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UPDATE: SEC shuts down 12dailypro.com; Federal court appoints receiver to take control of assets

March 01, 2006

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, 12dailypro.com, 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 alleged.

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 and to accept a court appointed receiver over corporate assets.

Federal District Court Judge Nora Manella froze the assets of 12Daily Pro and Lifeclicks and the personal assets of Charis Johnson, subject to cost of living allowance of $5,000 per month, and 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. The receiver has full authority and control over the operations of Lifeclicks and 12Daily Pro and all of their assets wherever located.

Lennon's job, in addition to investigating the activities of 12Daily Pro, is to gather the remaining assets of 12Daily Pro and Lifeclicks, and equitably distribute those assets to investors and claimants. The Permanent Injunction has the effect of freezing those assets and prohibiting anyone, including investors, from attempting to obtain those assets. More specifically, the Permanent Injunction, prohibits all actions against 12Daily Pro and any assets of 12Daily Pro. This prohibition is extremely broad and explicitly prohibits efforts by 12Daily Pro members from enforcing claims through self-help, such as initiating credit card charge backs, or reversing electronic fund transfers.

This is a serious matter and anyone with actual knowledge of the Permanent Injunction that takes any of the prohibited actions may be found in contempt of Court, with the resulting consequences. Moreover, the actual chargeback will likely not be allowed to stand, if initiated after the Permanent Injunction was issued. Rest assured that any funds actually recovered by investors exercising self-help before or after the issuance of the Permanent Injunction will be set off against any distributions those investors might otherwise have received from the receivership case. The Permanent Injunction also prohibits any interference with the Receiver taking control of 12Daily Pro and Lifeclicks, or their subsidiaries or affiliates, or any interference with the Receiver's discharge of his duties.

Lennon has commenced an investigation and has already secured the computer records of 12Daily Pro and Lifeclicks. He will continue to marshal the assets of 12Daily Pro and Lifeclicks, including those held by third parties.

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."

Charis Johnson (source: ABC)
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 12dailypro.com'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 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.

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.

12DailyPro.com 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 12dailypro.co.uk, 12dailypro.us, 12dailyproworks.com, etc - which mirror or link to 12dailypro.com aiming to earn a 12% referral commission.

Online since April 18, 2005, 12dailypro.com 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 12dailypro.com 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 12dailypro.co.za 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 12DailyPro.

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 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.

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


Case No. CV 06-01018-NM (PLAx)

Based on the ex parte application for order clarifying the scope and application of the Permanent Injunction Order submitted by Thomas F. Lermon ("Receiver"), Court-appointed permanent receiver for LifeClicks, LLC, 12daily Pro ("12DP"), and their subsidiaries and affiliates (collectively, the "Receivership Entities"), notice thereof being appropriate under the circumstances, and good cause appearing therefor,

1. All credit and debit card chargebacks, electronic fund transfer adjustment entries or returns, and other attempts to reverse transfers to 12DP, StormPay, Inc., EMO Corp., and all other Internet payment processors doing business with the Defendants initiated by 12DP investors after Feb 28, 2006, are enjoined. All credit or debit card issuing banks or banks at which 12DP investors hold accounts receiving notice of this order, are enjoined from processing or honoring the above these requests, notwithstanding those banks' obligations under the Electronic Fund Transfer Act or the Truth In Lending Act.

2. All entities involved in processing payments made by 12DP investors, including StormPay, EMO Corp., eGold, Ltd., credit card associations, credit card payment processors, acquiring banks and automated clearing houses operators, shall cooperate to the fullest extent possible with the Receiver's efforts to implement and enforce the Permanent Injunction Order and this order, including disseminating the orders to all issuing banks, participant banks, and other affected financial institutions, and assisting in obtaining those banks' compliance.

Dated: March 14, 2006

Hon. Nora M. MANELLA
Judge, United States District Court

Tom Lennon will prepare a report to be filed with the District Court within the coming weeks which will address his preliminary findings. This document will be available in the records of the District Court and on the Receiver's website.

As part of the ongoing effort to provide information to investors and creditors, a page has been set up on the Receiver's Web site at tlennonfor12dailypro.com.

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 www.ic3.gov

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