Sunday, August 31, 2014

Scam Alert: Bitcoin as disguise for Ponzi scheme

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://mint.bitminter.com:3333. 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?

BusinessDictionary.com 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:

Sunday, August 24, 2014

The Woo Files: MLM Viagra Coffee (no, I'm not kidding, and it's illegal)

There are all sorts of "fortified" coffee, containing all sorts of stuff that's allegedly good for you, from Asian mushrooms (Lingzhi) to various uber(woo) fruits like Acai berries, goji berries, to various forms of vitamins. So it's really no surprise when someone made coffee with allegedly "all natural herbs" to raise your libido, eh? 

Meet "Magic Power Coffee", world's first (and last?) aphrodisiac coffee.


Now, you may say, this is cute and stuff, but what does it have to do with MLM? Ah, but look at the words "income opportunity". Yes, this is a MLM.

Quoting from a recruitment website :
Start Your Magic Power Home Business Today Start as a Standard Associate for only $70.00 plus a one time $15.00 administration fee. Quickly break even, operate for FREE, and build your Home Based Business part time until it exceeds your primary income source
Furthermore:
The Magic Power Coffee Home Business Opportunity provides multiple income streams. They are covered below.
Personal Enrollments:
Each time a member joins the home business opportunity via your invitation you are awarded $15.00 to $45.00 depending upon their membership level... To keep it simple and free, enroll three.
Matrix:
When you introduce and invite others to become members they too establish their own Home Business. You are accredited through a 3 X 10 matrix system for those who fall within the three positions below you. ...
Matching Bonuses:
Matrix Bonuses are percentage matched down 6 generations of each individually sponsored member
Retail Sales:
Retail sales of Magic Power Coffee and the Magic Power Product line generate commissions...
Leadership Pool:
3% of the entire company product are sales set aside and distributed proportionately as you reach certain milestones. The Tour will explain this best, but the award amounts are substantial.

Thus, there is no doubt this is MLM, right? Except the product is ILLEGAL, as it is NOT all natural, as it claimed.


Friday, August 22, 2014

News Update 22-AUG-2014: More TelexFree Lawsuits, Zeek Lawsuits, and Phil Ming Xu (WCM) lawsuits

A lot of developments regarding various closed ponzi schemes in recent months...

According to an expert tracking ponzi scheme, a new Ponzi scheme was discovered every 5 days in the US. That's right, every five days, just during the first 6 months in 2014, with over 1 BILLION dollars in potential losses.

But here's some news...


Court Approves Zeek Receiver to Sue International Winners

US Federal Judge overseeing the receivership of Zeek Rewards has approved the receiver's request to start suing "net winners" who do not reside in the United States. Previously, receiver have already sued most net winners in the US who has gained 1000 dollars or more from Zeek Rewards. Many have already settled for a lesser amount, though a few notable exceptions are the really top winners, who have gained anywhere from 500K to well over a million dollars from Zeek.

It is worth noting that several prior top promoters of Zeek has indeed fled the US to various countries, including the Dominican Republic and the Philippines.

Speaking of foreign countries...


Federal Prosecutors Allege Extremely Complex International Fraud Regarding TelexFree

According to documents filed with Federal court overseeing the TelexFree case, Federal prosecutors asked the judge to designate the case as "complex case" which will make it exempt from the "Speedy Trials Act" that requires the indicted defendant to be tried within 70 days, because there are significant portions of fraud linked to Brazil and will require foreign investigation / testimony, and subpoenas.

Prosecutors asserted that they have seized 400 TERAbytes of data spanning 46 servers, 26 separate computers from TelexFree and 3 more from grand jury subpoenas containing yet more records.  There are total of 185 grand jury subpoenas issued for evidence related to TelexFree such as business records. They have not yet compiled catalog of existing evidence, and there are strong possibilities that they will need to travel to Brazil to interview yet more witnesses and/or gather more evidence there. Thus, there's no way this can be done in less than 70 days.

Judge has yet to rule on this motion.

In related TelexFree news:

Tuesday, August 19, 2014

An 2014 Update on AiYellow: Is this thing for real or for grins?

Recently, there seems to be a resurgence of comments, on AiYellow, probably because my previous blog post on AiYellow is somehow now #3 on Google search when you search for AiYellow, as of today, 18-AUG-2014.

Wow, how did that blogpost got to #3 search for AiYellow?
This, inevitably, has drawn in various defenders of AiYellow, who copy-paste a bunch of marketing material, without understanding the CONCERNS I had brought up almost two years ago regarding the legality and utility of AiYellow.

So far, it seems nothing has changed regarding its business practices, and the products are being marketed with the wrong emphasis, with its utility (i.e. how effective it can be) in further doubt.

Let's study one aspect of the problem... "Alexa Ratings". Feel free to check it yourself, as I can only offer you a snapshot of the information as I see them today, 18-AUG-2014.

Alexa rating for AiYellow can be found here: http://www.alexa.com/siteinfo/aiyellow.com  It's the 5th most popular link regarding AiYellow, as shown by Google search above. You should see something like this:

Alexa Overview of AiYellow.com, part 1, red lines and words are my comments

Global rank 7117th, yet in South Africa 135th. Why is it so much more popular in South Africa than elsewhere where global rank has dropped 2000 places in last 3 months? Let's keep looking.


Why is AiYellow more popular in South Africa and Thailand,
than where it started: Argentina? Colombia? 
The audience geography is strange. Normally if a website started in a particular country its countrymen would have embraced it first, so it should be more popular at home than abroad. AiYellow is exactly the opposite: it's more popular in South Africa and Thailand than its home in Argentina. This is a very weird growth pattern, keep that in mind while we keep looking.

Only 15% of AiYellow's visitors came from search engines
(but there's an upward trend)
According to Alexa, only 15% of visits to AiYellow came from search engines, and the most popular search terms seem to be South African. However, most visits seem to have came from the parent company, AmarillasInternet.com.

But it is where the visitors actually go that is the most interesting:

Sunday, August 17, 2014

MLM Basics: Why are there so many names for MLM?

Have you ever wondered why are there so many different names for multi-level marketing? Here are most of them:

There are probably a few more I missed. If you spot some new ones not on this list, as a something-marketing, feel free to let me know via the comments.

Any way, why are there so many fancy names for the same thing?  Fraud experts, such as Tracy Coenen say this is an attempt to obfuscate and distract from the bad reputation multi-level marketing had picked up over the decades it had been in existence. However, I think this is also a symptom of how the decentralized nature of MLM became a sin, not a virtue. People are just appropriating terms that sounds SOMEWHAT similar to multi-level marketing, and in some cases, inventing them out of thin air.

First, let us define multi-level marketing... a marketing strategy where the sales force is compensated on multiple levels... direct sales profit, and portion of sales profit achieved by other salespeople they recruited (downlines). Remember, MLM = direct sales + commission based on downline sales.

But first, we have to clear up a few myths...