Two Nigerians, Others Sue PayPal for Abetting $207m Ponzi Scheme Fraud

Two Nigerians have led other victims of an internet-based Ponzi scheme to sue global online payment company, PayPal, in a US federal court, accusing it of aiding and abetting an elaborate fraud that swindled about 162,000 investors of $207 million.

In their federal class action, lead plaintiffs, Kingsley Ezeude and Chukwuka Obi, said PayPal processed hundreds of thousands of transactions for a company called Monsoon Traffic, despite knowing its founder, Charles David Scoville, had perpetrated Ponzi-scheme frauds previously and was aware he was doing so again.

“PayPal was aware that Traffic Monsoon was making Ponzi/pyramid scheme payments to investors and that Traffic Monsoon’s Ponzi/pyramid scheme was growing exponentially in classic Ponzi/pyramid scheme fashion,” the plaintiffs said in the complaint.

They claimed “PayPal provided substantial assistance to the Traffic Monsoon scheme by allowing Traffic Monsoon to use its services in an extraordinary and atypical manner.”

A federal judge in Utah froze the assets of Scoville and his company in July, last year, after the Security and Exchanges Commission (SEC) began investigating the business that purported to be a “successful internet advertising-services company.”

Scoville set up his business as a pay-to-click scheme, which claims to pay people for clicking on banner ads. A customer pays $50 to purchase an Ad-Pack, through which he or she clicks on various advertisements and following completion of the programme receives a 10 percent return on the initial investment.

The customer can then choose to take the money or reinvest it in other similar pay-to-click programmes.

The SEC says Scoville’s business is a Ponzi scheme pure and simple, using money from new customers to pay the returns for older customers in a perpetual cycle.

“Over 99 percent of Traffic Monsoon’s revenue comes from the sale of AdPacks. The company has virtually no other revenue from any other source. All payments to investors are made out of these funds,” the SEC said in its July 2016 complaint.

Ezeude and Obi said PayPal was aware that Traffic Monsoon was a scheme, but were attracted by enormous profits earned from the many transactions the company produced.

“PayPal profited greatly from the Traffic Monsoon scheme. It earned fees from the hundreds of thousands of transactions made by Traffic Monsoon investors,” the plaintiffs said in the complaint.

They claimed PayPal kept Traffic Monsoon money in an account that accrues interest, which it kept for itself.

“All the interest earned by those funds throughout this time was accruing to PayPal itself – a highly atypical source of income for PayPal,” the complaints stated.

PayPal said the class claims are false.

“We recently became aware of this lawsuit. We believe these claims are false and look forward to refuting them,” a PayPal spokesman said in a statement.

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