A Michigan man has been indicted for allegedly operating a Ponzi scheme that promised no-risk returns through the placement of Google advertisements on internet websites. Jeffrey Curtis Folkert, of Holland, Michigan, was charged with thirteen counts of mail fraud stemming from the scheme. Each charge carries a maximum sentence of up to twenty years in prison, along with criminal monetary penalties.
Until approximately February 2008, Folkert operated iStorm Solutions LLC (“iStorm”) as a small computer consulting business in Hamilton, Michigan. Sometime in 2005, Folkert devised the idea to make money off internet advertising in connection with the creation of internet websites, and began soliciting investment. Through the use of Google’s advertising program Google AdWords, third-party websites receive a portion of the advertising income when a user accesses a Google advertisement on their webpage. Folkert represented to investors that iStorm could earn substantial revenues through these “click ads,” that the underlying principal was guaranteed and a "no-risk" investment, and that investors would receive monthly income from the revenue generated. Investors were provided with monthly account statements showing steady growth.
In total, Folkert raised more than $1,500,000 from investors from 2005 to 2007. However, Folkert used little, if any, of these funds to operate iStorm’s advertising business. Instead, investor funds were commingled with Folkert’s personal bank accounts, where they were used for various personal expenses, including the purchase of new cars. Additionally, investor funds were used to make fictitious “dividend” payments to investors to make it appear as if the scheme was legitimate.
Along with the mail fraud charges, the government is also seeking the forfeiture of $1,500,000 in money and/or assets deriving from proceeds of Folkert's scheme.
A copy of the indictment is here.