There was no ill intent

An agreement with the SEC means Charis Johnson cedes control of what she considers an online ad business, others a Ponzi scheme
ANDREW SHAIN
Consumer Writer

Charis Johnson, the Charlotte woman behind what government regulators call a $50 million worldwide scheme to defraud investors, said she never intended to run an illegal business -- just one that helped people make some money from the Internet.

"I'm working with the government to fix this," Johnson told the Observer. "I think it's important for people to understand there was no ill intent. We were the moral compass in the industry. We were running our business legally as far as I knew."

Johnson, 33, ran the 12dailypro Web site that offered 12 percent daily return on membership fees from $6 to $6,000 for viewing a dozen Web sites daily. She said members could include their own sites in 12dailypro's rotation of sites for promotion. "They used this for advertising," she said. "Where else could they reach so many people?"

But what Johnson considered an Internet advertising business, the Securities and Exchange Commission considered a Ponzi scheme -- an investment built virtually solely on money gathered from new members.

The SEC accused her and 12dailypro of failing to register to sell investments and tell investors exactly how the business made money. Johnson has agreed with the SEC to hand over control of 12dailypro to a receiver, who will examine company records and try to secure refunds for members.

Johnson, who still faces civil penalties, does not deny or admit any of the SEC's allegations in signing the agreement. The FBI said Tuesday it continues to investigate the company.

She told the FBI last month that 12dailypro'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 Observer she's earned between $150,000 and $200,000.

Members continue to stand behind Johnson. "I so respect everything you have done, and we will follow you anywhere. You are one awesome lady!" wrote one member this week on the company forum.

Said Johnson about members: "The more I read, the more they became family. I was glad that I could create something that could help so many people."

Johnson, a one-time television producer and filmmaker, said she found auto-surf programs while looking for a way to earn money after moving to Charlotte from the Triad in 2004 with her husband and young daughter.

She said many programs ended quickly or treated members poorly. "I wanted to create something more mainstream," she said. "I wanted to build a community."

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.

Membership doubled most every month, she said: "I had no clue it would get this big. We did our jobs so well that people started telling their friends, families and co-workers."

Johnson told the FBI that 95 percent 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.

"Investors have the right to know the particular risk involved, not a general statement," said Kelly Bowers, the SEC's assistant Pacific region director.

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. He said he took out $5,000 before Christmas for presents and to make a mortgage payment for a relative.

"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 was not intended for people to bankroll a lot of money and she never said returns were guaranteed.

"This was never for people to make their mortgage payments," she said. "We always talked about diversifying unless you were doing this professionally."

Money belonging to 12dailypro members remains frozen in accounts held by a Tennessee electronic payment service, StormPay.

Johnson said she has no idea how much of 12dailypro members' money StormPay holds. The SEC said it's $50 million. And Johnson told the FBI that StormPay held $35 million of 12dailypro's account alone. StormPay officials did not return calls Tuesday.

Johnson said she has let go all but two of her 13 full- and part-time employees. She's not renewing the lease on a south Charlotte office. She will get $5,000 in living expenses as part of her agreement with the SEC to freeze her bank accounts.

Johnson said after the investigation ends that she wants find other ways to help people build their Web businesses.

"People are looking to me for guidance," she said. "People see value in what I've done. After what they've been through, I want to help them generate something positive out of all of this."

Seekor Lalat

Saya sedang duduk di sebuah bilik yang sunyi di Maycrofin, sebuah tempat yang aman dan tenteram yang dikelilingi pohon-pohon pain yang rendang, lebih kurang satu jam ke bandar raya Toronto. Waktunya tengahari pada penghujung bulan Julai. Saya terdengar suatu bunyi perjuangan hidup dan mati yang sedang berlangsung di hujung sebuah jendela tidak berapa kaki dari sini. Ada seekor lalat kecil yang sedang membakar sisa-sisa tenaganya dalam suatu usaha sia-sia untuk menembusi cermin tingkap tersebut. Bunyi kepak kecilnya menceritakan starategi lalat itu; "Cuba lebih gigih lagi, malangnya tidak berhasil". Usahanya yang getir itu tidak menawarkan sebarang harapan untuk berjaya. Anehnya perjuangan tersebut merupakan sebahagian dari jeratnya. Mustahil bagi lalat itu mencuba labih kuat lagi untuk berjaya memecahkan cermin kaca tingkap tersebut!. Walau bagaimanapun serangga kecil itu telah bergadai nyawa untuk mencapai matlamatnya melalui tenaga mentah dan kesungguhannya. Lalat tersebut terjerat dan akan mati di tepi jendela itu.

Sepuluh langkah di sebelah sana bilik itu , pintu terbuka luas. Hanya sepuluh saat masa pernerbangan dapat menemukan haiwan kecil itu dengan dunia luar yang dicari-carinya. Menggunakan hanya sebahagian sahaja tenaga yang sedang dibazirkan, boleh membebaskan ia dari perangkap yang disediakannya sendiri. Kemungkinan menebusi di sebelah sana itu ada, ianya sungguh mudah. Mengapa lalat itu tidak mencuba jalan yang lain? Sesuatu yang amat berlainan? Mengapa fikirannya terbuntu dengan hanya memikirkan hanya jalan ini sahaja yang dapat menjanjikan kejayaan? Apa logiknya? Mustahil baginya menembusi cermin tingkap tersebut. Dimaklumkan hanya jalan itu sahaja yang memberi makna kepada lalat tersebut, akan tetapi ini adalah satu pemikiran yang boleh membunuh.

Mencuba lebih gigih bukan seharusnya satu penyelesaian untuk mencapai sesuatu yang lebih, kadangkala ianya ternyata merupakan suatu masalah besar. Ia mungkin tidak dapat menemui kejayaan hidup.

Petikan dari En. Praise Pritcher.

Letter from John

Studiotraffic Updates

---

Hello,

Due recent events that everyone of you may be aware (Canadian Office resignation, Stormpay have froze our funds, and so forth). Was the main reason of my absence in order to think clearly on a new plan that will let this company on the business of adverstings and keep with your surfings working.

As many of you may know Stormpay is withholding unlawfully a quite considerable amount of funds reserve we have with them. This directly affected our regular operation into the advertising business, placing everyone of us in a stressed situation, which mainly affect our Top Managements Structure located in the Canada Office who could not support the pressure of such circumstances. The consequence of this situation was our Top managements Resignation and the Canadian, as well as UK,Spain and Malaysia offices got closed. Causing a quite considerable reduction of our staff at the company.

I think this information it is not new to all of you , but as I always told you there is nothing I need to hide you, and show you the current situation .

But let me tell you more about this situation and what are the future plans I am working on.

Our loyalty and well trained programming staff is still working with us, we have volunteers working on the new plan we are going to launch within a very short period of time. I have interviewed a very well trained and potencials candidates for the NEW Top management Structure. Within in a few days I will make my final decision on whom will be the new Top Managers who will be in charge of recruiting and rebuild the New Staff in charge of the payouts, support. And so forth.

Also I do need to tell you, of course due the Stormpay issue, we are not longer taking upgrades through this payment processor. On Paypal we are currently updating the paypal system improving its functionality, planning to launched again.

So at the moment we are only taking E-Gold and Studiopay upgrades. Studiopay will just only be available to upgrade using money which was surfing earnings and commissions. Once we have our Studiopay Offices opened again we will let you use this payment processor for outside fundings

About the not in profits members let me inform that you will still be able to surf as usual, and your payout, refunds, and staff support (ticket Desk and Online Chat) will be restored once our Top Managers have rebuilt the Staff Crew in a short time.

About the in profits members you are considered into the New Project in order to restore your surfing and come back to earn with Studiotraffic.

This is my last post till I come back with the NEW PLAN ready to be implemented and with accurate information for you.

This will take me a short time.I did NOT run away and hidden from none, as it was said in a few post I have read


I hope all members will understand that we are doing our best. We will continue to work hard and make sure this company will keep running.

Sincerely

John

Studiotraffic also a Ponzi Scheme? Think about it

There have been accusations about Studiotraffic being a ponzi scheme. Practically this would mean Studiotraffic does not gain much revenue from its other programs and advertising, but the payments would come from new investors ('upgraders'). There is no certain data about this as it is impossible to know how many people buy advertising credits or banner ads from Studiotraffic. Studiotraffic has refuted this accusation and points out that they do not have to rely on upgrade fees to pay their members because they use the proceeds from their other online businesses to supplement their payout fund. They have their own web radio station, an on-line shop, and a web hosting business to name but a few, and there are more revenue-generating programs in the pipeline. Studiotraffic U.S. does not seem to be able to pay off the monthly withdrawals, and John has stated that if and when the U.S. becomes too much he will have to close off the U.S. section of Studiotraffic. He also stated that he does not need the U.S. anymore because he is now opening business in China. In November, US members' accounts were blocked from surfing for "in-profit" members whilst all accounts were audited. In December the same occurred with UK accounts.

Just recently, there seems to be a move towards a Kennedy-esque era of 'ask not what your country can do for you', with people being barred from surfing until they agree to 'work' for Studiotraffic. Most recently this has occurred with members of the UK, who from January 2006 are required to join "sales teams" or contribute in some other way to avoid losing their accounts. John Horan has stated publically that the UK was selected for reasons of poor member contribution, rudeness to staff and lack of profitability.

They have also introduced an intiative for those in profit to donate additional earnings into a fund called the Global Advertising Campaign (GAC), essentially asking such said members to contribute to the future while helping to ensure the longevity of Studiotraffic. GAC states that a percentage of the money you earn has to be returned to help studiotraffic.

John has recently stated that the auditing process is soon to be ended, but that affected members will now be required to compound all earnings for six months, rather than the three originally stated. This means that members will not be able to withdraw any earnings for this period.

All of these matters have led to speculation that studiotraffic is suffering from money problems. However this cannot be proven.

Auto Surf Programs Put on Notice After 12 Daily Pro Debacle

The federal regulators that took away control of 12 Daily Pro from it's administrator, Charis Johnson, have a warning for all autosurf programs now advertising on the net.

Randall Lee, the regional director of the Securities and Exchange Commission and a former U.S. attorney says, "One of our hopes is that as a result of this case ... it will send a message to owners of autosurf programs out there. If you cross the line and operate a fraudulent business, we will prosecute you."

On Wednesday, a federal judge in Los Angeles signed an order turning over 12 Daily Pro -- all of it's records and assets -- to a receiver. That order was signed by attorneys for both the SEC and Charis Johnson. Lee says Johnson admitted that 95% of the money paid out came from new investors. He says, "There were no outside investments, no business... it was a nearly pure Ponzi."

Lee also had a word of advice for people looking around for big money -- fast and easy. "It's critical that we help people understand how to make smart investments." He says incredible returns on investment for little or no work is a recipe for financial disaster.

Even though a court-appointed receiver is now taking control of 12 Daily Pro and some $50,000,000 has been preserved , those experienced with these types of investigations say 12 Daily Pro investors will likely get back very little.
"Hundreds of thousands of investors. Millions of Dollars," says Jake Given, a forensic accountant who now works for Price Waterhouse Coopers. "Most likely they're not going to get much money back. The average is only a few cents on the dollar." What's more, there's very little those investors can do but wait.

Lee says the receiver will be "reaching out" to those who have lost money. He advises people to watch for updates on both the www.sec.gov web site, as well as the 12 Daily Pro web site. He expects the receiver will eventually post updates for investors on those sites.

For those wishing to file a complaint in the on-going criminal investigation being conducted by the FBI, you can do so at www.ic3.gov.

Story by: Brent Hunsaker
brent@abc4.tv

The S.E.C. has issued a standing order preventing chargebacks against those purchases/investments.

The S.E.C. has issued a standing order preventing chargebacks against those purchases/investments. Any customer requesting a chargeback or refund either through their credit card issuer or bank are in violation of the order. Specifically, users are prohibited from “using self help (including, without limitation, initiating or processing chargebacks of any monies used to purchase or upgrade membership units in or with 12DP) or executing or issuing or causing the execution or issuance of any court attachment, subpoena, replevin, execution or other process for the purpose of impounding or taking possession of or interfering with”.

For a copy of the complete S.E.C. order, visit:

http://blog.1informative.com/sec_v_johnson_etal.pdf

12 Daily Pro Now Under Federal Control

12 Daily Pro investors may eventually get some of their money back, but it is going to take a while.

For the first time, Charis Johnson is talking to the media. She tells the Charlotte Observer that everything was legal as far as she knew, and she says shes now working with the government to fix this

But a judge in Los Angeles effectively took Johnson out of the business picture. 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 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.

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.

And yet Lee admits, We cant be on every street corner. We cant know what's going on in every corner of the internet.

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.

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.

Story by: Brent Hunsaker
brent @abc4.tv

“Auto-Surfing”: What You Need to Know

In the world of marketing, people often get compensated — with cash or free products and services— for doing fairly easy things, like sampling new ice-cream flavors, filling out surveys, or allowing a firm to monitor the television shows you watch or the websites you visit. While some “money for nothing” opportunities may be perfectly legitimate, others can turn out to be frauds.

“Auto-surfing” is a form of online advertising that purportedly generates advertising revenue for companies that want to increase traffic to their websites. The premise behind auto-surfing is that companies that advertise on the Internet are willing to pay to increase traffic to their web sites. These companies hire an auto-surf firm or “host,” which in turn pays individual web surfers to view certain websites on an automatically rotating basis. The more sites the individual visits, the more money he or she stands to earn.

While auto-surfing may sound easy and appealing — and risk-free — there can be a hitch. Some auto-surf programs require their surfers to pay to participate, although perhaps not initially. When you first sign up to auto-surf, the firm might assign a limited number of sites for you to visit and pay you accordingly. Once you’ve made a modest amount of money, the firm might encourage — or even require — you to purchase a “membership” so that you can maximize your earnings. The program will promise high — often double or triple digit — returns on your investment in the program, often within days or weeks of joining.

The line you’ll hear is that the more you click, the more you collect. But the reality is that any scheme that requires you to pay to participate — and promises handsome rewards in no time at all for little to no effort on your part — bears many of the hallmarks of a “Ponzi” or pyramid scheme. These schemes look deceptively legitimate because the fraudsters behind them typically use money coming in from new recruits to pay off early stage investors. But eventually the pyramid will collapse when it gets too big. It’s simply not possible to “rob-Peter-to-pay-Paul" forever.

The SEC warns investors to be wary of any sort of “get rich scheme quick” scheme — and to be especially leery of opportunities that require you to pay to play. Before you pay a dime to make extra cash in your spare time, be sure to do a little due diligence:

• If it sounds too good to be true, it probably is. Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you’ll get substantially more could be highly risky — and that means you might lose money.
  
  
• Check out the company before you invest. Contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. Also call your state securities regulator to see whether the company, its officers, or the promoters of the opportunity have a history of complaints or fraud. If a supposedly upright business lists only a P.O. box, you'll want to do a lot of work before sending your money!
  
  
• Steer Clear of Testimonials. Watch out if the company’s promotional materials, contain “testimonials” from supposedly satisfied customers, especially if all the “testimonials” are full of praise.
  
  
• "Guaranteed returns" aren't. Every investment carries some degree of risk, and the level of risk typically correlates with the return you can expect to receive. Low risk generally means low yields, and high yields typically involve high risk. If your money is perfectly safe, you'll most likely get a low return. High returns represent potential rewards for folks who are willing to take big risks. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are "guaranteed" or "can't miss." Don't believe it.

For more information on investing wisely and avoiding costly mistakes, please visit the Investor Information section of the SEC’s website at www.sec.gov/investor.shtml.

http://www.sec.gov/investor/pubs/autosurf.htm

SEC Halts “Paid Autosurf” Internet Ponzi Scheme that Raised Over $50 Million from 300,000 Investors Worldwide

FOR IMMEDIATE RELEASE

2006-26

Washington D.C., Feb.27, 2006 — The Securities and Exchange Commission today announced the filing of securities fraud charges against the operators of www.12dailypro.com, a “paid autosurf program” that in fact was a massive Ponzi scheme which raised more than $50 million from over 300,000 investors worldwide by offering a 44% return on investment in just 12 days. As a result of the SEC’s charges, the defendants, Charis Johnson, age 33, of Charlotte, N.C., and her companies, 12daily Pro and LifeClicks, LLC, ceased their solicitation of investors and agreed to a freeze of all their assets and the appointment of a receiver who will take control of the companies’ operations.

According to the Commission’s complaint, which was filed last week in federal district court in Los Angeles, Calif., www.12dailypro.com claimed to be a paid autosurf program — a form of online advertising program that purportedly generates advertising revenue by automatically rotating advertised websites into a viewer’s Internet browser. Advertisers purportedly pay “hosts,” which in turn pay their members to view the rotated websites. The Commission’s complaint alleges that 12daily Pro’s sale of membership units constituted the fraudulent and unregistered sale of securities under the federal securities laws. The Commission also today posted to its Web site an investor alert concerning autosurf programs. The alert can be viewed at www.sec.gov/investor/pubs/autosurf.htm.

Randall R. Lee, Regional Director of the Commission’s Pacific Regional Office, said, “Paid autosurf programs have become an enormous industry on the Internet. When these schemes depend on attracting new members in order to pay returns to current members, they are destined to collapse. The promise of guaranteed, double-digit returns in a matter of days should raise a red flag. We urge the public to be aware that paid memberships in these schemes may be a form of investment, and to exercise extreme caution before investing in any get rich quick scheme.”

According to the Commission’s complaint, the 12daily Pro website, recently ranked as the 352nd most heavily trafficked website, solicited investors to become “upgraded members” by buying “units” for a “fee” of $6 per unit, with a maximum of 1,000 units. 12daily Pro promised to pay each upgraded member 12% of his or her membership fee per day for 12 days. At the end of 12 days, the member purportedly would have earned a total of 144% of his or her original membership fee, 44% of which would be profit on the membership fee. To receive the promised payment, a member purportedly must view at least 12 web pages per day during the 12 day period. The amount of returns that 12daily Pro would pay its members, however, was in fact dependent solely on the amount of each member’s investment, not on the amount of website-viewing or any other services rendered.

The Commission alleges that the defendants defrauded investors by operating 12daily Pro as almost a pure Ponzi scheme — using new investor monies to pay the promised returns to existing investors — in violation of the federal securities laws. The defendants falsely represented that upgraded members’ earnings “are financed not only [by] incoming member fees, but also with multiple income streams including advertising, and off-site investments.” In fact, at least 95% of 12daily Pro’s 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 touted by the defendants were either negligible or non-existent. In addition, undisclosed to investors, Johnson transferred more than $1.9 million in investor funds to her personal bank account since mid-2005.

Johnson and her companies have consented to the entry of a court order that permanently enjoins them from future violations of the antifraud provisions of the federal securities laws, imposes a freeze on their assets, prohibits the destruction of documents, and appoints Thomas F. Lennon as permanent receiver over the assets of 12daily Pro and LifeClicks, LLC. The order is subject to approval by United States District Judge Nora M. Manella. Johnson and her companies consented to the order without admitting or denying the allegations in the complaint. The Commission’s complaint also seeks repayment of ill-gotten gains and civil money penalties; the amounts to be sought will be determined at a later date.

The Commission’s complaint alleges that the defendants violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act.

This matter was referred to the Commission in early February by several members of the public. Complaints and tips from the public are vital to the Commission’s mission to protect investors, and the Commission staff reviews each and every complaint it receives.

For further information contact:

Randall R. Lee
Regional Director
Pacific Regional Office
(323) 965-3807

Michele Wein Layne
Associate Regional Director
Pacific Regional Office
(323) 965-3850

Kelly Bowers
Assistant Regional Director
Pacific Regional Office
(323) 965-3924