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A federal judge in Utah has ruled that a company that purported to pay customers from around world for visiting websites or clicking on ads was actually operating as a Ponzi scheme.
U.S. District Judge Jill Parrish also granted federal regulators' motion for a preliminary injunction against Traffic Monsoon and its owner Charles D. Scoville and allowed a receiver to continue to control the company and its assets. The ruling means up to $60 million owed to company customers around the world remains frozen by court order.
The Securities and Exchange Commission sued Traffic Monsoon and Scoville last July. The agency alleged the company was a Ponzi scheme that paid returns to thousands of customers — about 90 percent from outside the United States — with funds from new customers.
Scoville touted Traffic Monsoon as an advertising firm that shared revenue with its customers who could earn a $5 profit on a $50 purchase of its "AdPacks" after about 55 days if they visited websites and clicked on ads. Some customers bought hundreds of AdPacks by rolling over their earnings, which they were told came from company revenues.
But Parrish, in a ruling this week, cited previous court decisions and legal definitions in which the central characteristic of a Ponzi scheme is that returns are not based on sales of products or services but come from new investors whose funds are used to pay previous ones.
"Under this definition, Traffic Monsoon operated as a Ponzi scheme," Parrish wrote.
She also found the "impressive 66 percent (or more) return obtained by early AdPack investors served as an example that both attracted new investors and convinced existing investors to roll over their AdPack returns into new AdPacks."
Scoville's attorney, Loren Washburn, said he planned to appeal.
"While we respect the District Court, we disagree with many of the legal and factual conclusions in the opinion and we look forward to having the 10th Circuit decide these important issues that the federal courts have not previously addressed," he said.
The ruling means the appointed receiver, attorney Peggy Hunt, still will control Traffic Monsoon, investigate its finances and control its assets for the foreseeable future.