The feds are moving in on and and not a moment too soon. Well, it is going to be too soon for those folks who have talked to the Wall Street Journal and blogged how much money they “lost” and how much more they were “owed.”

It seems there are plenty of people who know people who made a lot of money with 12dailypro. Michelle, a staff writer for, knows someone in Indiana who know someone who made $30,000 at

Again, that’s what happens in the beginning of a successful pyramid scheme. Get in early and reap the rewards. Get in late and you lose out.

What’s interesting is how Steve Gersky, the attorney who runs, says that his company doesn’t do business with companies like However, if you log onto the site and start to poke around, there are several other companies with auto-surf business models similar to, that are now complaining that StormPay has shut them down as well.

StormPay continues to profess it has the funds to pay everyone every dime they are owed. We’ll see. At the same time, the company says it only “just now” discovered that some of its clients may not be on the up and up.

But how could this be? According to a spokesperson at the Tennessee Dept. of Commerce and Insurance Securities Division, StormPay has been in trouble before. A few years ago, the company was caught selling shares of stock online and was essentially operating a Ponzi or pyramid scheme.

“The company offered shares in StormPay for $285 each, over the Internet, with an e-signature. Later, they offered shares of stock for $25 each,” explained the spokesperson. “The people who bought in early actually made money. They had gotten their original money back several times over. And they’re entitled to that income stream as long as they own the stock. But the people who bought at $25 (per share) didn’t get their money back.”

Apparently Gersky didn’t work for StormPay at that time. But you’d think with that kind of background, he’d be taking a close look at Web operations. And here’s another interesting fact about StormPay: The company is in the dirt racetrack business.

Of course, there’s always the possibility that StormPay really didn’t know that all these auto-surf Web sites weren’t legitimate. How do you know if a company is legitimate? In researching the story, I reached out to the best-known electronic payment system, PayPal, now owned by eBay.

I spoke with Sara Bettencourt, a spokesperson for PayPal, and asked her to explain how her company weeds out auto-surf and other scam sites. Under PayPal’s acceptable use policy, multilevel marketing schemes, pyramid or matrix schemes and Ponzi schemes are not permitted. The company also refuses to do business with online gambling, adult or pornographic materials web sites.

The key is having enough people to check out compliance.

“Between PayPal and eBay, we have 1,000 people who are dedicated to trust and safety,” Bettencourt explained, adding that many of these employees are former federal prosecutors and have other types of law enforcement background. “We also use a technical detection system that scours the Web. As a backup, we have a huge, active community of users and they’re proactive about letting us know about unauthorized use of service.”

But you aren’t going to find anything if you’re not looking for it. I’ll have more information to post on the story over the weekend. Stay tuned.

Feb. 10, 2006.