Sunday, July 27, 2014

Scam Detector: What is "Cockroach Theory", and how does it apply to suspect schemes?

cockroach (Photo credit: TomSpinker)
Ever heard of the "cockroach theory"?

It's quite simple, actually. When you see one cockroach, there's probably a lot more hiding nearby.

When applied to investments and companies, it means when you see one problem, there's probably a lot more problems that you are not seeing. (And you should jump ship ASAP)

The theory is also applicable to potentially shady opportunities, actually. If you are smart enough to read the signs, and not ignore them.

Let's take one very obvious example: Zeek Rewards. They were shut down by the Feds in August 2012. But signs had been there for MONTHS that it was in trouble.

Zeekler, the auction, had been in operation since 2010 (as FSC auction and later Zeekler) without an auction license (required in North Carolina, their home state). They did not obtain an auction license until March 2012! But nobody checked. That may have been a roach but nobody saw it. Because everybody assumed it's all legal.

Did you know that Paul Burks, head of Zeek, was performing as "the singing magician" before he retired from performing and started MLMs instead? You know magic is just deception for entertainment, right? That may have been a roach but nobody saw it, because they've been distracted. 

In April 2012 Zeek Rewards suddenly banned a dozen or so European countries from participating, and gave several bogus reasons, one even blaming the US State Department Office of Foreign Asset Control (OFAC) uttered by the head Zeek Paul Burks himself. However, this was all proven to be lies only weeks later. Turns out they were both hit with thousands of stolen credit cards and by Denial of Service attacks. And their system can't handle it. The lie was pierced by BehindMLM within two weeks. Is that a cockroach you see? Did you miss it?  

By June 2012 they apparently got a local TV station to report on their "success", and even got the reporter to state that the North Carolina's Attorney General office had deemed the business legal. (Wonder whose palm they had to grease to have that happen?)  AG's office was so shocked, they demanded the video be taken down and the text changed on the TV station's website. Oh my, another roach! Did you miss this one too? Or is that "I see no roach (negativity)?"

By July, they were accused DIRECTLY by another company's head as a Ponzi scheme.  Did you just ignore this one as "jealousy"? 

By August 1st, they fired their own consultant, Keith Laggos, who then said FTC will hit them in 6 months.

It turned out to be less than 3 weeks (August 16th), and it was the SEC.

And then we realized that it's an $850,000,000 (850 million) ponzi scheme... and it had paid off people such as Troy Dooly who was supposed to be neutral to "counter negative news", in addition to possibly ruining reputation of Howard Kaplan (tax consultant) and Kevin Grimes (MLM Attorney) and possibly many many more.

Will you miss the next "cockroach"?

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