Tuesday, October 6, 2015

Scam Tactics: Sell the Hype and the Opportunity, Ignore or minimize the Reality and the Cost

Scams usually hook you by selling you the hype and how much money you can make (i.e. the opportunity), while minimize or ignore the reality (such as risk, market, etc.) and cost.

I'll just go over some recent examples and show you what sort of **** they had to spread to generate hype about their so-called "opportunity" while ignoring reality.

The "Internet TV" biz clones

In 2015, over half dozen "internet TV box" companies popped up advertising stuff like "watch your favorite TV for free, cut your cable TV bill, watch favorite sports"... etc. They want you to pay them about $300-500, and for every people you enroll (who also pay them $300-500) you earn money, possibly $100 or more per person. They go by names that includes words like "Box" "Stream" and so on.

That's a pyramid scheme, folks. I've covered what's a pyramid scheme before, so I won't repeat that here. Let's discuss the hype instead.

The matter of fact is you can buy TV boxes like these for about $50-75 on Amazon. They are all based on KODI (used to be XBMC) any way, and wholesale from China they cost even less. You can probably hire some kid to program it for you for another $10-25 if you don't to spend time on it. So where does the extra $200+ go? To the company and whoever recruited you, of course.

TL;DR = you got something for $300 (or more).that you can buy for $60 (WTF?!)

AND you can get better and more legal boxes for $100 (Roku, Amazon Fire Stick, Apple TV, etc.)

They all advertise (some more blatant than others) that they can get pay-per-view programs and subscription programs for free. They tell you people are already doing this, boxes "like" this are being marketed by Amazon and Roku and others (except those don't pirate and cost less than $100). They count on you having "heard" of such stuff, but having NO detailed understanding of such. it sounds "vaguely familiar".

What they don't tell you is getting stuff "for free" is actually piracy and that breaks so many laws that you'll be personally held responsible for such.  And it's no joke, there already has been a raid in UK on seller of such boxes. And let's not forget RIAA and MPAA and so on suing grandmas and so on for astronomical sums.

The schemes hyped up the benefits (OMG FREE EVERYTHING!) and potential upside (OMG MAKE MONEY WHILE HELP OTHERS 'SAVE' MONEY!) while minimizing and hiding reality (The boxes cost $60 on Amazon) and risks (it's illegal to pirate and you can get sued).

TL;DR version:

Hype / Opportunity: OMG Make money, save money, no more cable TV!

Reality / Cost: Overpaying by 3-600%, piracy is illegal

Coming next, "cryptocurrency biz"

The "Cryptocurrency" biz clones

2015 is also the year of the bogus cryptocurrencies (along with legitimate ones) that usually have the word "coin" somewhere in their name. Without mentioning names, there are PLENTY of ScamCoins out there.

Actually, there are two kinds of schemes involving these cryptocurrencies. First kind is "we're starting our own coin, buy in! Recruit more people to buy in and watch your coins rise in value!" Gemcoin in the US is something allegedly "backed by amber". Another is UToken in Thailand supposedly backed by everything from real estate to malls to nickel mine and Chinese nutriceuticals. Some are backed by nothing (except empty promises)  And they are all over the world. One big one claims to be based in Bulgaria. There are dozens more that no one ever heard of except their promoters trying to get you to buy in.

A second kind claims to be a mining operation (you "mine" for cryptocurrency by performing complex math... a LOT of complex math) and want to sell you alleged CPU power to be applied to such mining and you get any coins "mined". You may mine big name coins like Bitcoin or unknown coins (i.e. we started our own), sort of combining the two.

The two are different enough we'll have to discuss them separately. Though there are schemes that combine both.

The "new coin" scheme is basically a ponzi scheme. Many don't even have a real publicly visible blockchain that can be audited, as they basically make up a random amount claimed the value rose by that much, and all the fanboys (and fangirls) cheer. Some even tie in some real products.  They make all sorts of grandiose promises, like buy in now, you can start selling them in X days, it'll rise Y times in period Z, W people / stores adopted it, blah blah blah. Most of which will be lies, or at best, half-truths. Examples are Gemcoin in the US, and UToken in Thailand/Malaysia.

They all cite Bitcoin, how it came from nothing and at its height worth over 1200 dollars, blah blah blah. They count on you to have heard of Bitcoin, but didn't know much about it. They didn't bother telling you Bitcoin, as of today, is less than $240 to 1 BTC. They didn't bother telling you that Bitcoin is untraceable. Once it's gone, it's gone. That's why criminals love them. Cyberransoms are often paid with Bitcoin, so much so at a Bitcoin exchange it's among the "reasons for buying".

TL;DR:   Hype and Opportunity = OMG get in while it's worth nothing! It sounds fancy! Reality and Cost = Worth nothing because nobody uses it, anyone can start one up.

The "mining" scheme, on the other hand, is unregistered securities. Look up "SEC vs. Howey", the decision that defined what is "securities" for decades since. Howey sold "citrus farm contracts", where buyers supposedly own a piece of citrus farm, but are not entitled to visit it or to the products, only to supposed profits as determined by Howey. SEC went to court and declared Howey to be selling 'securities', and won. And these "mining contracts" are just like these "citrus farm contracts".

Real cryptomining exists, and you can join, but you contribute CPU power, NOT money that supposedly buy such CPU power. Also, the difficulty of real cryptomining scale up as more CPU power were directed at it. Which also begs the question: if it's so profitable, why are they renting you the power rather than doing it themselves? Clearly, there's something that makes no sense if it works they way they claim, and thus, you're obviously not being told the whole truth.

TL;DR: Hype and opportunity = OMG I can invest in this new fancy thing! Reality and Cost = it's illegal unregistered securities, and that's NOT how crypto-mining works.


The swarm of closely related schemes shows a "me-too" phenomenon when scamming... "if you can do it I can do better" type mentality, but you can't make a scam legitimate, only more enticing, which means lie more effectively.

Scams are almost always based on current events, and TV boxes and cryptocurrencies are the hot button topics. By hyping the potential and the value of their "product", as well as left risks and costs unmentioned or minimized, scammers distorts your risk/reward decision process and leads you to the wrong conclusion. That is why it's considered fraud and misrepresentation.

Don't fall for such.

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