The Securities and Exchange Commission has filed an emergency enforcement action against a Colorado-based Ponzi scheme that offered 700% returns through a "triple algorithm" and "3-D matrix." Kristine L. Johnson, of Aurora, Colorado, and Troy Barnes, of Riverview, Michigan, were charged with multiple violations of federal securities laws in connection with the operation of Work With Troy Barnes Inc. ("WWTB"), which currently does business as "The Achieve Community" ("TAB"). Indeed, despite distributing a promotional video claiming that WWTB was "not a pyramid scheme," the Commission alleged that the venture was a "pure Ponzi and pyramid scheme." The Commission is seeking disgorgement of ill-gotten gains, injunctive relief, civil monetary penalties, and pre-judgment interest.
WWTB was formed in March 2014, and was subsequently rebranded as TAC. Beginning in April 2014, TAC solicited investors to purchase "positions" in TAC. These "positions," which cost $50 each, promised a pay-out of $400 per position in a term of three-to-six months - a return of 700% and an annualized return exceeding 1000%. In a short video on TAC's website, Johnson touted TAC as a "lifetime income plan," and explained:
How are we a lifetime income plan? It’s simple. Every $50 position you purchase, you make $400. With two positions, you make $800. With five positions, you make $2,000. Want to go bigger? With twenty positions, you make $8,000. With one hundred positions, you make $40,000. This is limitless.
Barnes made similar claims, narrating a different TAC video claiming that TAC “will teach you how to take $50 and turn it into thousands of dollars, and that’s a fact.” Investors that questioned TAC's ability to pay such exorbitant returns were assured that TAC utilized a "triple algorithm" and "matrix" created by Johnson and Barnes. Johnson attempted to explain the "3-D matrix" as follows:
I thought, what can I do, what can I make, what can I design, that has only what works and none of what doesn’t, and one day, honestly this is what happened, I just saw it. I just saw it in my head. This matrix is 3D, which is why we can’t put it on paper. It’s a triple algorithm. And I can’t for the life of me tell you why I could figure that out in my head. But I could.
Investors were encouraged to re-invest their returns, with Barnes assuring investors that such a strategy would make it "very easy to make six figures." In total, TAC took in at least $3.8 million from investors.
However, despite its claims that it was "not a pyramid scheme," the Commission alleged that TAC was, in fact, a pure Ponzi and pyramid scheme. For example, TAC's sole source of revenue is alleged to have originated from funds contributed from investors. Nor were any profits derived from legitimate business activities; rather, TAC used funds contributed from new investors to make principal and interest payments to existing investors. In addition to using investor funds for "Ponzi" payments, the Commission also accused Johnson and Barnes of misappropriating more than $200,000 for their own personal use - including $35,000 for a new car, making personal credit card payments, and more than $40,000 in Paypal transfers to Barnes.
A copy of the Commission's complaint is below: