Saturday, September 1, 2012

Victim, Denial, and Cognitive Dissonance

The shutdown of Zeek Rewards as a $600 million (and climbing) Ponzi scheme provides a very interesting study into the phenomenon of cognitive dissonance, denial, and victimhood.

Cognitive dissonance describes mental state of a person, who, upon finding what he believed to be true turned out to be a lie. There are now two conflicting ideas in the person's head, and somehow he had to reconcile the two, or the person is going to go crazy (maybe not literally, but he'll be uncomfortable for a while as he resolve this problem)  

Read more on cognitive dissonance

And the victims of Zeek are definitely suffering from cognitive dissonance now. What they believed to be a money making opportunity turned out to be a lie.

It is how they choose to deal with that cognitive dissonance that is the interesting part.

People NEVER want to hear negative information about themselves (negativity denial), and LOVE to hear positive information about themselves (illusory superiority). This was proven over and over in cognitive dissonance research.

Read more on negativity denial

Read more on illusory superiority

Friday, August 31, 2012

The Danger of Large Starter Kits

A "starter kit" in MLM is a recommended "kit" of products that you buy and use to "show off" your products in the marketing effort. There are usually several kits, small, medium, and large (though they usually go by fancy names, like "deluxe"). Starter kits can also be called "business in a box", or even named after specific ranks, like "Instant Coordinator Pack".

However, the starter kit and the comp plan will show a lot on how the business really works, vs. how it was described to work. Thus, you need to look out for the warning signs in a starter kit.

First of all, a MLM is NOT supposed to charge an application fee. If it does, the paperwork cost should be minimal (about $20, certainly no more than $50). If it's any higher, it is in danger of being classified as a pyramid scheme by the FTC for doing a "pay to play".

Second, MLM is NOT supposed to sell "training kits" and such material to affiliates and charge a high cost and profit off of that. Training is only sold to members, and that is also a sign for pyramid scheme for the FTC. Training should be sold "at or near cost" and should not be a profit center.

With the two sources of revenue cut, some suspect MLMs resort to "starter kits" they then "recommend" new members to buy. And these starter kits can be quite costly... $500 or more, and comes in big boxes as they contain virtually everything the company makes.

This is out of pocket expenses for you, and if large enough, it will hurt you in multiple ways.

Thursday, August 30, 2012

Cognitive Bias: Availability Bias

Availability bias is a cognitive bias where the afflicted person simply goes after the most readily available evidence, instead of ALL evidence available, and decided it's enough. It can also manifest itself as in believing that the more vividly remembered evidence is far more likely to occur than the anything else.

If this doesn't quite mean anything to you, perhaps an illustration is in order...

Do you remember your first kiss with your significant other?

How about the fifth?

Clearly, you remember the first one vividly, and the rest... are just blurs.

[ See "First kiss and last supper" ]

But this applies to all events that is relatively rare but widely reported. Things like mass shootings, stranger-child abductions, plane crashes, and so on are widely reported, but in reality they are extremely rare.

Rebuttal to "Russian Lawyer for Zeek"

In the last day or two, a letter from Anna Makovsky, who claimed to be a Russian lawyer, posted a missive that was spread on various Zeek related forums citing irrelevant laws and various logical fallacies and fractured arguments. In this rebuttal, we shall attempt to discover who she is, and how fallacious is her "argument" for Zeek (and illustrate how smart, or dumb, Zeek followers are for reposting it).

First of all, the woman claimed to be "Anna Makovsky"

CIS has not been dissolved, so there is no 'former CIS'. Yet the English is quite good, though very stiff.

Wednesday, August 29, 2012

Zeek Rewards Scam Coverage and related News

ZeekRewards scam coverage reached even India:

Another North Carolina business weighed in on Zeek Rewards Scam

Judge Dismissed lawsuit by Disner and Schweitzer to revive Ad Surf Daily Ponzi

NOTE: the same pair is now fronting someone else to restart the Zeek Ponzi.

WFMY News-2 reports on Ken Bell's news conference call 27-AUG-2012

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How did a scam become a cult?

About 2 weeks ago (18-AUG-2012) the American SEC shut down ZeekRewards as a $600 million Ponzi scheme. The owner plead no contest and gave up the company to the Feds and 4 million in his bank account (obtained from the Ponzi).

I have been speaking out against this potential scam since April 2012, and since then I've received death threats, "warnings", and even cyberattacks as well as a legal threat which temporarily knocked my review offline for 6 days.

So it is especially sad to see people who STILL believe in Zeek, even after the Feds shut them down. The following is an actual sign posted on Zeek shuttered HQ's window.

(source: )

Zeek is one of the outliers of Ponzi... snaring up to 1 million victims. While money-wise it comes nowhere close to Bernie Madoff or Alan Stanford's Ponzis, those went after rich people. Zeek went after the middle class, the everyman, the average Joe and Jane, that could be you, your friends, your family.

Tuesday, August 28, 2012

COMMENTARY: Why didn't the so-called experts speak up sooner?

In analyzing the MLM industry only for about 3 or so years, I've been called many names by supporters of many suspect schemes.

While I am just as happy to have been proven right, or even... vindicated, regarding my criticism of Zeek Rewards, one thing bothered me somewhat...

Where were the "real" experts? Those who had been studying the industry for years, both for and against the MLM model? 

And where is the DSA in the whole Zeek debacle?

Monday, August 27, 2012

Can you have a scam feed off another scam? Absolutely.

By now we've pretty much covered the Zeek Rewards Ponzi scheme to death, except the few folks that want to revive this monstrocity.

But let's back track for a moment... There were a lot of "feeders" that benefited off Zeek.

You need customers to give bids to? Instead of recruiting your own, you can "buy leads" from outside companies. It used to be internal (5cc and "customer co-op") but it was outsourced (supposedly for "compliance") to owned by Mr. Bessoni, who claims to be the same source that supplied the 5cc in the first place.

(Whether the customers are legit is a different story)

Well, turns out there was supposed to be some competitor to Mr. Bessoni in the coming months, except SEC got involved and closed off this little money tree someone's been shaking nonstop.

Bad Argument: The "You can't satisfy everybody" red herring

When supporters of a suspect scheme ran out of arguments against its critics, they often fall back to the "you can't satisfy everyone" fallacy, where they try to dismiss the critic's points as "negativity" without saying so. It is a type of red herring, and takes the following form:

A: Acme XYZ is a scam because of ____, ____, ____. 
B: Acme XYZ can't satisfy everybody. There's always some detractors.
This is a red herring because B's statement neither disproves the premise (Acme XYZ is a scam), nor does it prove the counter-premise (Acme XYZ is NOT a scam). Instead, it throws in a completely irrelevant statement: "so what?"

Which is just plain rude.

Sunday, August 26, 2012

Bad Argument: the "lack of complaints" fallacy

A suspect scheme supporter may defend the scheme by touting how few complaints it had with legal authorities or agencies such as the BBB (that is, when they are not discrediting the BBB). It may take the following form:

S: Acme XYZ is not a scam! It has a million affiliates and only 8 complaints! 
Unfortunately, this is a fallacy of "appeal to ignorance". Just because there's lack of complaints doesn't prove the scheme's legit.

The fact that there had been few complaints could have variety of explanations... age (it may have just started), maturity (Ponzi schemes and pyramid schemes don't generate complaints until they stop paying), cult control (if you complain you are not one of us), and so on.

EDITORIAL: People in denial do some crazy things...

It is interesting that people in denial will do some absolutely crazy things, such as claiming black is white, truth is fiction, and so on.

This is exactly what's happening with many Zeek affiliates, one week after their scheme, ZeekRewards, was shut down by the SEC as a $600 million Ponzi scheme. And they are being lead by someone who thus far has yet to publicize his own relationship with Zeek, not as an affiliate, but also as a consultant for Zeek.

This is a letter I was forwarded recently, and it illustrates the amount of delusion people in denial has, in that they refuse to see the truth, but would rather spin some sort of conspiracy to fit their own narrative.

Their words will be in blue, and my reply will be in red.