Wednesday, December 25, 2013

MLM Absurdities: Why Do New MLM Businesses Just End Up Cloning Old Scams? (Is Lucrazon a scam?)

Image representing Lucrazon as depicted in Cru...
 Lucrazon logo via CrunchBase
In studying network marketing and its illegal cousins, the pyramid schemes and the Ponzi schemes, it is sometimes rather disheartening to see that some people just end up reinventing old scams, or are treading so close they may as well as claimed to have reinvented the wheel. Here's one of those cliche quotes to throw around:
Those who cannot remember the past are condemned to repeat it. -- George Santayana
Perhaps in the modern times, it's necessary to add a corollary:
Those who cannot research the past are doomed to repeat it
And today, we shall examine one such biz... a seemingly very upright one... except it seem to be a business model that's a copy of a scam that was closed by the FTC 13 years ago.

That business is called Lucrazon.

Lucrazon, headed by Alex (aka "Alexy") Pitt, claims to be a merchant ecommerce solution provider, and indeed, Mr. Pitt claim to have worked for a major solution provider of such services. According to Lucrazon's own website, what you pay for is:
Lucrazon maintains a payment gateway that provides network connectivity, technology and security for a payment platform that allows its customers to access end-to-end electronic payment processing solutions. 
It provides a managed technology and security infrastructure, payment applications, web services, and connections to the TSYS payment network. 
The Lucrazon platform allows its customers to offer credit and debit card processing, ACH processing, gift card programs, electronic check processing services, secure hosted virtual terminal, hosted secure payment page, reporting, web services, and support for brand terminals and devices for payment processing.
Translation: replicated e-store website with shopping cart and payment processing. 

How much do you pay? $1795 (discounted to $1000 until end of year), and $99 a month.

IMHO, this is overpriced when compared to similar services such as, with plans starting as low as $14.95 a month and no fee upfront, but that's not the point of this analysis. It's this NEXT step that can potentially get Lucrazon into trouble.

You see, Lucrazon allows "stacking"... as you can buy up to 15 websites. Stacking for what you ask? Stacking so you can get paid by recruiting others.

Lucrazon pays its members (who had already purchased up to 15 websites / positions) through multiple ways, al all of them had to do with signing up even MORE affiliates, except "merchant commission" (i.e. you get 50% of what Lucrazon charges merchants per transaction)

There's the "20% referral commission, plus 3% up to 6 levels down" on recruited affiliates, PLUS binary commission (another 6% if you get two recruits to "pair up", thus binary).

You can read a review by Oz over on BehindMLM, and their "community relations manager"rebuttal.

When I first saw this, I thought... this sounded familiar, but I can't remember where I've seen it. It wasn't until Christmas Day, when I looked over the topic again, that I recalled the case... Skybiz.

Skybiz started in 1998, when it promised riches to the masses to join the plethora of companies selling things online... if they buy one or more online storefronts, and also recruit yet MORE people who want to do the same thing. In other words, you earn through recruiting people, not through selling stuff through your online stores. The company, based in Tulsa Oklahoma, spread and was outlawed in multiple continents (North America, Australia, Europe, Asia, and Africa). FTC finally slammed it shut in 2001, and appointed a receiver to sell off what it can after seizure of assets and repay those who lost money... with cooperation from police all over the world.

MLM Attorney Jeffrey Babener wrote about Skybiz:
In particular, it is the business model in which distributors are encouraged to purchase multiple replicating web sites, and then are encouraged to cause others to buy multiple replicating web sites, all of which are used primarily for recruiting rather than e-commerce, that is causing the greatest concern.
This describes Lucrazon PERFECTLY: multiple replicating websites (up to 15), encouraged to recruit others (all the payments except once are tied to recruitment) to also buy multiple replicating websites, all of which are used for recruiting rather than e-commerce.

I don't know Alex Pitt, so I don't know whether he sought to recreate Skybiz, or even he had heard of Skybiz before starting Lucrazon. But he had effectively reinvented the Skybiz scam, 13 years after it was closed.

The biggest achievement Lucrazon did thus far is adding a former Small Business Administration head, Mr. Barreto, to their board of directors (see below for related links). But that doesn't really prove anything, except more ammo for people who insist on using "legitimacy through association" bad argument.

The fact that Lucrazon seem to trigger 7 out of 8 warning signs on Mr. Babener's "Dot Scam" article is a major problem.

Lucrazon may not be intended as a scam, but it is effectively a clone of a PROVEN scam. Thus, you should not even get CLOSE to it until proven otherwise.

And "Alex Pitt" needs to consult a lawyer ASAP.

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  1. Australia and North america are not continents on their own

    1. Very funny, man. Which map are you using to base your opinion from?

    2. After reading this entire argument, you can only comment (erroneously) that Australia and North America are not continents?
      Putting aside the oddity of that comment, there are a few different schools of thought on that matter and are primarily promoted by the school systems in different countries (and continents). Most schools, for example, in latin-america, teach that there are a total of five continents: America (comprising North and South America), Eurasia, Africa, Australia and Antartica.
      Other places, primarily Euro-centric cultures, promote Europe and Asia as separate continents, as we do in the USA. But here in the USA, we are also taught that North and South America are separate continents, which I believe is just accurate as saying that Africa is separate from Asia and more accurate than saying that Europe and Asia are separate continents (which I never understood). So then there are 7 continents according to the USA school systems. I don't know of any school of thought that discredits Australia as a continent in its own right. So you should get your facts straight before making absurd comments that add nothing to the subject being discussed.

    3. Let's just say trolls are not known for their intellect.

  2. Agreed, any company which pushes multiple duplicate purchases is surely a scam. Like with Skybiz, owners pushed seven packs, and most it turned out were not being used, hence, pyramid scam. If they were smart and not greedy, they could have succeeded without pushing the multiple purchase strategy. Sadly, this is what brought them down, but the actual website for $99. was a fair deal as I saw it at the time. It always comes back to greed with all these deals, as it surely is with Lucrazon. In this case, there is no value, and when you push multiple purchases at $1000. or whatever, this company will not survive long, but long enough for Alexi to make a killing. The first red flag was he uses an alias, so stay away or you will get burned.