By: Esmat Hanano, IAC Student Intern Spring 2018
At the tail-end of last year, the Securities and Exchange Commission (SEC) issued a warning to investors about Paid-To-Click (PTC) scams. PTC websites “…promise investors a share of the program’s profits in exchange for paying an upfront fee or buying products.” The PTC site might even promise the investor advertising space on its network of ads in addition to a share in the program’s profits. In this way PTC sites seem to offer the best way of making money on the internet—buy online “ad packs” then sit back and watch as your profits roll in! However, the SEC warns that these websites are being used to further Ponzi schemes. In fraudulent schemes, a new investor will place money in a PTC program which will then be sent to previous investors in the same program as their “profits.” Not all PTC sites are malicious, but investors thinking about buying into such programs must be wary of the promises these websites make.
The SEC offers some warning signs for would-be investors in these programs. PTC sites that offer high returns for menial tasks such as merely purchasing the program or clicking on a certain number of ads are most likely malicious. Investors should approach PTC sites with a healthy dose of skepticism. Upfront fees or payments should set off alarm bells—the SEC correctly asks “Why would a company require you to pay a membership fee or to buy a product, for the ‘opportunity’ to click on ads?” The SEC also reminds investors to perform their due diligence; investors should ask for certified financial statements that show the revenue of the site. If the revenue of the PTC site stems solely from its own members, then any profits will likely be the payments of other investors in the site. Lastly, the SEC notes that withdrawal problems with the PTC site should also trigger alarm bells.
The internet affords a myriad of opportunities to make money, however, there are also just as many opportunities to lose money because of sophisticated scams. As with any investment, investors should be prepared to perform their own research.
For information on recent SEC enforcement actions related to PTC sites and Ponzi schemes see: https://www.sec.gov/news/press-release/2017-208.