Sunday, September 21, 2014

NEWS UPDATE: Quite a lot of catching up with all sorts of news updates regarding Ponzi, potential Ponzis, and such

Okay folks, sorry for not updating the blog for a week or so. Had been busy doing some other stuff... like playing way too much Doctor Who Legacy. Any way, articles are coming back next week. In the meanwhile there are some news to tide you over.

Remember, I link to the source, so click through if you want more details. Don't believe random people telling you some sort of news, then provide a link to their own website with no further citings.

Howard Kaplan claims he cannot be negligent regarding Zeek Rewards

In June Zeek Rewards receiver Ken Bell sued Howard Kaplan (the tax attorney who advised Zeek Rewards at a widely publicized event) and MLM lawyer Kevin Grimes for legal malpractice. Kevin Grimes have been since ousted from what used to "Grimes and Reese PLLC", and the company renamed "R & R Law" with a new partner in his place. We learned, on in late July / Early August 2013, Howard Kaplan's attorney(s) has denied any responsibility and wants to case to be dismissed, not because they're not guilty, but because they argue that a guilty party (i.e. Zeek) cannot sue its consultants/lawyers for malpractice because of "in pari delicto", a legal term that roughly means "both are equally at fault". Zeek Receiver Ken Bell have since fired back a reply to the court that Kaplan's reasoning is flawed, and urge the case to continue.

See BehindMLM article:

Which contains links to the actual court documents, courtesy of ASDUpdates.

Wednesday, September 10, 2014

BREAKING NEWS: TelexFree investigation in Colombia

There has been little news out of Colombia after their Twitter-announced shutdown of WCM777 Ponzi that involved tweets from both the President AND the Police Chief. Now, the Superintendency of Companies in Colombia has apparently shut down TelexFree Colombia.

The Agency has published a public notice, based on the authority given in the financial emergency act of 2008 that given the government authority to investigate and close down scams in the wake of DMG and other pyramid schemes that almost destroyed the country's economy.

The public notice listed names and ID numbers of multiple individuals, with surnames of Lopez, Sierra, Moreno, and Vergel, with specific reference to "TelexFree Colombia"

A Colombian News article also pointed out that Colombia had recognized the existence of DMG-style pyramid/ponzi scheme in TelexFree.

It's also worth noting that TelxFree had been shut down in Brazil back in 2013, and is also shut down by Federal authorities in the US in 2014 after attempting to declare bankruptcy.

Thanks to for the heads-up

Tuesday, September 9, 2014

Due Diligence: Does the Business Model Make Sense To You? Are you sure?

As the MLM Skeptic, one comes across all sorts of alleged businesses, and many of them makes sense as a business, but not so much as an affiliate/distributor. Some makes sense as an affiliate, but makes no sense as a business. Obviously, a real business have to make sense to both the business itself and to the affiliates/distributors. 

In a typical retail business, the business model is very simple: buy low, sell high, sell much. There is no separate model for the participants, as participant is the owner of the business. 

In a direct sale business, we have to examine both layers, and they should coincide. Business buy the inventory at low prices, then sends out the direct sales people to sell them at higher prices. The business model for the participants, the direct sales force, are the same: buy low, sell high, sell much. 

However, with newer technologies a variety of schemes have appeared to entice participants to put in money or sign up in order to reap benefits...  Yet its business model makes no sense upon closer examination. 

Remember, for a business to succeed, both its own business model and the business model of its participants must both be sensible AND profitable. 

Today, we shall examine one business whose business model makes no f***ing sense upon closer examination. 

Or to put it another way: If it's so profitable why are they paying you?

Sunday, September 7, 2014

News Update 07-SEP-2014: Herbalife problem in Norway; TelexFree Brazil Exposed; Zeek, TelexFree, and WCM ponzi updates

Remember folks, when you read "news", they better have a source, and it better be a reputable source (or links to a reputable source), and I do try to do that. If I don't, let me know and I'll fix it. If the sources you read don't cite sources... Well, maybe you shouldn't trust them.

I know I haven't updated this blog for a week, so here's some belated updates:

Herbalife Scandal in Norway; False Claims that former Norwegian PM joined Herbalife

Norwegian magazine Kapital broke the news that Gro Harlem Brundtland, former three-time Prime Minister of Norway and former director general of World Health Organization (WHO) was completely unaware that her name was used on the website "Herbashop Norway" where one of the replicated websites proudly claims "Welcome to Gro Harlem Brundtlands Herbashop! ... After only three months I had controlled my weight down and changed pant size from 42 to 36"

Screenshot of the said Herbashop Norway, courtesy of Kapital magazine
page has been since removed
The page had since been removed from the Herbashop website. However, there is no word on whether Brundtland will take further action against Herbalife or Herbashop, or whether Herbalife itself may take some sort of action against Herbashop, which is an independent operation based in Norway by affiliate Dan Ove Tuven. Herbalife has promised an investigation.

Norwegian news Dagbladet claims that several other Norwegian celebrities were also used in various claims regarding Herbalife products, probably without their permission.

In March 2014 Ray Liotta sued Nerium, when he found that Nerium affiliates claimed for months in late 2013 that Ray Liotta's skin condition improved due to use of Nerium products.

(First reported by BehindMLM)

Brazilian News Revealed Shell Companies Allegedly Used by TelexFree for Money Laundering
Coat of arms of Brazilian Federal Police
Coat of arms of Brazilian Federal Police
(Photo credit: Wikipedia)

Globo news in Brazil have published allegations from Brazilian Federal Police that they believe TelexFree has engaged in money laundering and concealment of assets through various shell corporations by using relatives of Carlos Costa, head of Ympactus, i.e. "TelexFree Brazil". At least two companies are registered to Carlos' daughter Leticia Costa: AgroFruta and Brasil Factoring, and their stocks are allegedly worth millions despite her only declaring income of 60K a year. It's also worth noting that Carlos' wife Jozelia is named as the biggest creditor in the original TelexFree US bankruptcy application.

Brazilian Federal Police suspect that money that was ordered frozen by Brazilian court back in 2013 may have been used illegally to fund these alleged shell companies in order to hide them from authorities. Many of the directors in these companies are TelexFree top promoters, said the police.

You can read the Globo report here in Portuguese

Sunday, August 31, 2014

Scam Alert: Bitcoin as disguise for Ponzi scheme

EDITOR'S NOTE: I counted the difficulty wrong. It's FAR MORE HOPELESS than I ever imagined. See revision throughout the last half of the article.

In the past 6 or so months there has been a plethora of suspect Ponzi schemes that involves Bitcoin as its disguise. Some of them are basically pure HYIPs (BitClub Network, Bitcoin Zones), while others are existing schemes that decided to incorporate Bitcoin as part of its various schemes (GetEasy, Paymony) Here's description from one of them:
XXXXXXX costs $99 for your membership. 
You can then buy shares in their three mining pools for $500; $1,000; and $2,000 per share respectively. 
Every share you purchase will pay you daily payouts for 1,000 days.
This, gentleman, is an unregistered security, as defined by US law known as the Howey Test.

A security in the US is defined as:

  1. investment of money due to
  2. an expectation of profits arising from
  3. a common enterprise
  4. which depends solely on the efforts of a promoter or third party

You "buy shares", you expect "payouts", you buy into "pool" which is obviously a "common enterprise", and payout solely depends on some unknown "mining pool".

This is OBVIOUSLY an investment security, and it's ILLEGAL to offer in the US of A.

"Now wait a minute", I hear you ask... "Are you telling me Bitcoin mining is illegal?"

NO! You see, in a *typical* bitcoin mining operation, you contribute CPU POWER ONLY (think of it as labor or material), not actual money. For example, this is how you join the BitMinter pool:
1. Register
2.  start bitminter clientBitminter client: Hit the start button to start Bitminter client. You get bitcoins for the work it does. Works on Windows, Linux and Mac. Requires updated Java. Other clients: bfgminer, cgminer, etc. Connect to the pool at stratum+tcp:// As user name put your Bitminter user name, an underscore, then a worker name, e.g. DrHaribo_asic3. In case you have firewall issues, port 443 and 5050 (Stratum) are also available. There is no password check, any password is accepted.
3. Get a wallet to transfer your coins to. Make sure you secure your wallet.
Other actual MINING pools are the same: you join by contributing CPU / processing power, NOT actual money.

In fact, you can join one now, using your regular desktop PC. It won't do much compared to dedicated hardware that costs THOUSANDS of dollars, but you can do it for FREE (and your payout will be negligible).

Ah, but you say, but *maybe* they really are buying the hardware to do the mining with the money you gave them?

Then it'd be a stupid investment, and I'll explain to you why by crunching some numbers.

Friday, August 29, 2014

BREAKING NEWS: Australia authorities sues Lyoness; alleges pyramid scheme and referral selling

According to press release from ACCC (Australian Competition and Consumer Commission) has launched a lawsuit to shut down Lyoness and related entities from operating in Australia. According to ACCC: 
The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers. 
Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.
“Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity," Mr Sims said. 
The ACCC also alleges that the conduct by Lyoness breached the ACL prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.
First hearing is set for September 16, 2014 in Australia. No word from Lyoness just yet.

(Thanks for BehindMLM and PatrickPretty for the heads-up)

Thursday, August 28, 2014

MLM Basics: Is MLM considered entrepreneurship?

A recent discussion regarding a certain suspect MLM already fined in Europe for pyramid selling brought up an interesting point of discussion... Is participation in MLM considered entrepreneurship?

But first, what exactly is entrepreneurship? defined it as "The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit."

From the surface, it does appear that participating in network marketing could be considered a business venture, but again, we have to look a little deeper: is becoming an IBO / affiliate a "business venture"?

Same place defined "business venture" as "Start-up entity developed with the intent of profiting financially. A business venture may also be considered a small business."

Ah, here lies the problem.

Most network marketing company deal with you as a hybrid... You're not a business (so it's not a business to business) but you're NOT an employee either. You are an "independent contractor". Here, for example, is Amway's agreement on this specific topic:
3. Independent Contractor Status. You agree this authorization does not make you an employee, agent, or legal representative of Amway, your sponsoring IBO, or any other IBO. As a self-employed independent contractor, you will be operating your own independent business, buying and selling products and services available through and by Amway on your own account. You have complete freedom in determining the number of hours that you will devote to your business, and you have the sole discretion of scheduling such hours. Amway will not provide you with a place of business, and if you desire a place of business other than your own residence, you will be responsible for procuring, furnishing, and paying the rental for such place of business. As a self-employed independent contractor, you are responsible for complying with any provincial licensing requirements and Municipal Zoning and Business Licensing By-Laws. With respect to services performed by you under your IBO Contract, you will not be treated as an employee for federal or provincial tax purposes, and you will be responsible for
payment of any self-employment and other income taxes
Well, Amway certain wants you to think you own an "independent business". In fact, they refer to all of their distributors as "IBOs"... Independent Business Owners. And you are REQUIRED to print that on your business card.

So what's the problem? The problem is in the PROFIT motive. Being an entrepreneur means you intend to profit.

Yet for a MAJORITY of participants in network marketing, apparently profit is NOT a motive.

You're probably going, WHAT?!  Let me give you examples: