RED FLAG #1: Is it "offshore"?Often companies claim to be offshore to "protect" you from your country's laws. The real reason they are offshore is probably to protect THEM from your country's laws, so when they take your money you won't sue them since you can't afford to in a foreign country. Some companies are registered in the tax havens like Seychelles, British Virgin Islands, and so on. Others are registered in Macau, Cyprus and other island nations. If they cheated you, are you really going to sue them in a foreign land? Furthermore, if they really are offshore, how are they doing business in your area? Did they register as a business in your area? Did they register to offer investments? Did they register to do direct sales? Etc. etc.?
Similarly, is the company supposedly MAKING money offshore, but is based on a second country, while recruiting investors in a THIRD country? Such as "altcoin mining in Hong Kong" or "amber mining in Dominican Republic" even though the company is allegedly in Europe or US? How do you verify they are indeed what they say they are?
EX: The gold investment "Emgoldex" scheme was denounced around the world as unregistered investment and even its alleged home, the UAE (the "Em" supposedly stands for Emirates), recently outed them as never registered there either. They ended up changing name to "Global Intergold". So if they were not in UAE, where *are* they really registered to do business? Where is their real headquarters? And where is the gold they supposedly have stored for you?
RED FLAG #2: Does the company primarily operate in a different language? Do their different names mean the same?If the company's "native" language is NOT the language you usually speak, there will often be problems with the translation, as you don't know which version is the real version, as people often make mistakes in translations, esp. in marketing material. This also makes it difficult to find out if it was derived from some prior scams elsewhere in the world.
It gets even worse when there is a third country involved, like when an allegedly European company paying outrageous interest for your money to offer "bridge loans" to businesses in Eastern Europe, but you are being recruited in the US, for example. (Real case, look up "Profitable Sunrise") How do you verify anything with language barrier? Google Translate is not enough to hold a conversation.
EX: USFIA supposedly stands for "US Fine Investment Arts". However, its Chinese name is 美洲礦業 (American Continental Mining Industry, or just "American Mining") and THAT was a scam that was busted in China in 2014.
RED FLAG #3: Are they a Sound-alike to a real company? Or are they using abbreviations a lot?A company name should be unique. An official sounding name may be an attempt to sound similar to a legitimate company, and perhaps even steal the trademark and cause confusion. Others just want to sound important, like called a one person company "Conglomerate" "Group" "Family" "Holdings" and so on. (related tactic: Open half a dozen companies, then claim you are a "group" or "consortium" doing all kinds of business, even though they are all just mailboxes. )
EX: An egregious offender in this is GetEasy, which also operated a company called "TachoEASY Iberica". TachoEASY is a real company based in Germany and Austria that supplies fleet telematics equipment and service to truck fleets, so for a long time GetEasy simply claimed that they do business with TachoEASY Iberica which *sounds* like the Spanish branch of TachoEasy. Until one day the real TachoEASY noticed and put up a disclaimer: We don't know who those guys are, They stole our name. We are NOT related! The GetEasy scheme collapsed not long after.
RED FLAG #4: Has any one ever seen the owner? How about the staff? How big IS the company?Many scams are perpetrated by hidden "admins" who never show their face, or only as an avatar (which may also be a false identity). Some even operated companies using assumed names, or hid their status as owner. Most of the time, you don't see the owner, only their local spokesperson portrayed as "leader".
EX: Smart Media Technologies was busted in Bangalore India as a pyramid scheme. Nobody seem to have real contact with "David Martin" founder and CEO other than company employees. All businesses were conducted by "Denise Driver" and some Indians in India.
EX: TVI Express head "Tarun Trikha" hosted company events as "first Diamond associate" and only later admitted he's actually the founder and owner. He was eventually arrested while transiting through India.
RED FLAG #5: Is the office real, not just a mailbox or a virtual office provided by Regus and such?Some perps use virtual offices / rent-a-office such as Regus to look much bigger than they are, or their employee count doesn't match the alleged business they are doing. ZeekRewards was supposedly doing 100 million a month before it was shut down by the SEC, yet its staff never number more than 20. TelexFree didn't even have a real office in the US until late 2013 yet it was supposedly a multi-national company doing a billion dollar business a year. They had to resort to using a guy walking through the lobby, speaking in Portuguese to a camera crew to generate the illusion that it's a real office. The perp, Sann Rodrigues, was eventually arrested in US after fleeing Brazil, which earned him an Interpol wanted "red notice".
Scams are also fond of moving virtual offices around sometimes between countries, always claiming it's to the benefit of the participants.
Just keep in mind that even a real office doesn't mean it's a real company.
EX: TVI Express started with an office in downtown London, only to move to Heathrow (suburbs) in a few months, then abandoning even that and created a new registration in Cyprus. However, no business was ever conducted in Europe. The server was in the US (then moved to Latvia?!) and actual operation appear to have been operated from somewhere in Asia, probably India and Indonesia.
RED FLAG #6: Do they talk religion or family a lot?A lot of scams invoke the name of religion or family to lull you into lowering your guard. They do this in order to distract you from their business model or operational details which doesn't make sense.
Nanci Jo Fraser was famous for pushing the Profitable Sunrise ponzi scheme with her "Focus Up Ministries", supposedly a charity, except she earns a commission for every dollar put into the scam that she solicited. And she's not even registered with the IRS as a charity. Profitable Sunrise was stopped through SEC and international enforcement in 2013, and it's believed the owner "Roman Novak" was a puppet avatar controlled by the real scammers, who remained at large. Nanci Jo Fraser fan attempted to plant fake stories at news websites claiming Fraser was found innocent. What really happened is Frazer and co-conspirator have to pay back over 100K over the next TEN YEARS as per court settlement.
EX: Church pastors are the logical choice to run Ponzi schemes because the church members inherently trust the pastor, and some turned away from God's business to do the devil work, as the Christians would say.
RED FLAG #7: Does the business model make sense AND is legal?Every business exists to make money, and to make money the rule is simple: "buy low, sell high". So, what does your business sell, and where do they buy it? Does the entire business model makes sense? If you are having doubts, then it may not be a real business.
EX: One of the European scams in recent year was "GetEasy", which was previously mentioned for having setup a clone of a real company to falsely claim association. Its business model was supposedly having you buy GPS trackers to be "leased out" to users, and that's how they are able to pay you monthly... IF you give them money first. Logically, this makes absolutely no sense. GPS trackers are cheap. You can find them on Amazon or eBay or wherever. Who would want to lease a GPS tracker at $20 per month when he can just buy one for about $50 and pay only monthly fee fo $10? The business makes no sense whatsoever.
Products known to have razor thin margins, such as travel or precious metals, cannot be MLMs. MLM generally need 40% margin to cover commission payouts down multiple levels. Thus, any business that has less margin than 40% is not viable as MLM.
Travel industry is now extremely thin margin. Airline average about 2% profit, and hotel do about 5%. The only way a travel MLM would work is as a pyramid scheme: by forcing members to pay a signup and monthly fee and pay commission off that instead of actual sales of travel.
Precious metal is the same. Spot prices are published daily. Where is the margin to support paying commission? Yet some companies promise commission if you can recruit members who sign up for "subscription" (i.e. buy some gold certificates, not even real gold, merely promises of gold) every month. So where is the $$$ coming from? The logical answer is the certificates are NOT backed by gold. After all, if the company goes under, who will honor your 'certificate'?
RED FLAG #8: Does the reason the business need YOUR money make sense?This is the most common sense question, it's disheartening to realize that the victims seem to have forgotten this very obvious question: Why can't they get a loan from the bank or whatever? Why do they need YOUR money?
One of the biggest disconnects happened in TelexFree. Supposedly TelexFree needs people to "advertise" (by spamming the net with text ads and referral links). If you buy one such "position" for $289, and sell a couple VOIP packages (to yourself or to Martians, they don't care) they'll pay you $20 a week. This already makes ZERO sense. If you are really posting ads, WHY DO THEY NEED YOUR MONEY? They can track sales based on the referral link used, right? But that's not the disconnect. The disconnect is how much money are the top affiliates are making, by having multiple "positions".
Let's take "TelexFree #1 Promoter" Sann Rodrigues for example. This is from his own video touting how much money he made in TelexFree:
|Sann Rodrigues showing off his Ferrari, Lamborghini, MB, and a mansion in Florida with his wife and kid|
all supposedly earned by working with TelexFree.
So hypothetically he can buy 1000 positions in TelexFree, ($289 each), earn 20K a week, pay some kids minimum wage to post the ads for him, and clear 80K a month, rather than telling all the OTHER people to invest in TelexFree, travel around the world, leaving his family behind, just to do promos, when he could be sitting at home doing NOTHING... After all, if it's THIS GOOD, why would he want to share?
Clearly, something about this doesn't make any sense. And the truth is simple: it doesn't work if you put in your own money. It only works if OTHER PEOPLE put in money, and you take THEIR money. In other words, TelexFree is a Ponzi scheme, and it was closed by Homeland Security Investigations in 2014, only months after they moved into that office. (remember we mentioned earlier they didn't rent an office until late 2013?)
If your scheme shows two or more of these red flags, you may want to take a serious look at whether it's really real, or merely real enough to fool you.