Securities commision: Utah-based online ad business is actually a $207M Ponzi scheme

Securities commision: Utah-based online ad business is actually a $207M Ponzi scheme

(Shutterstock)


Save Story
Leer en español

Estimated read time: 3-4 minutes

This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.

SALT LAKE CITY — Federal investigators say a Utah man's online advertising business is actually a $207 million Ponzi scheme that is bilking investors around the world.

According to U.S. District Court filings Tuesday, the Securities and Exchange Commission is accusing Charles David Scoville, of Murray, of using his online advertising company Traffic Monsoon to house a profit-sharing program that was taking in about $25 million each month.

According to the lawsuit, Traffic Monsoon offers seven online advertising products to its members, who participate in the internet traffic exchange by clicking each day on a set of online advertisements while other members click on their own ads in return.

However, 99.6 percent of its revenue came from sales of "AdPacks," which include an option to share in the company's profits, a program that Traffic Monsoon called a "perfect winning combination."

AdPack customers pay $50 to receive 20 clicks on each of their own ads and 1,000 website visits, a service that without the profit sharing option would cost $10.95. Each AdPack has the possibility, but no guarantee, of making back $55 for customers if they click on the required 50 ads per day for five seconds apiece.

When those profits were paid out, the money was actually coming from other AdPack purchases and not from click-based revenue or ad sales.

"In reality, Traffic Monsoon's advertising business is an illusion designed to obscure the fact that it is offering and selling a security in a pure Ponzi scheme," according to the lawsuit. "There is no way any returns could be paid to investors without the sale of new AdPacks. This fact is not, however, disclosed to Traffic Monsoon investors."

Many investors hold about $100,000 worth of AdPacks, the lawsuit states.

Under Scoville's model, Traffic Monsoon is also unable to deliver the promised amount of web traffic through its ad sharing, the Securities and Exchange Commission said.

Since Scoville established his company in October 2014, Traffic Monsoon has made $207 million selling AdPacks to more 162,000 people, 90 percent of whom live outside the United States, according to the lawsuit.

"The program appears to be most popular in countries that are also some of the poorest in the world. For example, the Traffic Monsoon website is the 385th most visited website in Bangladesh, 366th in Venezuela, and 517th most visited site in Morocco," the lawsuit states.

The bulk of Traffic Monsoon's revenue was kept in a PayPal account up until the company was flagged as a potential Ponzi scheme and its account frozen — with $60 million still in it — five months ago, the lawsuit says.

Customers were never informed of the freeze, the lawsuit says, but were told the company was taking its business to other financial institutions.

When the PayPal freeze was lifted earlier this month, Scoville began moving the money in $100,000 increments, the maximum PayPal allows, to other bank accounts, including his personal account, the Securities and Exchange Commission reported.

"Since July 11, 2016, Scoville has made 256 withdrawal requests and withdrawn over $25 million," the lawsuit indicates. "Since the freeze was lifted, he has been withdrawing funds, apparently for his own benefit, as quickly as possible."

The Securities and Exchange Commission lawsuit calls on the court to freeze Traffic Monsoon's assets and order Scoville and his company to cease the allegedly fraudulent practices, refrain from discarding or destroying evidence, and to pay penalties.

A temporary restraining order freezing Traffic Monsoon's assets was signed Wednesday by U.S. District Court Judge Jill Parrish. A hearing on the decision has been ordered for Aug. 5.

Most recent Utah stories

Related topics

Utah
McKenzie Romero

    STAY IN THE KNOW

    Get informative articles and interesting stories delivered to your inbox weekly. Subscribe to the KSL.com Trending 5.
    By subscribing, you acknowledge and agree to KSL.com's Terms of Use and Privacy Policy.

    KSL Weather Forecast