Charlotte Behavioral Health Services Provider Is Indicted For Defrauding The South Carolina Medicaid Program And COVID-19 Relief Fraud
CHARLOTTE, N.C. – A criminal indictment was unsealed today in federal court charging Troy Barnes, 53, of Riverview, Michigan, with wire fraud conspiracy and wire fraud, for operating a $6.8 million Internet Ponzi scheme that defrauded more than 10,000 investor victims worldwide, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina. Barnes’ conspirator, Kristine Louise Johnson, of Aurora, Colorado, pleaded guilty in June 2015 to wire fraud conspiracy for her role in the scheme.
Matthew Quinn, Assistant Special Agent in Charge of the United States Secret Service, Charlotte Field Division joins U.S. Attorney Rose in making today’s announcement.
According to filed court documents, Barnes was the owner of “Work with Troy Barnes, Inc.” (WWTB), which did business over the Internet under the name of “The Active Community” (TAC). Barnes was the President and Marketing Director of WWTB responsible for promoting the online scheme. Johnson served as TAC’s Chief Financial Officer, and managed TAC’s day-to-day operations, including the company’s bank accounts. Filed court documents indicate from about April 2014 to February 2015, Barnes induced victims to invest money in TAC, claiming “Achieve is the answer to all of our prayers…” and falsely promising investors would receive a bogus 700% return on their investment. Barnes also told his victims they could make as much money as they wanted claiming the investment was “never-ending,” when, in fact, TAC operated solely as a pyramid scheme and initial investors were paid with later victims’ money. Barnes also falsely touted TAC as a “lifetime income plan,” with “limitless returns, even though by August 2014, Barnes and Johnson had discussed TAC’s inevitable shortfall and knew that TAC did not have sufficient funds to cover weekly payouts to investors, much less operating expenses.
According to court filings, as the scheme grew in size and scope, Barnes and his 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.” Even when TAC was unable to operate because their payment processor concluded that TAC was indeed operating a Ponzi scheme and ceased doing business with the company, Barnes and his conspirators lied to victims, falsely stating that “The only reason that [TAC] is not paying out today is that our processor can’t handle the volume of money we are paying our members.”
According to court records, in order to sustain the scheme, Barnes and his 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. 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 had defrauded over 10,000 investors in the Charlotte-area and worldwide, and owed victim-investors at least $51 million in purported investment returns, yet only had available approximately $2.6 million. According to court records, over the course of the scheme, Barnes used over $140,000 of the victims’ money for his own enrichment.
Barnes had his initial appearance today and was released on bond. Johnson’s sentencing hearing has been set for November 19, 2015, before U.S. District Judge Max O. Cogburn, Jr.
The case was investigated by the U.S. Secret Service. In making today’s announcement, U.S. Attorney Rose thanked the Denver Regional Office of the Securities and Exchange Commission for its assistance with the case.
Assistant U.S. Attorney Corey F. Ellis is in charge of the prosecution.