Fake Biwako Bank HYIP Goes Dark, Was Pitched to Zeek and Profitable Sunrise Victims

According to report on PatrickPretty.com, the "Biwako Bank" HYIP apparently has gone bust.

This particular Biwako Bank was a fake website setup to assume the name of a former Japanese bank that had been merged into another bank in 2010.  It's identity fraud on a different scale.

This fake bank was clearly setup as an HYIP with multiple "plans" that offered up to 3.05% PER DAY. Yet some promoters are touting it as "NOT an HYIP, but a REAL BANK!"

Some reports indicate it apparently went bust two weeks ago and stopped paying out, and earlier this week the website went offline completely.

It was pitched to Profitable Sunrise victims as well as Zeek Rewards victims as a way to recoup their losses, making it a "reload scam".

http://www.patrickpretty.com/2013/05/22/update-pushed-to-profitable-sunrise-victims-biwako-bank-limited-appears-to-be-doa

Related articles

• BREAKING NEWS: "Universal Private Banking", not a bank, got flagged as PHISHING SCAM by McAfee
• More Reload Scams Targeting Ponzi Victims
• BREAKING NEWS: Multiple Profitable Sunrise Pitchmen subpoenas to appear in Federal Court investigation
• BREAKING NEWS: GoFunRewards Commits Seppuku, spirit returns to Hong Kong

MYTHBUSTING: The myth of "reward for promotional giveaway", and why it's illegal

Don't You Lie to Me (Photo credit: Wikipedia)

The best type of lie is a half-lie, in which truth is combined with lie so you don't know which is which and accept the whole thing is true.

There has been several businesses in recent years that claims to 'reward' its affiliates for promoting the business by buying the the products (by the affiliates) and giving them away to the public (free). The more they do this, the more they are rewarded.

This particular explanation is only half true, but do you know which half?

Let us first examine how one such scheme works.

The "Promotion Disguised Ponzi"

The best known example of such in recent years is Zeek Rewards, a Ponzi scheme that was shut down in August 16, 2012 by the Security Exchange Commission, believe to have sucked in over 700 million dollars from about a million members, making it the widest spread Ponzi scheme in US history. For comparison, Bernie Madoff's Ponzi involved BILLIONS of dollars, but only about 10000 victims or less. This sort of Ponzi is more insidious because it went after the "average Joe", the everyman, whereas Bernie Madoff went after the "fat cats", people who can afford to lose such money.

NOTE: The following is a short summary on how Zeek Rewards worked. If you want detail history how what was Zeek Rewards, please refer to my "investigation" piece.

Zeek Rewards allegedly "rewards" its affiliates for affiliate's purchase of "bids" in its Zeekler penny auction (a sister business, owned by the parent umbrella corporation Rex Venture Group) and giving them away to "potential customers" (usually nothing more than an email address). For every bid purchased and given away the affiliate gets "VIP Points" that entitles them to "revenue share" at rates of up to 1.8% per day, compounded daily. There are a couple wrinkles like the VIP points expire after 90 days, and the rate varies between 0.5 and 1.8% daily, but the overall idea is the same: the more you buy (and give away), the more revenue you share.

You have two balances in Zeek, a "cash" account, and a "VIP Points" account. Every night, based on how much VIP points you have, the "daily profit share" is added to your cash account. For example, let's say you have 1000 VIP points. And the daily profit share is 1.5%. At midnight, you will have 1000 VIP points and 15 dollars is added to your cash account. Then the cash account is distributed as you wish, as you can repurchase the bids (rollover) from 0 to 100%. If you do 100% repurchase, you will have 0 in cash account and 1015 VIP points, for example. Your cash account can be "cashed" once per week, but you are encouraged to "repurchase" bids for compounding.

There is very little documented genuine purchase from customers who buy bids as bids, not as VIP points that entitle them to revenue share, affiliates are paying each other, thus, Ponzi scheme, albeit a rather fancy looking one. Indeed, when Zeek Rewards was shut down, and SEC court document was made public, it was revealed that Zeek had virtually NO profit in July 2012 (took in 172 million, paid out 170 million) and would have gone insolvent very soon.

Yet Zeek Rewards is hardly the first company that encouraged its affiliates to buy their product and give it away for free to participate in the comp plan and got slapped hard for it... One of those prior offenders was Omnitirtion International, in a case that rocked the MLM world in 1992.

Bad Argument: The Open-Mindedness Strawman

Open-minded image
(Photo credit: Wikipedia)

When promoter of a questionable scheme that claims to have something new and exotic, cannot refute your logical criticism, they will often summon the "open-mindedness strawman". Basically, they accuse you of being closed minded and not accept their idea of business or product.

Here are a couple examples, all real comments posted to BehindMLM:

• I’M AN OPEN MINDED OPPORTUNITY SEEKER. This sounds like a good opportunity.
• We give away FREE “membership” cards to open minded people we choose to invite to share in our good fortune. 
• Open your mind! Maybe, just maybe, life does not have to be crap? You do not HAVE to LOOK FOR NEGATIVES in truly amazing opportunites?
• Since you are not ready to open up your minds and accept the new thing you will not be able to cherish this new concept
• and many many more. 

The problem is their definition of open-minded is NOT the dictionary definition. The dictionary definition of open-minded is "willingness to entertain new ideas". It means to consider and evaluate new ideas. It does NOT mean ACCEPT new ideas without evaluation and deliberation.

To promoters of questionable schemes, open-minded means "accept whatever I said as the truth, and ignore everybody else".

Never mind any proof or logic that points the other way.

Don't quite see it? Here's an example:

A: I believe in T because of X, Y, an Z.
B: T is wrong because of I, J, and K. Your use of X, Y, and Z are wrong because of _____.
A: You are just close minded! You refuse to accept T as real!

If A had analyzed B's position, and can explain why his rejection of X, Y, Z proof are not correct, and/or explain why I, J, and K does NOT disprove T, and they are all solid logic, not fallacies, then he would be open-minded. However, in this case, B was the open-minded one because he had studied A's position and have rejected it due to evidence and logic. A's refusal to even CONSIDER B's position is all the more ironic in that he's the close-minded one, yet he accuses B of being close-minded.

Bad Arguments: Shill Reviews / Astroturfing

Fake Eyelashes, better than fake testimonials
EDIT(Photo credit: Wikipedia)

EDITOR'S NOTE: An expanded version of this post with even MORE "proof" can be found here.

Sometimes supporters of a particular scheme will basically write a review of a particular MLM, then at the end including a recruiting link, i.e. "join as my downline!"

That's about as smart as Nokia reviewing a Nokia phone.

Yes, that did happen. Nokia's advertising agency had an employee "Adam Fraser" who posted a positive review of Nokia Lumia 620... on Nokia's website. When questioned, he said the review is 100% true.

Buddy, the very fact that you WORK for Nokia's advertising agency should have stopped you from posting anything for Nokia purely due to "conflict of interest".

But that doesn't stop tens of thousands of various MLMers from doing exactly the same thing: review the scheme they're already in, use various bad arguments to imply it's not a scam, SAY it's not a scam, AND you'll make bazillion bucks with almost no work, and you should join as their downline (so they can make money off of you joining).

Welcome to the world of shills and astroturfers.

Rippln was ripped a new one by scambuster "Salty Droid"

Patrick Stewart as Locutus,
the assimilated Jean-Luc Picard
The "internet marketing" scamworld hype machine
wants you to join them... and make more of them.
(Photo credit: Wikipedia)

Famous (infamous?) Scambuster "Salty Droid", who helped The Verge do an article on "Scamworld", has weighed in with his opinion on Rippln (warning: salty language at the link)

His conclusion is direct: it's a scam, involving the same scamworld players.

Russell Brunson had been on his radar for years, and Anthony Morrison was in the Verge article pitching products about internet scamming (marketing) that teaches internet scamming (marketing) made by internet scammers (marketers) to would-be internet scammers (marketers).

It's almost like the Borg, where "you will be assimilated".

Can you guess what Russell Brunson and Anthony Morrison were talking about recently? And posted their video online? Rippln, of course.

Jim Paris of ChristianMoney.com talks about the Profitable Sunrise Pyramid Scheme

It's about an hour long but there's a lot of good info on there about the scam and how do the victims react to the scam.


http://www.blogtalkradio.com/jameslparis/2013/05/13/profitable-sunrise-may-12-update

Genre Analysis: Does MLM and Energy Drink mix well?

Monster Energy, one of dozens of Energy Drinks
on the market  (Photo credit: Wikipedia)

EDITOR'S NOTE: Genre Analysis is my personal opinion on a particular genre of network marketing, like MLM + penny auction, or MLM + daily deals, and so on.  

You can mix MLM with almost any business that needs a lot of consumer-level marketing, and energy drink is no exception. There are a ton of energy drinks on the market, Red Bull being the original, but there's plenty like Monster, Rockstar, and bazillion more. It's gotten so popular that all the major beverage companies (Coca-Cola, Pepsi, etc.) bought themselves into the market, and there are bazillion small scale imitators, including 5-hour Energy, chomping at the bits from the outside. 

So does it make sense to combine MLM with energy drinks? Yes, to a certain extent. Energy drinks are almost pure profit. It's sugar water, like soda pop, albeit with slightly more exotic ingredients (gurana! ginseng!) and sells for twice the price of same size of cola/pop. So it can support a high-margin operation like MLM, where roughly 50-70% of the cost are paid out back to the affiliates as commission. 

The main problem with Energy Drink MLM is that it is in a heavily saturated market with plenty of traditional retail crowding out any more competitors, unless you have something really unique. 

Bad Argument: "It's Free and You Have Nothing to lose"

Free, but you still can be cheated!
By Stuart Miles, Freedigitalphotos.net

In the recent past, there has been several suspect schemes that basically promised that it's free and therefore you have nothing to lose. It's free to join, and it it promises a lot of money if you do what it wants.

While it is true that if a scheme does NOT charge you any money your chances of being cheated is smaller, it is NOT zero. A scam can promise "absolutely free", yet still cheat you, through several ways.

• Bait and switch
• Upgrade
• Partner offers
• Spam Harvest
• Forced Upsell / Slamming
• Identity Theft

Bait and Switch

By promising free benefits, get you to sign up, then changing the terms on you with a good excuse, the schemer can get you to accept the broken promise. This is due to "foot-in-door" technique, where once you agreed to a small change, becomes more amenable to a large change.

If there's a significant effort already invested, such as recruitment, websites created, and such, there's also the "sunk cost fallacy" involved, where you are less reluctant to disengage because you already have so much invested.


Upgrade/Premium Membership

A variation on bait and switch is to offer a "premium" membership which promised more income or more benefits for pay vs. free membership that has very limited earning. Another way is to limit free accounts to credit only (against whatever's being marketed), instead of cash.

Burnlounge did that and was ruled a pyramid scheme.  it offered free membership but free members can only earn credit to music. "Moguls" (those who paid the monthly fee) can earn real cash when they recruited members. Music was rarely sold. Only 2% of revenue came from music.

The Three Types of People Looking Into MLM: What You Should REALLY Know

Business Sign X
(Photo credits: www.roadtrafficsigns.com)

Richard Bliss Brooke is one of the pioneers in network marketing, and still heads one of the smaller (but long-living) companies today (called OxyFresh). He recently penned an essay: "Failure Is Your Option (In Network Marketing or Any Part of Your Life)"

He brought up some very important points, such as the three types of people who are looking into MLM. However, I have a little problem with his failure mode analysis, where he basically said that if you fail in MLM, it's probably because it's your fault, that you didn't give it all you got.

There seem to be three types of people who are looking to join MLM

1) "Wholesale Customers"
2) Part-timers
3) Full-timers

Let us discuss them each in turn.

BREAKING NEWS: GoFunRewards Commits Seppuku, spirit returns to Hong Kong

The Chinese characters for "Hong Kong". (Photo credit: Wikipedia)

As reported by BehindMLM and "The MLM Advocate" Troy Dooly, GoFun Rewards, a "business" with business model that heavily resembles Zeek Rewards ponzi, is closing its doors in the US and retreating to Hong Kong.

GoFun Places, i.e. GoFun Rewards was started by eAdGear, a company out of Hong Kong, that saw Zeek Rewards as its competitor where people can put in money and enjoy abnormally high returns, yet denies it is any sort of investment. It had previously sued affiliates in the US when those affiliates attempted to switch to Zeek Rewards and made websites comparing the two declaring Zeek Rewards superior in every way though highly similar.

Bad Argument: Poisoning the Well

Poisoning the well tactic is often used by scammers on the victims to "pre-condition" them to ignore any objections from critics and "people with negativity". Unfortunately, many MLM "coaches" adopted this same strategy as motivational speak mumbo-jumbo to preclude any questions. It is a part of overall strategy of "avoiding negativity".

This is best illustrated by citing an actual article:

My next approach was to question the fundamental premise of multilevel marketing, the sketchy business of selling not a product, but a dream. The conversation was making Mark uncomfortable. I saw a flash of panic in his eyes before they glazed over. Then he said this: "They told us there'd be ripe apples who are ready--who see it. They told us there'd be green apples that weren't ripe yet. And they told us there'd be rotten apples. ... You're a rotten apple," he said. There was an uncomfortable silence. I smiled thinly and suggested we both go home.

http://www.metroactive.com/papers/metro/10.03.96/cover/multilevel-9640.html 

Note the part where "Mark" replied "They told us there'd be rotten apples... You're a rotten apple."

Those who sold Mark the MLM dream already told him about "rotten apples" that won't "get it" (understand the appeal of MLM).  They have succeeded in "poisoning the well" (of Mark) that Mark now is predisposed to not believe anything MLM critics said, even if it's reasonable, logical, and supported by evidence.

Waiting for a company to turn legit? The initial "recruiting reps" rush

A hen chicken (Gallus gallus) (Photo credit: Wikipedia)

This is sort of a follow-up to the previous day's topic... The "chicken and the egg", or "afffiliates and customers" which come first?

In the MLM case, you need affiliates to sell to customers, but you recruit affiliates FROM customers. You can't have one without the other, it seems.

So what a lot of MLM companies do, in their "launch phase", is to come up with some sort of a plan where the affiliates pay to join up and buy a starter kit of some sort, and have the affiliates go out and recruit more affiliates, who also buy starter kit.

The problem is... that's illegal. There are no real customers. It's just affiliates recruiting affiliates, and that's a pyramid scheme.

The "apologists" complained that MLM have to start by acquiring a lot of affiliates, i.e. "building a sales team" in order to reach the customers. Once a certain threshold had been reached, then the affiliates will go recruit customers, instead of reps.

The problem is the MLM system DISCOURAGES doing that. It makes NO SENSE.

Chicken And The Egg: a MLM Startup Problem

English: A chicken egg
(Gallus gallus domesticus)
(Photo credit: Wikipedia)

Recently, on the subject of a "launching" MLM, an interesting question was brought up... How does a MLM company sustain interest in itself when it is mainly in an affiliate acquisition mode instead of customer acquisition mode? At first this question seem to be a "chicken or the egg, which comes first" question, but in the end it turns out this just means the company has a serious identity crisis.

For discussion's sake (as it's company neutral), I'll only mention the name at the end. Let's just say their business model is to launch a way to let people try products, and if they like them, buy them, then they'll get revenue that way (or get some affiliate fees / commission), then share with the affiliates (using whatever formula / rule that was defined).  The affiliate's job is to show people that specific way.

So now you have a problem... The chicken and the egg, or in this case, customers and affiliates.

MLM relies on affiliates to advertise to customers, and turn some of those customers into downline affiliates (who then goes out and advertise to more customers).  You can't have one without the other.

So in case of this business, people who buy the products are the customers, and people who share the "way" would be the affiliates.

Except this business can't keep them apart. In the way business was described, any one can "share" the way (it's an app that shows off other apps, and if you like it, you share it). Any one can share anything.

So what is the difference between an affiliate and a customer?

Nothing... except one had paid into the system (and can earn via the system), and one had not.

Burnlounge, a pyramid scheme shut down by the FTC, had the same problem: no distinction between affiliates and users/customers. The end result is affiliates are getting paid to recruit affiliates. You'd be stupid NOT to upgrade yourself to affiliate (mogul) "just in case".

Bad Argument: claiming the 3 stages of truth is on your side

Arthur Schopenhauer (Photo credit: Christiaan Tonnis)

When supporters of suspect scheme want to sound grandiose but without much evidence (a lot like conspiracy theorists), they will often cite this quote:

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."
-- usually attributed Arthur Schopenhauer, German Philosopher (b. 1788)

The intention of the citer is to IMPLY that whatever they want to believe (be it UFO, time travel, or scam, or whatever), but cannot defend, will "eventually" be accepted as "the truth". 

The problem is Schopenhauer never said it. What he said was:

Der Wahrheit ist allerzeit nur ein kurzes Siegesfest beschieden, zwischen den beiden langen ZeitrÄaumen, wo sie als Paradox verdammt und als Trivial gering geschÄatzt wird.

Which in English, says:

To truth only a brief celebration of victory is allowed between the two long periods during which it is condemned as paradoxical, or disparaged as trivial.

(See citation)

Nothing about ridiculed or violent opposed. Further research of all Schopenhauer works failed to produce a quote even SIMILAR to it. Clearly, this quote ain't right. Yet it was attributed to Schopenhauer by Harper's Book of Quotations (1981 et al).

Bad Argument: Pixie-Dusting and "Cool Ingredient" as "evidence" of efficacy

Lingzhi or Reishi (Photo credit: Wikipedia)

One way the nutritional supplement industry attempt to talk up its efficacy is to claim its product(s) contain ingredients that is allegedly good for you. However, such suggestions are usually left very vague, leaving it up to you to convince yourself that taking their product will improve your health when they promised no such thing through weasel words like "support" or "enhance".

This is often now done by adding some magic ingredient derived from Eastern medicine (previously it's always some sort of Asian superfruit. We've done Noni juice, then Mangosteen Juice, then special FORMULATIONS of such...)  Some of the more recently hyped ingredients would include gandorama and cordyceps, both were exotic ingredients in "Chinese Medicine".

Gandorama Lucidem, which usually goes by its Chinese name, Lingzhi mushroom, or the Japanese name, Reishi mushroom, is indeed, a mushroom that is revered in Chinese medicine for almost magical qualities due to long stories in old Chinese literature. Modern science have slightly confirmed some of the qualities, but not that much. That doesn't stop companies from claiming their coffee or pills with Lingzhi are good for you, of course. Pharmacists believe a daily dose of Lingzhi should be 1250 to 2000 mg. So how much Lingzhi does a typical serving of whatever contains? Try 250 mg (and I had to really really dig for that number, as it's NOT advertised anywhere!)

India rocked by emu Ponzi and sheep Ponzi

High sheeps (Photo credit: Bertoz)

Various farmers in rural India were cheated into invested in emu farms and sheep farms that promised return of 2% PER MONTH.

SHD (Sheep Husbandry Department) is believed to be a Ponzi, under investigation by Indian regulatory authority SEBI. It was only 4 months ago (November 2012) that SEBI warned people off Beetal, another sheep-husbandry scheme. The farmers will participate by buying a sheep for several thousand rupees, and once the sheep multiply (typically give birth to a litter of 4) that will give alleged high profits, and the company will "guarantee" buybacks.

Only a year ago SEBI warned farmers off emu farming by "Susi Emu Farms", that followed the same formula... they sell pairs of emus, you raise them have them lay eggs, hatch them, grow little emus, and sell them back. Soon there was a "VIP Program" where you don't even need to invest in the farm... just give them money and they'll do the "real" emu rearing, you just reap in the profits. It was all fake, and 50 million was believed lost.

The Bulgarian Ponzi Aftermath

In Bulgaria, even today, you'll find empty lots of land and half-finished shells of alleged apartment buildings, sitting there today. What you probably don't know is they are the aftermath of Ponzi schemes.

In the 1990's Bulgaria was attempting to transition out of the former Soviet Bloc command economy into a more capitalistic economy. As a result, it is a free-for-all for crooks and scammers, as there are virtually no laws on investment. All of the Soviet Block countries suffered to one degree or another. Even Russia was rocked by the MMM Pyramid, believed to have sucked in one BILLION dollars (not rubles, DOLLARS) Albania had a whole revolution known as the "Lottery Uprising" when the pyramid schemes collapsed and the impoverished poor took up arms and turned anarchist.

Bad Argument: Badass, Dare, and Neg

Badass (TV Series (Photo credit: Wikipedia)

One of the most often used tactics in getting people to commit is the "motivational speech". The objective is simple: get the people to get off their butts in a seminar and pluck down their dollars for your miracle solution to their problems, whatever they are. And one of those is basically insult your audience, though in a relatively gentle way, about how they are wussies, and they should be badasses, take charge of their lives, blah blah blah. In the dating scene, this is known as a "neg", and it's basically a disguised "dare", something you'd do back in kindergarten, like "I double dare you!" Surprising how well it still works today, on adults, who should have grown out of it long time ago.

Here's one such example. I won't "name" the company. I've done some blurring to prevent it from being too obvious. But it's hardly "disguised".

Without any context, what do you think of this picture? You'd think you're looking at one of those casino ads or something.

But no, this is an ad featuring an income opportunity / blog hosting / network marketing education amalgam. The question "are you all in" is a dare, that you have to "risk it all to gain it all", with the clear implication that if you don't risk it all, you are a wuss and therefore you should get out.

That may work as a motivational speech, as a "call to action", but do you really want to DO BUSINESS with people like that?

Ponzi "winners", don't hide your assets or you'll be sorry

Ponzi in 1920 (Photo credit: Wikipedia)

Ponzi schemes are easy to pull off with a bit of credibility. When Ponzi "winners" attempt to hide their assets from the law and creditors, they make things much worse. As the two men in Arizona found out when they agreed to help a Ponzi scammer hide assets.

Ponzitracker reported that the Hall Brothers of Arizona were arrested and indicted in Arizona. Authorities stated that they were in contact with a "winner" in a 90 million Ponzi scheme. Lindsey Howell, of South Carolina, did not start the Ponzi (That would be "Ron Wilson" former councilman in South Carolina)  However, Howell benefited hugely from it, to the tune of millions, as he did not disclose he was paid millions for promoting the scheme to others. Ron Wilson is spending 19 years behind bars for spending 60 million (much paid out to people like Howell) of the 90 million he soaked up.

Bad Argument: Demand for parity

(Photo credit: Wikipedia)

One problem with the MLM industry, and its various shady cousins (the HYIP, the Ponzi, and such) is their reputation. The oldest firms like Amway and Herbalife had been followed by various scandals and lawsuits, while the newer ones have no reputation or started by shady characters or do shady business (sell nothing substantial). One way these firms "manage" their reputation is to encourage its members to "demand parity" in news coverage. For example, if there's an article that reflects negatively on the industry, the pro-industry people would then demand some sort of positive coverage as a "balance" to the negative story. And if they don't get it (or just get a brief mention), they will portray that as some sort of a "bias" against the industry. They may encourage its members to seek parity, or they shill the demand for parity.

While the common adage "there are two sides to every story" is often true, the same thing does NOT apply the FACTS. Rather it is the INTERPRETATION of facts that is subject to debate.  When people started citing "there are two sides", they *may* be trying to imply that the "two sides" are equally valid, when they may NOT, in fact, be equally valid. Demand for parity tries to pin the burden on the critic, trying to portray the critic as "biased" and "unfair" when the facts were not in doubt.

Think about it. If they have better facts, they would have presented them and refuted the facts presented by the critic, thus defeating the critic's viewpoint. The very fact that they had to resort to "but you didn't show the side that's FAVORABLE to us!" means they can't refute the critic's facts, but must instead, try to shout him down.

Sometimes, the demand for parity takes rather curious leaps of logic. Here's one sample comment posted on BehindMLM when the student newspaper at North Texas State University published an article unfriendly to Vemma, calling it a financial threat to young students. The comment at BehindMLM says:

This comment contains a lot of half truths, let's analyze it one at a time. 

1) "My calculus textbook was $220. I haven’t used calculus once in 23 years."

The comment basically said the writer spent a lot of money for education that meant nothing to him. I don't doubt it, but is the message accurate, and furthermore, is it RELEVANT? No. He's using the "pot calling the kettle black" tactic... raise some other issues to derail the discussion. 

2) "Billionaires are buying network marketing companies while universities are putting kids into debt for jobs that are no longer in existence. "

This is such a generality that's impossible to evaluate. Donald Trump STARTED MLMs, which didn't really go anywhere. Warren Buffet only kept Pampered Chef, sold the rest. Even Sir Richard Banson sold Virgin Cosmetics (spun off). So which billionaire is this guy talking about? No idea. Thus, the claim is unsupported, and thus, useless to prove anything.