Charles Scoville wants to help you get better traffic to your website. He does it through the slimy method of paying people to click on an ad for your website. But he added in a revenue sharing system. The SEC decided that the slimy method had turned securities fraud.
There are many, many, many platforms for falsely generating traffic to your site. HBO’s Silicon Valley used a click farm to generate user activity increases for its fictional product.
The Scoville platform, Traffic Monsoon, is mostly a traffic exchange. Users/members agree to click on other members’ websites and they agree to click on your website through AdPacks. Business owners buy ad packs and get visitors and banner clicks in return. Members get paid to click. There are a few levels of AdPacks and services for sale.
Traffic Monsoon took things a step further to get members clicking more and paying more for the AdPacks. The platform offered “revenue sharing.”
When you purchase an AdPack combo advertising campaign for $50, you’ll receive 20 clicks to your banner, 1,000 traffic exchange credits, and a revenue sharing position.
When you click a minimum of 50 ads in our traffic exchange and remain on the websites for 5 seconds each, you’ll qualify yourself for 24 hours to share in site profits.
By paying for the more expensive AdPack, you get to share revenue or share in site profits. The problem is how you define revenue and profits.
Traffic Monsoon treated the purchase of the AdPack as revenue. The sale of these accounted for 99% of the company’s revenue. There were very few third parties enticed to the site looking for pay to click activity.
According to the SEC Complaint, as of May 16, 2016, Traffic Monsoon had sold 15,225,689 AdPacks. For each such AdPack, however, it must deliver 1,000 visitors, amounting to 15 billion visitors total. As of July 24, 2016, however, the Traffic Monsoon website states that the company had “delivered 1,618,996,340 visitors.
In February, PayPal froze the company’s accounts because it had the earmarks of a Ponzi scheme. According to the SEC’s complaint it is a Ponzi scheme.
The SEC’s jurisdiction is limited. It will need to prove that the scheme involves securities. It does a better job pleading the case that this involves securities than other past complaints involving matters that may not be securities.
- Members pay a premium price for the revenue sharing AdPacks.
- Member funds are aggregated into a common pool.
- The payment of returns is almost entirely dependent on Scoville’s ability to sell AdPacks.
- Members have no role in managing Traffic Monsoon enterprise.
- The interests are not registered.
- The members are not required to be accredited investors.
The SEC needs to prove that the AdPack arrangement was essentially an investment contract. That leads back to some derivation of the Howey case to determine if there is an investment contract, and look at whether there is:
- an investment of money,
- a common enterprise,
- a reasonable expectation of profits, and
- a reliance on the entrepreneurial or managerial efforts of others.
Whether Traffic Monsoon calls it “revenue sharing” or “site profits” it looks like its revenue sharing system could be considered a security.
Sources:
- SEC Complaint Against Traffic Monsoon and Charles Scoville
- SEC Halts $207 Million Internet-Based Ponzi Scheme
- Online get-rich-quick scheme Traffic Monsoon hits a storm
- Traffic Monsoon Review
- Can an ATM Machine Be a Security?
- Can a Vending Machine Be a Security?
- Revisiting the SEC’s Stance on When Real Estate is a Security
