Why the SEC says ‘paid-to-click’ arrangements may be scams

By Ken Tysiac
November 7, 2017

The SEC issued an investor alert Tuesday warning of the dangers of “paid-to-click” scams perpetrated by fraudsters on the internet.

According to the SEC, online paid-to-click programs often promise to pay investors simply for clicking online ads. These programs may promise investors a share of profits in exchange for paying an upfront fee or purchasing products. For example, paid-to-click scams may promise a share in profits in exchange for buying “ad packs” or other advertising products.

The paid-to-click programs might promise advertising services such as displaying an investor’s ads on their network or guaranteeing traffic to the investor’s website in exchange for the purchase of their ad packs or a membership.

The alert warns that paid-to-click programs may be Ponzi schemes, where money from new investors is used to pay earlier investors. The SEC cites the following red flags as possible indications of fraud:

1 Promises of easy money. These include offers of high returns in exchange for merely purchasing products or for trivial tasks such as clicking on a certain number of online ads each day.

2 Required upfront payments. Investors should beware if asked to pay money upfront to participate in a paid-to-click program, even if it’s supposedly for a membership or product purchase.

3 No revenue from genuine products or services. The SEC says investors should ask to see documents, such as financial statements audited by a CPA, showing that the paid-to-click program generates real revenue from selling products or services. If there is no revenue from customers other than a paid-to-click program’s own members, any returns are likely to be from other investors’ buy-in fees.

4 Virtual address. Investors should verify that the business address for the paid-to-click program is legitimate.

5 Withdrawal problems. If an investor has trouble withdrawing money or is required to reinvest his or her profits, it may be because there is not enough money coming in from new investors to cover earlier investors’ withdrawal requests, according to the alert.

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