Saturday, June 14, 2014

Scam Psychology: Naive Realism / Anecdotal Fallacy / Argument from Illusion

Illustration of Naive realism or Direct realism.
Illustration of Naive realism or Direct realism. (Photo credit: Wikipedia)
One of the most often used counter-arguments by a scheme participant against skepticism is the self-testimonial, as in "I have done this, so I know it works, and therefore the whole business works!"

Let us assume that they are not outright scammers for the moment (i.e. liar, liar, pants on fire)

What they don't realize is they are operating from "naive realism", i.e. they assumed that everything they experienced is real, when it is quite possible they've been defrauded (magic trick), and they then extrapolated from their limited (but realistic) experience to conclude that the whole business must be "real".  One version of such self-testimonial, and the most often used, is the "It paid me" argument, as in "this opportunity paid me, therefore it's not a scam".

Yet this is the most powerful of all arguments, even if it's false. TelexFree victims in and around Boston, Massachusetts told Boston Globe that pressure from friends and family, esp. when posing with new house, new car, new luxuries, etc. often prove to be impossible to resist, esp. by people with (naive) "unbridled enthusiasm". Quoting from the Boston Globe story:
...Fausto da Rocha said he probably lost $45,000, the proceeds of an insurance payment from an auto accident. He had initially resisted TelexFree, but after friends profited, he decided to join, hoping the investment would accelerate his recovery from bankruptcy a few years earlier and losing his house. Da Rocha, well known in the Brazilian community, said he recruited about 20 relatives and friends. 
“I feel guilty,” da Rocha said as tears clouded his eyes. “My career is gone. I’m going to clean houses with my wife. Cleaning houses is a good business.”
But the social cost is even greater. He had 20 relatives and friends he can never look in the eye again.

Sann Rodrigues, one of the "TelexFree 8" charged by SEC
as part of a scam, showing off his Ferraris and MB and mansion
in Florida in one of his videos (screencap from Vimeo)

Friday, June 13, 2014

News update 13-JUN-2014 (Friday!): TelexFree Faith Sloan plays dumb and begs for money; Solavei goes Chapter 11 Bankruptcy;

Remember, folks, get your news from a trusted news source, like I do. I don't relay unconfirmed information, and neither should you.

Faith Sloan Plays Dumb and Begs Court to Release Money; SEC says "No Way"

Faith Sloan, one of the "TelexFree 8", has filed a motion on 10-JUN-2014 asking court to release about 18K to pay expenses such as lawyers, rent, and food.

However, this is specifically against the injunction that froze her money in the first place. SEC and the judge that issued the freeze has specifically stated that no "carveout" ( i.e. taking money from accounts that contains money that may be tainted by the fraud) will be allowed if the account owner does not declare his/her assets. Thus far, Faith Sloan has refused to declare her assets as she claimed doing so may incriminate herself (i.e. "plead the fifth").

SEC has also long documents that detailed her multiple violations of freeze order, including:

1) Paid $14854 to "Changes Worldwide" another suspect scheme on 24-APR-2014
2) Paid $3990 to "Changes Trading LLC", which is a part of Changes WorldWide, on 28-APR-2014
3) Wired $30000 to her attorney on 7-MAY-2014
4) Transferred her house deed to her mother on 12-MAY-2014

And here she comes asking the judge to release more money to pay rent... to her mother, whom she just gave her house to. AND another $18000 to her attorney.


Thursday, June 12, 2014

Quick Research: What is Eternyon and should you give them any money? (Probably not)

Occasionally MLMSkeptic was asked questions about a specific company. This is both such an investigation and an example about how I do such research. All this is done in about 30 minutes. (It took longer to write this blog post than to do the actual research)

Today's subject... Eternyon

So what the heck is Eternyon? They claim to be "advertising, technology, and e-commerce, using network marketing".

Frankly, their website looks like what some spammers built to catch people unaware, using only stock photos, like those fake universities.

Right now, there's no mention on who runs this business, or where they're located, on their own website. But it's clear it's aimed at Brazilian Americans, because it's in both Portuguese and English.

The wording in English is also quite... interesting. "Our Differential"? "Clients Benefits"? That looks as if it's written in Portuguese then ran through a translator.

It's allegedly centered in Worcester, Massachusetts... Where TelexFree was just closed not long ago by Feds.

You need to search online to find that Eternyon was allegedly founded by Wayne Howe and George Lima... Howe's allegedly a Massachusetts native, while George Lima was born in Rio de Janeiro but emigrated many decades ago.  However, there are no official paperwork viewable by the public proving Wayne Howe and George Lima are indeed the founders or executives of Eternyon, other than words of people trying to recruit you into Eternyon.

Searching WHOIS hit a "domain by proxy"... They don't want you to know who registered the company domain.

Eternyon refers to itself as "Eternyon LLC" but never stated where the business is registered. There is an "Eternyon" registered in Wyoming: 2014-000657722, first registered in 2014-JAN-24.

You can search Wyoming entity search here:

However, this is NOT an LLC, but a "trade name", i.e. "dba - doing business as". And it was registered by yet ANOTHER LLC, at the same address:

Tech Products LLC
255 Park Ave Ste 1000
Worcester, MA 01609 USA

However, Tech Products LLC, which is also a Wyoming entity (2011-000603187), is marked as "inactive-dissolved".

So to make things clear, Eternyon is registered in Jan 2014 by an entity that went inactive merely 4 months later (May 2014). Its executives are unknown. Enternyon is just a name. The company is "inactive - dissolved".

What do we know about the address?

Is Your Upline a Machiavellian? (i.e. Is S/he Exploiting You or Helping You?)

Niccolo Machiavelli 1 u
Niccolo Machiavelli
(Photo credit: Wikipedia)
A Machiavellian, named after Niccolo (ni-co-LO) Machiavelli, is a manipulative SOB (or DOB, just to keep it equal), who knows every button to push to make you do his (or her) bidding, through cunning and duplicity. Whether the one being used will be harmed is of no consequence to the "user", as long as the user derived benefit from it.

By default, any network marketing upline is a Machiavellian, because as long as you have joined (and bought a starter kit), your upline will have benefited. Whether you benefit from joining is completely irrelevant.

However, as in most cases, manipulation can be for good... or evil. Machiavelli himself was often portrayed as amoral manipulator, but that would be simplifying the issues too far into black and white. He was advocating the rulers to get things done, through manipulation if need be.

Think about it. Aren't modern laws trying to "push" you into behaving a certain way? Like the various "sin tax" on things like cigarettes and alcohol?

But in general governments don't enact laws to be evil. Scammers do. Let's assume for now we are talking about the EVIL machiavellians only.

Machiavellianism (manipulate others for one's own gain), along with Narcissism (extremely self-centered), and Psychopathy (have no empathy), are known as the "dark triad" of personality traits.

Origin of Machiavellianism in Scams

How do uplines "go bad"? Generally, it's because they were taught that way. Instead of learning how to sell (i.e marketing), they were taught "ass backwards" to emphasize the network instead. Apparently they were taught that as long as everybody they recruit (into the network) buy a 'starter kit' that counts as "sales".

But it's not sales. There were no sales to real customers. All sales are to affiliates / recruits.

And they will instill the SAME (and WRONG) attitude onto their downlines.

Chinese has a term for this: 層壓式傳銷 which literally means "level pressure style marketing", though commonly translated as "pyramid selling". The closest term in the West is "product-based pyramid scheme", where products are barely sold outside the network, but are mostly consumed within, but with money moving from the bottom up. At certain angles, this indeed resembles network marketing, but the key difference is in network marketing, the overall goal is to sell products to customers OUTSIDE the company. There are people outside, NOT affiliates, that are actively using the products, and people are selling to those customers. Product-based pyramid scheme, on the other hand, sells to its own affiliates, with little to no sales to outside customers. Some are known to claim to give away stocks or "points" that can be traded for stocks later... if you buy up a lot more products.

One such scheme in China went after the elderly, by telling them the company will do initial public offering (IPO) soon, must bring up sales figures, must look good, so IPO can go smoothly, and encouraged the affiliates / customers to buy up even more products (most of which are vastly overpriced) for the "virgin stocks" which supposedly can be traded for real stocks if IPO goes through. It never did, and the company was busted as pyramid selling. The seniors were manipulated into joining, with fraudulent product claims and income potentials, then with various manipulations to buy up even more stuff that they don't need. The same scenario was repeated last year, when another company was busted in Hong Kong, this time claiming that this US-based company is going to be very big if people buy up their "Internet Comm Suite" for 24000 HKD (about 3000 USD) a year to accumulate "points" to be traded for stock later, and company will buy back the stock for huge riches.

Both pyramid selling cases relied on people who have little understanding of IPO and stock market. But the same idea can be applied to almost any sort of potential profit. And it always involve the same 3 steps.

A machiavellian's "modus operandi" has 3 steps:
Let us discuss each in turn.