SEC shuts down $50 mln Internet Ponzi scheme

Joel Rothstein

WASHINGTON: U.S. regulators last week charged the owner of 12dailypro.com and her two companies with fraud for running a $50 million Ponzi scheme, according to a statement released on Monday.

The U.S. Securities and Exchange Commission alleged that Charis Johnson, 33, raised more than $50 million from more than 300,000 investors by convincing visitors to the Web site that they could earn a 44 percent return on their investments in 12 days by looking at Internet advertisements.

12dailypro.com was the 352nd most highly visited site on the Internet, according to the SEC.

Johnson's companies, 12daily Pro and LifeClicks LLC, were also charged.

The scheme, which the SEC calls "paid autosurf," required users to buy $6 "units" - up to a maximum of 1,000 units - and to view advertisements from what were described as paying advertisers.

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 is also alleged to have transferred more than $1.9 million to her personal accounts since the middle of 2005, the SEC said.

Without admitting or denying the charges, Johnson and her companies agreed to stop seeking further investors, to freeze assets and to accept a court appointed receiver over corporate assets.

Johnson's attorney did not immediately return a call seeking comment.

The commission is also seeking the repayment of ill-gotten gains and further fines.

The SEC also released a general warning on paid auto-surf schemes on Monday at http://www.sec.gov/investor/pubs/autosurf.htm.