A Michigan man has been charged with operating an online Ponzi scheme that prosecutors say defrauded more than 10,000 investors in Charlotte and around the country.
The federal indictment against Troy Barnes, 53, of Riverview, Mich., was unsealed Tuesday, the same day he made his initial appearance in court in Charlotte. He is charged with wire fraud and wire fraud conspiracy and was released on bond.
His accused co-conspirator, Kristine Louise Johnson of Aurora, Colo., pleaded guilty in June to wire fraud conspiracy. She is scheduled to return to Charlotte on Nov. 19 for a sentencing hearing before U.S. District Judge Max Cogburn.
According to an online blog, PatrickPretty.com, Barnes sent a hand-written letter to a Colorado judge earlier this year in which he said he was guilty “of being ignorant,” and adding, “I want to do the right thing.”
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Investigators say Barnes was the owner, president and marketing director of “The Active Community,” which operated for about a year and promised up to a 700 percent return on an investment.
Barnes marketed his scheme as a lifelong investment plan “with limitless returns” that was “the answer to all our prayers,” prosecutors say. Instead, he and Johnson were operating a classic pyramid scheme, in which early investors were paid with the money from later clients.
As more people were lured in, Barnes and Johnson urged their clients not to describe The Active Community as an investment, in hopes of eluding federal scrutiny. When the company that handled payouts for TAC refused to do business after discovering it was a Ponzi scheme, Barnes told investors that the company quit because it could not handle “the volume of money we’re paying our members,” prosecutors say.
The scheme began to fail when the payments stopped, however. It collapsed in February, owing investors in Charlotte and around the globe some $51 million in promised returns. TAC had holdings at the time of $2.6 million, prosecutors say, and they accuse Barnes of skimming more than $140,000 for his own use.
Investment fraud cases continue to be a priority of the U.S. Attorney’s Office in Charlotte, one of the country’s top banking centers.
The U.S. Secret Service handled the investigation of Barnes’ alleged scheme, with assistance from the Denver, Colo., regional office of the Securities and Exchange Commission, prosecutors say.
Last week, Ponzi operator Daniel Williford of Fleetwood was sentenced to more than nine years in federal prison for defrauding 100 investors. Cogburn also ordered him to pay $17.9 million in restitution.
In August, U.S. District Judge Frank Whitney of Charlotte sentenced James Mason of Graham to eight years for a Ponzi scheme in which 500 clients were lured into investing almost $5 million in the foreign currency market. Mason, 67, a convicted felon before his sentencing, also must pay more than $4.3 million in restitution.
U.S. Attorney Jill Rose’s office also is handling the prosecution of ZeekRewards president and founder Paul Burks, accused of masterminding one of the largest Ponzi schemes on record. Prosecutors say Burks operated a sham, online penny auction that drew more than $845 million worldwide. Some 50,000 investors came from North Carolina – 1,500 from Charlotte.
Burks, a former retirement-home magician, is also accused of pocketing more than $10 million. He has pleaded not guilty, and his attorney says he has committed no crimes.