SEC Moves Against Alleged Pyramid Scheme in Colorado
In Securities and Exchange Commission v. Johnson No. 1:15-cv-00299-REB (D. Colo. Feb. 12, 2015), the Securities and Exchange Commission (“SEC”) alleged Kristine Johnson, Troy Barnes, and Work With Troy Barnes, Inc. (collectively, the “Defendants”) operated a fraudulent Ponzi scheme and misappropriated investor funds. Achieve International, LLC (“AI”) was named as a Relief Defendant.
According to the allegations in the SEC’s complaint (at least some based “on information and belief”), Johnson or Barnes incorporated Work With Troy Barnes, Inc. (“WWTB”) in March 2014. WWTB was later rebranded as The Achieve Community (“TAC”), described in the complaint as “trade name of d/b/a [doing business as] for WWTB.” TAC allegedly offered and sold “positions” to potential investors at $50 each. Investors were “promised” a pay-out of $400, or a 700% return. TAC claimed that it was “able to pay out these investment returns as a result of a “triple algorithm” and “matrix” that Johnson and Barnes created.”
The SEC alleged that the Defendants operated a Ponzi scheme. As the complaint stated:
Contrary to TAC’s explicit representation, TAC is a pure Ponzi and pyramid scheme. Earlier investors are paid their returns from the funds of newer investors. Similarly, investors must wait to progress through the “matrix” before their returns are paid to them.
The SEC also alleged that “Defendants have misappropriated investor funds for Johnson and Barnes’ own personal use.”
The Complaint alleged violations of Section 17(a) of the Securities Act of 1933 and Rule 10b-5 of the Securities Exchange Act of 1934. Achieve International has been named as a relief defendant “for the purpose of recovering ill-gotten gains from the scheme in its accounts.”
The primary materials for this post can be found on the DU Corporate Governance website.