SEC shuts down 12dailypro.com / LifeClicks LLC

by louabbott on March 1, 2006

12DailyPro.com Shut down by SEC

Interesting Reading  – Classic Ponzi Scheme

Here are excerpts from the news clip below:

March 01, 2006

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.

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