Michigan Man Sentenced to More Than Two Years In Prison For Operating Multi-million Dollar Internet Ponzi Scheme
Co-Conspirator Previously Sentenced to Prison for Her Role in the Scheme
CHARLOTTE, N.C. – Troy Barnes, 53, of Riverview, Michigan, was sentenced today to 33 months in prison for operating a multi-million dollar 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 was also ordered to spend three years under court supervision after he is released from prison. Furthermore, Barnes was ordered to forfeit $4.7 million and to pay $302,297 in restitution to victims.
Barnes’ conspirator, Kristine Louise Johnson of Aurora, Colorado, was sentenced previously to 21 months in prison for her role in the scheme.
Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Office, joins U.S. Attorney Rose in making today’s announcement.
According to filed court documents and today’s sentencing hearing, 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. According to the indictment to which he pleaded guilty, 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. According to the criminal information to which she pleaded guilty, Johnson told victims that TAC was not a pyramid scheme when, in truth and in fact, TAC operated solely as a pyramid scheme.
According to court filings, as the scheme grew in size and scope, Barnes and Johnson 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, “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 Johnson 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 Johnson 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. According to court records, over the course of the scheme, Barnes used over $140,000 of the victims’ money for his own enrichment and Johnson misappropriated over $200,000 for her own personal use.
Barnes will be ordered to the Federal Bureau of Prisons to begin serving his sentence upon designation of a federal facility. All federal sentences are served without the possibility of parole.
The U.S. Secret Service led the investigation. In making today’s announcement, U.S. Attorney Rose thanked the Denver Regional Office of the U.S. Securities and Exchange Commission for its assistance with the case.
Assistant U.S. Attorneys Corey F. Ellis, Daniel Ryan, and Taylor J. Phillips, of the U.S. Attorney’s Office in Charlotte prosecuted the case.