Traffic Monsoon Facing Claims for $207M Ponzi Scheme

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By Cameron Finch

July 26 — Utah-based internet advertisement seller Traffic Monsoon LLC is facing Securities and Exchange Commission allegations that it orchestrated a $207 million Ponzi scheme using its main internet advertising product ( SEC v. Traffic Monsoon, D. Utah, No. 2:16-cv-00832, 7/26/16 ).

The purported profit-sharing scheme by the company and its owner Charles Scoville relied entirely on new sales of its leading product Banner AdPack to repay earlier investors, the SEC said in a complaint filed in the U.S. District Court for the District of Utah July 26. “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,” the SEC said.

AdPack Scheme

Scoville told investors that Traffic Monsoon's profits were derived from a variety of advertising services, when in fact over 99 percent of its revenue was obtained from the sale of AdPacks, the SEC said. For each AdPack that Traffic Monsoon sold, almost 80 percent of the profit was used to supplement other investors' returns, the SEC said. Scoville programmed the company's system so that profits were shared based on sales that occurred on the previous day, the SEC said.

Through his scheme, Scoville raised millions of dollars in an unregistered offering from tens of thousands of investors worldwide, the SEC alleged.

“There is no way any returns could be paid to investors without the sale of new AdPacks,” the SEC said. “The financial success or financial failure of the investors were inextricably tied to the efforts of Scoville and Traffic Monsoon,” the SEC said.

The SEC is seeking permanent injunctive relief, disgorgement and prejudgement interest and civil monetary penalties.

Defense counsel is unknown at this time.

To contact the reporter on this story: Cameron Finch in Washington at cfinch@bna.com.

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com.

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