BREAKING NEWS: WCM777 smashed AGAIN in China, is Phil Ming Xu in custody?

PatrickPretty.com spotted a news in ShanghaiDaily that a Mr. Xu of "World Capital Market" was arrested by Chinese police for pyramid scheme in China. It appears that Phil Ming Xu of WCM777 has moved back to China and restarted his scam which collapsed in 2014 in the US. Below is a bilingual version of the news, with English version provided by me.


http://www.legaldaily.com.cn/index/content/2016-05/15/content_6626584.htm?node=20908

会员遍布28省 涉案金额数亿

Members spread across 28 provinces, amount into hundreds of millions

“万通奇迹”涉嫌非法吸存被查

Wantong Miracle suspected of illegal securities, being investigated

发布时间：2016-05-15 20:42 星期日   来源：法制日报——法制网

Posted: May 15 2016 Sunday 20:42     Source: LegalDaily.com,cn

法制网记者 李想  Reporting for LegalDaily Xiang Li

2015年5月27日，广东省肇庆市鼎湖区居民周华（化名）走进当地经侦大队报案。情绪激动的周华告诉警方，自己听信他人投资了万通奇迹社交资本云计算平台。孰料，不仅没有收到一分钱分红，连2.6万元本金也“打了水漂”。

On May 27, 2015, Ms. Zhou Hua (pseudonym) who resided in Guandong, reported to the local Police Economic Crime Detachment to report that she had been defrauded. The frustrated Ms. Zhou told police that she trusted others and invested in "Wantong Miracle Social Capital Cloud Computing Platform", and not only did not get any promised profit, the 26000 investment is "gone with the wind".

    警方顺藤摸瓜，一个披着投资原始股权理财、电子商务等新概念外衣的特大非法吸收公众存款犯罪团伙浮出水面。据调查，此案涉及万通卡会员5800余人，分布于全国28省，涉案金额达数亿元人民币。

Police followed the leads, and revealed this humongous illegal securities crime syndicate that used various new concepts such as "protoshare money management", "e-commerce" to disguise itself. Based on investigation, this crime involved over 5800 Wantong Card members, spread across 28 different provinces (in China), involving hundreds of millions in RMB. 

    精心包装欺骗群众

A exquisite facade to deceive the masses

    据警方介绍，2014年1月，周华听信犯罪嫌疑人梁某、陈某的话，投资购买两份“万通奇迹”WCM705套装，价值1999美元，按照“万通奇迹”公布的人民币和美元6.5:1的汇率，折合人民币13000元，对应1999个电子积分。对方向周华承诺，她可以获取每天16美元的分红，可累计100次分红。

According to police, in January 2014, Ms. Zhou believed suspects Mr. Liang and Mr. Chen, and purchased two of the Wantong Miracle "WCM705" suite at cost of $1999 each. Based on the then published rate of 6.5 RMB to 1 dollar that's about 13000 RMB. This would give the investor 1999 "points". According to the then promises, she can get 16 USD every day as profit share, and can do it 100 times. 

    《法制日报》记者登录网页搜索“万通奇迹”，发现有不少人在网上询问投资“万通奇迹”是否靠谱。那么，“万通奇迹”到底是怎样的一家公司呢？

Legal Daily reporter searched the Internet about "Wantong Miracle", and found there were many people asking online is Wantong Miracle" legal. So what sort of company is Wantong Miracle? 

    5月6日，在深圳市第二看守所，记者见到了在押犯罪嫌疑人徐某。据徐某称，大学毕业后他曾在媒体做过编辑，后来转行到金融领域工作。

May 6th (2016), in Shenzhen 2nd detention center, reporter met the suspect Mr. Xu, who had been arrested. Mr. Xu claimed, after graduating from university he worked as producer in media, then transferred to finance. 

    据肇庆市公安局经侦支队副大队长张朝晖介绍，2013年5月，“万通奇迹”系列融资产品由某投资银行控股集团董事长徐某等人策划成立。徐某等人宣称，“万通奇迹”进行的是社交资本革命，利用互联网云服务、云计算和全球零售折扣系统，为全球客户提供资本放大。

According to Zhang Zhaohui, deputy chief, economic investigation detachment, Zhaoqing Public Security, Wantong Miracle's various products was introduced to China in May 2013, by a Mr. Xu (supposedly some "investment bank holding group CEO") and others. Xu, et al, claimed that "Wantong Miracle" is a social capital revolution, using Internet, cloud computing, and world retail discount system, to provide "capital magnification" to global customers. 

Scam Tactics: False citing of legislation or certification authority

Scams, in order to claim false legitimacy, will cite laws, regulations, and licenses to sound official, when they are grossly exaggerating the truth, or are outright lying.

Below we will discuss four example of such outrageous fraudulent behavior, and how you can see through such deception with just Google and some sense of skepticism.

Gemcoin, USFIA, and AB129

USFIA was an alleged 32 million ponzi scheme shut down by SEC on September 29, 2015, having been previously chased out of China in 2014 by Chinese authorities. Two of the perps were arrested in Thailand in 2014 through China's Operation Foxhunt extradition program and extradited with other perps back to China, only to see the scheme restart in the US under the same US leader Steve Chen.

When it was running at full steam their marketing material claimed that Gemcoin, their supposed altcoin was the first cryptocurrency authorized by California bill AB129.

Gemcoin believers repeating claims that Gemcoin was first cryptocurrency authorized by
California bill AB129 (2014). It was complete bull****, of course. Every bit of Steve Chen's assets
had been counted and it came out to only 20 or so million. "50 billion"? Hilarious. 

The problem is AB129 said no such thing. The full text of AB129 is easily Google-able.It is only a single sentence.  It simply says that from here on California's restriction (that all transactions must be done with US dollars) is rescinded.  Gemcoin was not mentioned or referenced.

Yet the Gemcoin believers did not question the claim. They simply accepted the extraordinary claim as true. And they put in money for something "backed by amber".

There was no amber or amber mine. And now their money is lost or tied up in an international ponzi scheme. At least report, the receiver that took over the company can only locate about 20 million of the 32+ million believed to be involved. A big amount was sent overseas to China and Singapore.

But at least USFIA scam referenced a real law. The next scammer simply made up an agency that doesn't exist.

How to be an online marketing idiot: arbitrary DMCA takedown notices and SLAPP

English: Very poor sketch of a desired icon for DMCA takedown notices on articles, emphasizing Wikimedia's submission... created for conversation at Commons:Village pump#DMCA takedown templates and material. (Photo credit: Wikipedia)

It seems some people have NO concept of copyright, and think that issue random threats to sue is somehow a valid tactic in "reputation management". Such idiots should never be allowed to do marketing online, but this is a democracy, with freedom to do all sorts of things, including making a total fool of oneself.

Recently, Techdirt, a tech news website, highlighted a particular idiotic DMCA takedown notice. The story basically goes like this. in 2015, Techdirt writer Tim Cushing put together a list of "stupid DMCA takedown requests" because, well, they are stupid, like DMCA takedown notice to Google... about images cached on Bing (which belongs to Microsoft, not Google), or DMCA takedown on news coverage about one's crimes by self-publishing a book about it, and so on and so forth.

One of these... online marketing idiots, instead of acknowledging mea culpa, doubled down and issued a DMCA request to Techdirt claiming their copyright were violated because Techdirt used a couple of the images offered by the company, called Andromedical, as example, complete with Andromedical's prominent watermark. Oh, and the same copy apparently posted random comments online claiming Techdirt is owned by some company nobody ever heard of, is a patent troll, claiming various bogus misdeeds by the writer, and more. It's a basic slander campaign... all because they can't admit they were idiots.

The idea that TechDirt, a news website, can be liable for copyright violation for "covering" Andromedical (whose product is a penis pump, named... AndroPenis (tm), really imaginative, guy) as a news item is simply hilarious. It's even MORE hilarious that Andromedical's complaint also claimed that Techdirt is a "counterfeiting operation" and the violation is being reported "to INTERPOL".

The bottom line is actually quite clear: "we don't like what you say about us, STFU!"

But the world doesn't work like that. There are exceptions to copyright called "fair use", and using the company logo and publicly available photos provided as promotional material by the company to illustrate the company, and in no way asserts being the company, is obviously fair use.  If you put info out in the public, you can't control what people do with it, be it positive or negative.

Yet some scams and suspect schemes are quite fond of using these bogus copyright and/or trademark claims as well as threat to sue or outright lawsuits in hopes of silencing critics as a part of their "reputation management" strategy.

Is it just series of bad judgment, or "once a thief, always a thief"?

Given that how many of the Ponzi pimps have been around for years, it's quite surprising that people aren't using Google enough and pick up their history.

One of the most vocal supporters of OneCoin was Thomas E. McMurrain. This is him pitching his "Welcome to OneCoin AlphaTeam"

Thomas E. McMurrain, pitching his OneCoin Alpha Team

The guy really needs better green-screening. The sun is clearly coming from the RIGHT in the photo background, but his face is lighted from the LEFT.  But who said that these folks are exactly detail oriented?

But if you bothered searching his name for a bit (never mind his self-PR like "7th Disruption", a book he "wrote" to promote OneCoin) you'll find some rather... disturbing details, like how he kept picking losers... Such as... Solavei

Tom McMurrain touring country w/ Solavei in 2012
Solavei went belly up in 2015

For those who didn't keep up, Solavei closed its doors in late 2015.  Which is apparently when Tommy here picked up the OneCoin banner. He apparently posted on Facebook when Vemma was closed by FTC "come join us in OneCoin", much like ambulance chasers.

So what was Tommy doing before 2015? Well, we need to count, but there's FlexKom... a scheme that went nowhere except Turkey and pushed by Ponzi-pimp Ian Driscoll, formerly of BannerBroker.

Just a few months later, it apparently did not pay Tanju Colak a Turkish ex-footballer and local celebrity, whom joined FlexKom a while back. Mr. Colak sued and FlexKom lost. A possible class action lawsuit was still undetermined as of 2014, and I can't search in Turkish to find an update, but it is said to possibly involve 40000 FlexKom members in Turkey. The business also seem to have gone quiet at the end of 2014. Definitely NOT another winner, something that sells itself, as Mr. McMurrain claimed, if it can't even sell itself on their home continent.

So what else did Mr. McMurrain involve himself in? No less than one of the widest spread Ponzi schemes in US history:  ZeekRewards.

Tommy here registered a "join Zeek and make me $$$" domain in March 2012. For the record, Zeek Rewards was shut down in August 2012 by Secret Service, SEC, and other Federal agencies.  Again, Tommy can't seem to pick a winner.

So what was Tommy doing even before this?  TVI Express... an international pyramid scheme.

Scam Absurdities: Birds of a Feather Flock Together, or the Rodrigues and Filho financial links

There was an old saying: Birds of a Feather, Flock Together

Basically means: like attracts like.

So how does this apply to Ponzi schemes? One needs to look no further than Sanderlay Rodrigues De Vasconcelos aka "Sann Rodrigues", and his ties to Daniel Rojo Filho.

For those of you who don't know "Sann" Rodrigues... he used to go by the title "First Millionaire TelexFree US". That's right... he's a "net winner" in the TelexFree scam in both Brazil and the US. Previously he operated a Ponzi scheme called FoneClub that was shut down by the SEC around 2006. Oh, gee, now here he is again, a top leader in ANOTHER Ponzi scheme, TelexFree, shut down by the the SEC! But it gets better. At the time Sann was in Brazil, and he simply came up with a new scheme... called iFreeX.  And within a few months Massachussetts called it suspect Ponzi, which apparently prompted Brazilian authorities to raid his recruiting seminar and invited him downtown for a long chat.  He was released but apparently under travel restrictions, roughly March 2015 or so.

MLMSkeptic was immediately reminded of the circumstances how half of the TelexFree US, Carlos Wanzeler, escaped the country... by driving into Canada ahead of the authorities with his daughter, leaving his wife behind, and from there they flew to Brazil, where they cannot be extradited against their will (as per Brazilian constitution. Wanzeler still holds Brazilian citizenship). When his wife Katia Wanzeler tried to join them she was arrested at the airport by Federal agents, minutes before she got on the plane.  She had previous told Federal agents serving a search warrant on the Wanzeler house that Carlos is staying at a hotel when it was later discovered that when she told the Federal agents Carlos and daughter was in fact heading toward the Canadian border in a car registered to her company.

But we're here to talk about Sann Rodrigues... Any way... Apparently Sann Rodrigues managed to get himself out of Brazil despite Brazilians told him to not go anywhere. So when he disappeared, Brazilian authorities put out a Interpol Red WANTED notice:

Interpol Wanted Notice for Sann Rodrigues

So when he showed up in Newark, New Jersey (yes, in the US) getting back into the US... He was promptly arrested for VISA fraud. He had apparently neglected to mention that he was arrested for Ponzi scheme back in 2008 or so... among other problems. He posted bail, had his passport (and those of his family) confiscated, only to be arrested AGAIN for the Interpol warrant. He spent another weekend in jail until Brazilians eventually responded "you can keep him for now".

Okay, so what does this have to do with Daniel Rojo Filho? And who is Daniel Rojo Filho? Pretty complex guy... and "ambassador of the Sinaloa Drug Cartel", according to a Mexican article.

MLM Basics: Why a MLM Comp Plan is MORE important than the product, not less

One of the biggest mistakes a MLM "noobs" makes is put all the emphasis on the product, without analyzing the business model itself, i.e. the compensation plan, or in jargon, "comp plan".  (Or perhaps there's only a cursory glance). They are all enthusiastic about the product. OMG, it totally works. I (blah blah blah blah),  product is (blah blah blah blah). You have to try it! It's totally legit! I didn't believe at first but now I do! (blah blah blah blah)

When critics / concerned friends/family told them the company is likely a pyramid because of X, Y, and Z, the first thing out of their mouth is "it can't possibly be a scam, the product works".

They are suffering from the "blind men and an elephant" problem... They cannot understand that what they experienced  may be true for them, but is NOT the WHOLE truth.

Here's a very simple analogy... Take a look at this car:

Those of you who know cars should be able to tell, by the GT-R badge on the hood, that this is an older generation, Nissan Skyline R34 GT-R (or a reasonable facsimile thereof), which is a two-door coupe.

Except this is not a coupe. It's a station wagon. A five-door station wagon Nissan GT-R, and no, it's NOT photoshop(ed).

The point is if you ONLY look at the nose of the car, you'd have assumed it's a GT-R. But it's not. You have to see the entire body to realize this is NOT a coupe but a station wagon.

Similarly if you ONLY look at the products of a MLM, you could not have gotten "the whole picture", on whether the company may be a scam or not.

That's why the compensation plan, i.e. what you need to do to get paid by a MLM, is FAR MORE important than the product... It is the PRIMARY indicator on whether the company is a pyramid scheme... or a real MLM.

So how do you determine which is which?

Charity MLM? What a joke, and here's proof

Here's a simple and logical premise: MLM and Charity does NOT mix.

Think about it. MLM is a MONEY MAKING enterprise, both for the company itself, and for the individual affiliates. Charity is.. altruism. The two goals are mutually conflicting.

That doesn't stop a bunch of lame MLMs from trying to cash in on the charity angle, some by claiming it is helping kids where you "donate" your money to them, and they will deliver the food to kids in some third world country. Another claim that by participating in their penny auction your bids will be partially donated toward a worthy cause. There are many other variations, but they all include a supposedly non-profit charity making profit AND income for participants.

And in 2016, it turns out that leader of one of these so-called charity MLM is the largest tax cheat in the state of Oregon.

A gentleman by the name of Randall "Randy" Jeffers.

Do You Know Where Your Money Went If You Invested in a Suspect Scheme?

According to court documents made public recently, ZeekRewards ponzi scheme victims may have a longer wait if any money can be recovered, for millions of their money held by payment processor for Zeek being a high risk client, may have been in several Eastern European Banks that have been shut down for fraud, and chances for recovery is remote.

Zeek Rewards was a Ponzi scheme in North Carolina that ensnared MILLIONS of victims in the US and beyond by promising massive profit sharing from the alleged penny auction business if they "purchase" bids to be given away as promotional items and in return gets a profit share based on amount of bids purchased for the next 90 days at daily rate of up to 1.8%. The scheme collapsed in 2012 when facilities was raided by SEC and Secret Service agents and entire operation closed down. Since that time, a receiver has attempted to recover tens of millions of dollars held by third-parties, who were supposed to obey court orders not to move the money, and to be eventually returned. Yet it is clear now this order was not obeyed on many occasions, and tens of millions have gone missing.

Before the collapse of Zeek in 2012 Zeek consultant "Keith Laggos", MLM Expert, boasted that he helped Zeek management to move payment operations abroad. People then didn't ask why. The reason can only be that US financial institutions no longer want to touch Zeek. Now, millions of dollars are out of the US, and potentially out of the reach of the victims, all thanks to efforts of Zeek to continue operating its criminal enterprise by moving money overseas. If this all sounds confusing as heck, let's start from the beginning.

Scam absurdities: "An honest Ponzi" is still illegal (duh)

Those of you who read articles in general may recall something about MMM... If not, here's a TL;DR version:

MMM, or Mavrodi's Money Machine, is a fraud company founded by Sergei Mavrodi, his brother Vyacheslav Mavrodi, and Olga Melnikova. With its start in 1989 Sergei tried to do legit business, but was chased down for tax evasion by 1992. By 1994, Sergei had gone into financial market and with the Russian economy in hyperinflation he was promising profit of 1000% percent a year with a full-on TV campaign as well as a "free metro ride day" where they paid for EVERYBODY's metro ride for a day in Moscow.

In 1993 and 1994 it was estimated that MMM was taking in 100 BILLION rubles PER DAY for its shares. Party finally ended in Mid 1994 when tax police closed MMM for tax evasion. However, Mavrodi was able to manipulate the victims into voting him into Russian Dumas (house of representatives) by claiming government closed MMM, not him, and if they do that he'll pass measures to pay them back. Elected official was also immune from arrest. Mavrodi's run came to and end when the Dumas chose to cancel his immunity in 1995, and MMM finally declared bankruptcy in 1997.

However, Mavrodi went on to start several more scams, including "Stock Generation" (closed 2002, Mavrodi arrested and convicted 2007), MMM2011, MMM-India, and MMM-Global.

The interesting parts about MMM2011 and the last few schemes is its.... "honesty", so to speak. MMM2011 was described as...

"This is a pyramid. It is a naked scheme, nothing more ... People interact with each other and give each other money. For no reason!"  (source)

Which brings us to the "honest Ponzi"...   Is it a Ponzi scheme if the owners admits to it?

Of course it is. Does a weasel stop being a weasel by admitting it is a weasel?

Yet that's what many scammers want you to believe... that as long as they paper over any irregularities with enough disclaimers... they can't be "liable".

Scam Tactics: Attribute Transfer

Scammers want you to trust them, and they usually try to invoke something that we respect and revere, then use "attribute transfer" to get you to transfer the respect and reverence onto the scammers. Many scams invoke religion, patriotism, celebrity, and such, in order to transfer authority, sanction, and prestige to their scam, so that the victims are more likely to accept it than reject it out of hand.

What is Attribute Transfer? 

Attribute transfer relies on easily recognized symbols linked to popular and accepted concepts. Cross, Jesus, Flag, Cartoon, Prayer, Military Service (in some areas), large and old companies, famous investors with loads of money, scientists and doctors (in white lab coats) and so on. They wish you to associate the attributes of the popular concept or symbol with this new scheme that they have.

It can be summarized as "we are kinda like that more popular thing".

This is related, but not the same as excitation-transfer theory in psychology, which is defined as "how residual excitation from one stimulus amplify the response to a different stimulus". One of the most often given examples is the cliche advice "take a girl on a date to do something really exciting like roller coaster in hopes of she associate the excitement with you".

Profitable Sunrise brochure
using Christ the Redeemer image

Example: Profitable Sunrise 

Profitable Sunrise is an international ponzi and pyramid scheme shut down in 2013 that supposedly operates out of England and solicited investments with slogan "profit with every sunrise" (which is itself a symbol) and also used the symbol of the "Christ the Redeemer statue" in Brazil (see right).

Profitable Sunrise promised payout of 1.6% to 2.7% DAILY and justified these profits by claiming that they make short-term usurious rate "bridge loans" to large businesses. Yet nobody in Europe can track down this company. The executive, "Roman Novak", apparently does not exist, as no one seem to have ever met him.

In the US its most notorious promoter of Profitable Sunrise was Nanci Jo Frazer of Ohio, who used a church / charity called "Focus Up Ministries", which was later renamed "Defining Vision Ministries" for her recruitment purposes, along with her husband and another co-conspirator.  As a part of settlement with state of Ohio, they are to pay back $108146.61 over the next TEN YEARS, AND have her "ministries" dissolved. The fine is substantially reduced from original judgment of 710000 dollars.

Nanci Jo Frazer and gang was also known to have released fake news that claimed she had been exonerated. You can still find it when you Google her name. It's bogus.

Scammers invoked attributes of religion, Jesus, sunrise (a generally good symbol), and so on to make their scheme look more realistic than it is.

Example: USFIA

USFIA started back in 2012/2013 when it infiltrated China as "American Mining 美洲犬業" claiming to offer amber jewelry at discounted prices, but will pay people if they invest money in "amber units" AND introduce yet more investors. Its owner, Steve Chen 陳力 had several previous ventures including Amkey and NGTalk that had failed or withered. Chinese government caught on in 2014 and arrested over a dozen local representatives in a nation-wide raid, but failed to stop the scam as Steve Chen operates out of the US city of Arcadia, in the suburbs of Los Angeles and based his USFIA (and various other entities, such as AFG) there. Two of the suspects escaped China to Thailand, and was repatriated as a part of "Operation Foxhunt 2014". However, the root of the problem was not destroyed, and USFIA quickly rebooted itself by late 2014 by adopting a new American name: US Fine Investment Arts, and a new Chinese name 富豪集團 (Royal Group), and shifted to "investment in Gemcoin, a new cybercurrency backed by amber". It then proceed to claim their cybercurrency is "approved" by California law, and just look at Bitcoin's meteoric rise.

USFIA was closed in 2015 by coordinated raid between SEC, State of California, FBI, US Marshal Service, and so on. A receiver took over the company and fired all employees immediately and proceed to take inventory of all assets.  Receiver's first report shows that they were barely able to find about 20 million, and Steve Chen has chosen NOT to provide a list of his assets, claiming his 5th amendment privilege to not incriminate himself. All the supposed amber jewelry with astronomical prices are vastly overpriced, and supposed inventory of amber to "guarantee value" is worth "nominal value", i.e. souvenir grade, not gem grade. The "law" that Steve Chen and minions claimed permitted Gemcoin actually repealed a law that says business may ONLY use US dollars and in no way validates or approves "Gemcoin". There are even rumors that one of the VPs in the company claimed to be related to President Obama. There was no proof that Gemcoin is actually a cryptocurrency like Bitcoin. So far the only proof appears to be a PDF file that contained screenshots of "transactions" online.

USFIA is also famously used several celebrities at its events, including former mayor of Arcadia John Wuo who appeared in multiple events singing praises of the scheme and its leader. In 2015 John Wuo was a city councilman and quickly resigned after USFIA office was closed, citing "health reasons".

Scammers tried to invoke attribute of state government, bitcoin and cybercurrency in general.

How to See Through Attribute Transfer

To see through attribute transfer, you have to look through the examples and stick with just the facts and general idea, such as

• What does the speaker want? 
• According to the speaker, WHY should you believe the speaker? 
• What attribute are they trying to transfer onto themselves from the symbol? 
• Is there any LEGITIMATE connection between the speaker and the symbol?
• What's left of the speaker's argument AFTER you cross out the attributes?   

Related articles

• USFIA Update: What was USFIA doing before Gemcoin? Exactly the same thing... selling promises of amber
• Scam Tactics: Using Cultural Preconceptions and Stereotypes for Affinity Scam
• USFIA Update: Turns out all both the Chinese name and the English name may have been stolen
• USFIA Update: Denial in Spain (and fun Spanish Vocabulary)

PSA: Victims of WCM777 and related fraud must file claim by December 24th (Deadline extended)

If you were a victim of Phil Ming Xu's ponzi scheme WCM777 and its related entities, you need to gather up your paperwork ASAP and file a claim before December 24th, 2015.

This is the URL of the receiver’s site: http://www.worldcapitalmarketreceivership.com/

This is the URL of the site to file claims: https://www.wcm777claimsprocessing.com/en/Home/Filing

Among the defendant companies, affiliated entities or receivership entities are World Capital Market, Inc.; WCM777, Inc.; WCM777 Ltd (d/b/a WCM777 Enterprises, Inc.); Kingdom Capital Market, LLC; Manna Holding Group, LLC; Manna Source International, Inc.; WCM Resources, Inc.; To Pacific, Inc.; and ToPacific, Inc.

You do not need a lawyer, but you do need to be online and have paperwork ready, and ability to use an English website and follow instructions.

Any delay in filing a claim may result in you not getting any compensation from this fraud.

UPDATE: After a motion filed by the receiver and agreement by the judge, the deadline has been extended to December 24th, 2015.

Now you have NO excuse not to file if you are a victim.

Scam Psychology: Victim Mindset is all about asset recovery, not justice

JusticeAlwaysLate, a FB blogger in Malaysia who primarily blogs in Chinese / Cantonese, recently relayed a little anecdote which I thought was rather... illustrative of the victim mindset. The scam name is not important, but it's a pretty big one in China that resulted in arrests earlier this year called Nanning (南寧) any way, it goes like this:

有个南宁受害者来找哦，丈夫倾家荡产相信兄弟，投资了下去。先是云数贸， 然后圆梦都亏大本，兄弟建议他用南宁回本，有事他包。
A certain victim of Nanning scam came to tell a sob story. Husband is about to go bankrupt, believing in a buddy, invested everything, against and again, first it was YSM (a scam fronted by a Chinese guy), then YC and lost big in both. Buddy told him he can make it back with Nanning, and the buddy claims he'll cover the losses if it happens.  

这个丈夫就把所有钱丢进去了南宁骗局，留下老婆和父母，家里一直缺钱用。他问我怎么办。
Thus, this husband threw everything that's left into the Nanning scam, leaving wife and parents with nothing. She asked me, what should she do? Family needs money now to live.  

我说：我叫她报警捉人。。
I said, go to the cops, have the perps arrested.  

她又说：不能，这样会拿不回钱，兄弟答应丈夫在等一段日子就会把钱还给丈夫。。请问现在该怎么办？
She said, no way, can't get the money back that way. Buddy promised that he'll make up the money later. What should she do now?  

我说：那么给我他们的资料与细节，我炸到他们出门都没得躲，
I said, give me their information and background. I'll reveal them so they can't hide anywhere.  

她又说：这样就更没有办法还钱给我们了。请问现在该怎么办？
She said again, no way they'll return the money if you do that. Now what?  

我就说：现在是他欠你们钱，为什么你要替老千着想？
I said, why are you thinking for these crooks? THEY owe YOU money!  

她又说：不是不要报警不给你资料，等我们拿到钱了我们会去做的。
She said, It's not that she's not going to the cops, she had to get the money first, THEN she'll go to the cops.  

我说：那你找我干嘛？闲聊吗？
I said, so why are you here? Chitchat?  

她的最后回复是：好，当我看错你了。
Her final answer was, alright, guess I was mistaken about you. 

The victims have primary emphasis on recovery of money. They realize they had been deceived, but they don't want justice done. They want to be made whole first. This greed (what got them scammed in the first place) lead them to believe that they will get the money back, either someone promised them so, or they decided to lock their morals in the basement and went all out recruiting (i.e. turned judas goat) so they can get their money back.

They don't realize that the money is GONE, and they've just seeing excuses after excuses.

Scam Tactics: Sell the Hype and the Opportunity, Ignore or minimize the Reality and the Cost

Scams usually hook you by selling you the hype and how much money you can make (i.e. the opportunity), while minimize or ignore the reality (such as risk, market, etc.) and cost.

I'll just go over some recent examples and show you what sort of **** they had to spread to generate hype about their so-called "opportunity" while ignoring reality.


The "Internet TV" biz clones

In 2015, over half dozen "internet TV box" companies popped up advertising stuff like "watch your favorite TV for free, cut your cable TV bill, watch favorite sports"... etc. They want you to pay them about $300-500, and for every people you enroll (who also pay them $300-500) you earn money, possibly $100 or more per person. They go by names that includes words like "Box" "Stream" and so on.

That's a pyramid scheme, folks. I've covered what's a pyramid scheme before, so I won't repeat that here. Let's discuss the hype instead.

The matter of fact is you can buy TV boxes like these for about $50-75 on Amazon. They are all based on KODI (used to be XBMC) any way, and wholesale from China they cost even less. You can probably hire some kid to program it for you for another $10-25 if you don't to spend time on it. So where does the extra $200+ go? To the company and whoever recruited you, of course.

TL;DR = you got something for $300 (or more).that you can buy for $60 (WTF?!)

AND you can get better and more legal boxes for $100 (Roku, Amazon Fire Stick, Apple TV, etc.)

They all advertise (some more blatant than others) that they can get pay-per-view programs and subscription programs for free. They tell you people are already doing this, boxes "like" this are being marketed by Amazon and Roku and others (except those don't pirate and cost less than $100). They count on you having "heard" of such stuff, but having NO detailed understanding of such. it sounds "vaguely familiar".

What they don't tell you is getting stuff "for free" is actually piracy and that breaks so many laws that you'll be personally held responsible for such.  And it's no joke, there already has been a raid in UK on seller of such boxes. And let's not forget RIAA and MPAA and so on suing grandmas and so on for astronomical sums.

The schemes hyped up the benefits (OMG FREE EVERYTHING!) and potential upside (OMG MAKE MONEY WHILE HELP OTHERS 'SAVE' MONEY!) while minimizing and hiding reality (The boxes cost $60 on Amazon) and risks (it's illegal to pirate and you can get sued).

TL;DR version:

Hype / Opportunity: OMG Make money, save money, no more cable TV!

Reality / Cost: Overpaying by 3-600%, piracy is illegal

Coming next, "cryptocurrency biz"

Vemma Lost Injunction Fight. Now What?

If you haven't heard, Vemma lost its attempt to reverse the temporary restraining order put in by FTC when it was shut down. The judge found that the claims and evidence supporting such as put forth by FTC to have merit  and Vemma's counter-argument and evidence insufficient to counterbalance such evidence.

As a result, Vemma will have to change:

...prohibition of the sale of Affiliate Packs, and the linking or tying of an affiliate’s eligibility for bonuses or accumulation of qualifying points to their own purchases of Vemma product, whether through participation in the auto-delivery program or otherwise. 

The injunction will also encompass the “Two & Go” Program, which falls under the above prohibition.

In other words, buying drinks no longer counts as qualifying criteria.

What are the points to take away from this decision?

1. Affiliates are not customers

Affiliates' job are to FIND customers, and be compensated for doing so. They should not be customers themselves, who want product for product's value.

Yet there's no doubt that affiliates are making the purchases in Vemma. That leads us to the next item...

What is Business Porn, and Why Is It Bad For You?

Ever wonder who writes those books about MLMs? Or "how to become a millionaire" type books?

Probably nobody you ever heard of.

G.K. Chesterton once wrote in his essay The Fallacy of Success,  "...On every bookstall, in every magazine, you may find works telling people how to succeed. They are books showing men how to succeed in everything; they are written by men who cannot even succeed in writing books. To begin with, of course, there is no such thing as Success. Or, if you like to put it so, there is nothing that is not successful. That a thing is successful merely means that it is; a millionaire is successful in being a millionaire and a donkey in being a donkey."

Don't get me started on Robert "Rich Dad" Kiyosaki... As I've written about his bargain with MLM, and how his success is due to selling to MLM, not due to his own success. He had f***ed over at least two of his partners. His advice on MLM doesn't even fit his own quadrant system. And he doesn't understand what Ponzi is but managed to write about it any way for Yahoo Finance.

Yet people seem to regard him as some sort of financial genius. Why?

Frankly, Kiyosaki, and many of these so-called business advice writers, write "business porn".

Do you know what is business porn? No? Do you know what regular porn is? It's sex, with the boring parts edited out and dressed up to look the most exciting that few if any sane people would f*** that way.

Porn is fake. It's a SIMULATION of sex. Business porn is the same... books that explain to you the bloody obvious: making money is good. Stock photos that you wish your office look like, and so on. It's NOT REAL.

People who buy these books think there's "that one thing" they will "realize / get" to suddenly turn failure into "success". Often it's something about "attitude" (or mindset), or "gadget" or tool or system, or certain behavioral gimmicks that somehow symbolizes "leadership". They put up the stock photos that their business would never look like, or sprout cliche slogans like "you have to fake it to make it".

But just as porn is not real sex, business porn is not real business advice, even though they sure sound like real advice.

Scam Psychology: How does a scam encourage people to adopt a lost cause?

When one questions scams and suspect schemes for as long as the MLMSkeptic did, one'd seen a lot of things, such as people claiming that they forgive ZeekRewards Ponzi even before we knew the full extent of damage (just under a billion dollars), how Paul "ZeekRewards" Burks told newspaper "don't blame me, I never told them to invest more than they can afford", and so on.

Jael Phelps of Westboro Baptist Church picketing Trinity Episcopal Church in Tulsa, Oklahoma
(Photo credit: Wikipedia)

However, some time the... fanaticism of certain fans of particular schemes rival that of the pro-life-crazies (who had assassinated doctors that performed abortions, for example, try reconciling that!), or perhaps those of Westboro Baptist Church (well-known crazies of the US). Others appear to be willing to "go down with the ship".

A recent example is Emgoldex, which just rebranded itself as Global InterGold, and some "diehard" Emgoldex fans, eager to defend their own stance on the scam, engaged in conspiracy theory with zero regard to logic.

I won't bore you with long history of Emgoldex. Suffice to say this European based Ponzi scheme had spread via help of the Internet, and nobody really knows where it's being ran out of (may have been Russia) but it was denounced as illegal all over the world, including the US (both state and Federal level), Malaysia, Philippines, even Dubai UAE where it allegedly was based out of.

Yet there are still backers who claimed that "you just don't understand Emgoldex", "you just don't understand MLM", "you are prejudiced against MLM", and so on and so forth. You can find many of them in the comments on this topic.  Some of them are certain of their righteous cause, others are somewhat doubtful but "hopeful" that they had made the right choices, even when facts started to stack against them.

USFIA Update: Was in China earlier than previous reported, but definitely originated in the US

Searching for signs of USFIA, known in China as  美洲矿业 (American Continental Mining Industries, or just 'American Mining' for now), yielded a couple more links.

The earliest mention of American Mining was not in China, but in the US. A poster "Harryyu" posted a wanted ad in Southern California about "seeking USFIA sales rep for gemstone mining" dated 06-SEP-2013.

The earliest mention in China was a forum post in February 9th, 2014, where Mr. Ho Peng 候鵬 (surname is "Ho") made a big presentation in Qingdao, Shangdong province, China. You are welcome to Google translate the link, but I'll give you the TL;DR version:  Ho held a big meeting in the local 5-star hotel called Le Meridien  ( 青岛万达艾美酒店)  where Mr. Ho presented to a packed house full of MLMers from all over China for two hours. Ho claimed he had been in various MLM things for two years, and made over 20 million RMB and this American Mining will be the biggest next thing, and he had already made millions in this one, and he guarantees this is a sure win. Ho kept talking about his "aunt" 姨媽 from Guizhou 貴州, who's a local fortune teller and told him he will make tens of millions. Everybody can believe this fortune.

Alleged insider claimed that Ho is the local Judas Goat and may be part owner. He was shifting money out of the country and already got a divorce to emigrate. He had to make "one last job" before disappearing from China. Another accused Ho Peng of swindling people using his aunt's name.

Ho Peng, in Macao 22-APR-2014, promoting USFIA

I won't bother translating the comp package, except to explain that if you buy in at packages of 2K, 5K, 10K, or 30K (RMB of course), you get either protostock, or actual amber, and you can trade the protostock with their platform.

Other news sources claimed that Ho Peng was doing the same schtick all over China, and claimed to be a standing member of UCCA. USFIA name was mentioned prominently. Here is Ho Peng doing his schtick in Macao in April 22, 2014. You can see USFIA and 美洲矿业 in the background. You can view the entire video here. Chrome users: Use incognito mode to bypass the "missing plugins" error.

Note that the video title is 美洲矿业中美政治协商促进会—侯鹏 which translates to "American Mining UCCA -- Ho Peng"

In a different copy of the video, Ho Peng got a different title: 美洲矿业中美政治协商促进会常务委员—侯鹏 which translated to "American Mining UCCA standing member -- Ho Peng"

And he apparently got an ID card from UCCA shown at the same event, vidcapped from a different video.

Back in the US, also on the ChineseInLA website, a user by the name of "Amber Dream" posted an ad copy under "China-US Commerce" topic on 20-FEB-2014.

Another forum post in China was made on March 8th, 2014 where similar allegations was mentioned and the meeting in Qingdao was again referenced, but this time with a promise that Ho will do a presentation in Beijing. It also mentioned that his biggest downline is a Mr. Wang  王軍 Wang Jun who also made millions.

The fortunes started to turn for USFIA in China around March 2014, as they are starting to attract the attention of the authorities all over China.

USFIA update: Who is Leonard S. Johnson and was he really invited to Dubai to speak about alternative currencies such as Gemcoin? (Hint: No)

One of the most interesting (yet ridiculous) HYIPs based out of the US is USFIA, i.e. "American Mining" 美洲矿业, which was apparently kicked out of China in 2014. USFIA claimed to be a part of AFG (Alliance Financial Group USA) and controlled by UCCA, headed by Mr. Steve Chen.

Leonard S. Johnson
as shown on aimcongress.com

One of the frequent faces for USFIA is Mr. Leonard S. Johnson, who were mentioned multiple times as a stand-in for the head of USFIA Steven Chen at various seminars in Chinese-heavy cities such as SF Bay Area, Toronto, and so on.

There are various posts touting him being "invited to Dubai in UAE to attend AIM Congress, a gathering of the world's top economists, investors, and money big shots, and to speak there."

Is this real, or merely someone embellishing the facts? Let's find out.

If you search for Leonard S. Johnson Dubai, you will come across this page under aimcongress.com:

Which appears to be legitimate, until you realize it never said anything about what he will be speaking about. Indeed, there's no listing for him to speak AT ALL under "Speakers and Partners' contribution"    Searching the website for Leonard brought up that exact profile page, and nothing more. He's not listed on any sort of itinerary, speaker schedule, and so on. He's certainly not in the "Conference Programme" which lists every event, or in the brochure either.

If we search for AFG, we find a listing for GEMCOIN even though the profile is for AFG and USFIA. Even the website link goes to AFGroupUS.com.

There are two more mentions of AFG besides Leonard's profile and Gemcoin page though.

Scammer Update: Sann Rodrigues (i.e. Sanderlay Rodrigues de Vasconcelos) posted bail for US crimes, rearrested for escaping from Brazil

Previously MLMSkeptic has covered the various scams pumped by noted scammer Sann Rodrigues, whose real name is Sanderlay Rodrigues de Vasconcelos. For those who haven't caught up, here's a quick summary:

• Universo FoneClub circa 2006, closed by SEC as Ponzi scheme
• Tried to restart FoneClub in Brazil, closed after a year
• TelexFree scam that was eventually shut down in 2014
• iFreeX (meeting raided by Brazilian police in Feb 2015)

Back in February 2014 MLMSkeptic did a profile on Sann Rodrigues, here's a bit of an update. 

In April 2014, TelexFree tried to declare bankruptcy, and was immediately raised by Homeland Security and Mass Department of Securities. Their CFO Joe Craft tried to leave with a laptop bag he claimed was personal property. It was searched and TENS OF MILLIONS in cashier's checks was found in the bag and the entire bag was held for evidence. SEC filed its case under seal to be opened upon raid. . 

After TelexFree went bust in April 2014, it appears that Sann Rodrigues was still traveling the world, still selling TelexFree, but is looking for another scam to promote, and he seem to be the first person EVER to promote iFreeX as of September 2014, which, based on the name, appears to be at least inspired by, if not an outright clone of TelexFree, as it claims to be a communications app to do voice and text chat, video talk, and video conference. (TelexFree was VOIP, which is voice chat)  There are many who suspect that Sann Rodrigues was the real founder of iFreeX (though the real founder had not been identified thus far). 

Within 1 month, Massachussetts, where TelexFree was based, issued a warning on iFreeX being a scam and a clone of TelexFree. Sann Rodrigues then apparently deleted all the iFreeX content from his Facebook timeline. (it is widely believed that he then started a new one somewhere that only posts in Portuguese, hidden from public view) 

In Feburary 2015, Brazilian Federal police special unit GAEP raided an iFreeX meeting headed by Sann Rodrigues. Rodrigues was invited downtown for a long chat, and apparently had his passport confiscated and told "don't leave the area". Apparently the Brazilians want to talk about his tax evasion. 

Scam Psychology: Know Just Enough to be Dangerous (to yourself and others)

Do you know just enough to be dangerous? You don't think so?

You are probably wrong, as scientists have LONG documented "Dunning-Kruger Effect". Basically, for a given skill, incompetent people will

• fail to recognize their own lack of skill
• fail to recognize genuine skill in others
• fail to recognize extremity of their inadequacy

Basically, you are so incompetent, you don't even recognize that you ARE incompetent. It's be like a person born and grew up near-sighted, that he thinks the world really is slightly blurry, and didn't even realize he needed glasses. 

This is related to, but is not the same as overconfidence effect, in that a person always thinks his confidence in his or her judgments is greater than the ACCURACY of those judgments. This is especially true when the confidence is high. People who were 100% sure of their answer in a certain test that turned out to be only 80% right are guilty of such overconfidence.

This is very common in scams, where the victims were recruited to be a co-conspirator, (i.e. to also recruit, for pyramid and Ponzi schemes, and/or to act as "anecdote witnesses", promoters, and so on), where the victim, overconfident in his or her skills to spot a scam (often armed with such myths as "we have a product, thus we can't be a pyramid scheme", or "I got paid, thus it can't be a scam"), failed to even realize s/he is not competent to even recognize his/her incompetence and failed to recognize proper advice from others.

The scammers are experts in making you believe you made the right decision(s) all along by give you the mushroom treatment, through "learned optimism", except they do it through lie and deceit.