SEC v Charis Johnson, LifeClicks, LLC & 12DailyPro

Updated Information

Re: Securities and Exchange Commission v. Charis Johnson, LifeClicks, LLC, and 12Daily Pro; USDC, Central Dist. of CA, Case No. CV 06-01018-NM(PLAx)

As most of you know by now, on March 1, 2006, Judge Nora M. Manella of the United States District Court for the Central District of California entered an Order of Permanent Injunction and related Orders which included the appointment of Thomas F. Lennon as permanent receiver in the above-referenced case. This Permanent Injunction specifically enjoined investors from exercising self-help, including "initiating or processing chargebacks of any monies used to purchase or upgrade membership units in or with 12DP." Because the Permanent Injunction was not clear as to whether it also applied to financial institutions processing chargebacks, the Receiver sought and obtained the Clarification Order that explicitly also prohibited financial institutions, to the extent possible, from processing chargebacks or refunds on electronic transfers. The Clarification Order was entered March 14, 2006. Visa, MasterCard, Global Payments, and Nova Information Systems, Inc. all filed applications requesting that the Clarification Order be vacated and that the Permanent Injunction Order be narrowed to make clear that individuals that used their credit cards to purchase memberships or upgrades retained whatever rights they had under their agreements with their credit card issuer. These applications were granted by the Court's minute order dated March 27, 2006.

As a result of these orders, investors who used credit cards to invest are not enjoined from exercising self-help vis-à-vis their credit card, but investors that used electronic fund transfers to invest are enjoined from exercising self-help. Although this may seem like an unfair distinction, the legal rights of each group are different. The rights of consumers to dispute electronic transfers are limited to unauthorized debits or errors in the amount of debits, but do not provide a right to reverse a transfer because the consumer has discovered that the recipient was perpetrating a fraud. Moreover, all investors and creditors are enjoined from initiating any legal action against 12Daily Pro, LifeClicks or Charis Johnson.

The Receiver's goal is to try and put all investors on the same footing in obtaining a return of their principal. It is uncertain at this time whether there will be enough funds recovered to achieve that goal. The Receiver's efforts are focused on recovering funds that rightfully belong to the receivership estate, obtaining records from StormPay and others in order to determine how much each investor transferred to 12Daily Pro, how much each investor received in returns, and how much each investor recovered through chargebacks or electronic transfer returns. From this information, the Receiver will determine the net claim amount of each investor. The Receiver anticipates asking permission from the Court to distribute the assets recovered to investors pro rata based on net claim amounts. It is impossible to estimate at this time what likely recoveries will be or when the Receiver may be in a position to make distributions. The Receiver realizes that this is an extremely frustrating situation for investors, but please understand that he is working as diligently as possible to reach a fair and equitable result.