Florida Investment & Securities Lawyer
Call to Schedule a Consultation
561-475-1332

SEC Puts a Stop to Colorado-Based Pyramid Scheme

If you are considering investing with a company that feels the need to proclaim, “We are not a pyramid scheme,” you may, in fact, be dealing with a pyramid (or Ponzi) scheme. Investors in one Colorado-based company probably wish they had considered that possibility as federal securities regulators recently moved in on the firm and its two principals. Last week a federal judge granted the government’s request for a temporary injunction and froze the pair’s assets.

SEC v. Johnson

According to a complaint filed under seal on Feb. 12 by the U.S. Securities and Exchange Commission, Kristine L. Johnson and Troy Barnes operated an illegal pyramid scheme under the trade name of “The Achieve Community” or TAC. Johnson, who lives in Colorado, controlled TAC’s finances, while Barnes oversaw marketing. TAC promoted itself primarily through the Internet, including a now-suspended website and a YouTube channel.

TAC sold “positions” for $50 each to investors with the promise of a $400 return. Investors were then encouraged to re-invest those returns in additional positions. As TAC explained in its own marketing materials, “When you sign up with us you have a date and time stamped position in our moving matrix. You are effectively ‘in line’ to reach the matrix and get paid. As each position moves out of the matrix another goes in.”

The “matrix” was described as a “triple algorithm” investment formula conceived by Johnson. What is a “triple algorithm”? Johnson and Barnes never gave investors a straight answer. According to the SEC, Johnson once said the matrix “is 3D, which is why we can’t put it on paper.”

Of course, the SEC said the real reason was that the matrix did not exist. TAC was nothing more than a classic pyramid scheme. As new investors purchased “positions,” that money was used to make payouts to the earlier positions. Although TAC expressly said in its advertising materials, “We are not a pyramid scheme,” according to the SEC that is exactly what it was. TAC sold no actual investment products. As noted above, investors simply waited “in line” until TAC found enough new money to cover preexisting obligations.

Altogether, the SEC said Johnson and Barnes sold more than $3.8 million in worthless TAC positions. The SEC said the pair appropriated a significant amount of that money for themselves. The SEC is seeking disgorgement of assets from TAC, Johnson and Barnes as part of its civil lawsuit in Colorado.

The Warning Signs Were There

From what the SEC describes, this was about as blatant and obvious pyramid scheme as one could find. TAC’s own promotional materials indicated as much. Furthermore, investors should have been suspicious when TAC encouraged investors to purchase their “positions” using credit cards and online payment services like PayPal.

None of this is to minimize the losses suffered by TAC’s purported victims. Even the savviest investor may fall prey to a seemingly can’t-miss opportunity. But the fairly straightforward nature of TAC’s scheme provides a good example of the obvious warning signs any investor should look for. If you have been the victim of a pyramid or Ponzi scheme and need legal advice on how to seek recovery for your losses, contact Florida securities fraud attorney Gregory Tendrich, P.A., right away.

MileMark Media - Practice Growth Solutions

© 2015 - 2017 Gregory Tendrich, P.A. All rights reserved.
This law firm website is managed by MileMark Media.

Contact Form Tab