SEC shutdown of Traffic Monsoon: The Facts
Following the announcement of a TRO granted against Charles Scoville and his Traffic Monsoon Ponzi scam, we now take a look at the details behind the granting of the TRO.
The SEC’s filed memorandum accompanying their motion for a TRO is thirty-one pages long. I’ve broken down points of interest from the filing into relevant subheadings below.
Traffic Monsoon was a $207 million Ponzi scheme
Traffic Monsoon is a massive Ponzi scheme that relies on new investor funds to pay returns to earlier investors.
Of the $207 million dollars invested into Traffic Monsoon by over 160,000 paid investors, $60 million has been traced ‘in accounts located in the United States, Canada and the United Kingdom‘.
Over the last few months, Traffic Monsoon added around 175,000 new affiliates each month (most of which were free members).
90% of Traffic Monsoon’s investors are based outside of the US.
The program appears to be most popular in countries that are also some of the poorest in the world.
For example, the Traffic Monsoon website is the 385th most visited website in Bangladesh, 366th in Venezuela, and 517th most visited site in Morocco.
Funds invested into Traffic Monsoon topped out at $1 million a day in late 2015.
In December of 2015 Traffic Monsoon affiliates invested $28.94 million dollars into the scheme. In January 2016 they invested $26.26 million.
Traffic Monsoon could not meet its ROI obligations
Analaysis of Traffic Monsoon’s financial records revealed the company has taken in $207 million dollars in actual cash.
Due to reinvestment of funds by affiliates, on paper Traffic Monsoon had generated $738.5 million dollars in revenue.
This represents a ROI liability of $812.35 million.
There is no way known Traffic Monsoon could pay this with just $207 million dollars of actual money entering the scheme since it launched.
Traffic Monsoon’s adpacks accounted for over 99% of revenue
Although Traffic Monsoon purports to sell several products, its main product, and the one that accounts for over 99% of its revenue, is the Banner AdPack (“AdPack”).
Each AdPack costs $50, which price includes both certain exchange credits and website clicks as well as the opportunity to share in Traffic Monsoon’s profits.
The investor who purchases the AdPack purportedly earns those profits in small increments over time until he has earned $55, amounting to a return of 10% on the purchaser’s initial $50 investment.
Historically, the AdPack has always earned that return at the rate of $1 per day, providing a 10% return over a 55-day period.
If the investor continues to reinvest the returns in AdPacks on an ongoing basis throughout the year, he will realize an annual return of about 60%.
The revenue that makes up nearly the entirety of the investor’s return comes almost exclusively from new investors’ purchases of new AdPacks.
Traffic Monsoon has virtually no revenue from any other source.
Because all investor returns are funded through new investor contributions, the company operates as a classic Ponzi scheme.
PayPal froze $61 million dollars of invested Traffic Monsoon funds
What with Paypal being one of the largest payment processors in the world, millions of dollars in Ponzi fraud is naturally going to raise suspicion.
Up until early 2016, Traffic Monsoon had been using PayPal Holdings, Inc. (“PayPal”) to take in and pay out all funds.
At that time, however, PayPal noted the very rapid growth of the program, as well as other suspicious factors indicative of a Ponzi scheme, and froze the company’s funds – approximately $61 million.
The Paypal seizure was a significant setback for Traffic Monsoon, with the SEC revealing that ‘almost all member funds were kept in PayPal‘.
In March 2016 Scoville, through the Traffic Monsoon Facebook page, advised affiliates PayPal funds would be frozen for 180 days:
Paypal froze outgoing funds from Traffic Monsoon’s account on January 11th, 2016.
On January 12th, Scoville published a YouTube video ‘to offer an explanation to current and prospective members‘.
In the video he did not, however, disclose the PayPal freeze, saying only that for the sake of convenience he was planning to transition away from PayPal to eventually open a “Traffic Monsoon bank.”
PayPal completely froze Traffic Monsoon’s account on February 11th. The same day Scoville, for the first time, disclosed the fund freeze to Traffic Monsoon affiliates.
During the intervening month, because PayPal was allowing investor funds in but not allowing them to be withdrawn, members who bought advertising services (including, most prominently, new AdPacks) and transferred funds to Traffic Monsoon had no idea their funds would be frozen.
The SEC’s memorandum reveals the PayPal freeze expired on July 11th.
Instead of paying investors however, Scoville instead began transferring funds to his personal bank account.
Scoville transferred $25.6 million out of the PayPal account into a separate Traffic Monsoon account held at JPMorgan Chase Bank (“Chase”), and immediately transferred $21 million of those funds into his own personal Chase account.
He attempted to transfer additional funds out of the PayPal account, but PayPal precluded additional transfers.
Sworn testimony by Scoville provided to the SEC, reveals Scoville intended to transfer these funds to “offshore entities”.
Based on these transactions, it is appears that Scoville is making efforts to take control of tens of millions of dollars of investor funds, apparently for his personal use.
Had the SEC of not stepped in, Scoville and the funds would have likely disappeared.
The SEC have requested the appointment of a Receiver
With millions of dollars seized and over a hundred thousand victims, the SEC has requested a Traffic Monsoon Receiversip be established.
The SEC has proposed Mary Margaret Hunt of Dorsey Whitney LLP be appointed Receiver.
In line with other Ponzi scheme Receivership’s, if appointed Hunt will marshal what’s left of Traffic Monsoon’s assets.
She will also investigate the whereabouts of any other funds attached to the scheme, as well as explore the possibility of clawback litigation.
Eventually seized funds will be distributed to Traffic Monsoon victims.
Charles Scoville attempted to manipulate Traffic Monsoon’s Alexa rank
The advertising side of Traffic Monsoon was a pseudo-compliance sham.
Traffic Monsoon’s website sells purported internet advertising services.
It is a combination of an internet traffic exchange, where exchange users browse other users’ websites, and a pay-per-click program, where users are paid to click on other users’ website banner ads.
The majority of the traffic to Traffic Monsoon member sites now comes from inside Traffic Monsoon, meaning that members are simply clicking on other members’ ads.
Initially and order to qualify for a daily ROI, Traffic Monsoon affiliates had to view eachother’s ads for 5 seconds.
Until very recently the requirement was that the investor click on 10 ads for 20 seconds each.
Scoville made the change to increase Traffic Monsoon’s Alexa rank.
Alexa rankings are a broad indicator of investment activity in an online Ponzi schemes.
By manipulating Traffic Monsoon’s Alexa rank, Scoville would be able to create an artificial sense of investment activity taking place, which in turn instills investor confidence.
Charles Scoville knew the SEC was investigating Traffic Monsoon
To the best of my knowledge Charles Scoville never disclosed to Traffic Monsoon affiliates that the scheme was under SEC investigation.
The SEC’s memorandum contains several references Scoville’s sworn testimony to the SEC. Infact 79 pages of sworn testimony from Scoville are included an attached exhibit with the SEC’s memorandum.
The memorandum also notes Scoville’s participation the SEC’s investigation.
During the course of its investigation, Scoville provided the Commission with two databases that included, for Traffic Monsoon since inception,
(1) every transaction in Traffic Monsoon account balances; and
(2) all funds coming into Traffic Monsoon from outside the company.
This confirms Scoville knew he and Traffic Monsoon were under regulatory investigation, well before yesterday’s granting of a TRO.
Traffic Monsoon’s AdPacks were a joke
Each AdPack sold by Traffic Monsoon was supposed to provide 1000 visitors to a website.
Scoville stated in an e-mail to the Commission on May 16, 2016, that Traffic Monsoon had sold 15,225,689 AdPacks. The current figure is undoubtedly higher.
For each such AdPack, however, Scoville must deliver 1,000 visitors, amounting to 15 billion visitors total.
Since it launched, Traffic Monsoon has only delivered 1.5 billion visits period. In addition to this, Scoville purchased 435 million visits from a third-party merchant for $239,701.
All things considered, it would still take Traffic Monsoon over ten years to deliver purchased visits, not withstanding exponential growth within the scheme.
Traffic Monsoon is a classic Ponzi scheme in which investors are paid from money contributed from new investors, and there is little real business activity.
A preliminary injunction hearing has been scheduled for August 5th. Stay tuned…
This one’s for my homies in the FBI and DOJ…
He must have been brain dead using paypal in the first place, we know paypal will freeze accounts, if he didn’t, what else doesn’t he know?
Now he is deluded if he thinks he will win.
Hey SEC, it is our money! You filthy bastards! Give us back what is ours! No one gave you permission to meddle into our business!
He wanted to surprise everyone…. yeah ok…. Guess the SEC beat him to the punch!
The SEC doesn’t need your permission to uphold the law. Ponzi schemes are illegal in the US.
Like they did a few years ago with one of his other Ponzis, Infinitybux.
A very similar M.O..
In all fairness, TM members did recieve monies from TM based on the program guidelines. TM never promised a ROI and was for advertising for affiliate opportunities.
And, this article above uses the word “investement” this language is forbidden in TM.
Many of the TM members would like to get our “pending funds” from PayPal and other funds as SEC sees fit after their investigation. I truly believe Charles Scoville is a good person and he was only was trying to move funds because TM chase business account was comprosied and that TM is Global.
Granted, communication of the SEC info. could have been communicated earlier to his affiliates and funds he recieved and taken in cash should have paid those members as this should have ben the #1 priority. We hope the SEC will realize that this in not a ponzi scheme and TM willbe relieved from any wrong doings.
I’m not in Traffic Monsoon, thank God! But what I don’t understand is why aren’t sites like Clicksense, InBox Dollars, NeoBux, Cashcrate etc. don’t get shut down also?
Those sites have been around for years. Aren’t they the same type of sites as Traffic Monsoon?
Of course they did. Invest $50 and get $55. That’s a ROI.
Neither the SEC or BehindMLM care about pseudo-compliance. $50 in and $55 out is an investment paying a ROI.
Your ROI? Yeah you’re not getting that.
A Receivership will be established and net-losers (most of you) will get back a percentage of what you invested. With any luck net-winners will get sued and have to return some of what they stole from you.
As someone who follows SEC regulation of business opportunities closely, good luck with that (insert laughter here).
Unless they solicit investment on the promise of a ROI, paid out of subsequently invested funds, then no.
Oz, thank you so much for your diligence in following this SCAM and your meticulous reporting as it was marketed to the hopefuls before predictably going down in flames.
The various presentations of internet fraud may be simple in their slight variations of the “money for nothing” concept, but keeping potential suckers educated on the day-to-day nonsense that the criminals who run these SCAMS resort to is a never-ending process of sifting through the bullsh*t and laying bare the facts.
Mike Deese and “Dr” Ruja Ignatova, pay heed. Your days are numbered.
I didn’t actually follow Traffic Monsoon as it wasn’t MLM (I never reviewed it).
Covering the shutdown though because Charles Scoville has an MLM history.
Using paypal is just a lazy way to take in money fast by tapping into a market of people that already use it.
yet paypal already has rules in place for things like this so they should have frozen this a lot sooner.
so paypal knew with this type of money coming in it deserved a real look into what was going on. Unless they allowed it to go on to hang the whole business up.
I have asked a few times before why Traffic Monsoon was never covered by BehindMLM as its as ponzified as you can get but every time my post got removed.. Why the sudden interest?
Paypal should have some legal implications in this as well.
In time they might have to return fees charged to Traffic Monsoon. Paypal appear to have taken a year and a half to cotton onto the scheme.
As far as securities fraud goes however, they appear to have done what was required.
Because this is BehindMLM.
Charles Scoville has a background in MLM and I’ve reviewed at least one of his past opportunities.
I’m not about to write a Traffic Monsoon review because it’s still not an MLM opportunity. I will cover the SEC regulation against Scoville however because of Scoville’s MLM past (as I understand it AdHitProfits was still limping along).
Nobody has lost any money yet! I am convinced this is a complete stich up from paypal allowing them to hold onto a lot of other floks money for as long as they possibly can!
IMHO, any money recovered from this type of fraudulent scheme should be confiscated by government … as a sort of tax on stupidity … and used for information campaigns to educate the public on how to identify and avoid this type of fraud and the lowlives who perpetrate it.
To my mind this would be a better use of the money than returning it to folks who’d likely only use it to fund their next Ponzi foray and in doing so only help to further perpetuate and proliferate these harmful scams.
I’d also like to see the government begin charging the main promoters, i.e. “net winners”, of these schemes so that these scumbags can join guys like Scoville in the crowbar hotel.
OZ… can you give some feedback on the below latest update on Traffic Monsoon…
How many complains does sec Receive against TM From Member.
$207 million invested and $60 million or so in the kitty. Yeah, you’ve lost money.
Hasn’t been disclosed. Not that the SEC needs to receive complaints to shut down a Ponzi scheme.
Here you go:
Sounds like you’re at stage 2 heading rapidly to stage 3.
Addressed today’s developments here – https://behindmlm.com/companies/traffic-monsoon/traffic-monsoon-preliminary-injunction-hearing-rescheduled-for-23-sep/
People who compounded Add-Packs should not suffer, they should be paid back.
then take the scammers to court. they are the ones making you suffer by lying to you.
This is exactly, what is NOT going to happen. You will receive no credit for anything purported to be an investment return, nor any commissions you may think you earned. It was ALL fake… you were defrauded. Be angry.
Paid back or refunded?
Compounded earnings were just fake earnings anyway.
so you or them would only need to be refunded anything but an original spend / investment if that much.
I lifted this from Realscam. Here is a list of his past schemes (to the best of their knowledge).
5. Wealthenginex .com
16. AdHit Profits
17. Traffic Monsoon
CLIXSENSE? Are you kidding me? You cannot even classify ClixSense in the same category as TM. We are nothing like TM. Please get your facts straight!
Why oh why do you ‘behindmlm’ continue to write such dribble before reading the facts.
You repeatedly keep referring to ‘investors’, please go to the site and read up, it makes it very clear that no income is guaranteed and that people are buying ad packs, which do actually work as I have used them and got good response from.
NO WHERE DOES IT SAY ANYTHING ABOUT INVESTMENT.
“A rose by any other name would smell as sweet”.
Changing the terminolgy has NO effect on the underlying reality.
Why would anyone want to “read up” what the owner of a company accused of being a fraud and who has had all his assets confiscated has to say ???
Nah, I think I’ll go with what the SEC is saying and what the Judge accepted as being true, if you don’t mind.
Yawn.. the same tired argument of previous pyramid/ponzis. It didn’t work then and won’t work now.
Define “good repsonse” for your ad pack investments.
Very few ad packs would have been sold if people weren’t expecting a $55 return on their $50 spend.
Let’s not pretend otherwise.
I did. Soliciting $50 on the promise of a $55 ROI makes the $50 an investment.
You think the SEC or anyone else gives a crap about your pseudo-compliance garbage?
Call it a unicorn, bottle of coke, your grandma’s dentures… whatever you want. $50 in and $55 out is a ROI paid on an investment.
the 79 pages of sworn testimony were recorded in the SEC office in salt lake city, utah, on may 17th, 2016.
even before may 17th, 2016, scoville had sent a lot of information to the SEC, on the basis of which they questioned him on the 17th.
so scoville was well aware of a SEC investigation even before may 17, 2016, but did not tell his affiliates anything about it, and kept them hanging on and paying in with promises of solving the problem with paypal, and acquiring his own private bank etc.
i think that in july 2016, when paypal released scoville’s traffic monsoon funds, and he transferred them first to the TM account in chase bank, and then immediately into his personal account, the SEC moved quickly to freeze his assets to prevent these funds from being routed out of the country.
the 79 page testimony of scoville before the SEC can be read here:
(Ozedit: Hold up, I’m currently going through this document as we speak. About 70% done and will have an article up in a few hours.)
What ever happened to Scoville’s other ponzi scheme he had a couple of years ago called Ad Hit Profits?
It was basically the same as Traffic Monsoon except you actually clicked each banner to view the website.
in its complaint filed in court, the SEC said:
when the SEC says ‘Immediately’, i assume they mean the same day or the next day at most.
yet on july 13, 2016, in a TM meeting in manchester, scoville announced that paypal had confirmed that they would release the funds on august 11, 2016.
on july 13th, when he made this ^^ announcement, was scoville unaware that paypal had released the funds on july 11th itself?
it’s a close call, but seeing that the SEC has used the word ‘Immediately’, there is room to suspect that scoville knew the funds were released on the 11th, but lied to affiliates on the 13th.
the manchester meeting was on the 12th of july, 2016 and scoville personally announced that paypal would be releasing TM funds on the august 11.
[there is a video of scoville making the announcement about paypal on june 12th, but i don’t know how to copy it here]
i dont know how paypal works. would they have informed scoville in advance, or at least immediately, that they were releasing funds on july 11th?
on july 12th, did scoville know his paypal funds were released or not? if he did know then he is a bald faced liar.
Why, you think someone else made 200+ transfers out of his Paypal account on July 11th at 100K each?
oh, were those transfers made on july 11th itself?
well, well, well, mr scoville kindly explain why you LIED to your affiliates the very next day!
Selling a dividend yielding “profit sharing” position is an investment regardless the word you use for it.
Not only this, but he was not transparent nor honest with those investors on the state of the business.
These people think they can battle against the SEC. Feel sorry for them. Nobody can win against the SEC.
Hey what’s the problem? Mr Scoville said he didn’t tell anyone because he wanted to give everyone an early surprise. 🙂
Does anybody know the EXACT date when the website went down?
On or around August 5th: https://behindmlm.com/mlm/regulation/traffic-monsoon-receiver-to-pay-for-scovilles-flight-to-us/#comment-364824
Not strictly true. There were one or two companies that survived.
One was an oil exploration company. They managed to present a defense that convinced a judge that they do legitimate exploration and the risks are spread out through many projects, rather than taking in investment money and gave it out as payoutr previous projects.
Just found this today
Did Charles Scoville go to jail?
Charles went to prison, but not for Traffic Monsoon. He still has not made a plea in his civil SEC lawsuit; nor has a trial started.
He pled guilty to one count of attempted aggravated sexual abuse of a child.
He spent years with his appeals against having civil charges by the SEC against him and lost them all.