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Comment The Post Below...
Greetings,
Caution: Beware of "autosurf" sites that promise to pay
investors for viewing a few online advertisements. They are
just out to get your money...Read today's article to learn
more about this!
Best,
Mandi
Be sure to visit the SoHo News and Tips blog!
SoHo News & Tips Blog
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Online 'Autosurf' Scams Use Legal Businesses
By MARK MAREMONT
Staff Reporter of The Wall Street Journal.
On Monday, the Securities and Exchange Commission
issued a warning to the public: Beware of "paid
autosurf" Web sites.
Such sites, most of them of recent origin, promise
to pay investors for viewing a few online advert-
isements. A "member" goes to the site and clicks
on an automatic surfer that visits a series of ads,
after which the viewer is rewarded with monetary
credit.
There are dozens of such sites, some of which are
legitimate businesses. But the SEC said that others,
especially those promising to pay members huge
profits, can be scams.
Yet the scams wouldn't be possible without the help
of larger, well-established Internet businesses,
raising the question of whether these companies are
-- wittingly or unwittingly -- playing a role in
the growing scourge of Internet-based frauds.
Yesterday, for example, at least one suspect auto-
surf site displayed a "PayPal Verified" logo,
meaning users could pay and receive funds using
the popular PayPal online payment service owned by
eBay Inc. And over on eBay's Internet auction site,
sellers were advertising inexpensive software
templates that would allow buyers to easily set up
their own autosurf sites -- which could be used to
scam money out of the unwary.
A PayPal spokeswoman says the Web site in question
conforms to its policies, but she adds that PayPal
is taking a closer look at autosurf sites in light
of the SEC's warning. An eBay spokesman says that
the company is reviewing the autosurf postings but
adds that eBay likely would take no action if the
software also has legitimate uses.
The SEC warning was prompted by the recent collapse
of one of the biggest paid autosurf sites,
12DailyPro.com, which promised members a 44%
profit in just 12 days -- a return that the SEC
said amounted to more than 1,300% annually. Members
could join 12DailyPro at no charge but got paid
only if they "upgraded" to a paid membership and
signed on to view ads 12 days in a row. Some
investors put in as much as $6,000 every 12 days.
The agency last week moved to freeze funds
controlled by the Charlotte, N.C., company that
operated 12DailyPro, saying it had defrauded more
than 300,000 people of more than $50 million. The
agency said 12DailyPro claimed it generated reven-
ue in part from advertisers willing to pay its
members to view their online ads. In reality, the
SEC charged, at least 95% of revenue came from
fees paid by other members, making the site "almost
a pure Ponzi scheme."
Named for Charles Ponzi, an Italian immigrant to
the U.S. who gained notoriety early in the 20th
century, a Ponzi scheme promises huge returns to
investors but pays them with money from subsequent
investors rather than from revenue generated by
business. "Paid autosurf programs have become an
enormous industry on the Internet," Randall R. Lee,
the head of the SEC's Pacific region, 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."
Charis Johnson, who operated 12DailyPro, previous-
ly has defended the site as legitimate but last
week agreed to the SEC's asset-freeze proposal
without admitting or denying the allegations. The
SEC charged that Ms. Johnson transferred $1.9
million to her personal bank account since mid-
2005. Ms. Johnson's attorney, Noell Tin, yesterday
said he and his client are looking forward to the
SEC process, which he said would lead to money
being returned to members and declined to comment
further.
A key part of 12DailyPro's operation relied on a
small PayPal rival, StormPay Inc. of Clarksville,
Tenn. Payments to and from the Web site were made
via StormPay and a couple of other small online
payment processors.
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StormPay officials didn't return calls seeking
comment. The company has previously said it
voluntarily froze funds related to 12DailyPro
about a month ago after being alerted that the Web
site may have been part of a fraud. Although the
SEC said the amount originally frozen was about
$50 million, with additional sums already having
been paid out to members, the total involved in
the alleged scheme likely was significantly great-
er.
Instead of being angry with 12DailyPro, many
investors in the site have turned their ire on
StormPay. "They basically just froze my money,
that I felt I was entitled to," says Mike Bromell,
of Austin, Texas, who started investing in
12DailyPro in December. "It's just like if I wired
you money via Western Union, and Western Union
decided to keep it."
PayPal, the dominant force in the online-payment
industry, says under its "acceptable use policy"
it won't do business with illegal pyramid schemes
and "Get Rich Quick" schemes "where the claims of
profit or returns on investment are unrealistic
or unsupported." It also bans transactions related
to online pornography and several years ago stop-
ped doing business with online gambling sites,
after reaching a settlement with New York Attorney
General Eliot Spitzer.
But PayPal is listed as a payment-processing
option on a number of autosurf sites. One,
NetInvestAutoSurf.com, promises "members" a return
of 1% per day on fees they give the site, and
displays a yellow "PayPal Verified" logo. Another,
123eTraffic.com, says on its home page: "Get paid
up to $3,100 Monthly -- no selling, no marketing,
just surfing! 123eTraffic has to be the fastest,
easiest way to make money on the Internet." Email
messages directed yesterday to the operators of
both sites went unanswered.
Amanda Pires, a PayPal spokeswoman, says both Web
sites are "within the bounds of our policies." Ms.
Pires says the sites don't have characteristics of
typical pyramid schemes -- they allow free member-
ship, and members don't make most of their money
by referring other members to the site. As for the
"PayPay Verified" logo, Ms. Pires says it "means
not much," except that PayPal has confirmed that
the customer is linked to a real bank account.
Still, she says, these are "a new type of business
we are just starting to see on the Web. We are
monitoring these businesses very closely to ensure
there are no violations with our existing policies,
and to ensure there are no issues reported to us
by our customers."
Robert L. FitzPatrick, who wrote a book about
pyramid schemes, "False Profits," reviewed several
autosurf Web sites accepted by PayPal and says
they are "thinly disguised Ponzi schemes." PayPal,
he adds, is "trying to narrowly define a pyramid
scheme because PayPal makes money every time there
is a transaction."
Tucker Ronzetti, a Coral Gables, Fla., attorney
who has represented investors in class-action
suits related to Ponzi schemes, says third parties,
such as payment processors, could be held liable
under state laws for "aiding and abetting" an
Internet fraud. But, he says, such cases are rare
and difficult to prove, because the third party
must have "actual knowledge" of the fraud.
"On the one hand," he says, "you've got to applaud
PayPal for trying to monitor this. It's a legiti-
mate problem, and innocent people are being
victimized. On the other hand, if they're looking
at the definition of a pyramid or Ponzi scheme in
too strict or picayune a fashion, they may be
allowing these schemes to flourish."
Many sites similar to 12DailyPro continue to
operate. They come and go: One Web site offering
advice about online investment programs lists more
than 2,200 sites that have become defunct. One
reason for the proliferation of copycat sites may
be the easy-to-use software templates, or "scripts,"
that allow anybody to instantly set up an autosurf
Web site with built-in links to online payment
processors.
Hani Durzy, an eBay spokesman, says the company
prohibits the sale of products directly related to
fraud. But he notes that the SEC itself said that
autosurf programs can be legitimate, and unless
the software templates specifically are marketed
as allowing Ponzi schemes or the like, eBay
probably would allow them.
So what did you think about this issue? Drop me a line and let
me know at mandi@gophercentral.com
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