Colorado Woman Charged With Wire Fraud Conspiracy For Operating $6.8 Million Ponzi Scheme
Investment Scam Solicited over 10,000 Victims before Collapsing in February 2015
CHARLOTTE, N.C. – A criminal bill of information was filed today in federal court, charging Kristine Louise Johnson, 60, of Aurora, Colorado, with wire fraud conspiracy for operating a $6.8 million Ponzi scheme that defrauded more than 10,000 investor victims, announced Jill Westmoreland Rose, Acting U.S. Attorney for the Western District of North Carolina.
Robert W. Rolin, Jr. Acting Special Agent in Charge of the United States Secret Service, Charlotte Field Office joins Acting U.S. Attorney Rose in making today’s announcement.
According to filed court documents, from about April 2014 to February 2015, Johnson and her conspirators ran the investment scheme through a sham internet company, “The Achieve Community” (TAC). To induce victims to invest their money, the conspirators falsely claimed the investors would receive a bogus 700% return on their investment. According to court records, the victims’ money was never invested. Rather, TAC operated as a “Ponzi” scheme, and the conspirators used monies from later victim-investors to pay fraudulent “returns” to earlier ones and to enrich themselves. Johnson and her conspirators defrauded over 10,000 investors both in the Charlotte-area and worldwide, causing the victims to sustain losses totaling millions of dollars.
Court records show Johnson served as Chief Financial Officer (CFO) and managed TAC’s day-to-day operations, including managing company bank accounts and producing marketing materials. According to filed documents, Johnson falsely told potential participants that TAC was not a “Pyramid Scheme,” when, in fact, TAC operated solely as a pyramid scheme and initial investors were paid with later investors’ money. Johnson also falsely told potential investors that the “more products purchased, the more people move through the matrix and get paid.” According to filed documents, there were no actual products and early victim-investors only received Ponzi-like payments, regardless of the purchase of any products. Johnson and her conspirators also falsely promoted TAC as a “lifetime income plan” with “limitless” returns when, in reality, the Ponzi scheme could only operate with ever increasing infusions of new victim-investor cash.
As described in court documents, Johnson and her conspirators falsely represented that TAC was able to sustain and continue making payouts through the use of what they called a “Triple Algorithm” and a “3D Matrix,” which were so complex that they could not be explained in writing. In reality, no such business model existed and the only revenue for the scheme came from victim-investors. According to court records, in order to sustain the scheme, Johnson and her conspirators encouraged investors to “re-purchase” positions in the matrix, thereby reducing the amount of money needed to pay out to early investors and enabling the fraudsters to prolong the scheme. Court records indicate that Johnson used over $200,000 of the victims’ money for her own enrichment.
According to court filings, as the scheme grew in size and scope, Johnson and her conspirators concealed the true nature of the scheme through multiple misrepresentations. According to court records, when the conspirators became concerned that the use of the term “investment” would draw scrutiny from regulators, they instructed victim-investors that “We ARE NOT an INVESTMENT program, please don’t use that term when you speak or post about our re-purchase strategy.”
According to court records, Johnson and her conspirators also lied about the company’s “business model” to the third-party payment processors which processed TAC’s money transactions. When one payment processor concluded that TAC was operating a Ponzi scheme and terminated TAC as a client, court records show that Johnson and her conspirators falsely told victim investors that it was because the payment processor was unable to handle the large amount of money TAC paid to its investors.
As indicated in court documents, the investment scheme began to crumble when payment processors stopped processing the Ponzi payments to victim-investors. By the time the scheme collapsed in February 2015, the conspirators owed victim-investors at least $51 million in purported investment returns, yet Johnson, her conspirators and TAC had available only 4% or approximately $2.6 million.
A signed plea agreement was also filed today, and Johnson is expected to appear before a U.S. Magistrate judge in the coming days to formally accept the plea. The wire fraud charge carries a maximum of 20 years in prison and a $250,000 fine. As part of her plea agreement, Johnson has agreed to pay restitution, the amount of which will be determined by the Court.
The case was investigated by the U.S. Secret Service. In making today’s announcement, Acting U.S. Attorney Rose also thanked the Denver Regional Office of the Securities and Exchange Commission for its assistance with the investigation.
Assistant U.S. Attorney Corey F. Ellis is in charge of the prosecution.