TELECOM Digest OnLine - Sorted: SEC Shuts Down a Scammer

SEC Shuts Down a Scammer

Spam Daily News (
Sat, 18 Mar 2006 15:17:53 -0600

From Spam Daily News

SEC shuts down; Federal court appoints receiver to take
control of assets

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,, 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 premise behind autosurfing is that companies that advertise on the
Internet are willing to pay to increase traffic to their Web
sites. The more sites the individual visits, the more money he or she
stands to earn.

Autosurf services offer advertising packages for as low as $.05, so
that's the cost to the advertiser, somewhere between $.05 and $1 per
thousand (CPM).

These services pay a fixed $.01 to $.10 per THOUSAND impressions to
its autosurfing members. That's the market value for the autosurfer's
work of viewing ad impressions.

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

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 Thomas F. 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."

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'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.

"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, 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

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.

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. 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,,, etc -- which mirror or link to
aiming to earn a 12% referral commission.

Online since April 18, 2005, is ranked as a Top 500
Website (currently #346) in the world. According to Alexa, the Top 500
Websites account for 45% of the total Internet Web traffic.

"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 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 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

Just after the "advice" follows an anonymous "testimonial" which
resembles a Scam 101 text:

Our experience:

We joined 12DailyPro on 12/3/05 with just $84. We have added to this
since then. From this small base we have managed to grow our
contributions. We are currently awaiting payment on $7,876.

Initially we were very skeptical as to how this program would work, as
most people would be. A great deal of research was on done. Many sites
such as this one, explained the process, and offered proof of the
legitimacy of the program. Through the forums information was gained
and even proof.

Initial skepticism has been replaced ... we are overjoyed to have
found this opportunity. Long may it continue!!

ABC4.COM Investigative reporter has been unable to locate Charis
Johnson. At the location she was having her members send her funds for
her legal expenses was actually at an UPS Store Mailbox. At her
address on file with the State when she registered her LLC, she was
also not found. Instead they found someone else living there. They
stated that Charis moved in January.

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 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.

The FBI is encouraging persons involved with 12daily Pro who suspect
being a victim to file a complaint with the Internet Crime Complaint
Center at

SOURCE: Charlotte Observer; U.S. Securities and Exchange Commission;
ABC News; eWEEK; InternetNews; Alexa

[TELECOM Digest Editor's Note: Is it just me, or is 99 percent of the
internet just spams and scams these days? If I have seen that Johnson
lady's scam for her Ponzi scheme once on television, I have seen it
a hundred times ... All I can say is this Charis Johnson lady is a
fraud, a total fake, and I hope when they catch up with her -- if they
do -- they totally fry her. Not only her, but all the people who make
those outlandish claims about money they make on the internet.

Just this afternoon, there was a commercial for a couple other web
sites where, it is alleged, you can make a 'minimum of five thousand
dollars per month'. One man on those commercials this afternoon
claimed 'he likes working at home so much, he decided to built a new
house to live in with his profits from running a web site. Then he
tells us 'he has not decided yet how much money he wants to earn next
month; probably at least ten thousand.' I see all those television
commercials and have to wonder if the person(s) who wrote the
commercials were seeking an audience of mentally handicapped
kindergartners. Is it just me? Are there actually people out there
making money like that on the web? I will admit that since my brain
aneurysm I have felt pretty rotten most of the time, and not very
enthusiastic about the net. But some days I work my tail off online
and do not _come anywhere close_ to making the type of money Charis
Johnson and those other jokers and liars talk about. Do you know
anyone who does? PAT]

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