SEC Shuts Down Paid Auto-Surf Ponzi Scheme

The Securities and Exchange Commission has charged the Charis Johnson of Charlotte, North Carolina, with securities fraud by running a “paid auto-surf” program. According to the SEC, Johnson bilked more than 300,000 Internet users worldwide out of more than $50 million by claiming to offer more than a 44 percent return on an initial investment in 12 days’ time. As a result of the charges, Johnson’s companies have ceases soliciting investors and have agreed to a freeze of their assets.

The filing alleges that Johnson’s companies, 12daily Pro and LifeClicks, LLC, claimed to be a form of paid auto-surf program, generating advertising revenues by automatically rotating online advertisements in a user’s Web browser. Advertisers would pay “hosts,” which in turn would pay Internet users to view the rotating ads. 12dailypro.com would solicit members to “upgrade” by purchasing $6 “units,” up to a maximum of 1,000 units. In turn, 12dailypro.com promised to pay each upgraded member 12 percent of his or her membership fee per day for 12 days, for a 44 percent profit on the membership fee. 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 result is a close relative of the classic Ponzi scheme, where income from new investors is used to pay returns promised to existing members. The SEC alleges at least 95 percent of 12dailypro.com’s revenue came from new member investments.

The SEC has posted a consumer alert regarding paid auto-surf programs and online Ponzi schemes. While Johnson and her companies have admitted to no wrongdoing, they have consented to a court order permanently barring them from future antifraud violations, prohibiting destruction of documents, freezing their assets. The SEC is also seeking repayment of money obtained using the fraud, as well as unspecified civil penalties.

Bottom line: “get rich quick” schemes are too good to be true