North Carolina authorities have filed criminal charges against a Colorado woman on allegations that she operated a massive Ponzi scheme that duped over 10,000 victims out of at least $7 million under the guise that a "lifetime income plan" could deliver annual gains exceeding 700%. Kristine L. Johnson, of Aurora, Colorado, was charged with one count of wire fraud conspiracy in an information filed in the Western District of North Carolina. Johnson has agreed to plead guilty to the charge, and could face up to twenty years in prison.
Johnson and Troy Barnes, of Riverview, Michigan, operated Work With Troy Barnes Inc. ("WWTB"), which was subsequently rebranded as "The Achieve Community" ("Achieve") in April 2014. Johnson served as CFO of WWTB and Achieve and was responsible for day-to-day activities. Achieve solicited investors to purchase "positions" costing $50 each that in turn promised a pay-out of $400 per position in the subsequent three-to-six month period - a return of 700% and an annualized return exceeding 1000%. In a short video on Achieve's website, Johnson touted Achieve 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 Achieve video claiming that Achieve “will teach you how to take $50 and turn it into thousands of dollars, and that’s a fact.” Investors that questioned Achieve's ability to pay such exorbitant returns were assured that Achieve 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, Achieve took in at least $6.8 million from investors.
However, despite its claims that it was "not a pyramid scheme," both civil and criminal authorities alleged that Achieve was a pure Ponzi and pyramid scheme. For example, Achieve's sole source of revenue allegedly originated from investor contributions. Nor were any profits derived from legitimate business activities; rather, Achieve used funds contributed from new investors to make principal and interest payments to existing investors. Johnson admitted to taking more than $200,000 in investor funds for her own personal use.
Despite Barnes' prominent role in the suit filed by the Securities and Exchange Commission, he is named in the criminal information only as an unindicted co-conspirator, suggesting that he may have cooperated with authorities.
The criminal charging document filed against Johnson is below. Special thanks to Don at ASDUpdates.