The "Legal Threat" Scam

Image via CrunchBase

One of the latest ways to scam people is to pretend to threaten them with legal action... unless they pay up.

Basically, any sort of big news that involves government or lawsuit may be mentioned a scam.

One example: you got a robocall that claims the government tracked your visit to the Wikileaks site, which leaked a lot of US government diplomatic messages and caused some severe embarrassment. And now US government is going to take action against you... You may want to pay a fine and make them go away.

Except US government had taken NO such action.

http://www.forbes.com/sites/williampbarrett/2011/01/19/fraudsters-invoke-wikileaks-in-new-scam/

But wait, there's more!

Funky Shark fined by Montana AFTER shutdown

funky shark (Photo credit: cyanocorax)

Breaking news: Montana has fined Funky Shark, which was originally launched as a penny auction / rewards program similar to Zeek Rewards (which was shut down as a Ponzi scheme back in August 2012).

Funky Shark had actually shut down in October 2012, when it was revealed that the founder had solicited money for so-called "Founder's Club" where people are expected to put in up to $10000. As this is essentially soliciting investments, but without any sort of registration with SEC or state-level agencies, such as the Commission of Securities and Investment, this is illegal.

Upon finding this, and probably on the advice of their advisor Kevin Thompson, Funky Shark shut down and refunded all the founder's club members' money.

Today, we found out what really prompted the shutdown... an investigation by Montana Office of Securities and Investment.

Fast Decision or Accurate Decision, but not both

Previously we have covered how time pressure is an integral part of most scams. While this is seemingly obvious, now there seems to be some scientific proof, based on an article published recently.

The extremely short summary:  instead of one whole brain doing both fast and accurate, there seem to be separate areas of the brain involved with fast decisions, vs. accurate decisions.

In other words, the faster you need to make a decision, the more likely you are to make a mistake.

Bad Argument: Neglect to Mention

There are PLENTY of ways marketers can disguise themselves in order to get "foot in door".

I've personally been tricked once. I was looking for an IT job, when I got wrangled by this guy who said he needs a person familiar with the Internet. Turns out he was recruiting for Quixtar, the Internet arm of Amway., and not as an IT guy, but a regular MLM grunt. I hung up.

He neglected to mention he's recruiting for MLM, not IT.

However, the marketers are getting smarter. In 2012, before the US Elections, some shady marketers started to disguise their timeshare selling pitch as a political survey.

(A "time share" is where you buy only a piece of vacation home in some nice place but only use it maybe a month or two out of the year, so you only pay a fraction of the cost.)

In one such case, they claim to be conducting a survey, then at the end, it's "you've been selected to win a X day Caribbean cruise! You are now being connected!"  and they are asking for all sorts of booking dates.

Wait, they are giving away a cruise just for giving your opinion? How can they afford to do it?

Ah, we just want to fill up our cabins with you as free ads!

Can I have some time to think about it?

No, when you hang up this offer expires.

RED ALERT! RED ALERT!

There's something this offer neglected to mention, but what?

Zeek 2013 update: same people, same fraud, different biz

My "good friend" Robert Craddock was spotted pushing "Offer Hubb", which claims to sell ads, and promise to share profits from ad sales... esp if people who "pre-purchased" ad packs for resale to businesses.

Hey, doesn't that sounds JUST LIKE "Ad Surf Daily"?

What other warning signs are there regarding "Offer Hubb"?  BehindMLM did some basic fact-checking, and came up with the following:

• Offer Hubb is a virtual company with address listed in an outfit in Wyoming known to investigators as home of THOUSANDS of corporations, which only exists as mailboxes.
• It's headed by a "David Flynn" which is a name popular enough that it cannot be researched effectively.
• It's pushed by the SAME Zeek top earners, including Jerry Napier, Trudy Gilmond, and O H Brown.
• Its video is produced by USHBB, the SAME company that did video promos for various suspect schemes, including Zeek Rewards, Ad Surf Daily, Narc that Car, and many others. 
• USHBB is headed by O. H. Brown, who's ALSO a Zeek affiliate, and once referred to as "employee" and "official rep" on Zeek's support forum. 

If these aren't enough warning signs for you, you are probably blind and deaf.

But there's more.

Fraud, Acting, and HYIP

When something's too good to be true, it probably is, no matter how fancy / shmancy the proponents claim.

For example, one group of fraudsters claimed that they have a special high yield investment program (HYIP) offered by no less than the US Federal Government, specifically, the Federal Reserve.

Yeah, right.

Then they really piled on the sale... by claiming that this program generates so much profit, part of it goes to humanitarian purposes, like disaster relief for FEMA, part of it goes back as seed money, and part is given to the investors.

Yeah, right.

Oh, but wait, these fraudsters promise that investors get to meed a local Federal Reserve branch chairman, and head of a major bank, that'll testify that this HYIP exists.

Yeah, right.

Oh, and your money will be in an offshore Swiss Bank Account.

A program ran by Federal Reserve, *the* bank in the US of A, put money into a Swiss bank account?

If you are still enthralled by all this "crap", you are hopeless...or pretending to be.

Due Diligence applies to business opportunity

Multi-Level Marketing (Photo credit: Larry L for school)

Previously I've covered what constitutes "due diligence" when it comes to an "income opportunity", such as a MLM. I then ran into an article at Investopedia that talks about 10 steps you should do before you invest in a company.

MLM crowd, esp. Robert "Rich Dad" Kiyosaki kept saying "own a part of the system" like an investor. Well, why not apply the same due diligence to a MLM? When you join a MLM, should you not apply the same sort of criteria on the MLM company?

So, here goes, with the questions slightly rephrased for more relevant. And there are a couple items that doesn't apply to MLMs as they are not public, but there are a couple items that are important.

1) How big is the company? 

Most MLM companies are tiny, run by a few people. They will often claim that they run lean, and most of the work are done by you affiliates, but that begs the question... are you actually affiliates, or just not-quite-employees that have to put in your own money?

The size of the company is also indicative of how stable they are. BIG MLM companies like NuSkin, Amway, Herbalife, the ones that are public and had been around for many many years, have sales figures and other public info that you can look up. In general the larger the company is, the more stable its business model (and how trusted its products are). The fad-pills-of-the-week  companies generally don't last more than a year or two.

The smaller the company, the higher the risk.


2) Revenue, Profit, and Margin

A publicly listed company such as the big MLM companies have figures you can look up, and you want a company that has steadily growing revenue, stable or rising profit, and good amount of margin (sales to profit ratio). This is even MORE important in MLM as that margin is what you get paid out of.

If this is a private company that does not publish any figures, then you will have nothing to research on, and this is a major risk factor.