as receiver over 12 Daily Pro. Lennon, who's business
is based in Southern California, is already in Charlotte,
North Carolina.
With the judges order now in hand, he can take control of
all aspects of the Internet venture and start tracking down
the money. At this point, the largest chunk of investors
money appears to be held by Storm Pay.
Storm Pay is the Internet payment processor that froze the
12 Daily Pro account a month ago. Storm Pay has been
vilified by many 12 Daily Pro faithful for stopping what
they say had been a company that always paid its members on
time.
Ironically, it now appears the money Storm Pay froze
estimated now at just under 50-million dollars -- may
represent the best hope for those who have lost money.
Randall R. Lee, Regional Director for the Securities and
Exchange Commission in Los Angeles is just grateful that
there is any money. "The sad truth is, in most cases by
the time we shut it down, most of the money if not all of
the money is already gone," said Lee.
Lee also thinks quick action in this case has led to a good
result.
"It was almost a pure Ponzi," says Lee, who
oversees the investigators who filed the original complaint
with Judge Manella and negotiated the stipulated order that
led to the appointment of a receiver.
Lee said, "The only real source of income was from new
investors. Our investigation found that 95% of the funds
were simply moved from one investor to another."
 |
| Charis Johnson
(source: ABC) |
The SEC is also seeking the repayment of ill-gotten gains
and further fines. The complaint alleged that Johnson
transferred about $1.9 million to her own accounts.
The FBI said Tuesday it continues to investigate the
company.
Johnson told the FBI last month that 12dailypro.com's
300,000 members have been paid more than $300 million over
since May, according to a transcript of her statement to
authorities. She told the Charlotte Observer she's earned
between $150,000 and $200,000.
Charis Johnson said she never intended to run an illegal
business -- just one that helped people make some money from
the Internet....
|
Ponzi
Scheme: Named after Charles Ponzi, who ran such
a scheme in 1919-1920, a Ponzi scheme is an
investment scheme in which returns are paid to
earlier investors, entirely out of money paid into
the scheme by newer investors. Ponzi schemes are
similar to pyramid schemes, but differ in that Ponzi
schemes are operated by a central company or person,
who may or may not be making other false claims
about how the money is being invested, and where the
returns are coming from. Ponzi schemes don't
necessarily involve a hierarchal structure, as in a
pyramid scheme; there is merely one person or
company that is collecting money from new
participants and using this money to pay off
promised returns to earlier participants. |
She said she used marketing and Web design skills she taught
herself to build 12dailypro, named after daily percentage
paid to members and her desire to help people become
professional Web entrepreneurs.
Johnson told the FBI that 95% of 12dailypro's money came
from new members, according to documents. Members were told
this on the company Web site, but 12dailypro also cited
other revenue, including advertising and non-site
investments.
12DailyPro.com is one of the busiest websites on the planet.
Part of the traffic is gathered via a huge number of
affiliated sites and third-party domains - such as
12dailypro.co.uk, 12dailypro.us, 12dailyproworks.com, etc -
which mirror or link to 12dailypro.com aiming to earn a 12%
referral commission.
"Paid autosurf programs have become an enormous
industry on the Internet," Lee said in a statement.
"When these schemes depend on attracting new members in
order to pay returns to current members, they are destined
to collapse. We urge the public...to exercise extreme
caution before investing in any get rich quick scheme."
Lee says investors have to take some measure of
responsibility for where they put their money, and he says a
12% daily return as promised by 12 Daily Pro is
unreasonable.
Still, Lee is reluctant to place blame for any Ponzi
scheme's collapse on investors, adding, "Nobody
deserves to be cheated. Nobody deserves to be lied to.
Everybody is entitled to the protection of federal
securities laws. And so we are here to protect investors
even if they make decisions that they might later
regret."
Ben Luke, a 60-year-old from Charlotte, said he spent
$24,000 in fees since July for him and his daughter, using
money from a home-equity loan and his retirement fund.
"I was letting it ride," said Luke, who's gone
back to substitute teaching. "I'm mad at myself. I'm
mad at (Johnson). There was not enough warning about this
business."
Johnson said the site 12dailypro.com was not intended for
people to bankroll a lot of money and she never said returns
were guaranteed.
In fact, the still alive mirror/affiliated site
12dailypro.co.za home page reads:
The risks
Just like any other type of contribution, participating
in autosurf programs has its own risk. The autosurf
industry today is full of scams. Many individuals have
taken autosurfing as an opportunity to create modern
pyramid schemes. They design their sites to look like
professional autosurf companies, offer high interest
rates (in return for high contributions), and run away
with the members' money when the programs start to
collapse.
12DailyPro has never missed a payment to anyone!
Additionally every single member has been paid on time.
See for yourself here. You can make up to $220 profit a
day without ever having to recruit anyone, advertise, or
sell anything. This paid Auto-Surf program is the real
deal, and you will soon see this for yourself once you
join.
If you think 44% every 12 days is worth the risk you
should try it out. We have and are continuing to
contribute. However, keep in mind that there are several
other ways to make money online besides 12DailyPro.
...
Of all the emails and phone calls received by ABC4 News from
angry 12 Daily Pro members, no one has come close to an
explanation of how the program can provide a 44% return on
membership investment. What may be more disturbing is the
fact that some 12 Daily Pro members have actually told ABC4
News they "don't care" where the money comes from.
SEC director Lee says there isn't much that investors can do
but wait. "The receiver will be taking overlooking at
the full scope of the operations including anybody that lost
money in this scheme. The receiver at the same time will be
making an effort to reach out and contact all investors.
There is nothing immediate that anyone can do. It will take
some time. We are firmly committed to the protection of
investors."
Lee advises investors to watch for updates on the
www.sec.gov Web site. He also says the receiver will
probably eventually start posting updates on the 12 Daily
Pro Web site -- which is now under his control as well.
Johnson said after the investigation ends that she wants
find other ways to help people build their Web businesses. |
