By Julie Espinosa
Securities fraud charges have been filed against 12daily Pro, which was a “massive Ponzi scheme” dealing with millions of dollars, according to court documents filed by the U.S. Securities and Exchange Commission.
At least 95 percent of 12daily Pro member payout came from membership fees, the SEC stated in a news release Monday. StormPay, 12daily Pro”s payment processor, currently holds frozen $50 million from 300,000 users.
Charis Johnson, administrator of 12daily Pro, has improperly transferred $1.9 million of member funds to her personal accounts. She refuses to freeze them without a court order, court documents state.
Based on public complaints and initial fact-finding, the SEC filed a partial settlement in a Los Angeles federal district court. The SEC seeks an asset freeze and hopes to do a thorough accounting. They also seek eventual civil compensation, though the amount has not yet been determined. Johnson, 33, consented to the court order without admitting or denying the allegations.
The 12dailypro.com Web site claimed revenue came from membership fees, advertisers and other unidentified investments, but the SEC says the majority came from new and existing member upgrades. They found the other “multiple income streams” were negligible or nonexistent.
Members joined 12daily Pro with the confidence that after only 12 days, they, like everyone else who joined the less-than-a-year-old company, would be guaranteed a 44 percent profit. Their profit was based on the size of their “upgrades,” or nonrefundable membership fees, ranging from $6 to $6,000.
The SEC says upgrades constituted an investment because only paying members got paid for autosurfing – clicking on a program that automatically cycled through 12-50 ads.
Returns were based solely on the amount of each member”s investment, not on the amount of autosurfing or any other services rendered, the North Carolina Securities Division stated in a cease and desist order issued Thursday against Johnson and 12daily Pro.
Both regulatory bodies allege 12daily Pro willfully violated state and federal securities law. SEC Pacific Regional Director Randall R. Lee warned consumers against 12daily Pro and other autosurf programs in the SEC news release.
“When these schemes depend on attracting new members in order to pay returns to current members, they are destined to collapse,” Lee said. “The promise of guaranteed, double-digit returns in a matter of days should raise a red flag.”
Johnson wrote in an online forum post she believes the SEC only started investigating 12daily Pro because of a tip from StormPay as part of the ongoing feud over frozen accounts.
“The fact about this is that while we were cooperating with the FBI and the U.S. attorney”s office, StormPay was going behind everyone”s back and feeding lies to the SEC,” she wrote.
Since member assets were frozen weeks ago, 12dailypro.com hasn”t accepted monetary upgrades. A few days ago, it stopped accepting new members. Many members still staunchly support Johnson, though their faith in being refunded is waning.