Popular online "Auto-surf" HYIP 12DailyPro has stopped accepting new members after it's online payment processor, StormPay, has frozen 12DP's account. This comes after StormPay sent out emails to most all of the auto-surf programs that accept StormPay as a payment processor to upgrade accounts, telling it that it must use only StormPay or a different processor.
This initially created an uproar in the online HYIP investment community as they saw StormPay as the villain, knowingly accepting payments for these auto-surf programs for years and making a fee doing so, then all of the sudden demanding that these companies revoke the ability to use any other payment processors other than StormPay, creating a monopoly for the processor for taking HYIP payments. However, it seems there is much more to the story than simply just StormPay freezing 12DP's account and attempting to force other auto-surfs to choose between SP or other processors.
The Start of the Problems
In late December of last year, risky payment processor, e-Gold was raided by the FBI as reported here on Pogue's Blog. After this event, many companies stopped accepting e-Gold as payments or money transfers, including StormPay and 12DP. Many people have speculated that this was a wider action by the government to possibly crack down on shady investment programs and ponzi schemes that work by paying out people at the top of the pyramid and then collapse once they run out of money or new members to recruit into the program. Most all legitimate payment processors, including PayPal, have specific rules in place that do not allow money to be transferred to questionable accounts. PayPal's acceptable use policy specifically has a clause against "Multi-level Marketing, Pyramid and Matrix Programs". SP has a similar policy against what it calls "Get Rich Quick Schemes", saying:
17. Get Rich Quick" Schemes: Get Rich Quick Schemes are prohibited resell items by StormPay. Get Rich Quick schemes include any type of self-employment, start-up businesses, or investment opportunity where the claims of profit or returns on investment are unrealistic or unsupported. By law, if a business opportunity costs $500.00 USD or more, the promoter is required to support any claims regarding earnings or profits with written documentation.However, in the past, StormPay itself has been accused by the Tennessee Securities Division of the Department of Commerce & Insurance, of running a ponzi scheme. The Better Business Bureau, which gives StormPay an unsatisfactory rating, says the following on it's website regarding StormPay:
Pyramids don't pay. StormPay Inc. and the Federal Trade Commission caution consumers about clubs or programs that promise quick money for recruiting new members. Don't bank on the pyramid promise that someone else will pay you. For more information on get-rich-quick schemes, visit the FTC at www.ftc.gov.
Government ActionsThe full Cease & Desist order can be read on the State of Tennessee's website. (PDF)
On August 7, 2003, the Tennessee Securities Division of the Department of Commerce & Insurance issued an "Order to Cease and Desist" (file number 03-020) with TymGlobal, Inc., StormPay, Inc. and John R. McConnell, Jr.
The order states that TymGlobal and StormPay are under common ownership and/or control. TymGlobal operates an internet website which is registered to StormPay. On the internet website, respondents are operating a pyramid and/or Ponzi scheme promising large returns on investments for participating in the scheme. The order further states that TymGlobal has not registered any securities offerings with the Division pursuant to Tennessee Securities Act of 1980. Nor has the company registered with the Division as a broker-dealer, agent of a broker-dealer or investment adviser. Also, the respondent StormPay has not registered any securities offerings with the Division nor has the company registered with the Division as a broker-dealer, agent of a broker-dealer, or investment adviser. John R. McConnell, Jr. has not registered with the Division as a broker-dealer, an agent of a broker-dealer or as an investment adviser.
Potential investors were given the opportunity to invest in both partnership shares as TymGlobal as well as to participate in various Ponzi schemes. Respondents promised a high return. The offering of participation in the schemes sold by the respondents is an investment contract and thus, a security under the act.
The Division ordered the respondents TymGlobal, StormPay and John R. McConnell, Jr to cease and desist the conduct of a broker-dealer in the state of Tennessee until such time as it effectively registers with the Division. The order did not intend to prohibit lawful conduct of the respondents.
For additional information concerning this order, please contact Daphne Smith, Assistant Commissioner for Securities, State of Tennessee, Department of Commerce and Insurance, Suite 680, 500 James Robertson Pky, Nashville, TN 37243.
12 Daily Pro
12 Daily Pro currently has 2 entries in the BBB's website, one listed with an "unknown" address and one registered in Tampa, Florida. Both have no complaints against them. However, in an interview on a recent news report by ABC4 (KTVX) in Salt Lake City, Utah, a representative from the BBB, Jane Griggs, was quoted as saying "The company is actually located out of Charlotte, NC [...] Definitely use caution, it's a high risk, you're probably going to lose your money".
The report by ABC4 shed light on many facts about 12DP that could be potentially damaging to it's users, beyond the fact that it has simply stopped accepting upgrades and new members. According to a news report by them, they are under investigation by Attorney Generals offices in two states. "ABC4 News did successfully contact the Attorneys General offices in both North Carolina and Georgia. Both confirmed active investigations into LifeClick L.L.C. and 12 Daily Pro, but neither has yet to take any action." LifeClick LLC is apparently the parent company of 12DP, whose sole operator is a woman named Charis Johnson, who is reported to run 12DP out of her apartment in a "bad neighborhood". There has been a great deal about her posted on the talkgold forums. Although, apparently no one has looked up official public records about her to determine who she is or if she has any type of a criminal record, her official LLC filing papers have been posted (see the link above) as well as her address and phone number. The news reporters at ABC4 have left messages requesting a her to "provide a detailed prospectus that shows exactly how the company can generate revenues to support its interest claims."
According to most consumer advocacy groups, a true steady revenue stream offered by 12 Daily Pro would be impossible to offer. The SEC titles HYIPs "Prime Banks" and calls the people who operate them fraud artists. It has a detailed explanation of how they work on their website and asks for anyone who has information on them to immediately report them to the SEC. The SEC also says they have taken action against numerous operators of these types of system, but it has failed to stop their spread. This is probably because the large amounts of HYIP scripts available for sale online, and hosting companies who are more than happy to take the money of operators of these companies. According to the online fraud watchdog, Quatloos!, any investment firm that is not registered with the state's SEC where it's located, it is illegal.
Often HYIPs will claim enormous returns on investments that would be unlikely in any type of market, regardless of how they operate. Despite that, even if returns were high, it would be impossible to sustain that type of return because of market changes in any type of investment conceivable. The only way this type of system would be able to operate with returns that are never changing throughout a long time period would be through a ponzi system, whereby individuals are paid returns from the new members that are being recruited and putting money into the fund. So called "auto-surfs" are just new internet based versions of this type of fraud. In reality, there would be absolutely no way that a company would pay that large of an amount for a person to view their website (not to mention the fact that people are not even required to view the site). Regardless of which type of investment used to attempt to fund this account (forex, stocks, bonds, etc) it would be impossible to sustain returns of this amount for periods of time without doing something illegal. If anyone can produce evidence to the contrary, I would be very interested in seeing it to determine how these types of auto-surfs can create the investment returns that they claim for customers. Even online advertisements generally pay pennies on the dollar to be clicked on, and to be displayed is even less, if anything at all.
Currently, StormPay is not allowing users to login to it's service, making many people wonder if the service itself is still in business. It is highly likely that since 12DP is under investigation, SP is as well. SP posted a message in their update section of their site that they are experiencing denial of service attacks and that they will continue to operate in the future.
Rumors Put to Rest.A call to StormPay's main line went unanswered. I left a message and will update here if I hear back from them.
Recently StormPay.com closed the accounts of what appear to be some major ponzi schemes. These account closures came as the early results of investigations into those businesses by outside investigational organizations as well as our own internal investigations.
As a result, possible victims of these businesses are attempting to retaliate against StormPay.com by spreading false rumors and performing DDOS attacks against StormPay's servers. The rumors include such things as "StormPay.com has gone out of business", "Their building has been burned down", and other falsehoods. The DDOS attacks are "Denial of Service" attacks where massive amounts of traffic is sent to the website whereby disallowing legitimate web traffic to reach the website. These attacks only prevent legitimate traffic from reaching the website and pose absolutely no threat to the security of your StormPay account.
StormPay will CONTINUE to cooperate with authoritative investigations into these businesses which very heavily appear to be nothing more than illegal ponzi or pyramid schemes. Our hopes are to get these investigations completed as early as possible so that victims can quickly be refunded monies that have been captured in those account closures. However, we must warn that those who are impeding the investigation are only slowing the process for everyone involved.
What Other People Are Saying
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I will update this story as I here more. Comments are welcome, as always.
I have posted the news reports from ABC4 online for viewing. The files below are encoded in Divx, so you will need the codec to view them if you don't have it installed. They are uploaded to Rapidshare, so you might have to wait to download all of them. I apologize if the audio is off sync. I spent all day yesterday trying to edit them and make them work properly.
12 Daily Pro Video 1 (10MB)
12 Daily Pro Video 2 (9MB)
12 Daily Pro Video 3 (15MB)