Will US Recognize a new mental disorder: Cult Sales Addiction?

While researching a different topic, I came across this interesting article in Changsa, China, where the local hospital had to treat at least two cases of a mental disorder that was previously unrecognized: addiction to cult sales.

The story can be read here in Chinese, but I'll give you the gist of it:

Hunan Province 2nd People's Hospital Addiction Treatment Center back in December 2014 had to treat a patient who was apparently brainwashed by a cult sales (pyramid sales / pyramid scheme ) organization. The victim, 27-yr old female, lost her job in October 2014 when her company lost the product distributorship, and was recruited by a friend to go to Nanning where supposedly things are better. About two months later, she called home and want her mom to come along and make lots of money. Her mom went for a visit, and realized victim was in the clutches of a pyramid sales organization and had been brainwashed for two months and is totally under their control, with full personality shift.

(article continues after this break)

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.

FTC shuts down Vemma for being a $200 million pyramid scheme...

It brings me no joy to see this news, which was a surprise even to me... I expect action, but not this fast. 

But to summarize, Vemma's assets has been frozen and operation stopped based on temporary restraining order as issued by court based on lawsuit brought by the Federal Trade Commission.

Quoting AP / CNBC story:

The Federal Trade Commission said Wednesday that Vemma Nutrition has been temporarily shut down for operating a pyramid scheme that promised college students riches if they sold its nutritional drinks, but most ended up losing money. 

The consumer protection agency said that Vemma told recruits that they could make as much as $50,000 per week selling its nutritional beverage Vemma, energy drink Verge or protein shake Bod-e. An initial investment of $600 was paid for products and business tools and $150 in Vemma products had to be bought each month to receive bonuses. The FTC said Vemma provided little help on how to sell its products and instead rewarded them for recruiting more people. 

Vemma earned $200 million a year in 2013 and 2014, according to the FTC.
A representative from Vemma, which is based in Tempe, Arizona, did not immediately respond to a request for comment.

A full copy of the complaint and the 5 summary points are available at BehindMLM.com:

Count 1 – Vemma is an “illegal pyramid” scheme 

Defendants promote participation in Vemma, which has a compensation program based primarily on providing payments to participants for the recruitment of new participants, not on the retail sale of products or services. 

Defendants’ promotion of this type of scheme, often referred to as a pyramid scheme, constitutes a deceptive act or practice. 

Count 2 – Income Claims 

In numerous instances in connection with the advertising, marketing, promotion, offering for sale, or sale of the right to participate in the Vemma program, Defendants have represented … that consumers who become Vemma affiliates are likely to earn substantial income. 

In truth and fact … consumers who become Vemma affiliates are not likely to earn substantial income. 

Count 3 – Failure to Disclose 

In numerous instances … defendants have represented … that individuals have earned substantial income from participation in the Vemma program, and that any consumer who becomes a Vemma affiliate has the ability to earn substantial income. 

In numerous instances … Defendants have failed to disclose, or disclose adequately, that Vemma’s structure ensures that most consumers who become Vemma affiliates will not earn substantial income. 

This additional information would be material to consumers in deciding whether to participate in the Vemma program. 

Count 4 – Means and Instrumentalities 

By furnishing Vemma affiliates with promotional materials to be used in recruiting new participants that contain false and misleading representations, (Vemma) have provided the means and instrumentalities for the commission of deceptive acts and practices. 

Count 5 – Relief Defendant 

Relief Defendant Bethany Alkazin, has received … funds or other assets from (Vemma) that are traceable to funds obtained from (Vemma’s) customers through the deceptive acts or practices described herein. 

Relief Defendant will be unjustly enriched if she is not required to disgorge the funds or the value of the benefit she received as a result of (Vemma’s) deceptive acts or practices.

But what does this mean to you, the Vemma affiliate, other MLM participants, and so on? What will happen on the hearing on September 3rd?

Here's a few layman's speculations. Remember, I'm not a lawyer, and I have no insider information. (Lack of such, however, has not stopped various Vemma "leaders" from issuing feelings, such as "Vemma doesn't deserve to be shut down" "It's just a complaint, not a lawsuit" "The lawsuit is a joke", "FTC bit off more than it can chew" and so on)

But let's be realistic here... If you want people to lie to you and tell you everything will be alright, go read whatever verbiage your upline put out. You're here for some real analysis.

MLM Basics: Is Multi-Level Marketing a Shared Delusion?

In a blogpost back in 2014, author Robert Fitzpatrick, who operates the website PyramidSchemeAlert postulated that Multi-level Marketing, i.e. MLM is really a delusion that redefined various terms to create a myth around itself that cloaked its true nature (as a part of his "Myths of MLM" series). It is an interesting viewpoint, and I can see how he came to that conclusion. The premise can be narrowed down to five separate yet related delusions that MLM participants perpetuate. Fitzpatrick claimed that by accepting the myth jargon, the participants gave the MLM myth power over themselves.

The MLM Myth has five major components, according to Fitzpatrick:

1) MLM is described as "direct selling", but few if any participants actually make retail sales or profits from such.

2) MLM is described as "income opportunity" even though most MLM participants lose money.

3) MLM is described as a "business" even though there is no fair exchange of value... Majority of people lose money.

4) MLM is described as "legal" even though it's merely "have not been proven to be illegal", i.e. presumed innocent

5) MLM is described as "network", "relationship", "personal" even though it disrupts the social norm.

Let us examine each part and see if Mr. Fitzpatrick is right.

Is MLM really Direct Selling? 

From my personal experience, most people in MLM had learned to emphasize the "multi-level" part of MLM rather than the "marketing" part. I have read comments of hundreds of people on BehindMLM and many commenters believe one cannot succeed in MLM without recruiting, and the emphasis should be on recruiting and retaining downlines, rather than product sales. Not that BehindMLM attracts the "typical" MLMer, of course.

It is also interesting that the MLM industry association is called Direct Selling Association, even though the organization actually predated MLM by about 20-30 years. DSA started its life as "Agent Credit Association" in 1910, and its members are companies that employed door-to-door sales, and Avon, then known as California Perfume Company, was a founding member. It wasn't until 1968 that it adopted its current name, Direct Selling Association.  Most people accept that MLM was popularized with California Vitamin Company, later Nutrilite, in the 1930's, which eventually became an Amway brand, founded in 1950's. Thus, MLM came AFTER direct selling, but took over the name direct selling.

For what it's worth, Avon was direct sales up to 2005, when it went multi-level. Didn't seem to help its bottom line though.

There is no doubt that MLM is supposed to have a direct sales component, but in reality, this is rarely put into practice. When the companies themselves count purchases BY the distributors as "sales" for calculating commission, instead of actual retail sales by the associates, there really is little if any incentive to retail. Even Direct Selling Association want to formalize "self-consumption" as a RIGHT of MLM distributors, i.e. they have the RIGHT to NOT retail what they buy, and still have that counted for commission. A couple states even put that into law thanks to lobbying by DSA.

Indeed, in the past decade or two DSA has fought every attempt by various groups to require the companies to document how much retail was actually performed by the industry. Any stats they compile are based on estimates by the companies themselves based on sales to distributors.

In 2013/2014 Herbalife was accused by none other than Bill Ackman to be a huge pyramid scheme. You'd think that Herbalife would simply produce some numbers proving they were retailing their products, and if they didn't, they have a WHOLE YEAR to gather that data, but no, instead, it spent money on hiring lobbyists instead, and hire survey teams, but NO ACTUAL RETAIL FIGURES. And DSA said nothing, because DSA is not a regulatory body... DSA is a lobbying organization for the companies.

Think about it. The Direct SELLING association does NOT want its members to prove they are actually SELLING stuff, through their distributors, to the public. And claims it is a RIGHT for distributors to NOT SELL their stock.

Verdict: MLM is now mostly NOT direct selling, even though it was meant to be.

Is MLM really an income opportunity? 

Proponents of MLM claimed this is a way to earn supplemental income, part-time income, side job, with potential transition to full-time if you find yourself attracted to it.

The REAL pros in the business knows that to make serious income in MLM you need to dedicate two to five YEARS to build your organization and during which you will achieve MINIMAL income.

Thus one can be answered pretty definitively: NO, not for a vast majority of the people involved.

From DSA's own statistics for 2014:

• 18.2 million people involved in direct selling
• Estimated product sold 34.47 billion dollars

That's average SALES of... $1894 dollars per person PER YEAR. And that's just revenue, not profit. We haven't taken into account any of the expenses involved either. Even if the person was able to achieve 50% profit, (i.e. $947) AFTER counting expenses (highly unlikely), and spent only two hours a week on this... That's only that's $9.10 per hour, not much above Federal minimum wage of $7.50 an hour.

Furthermore, Herbalife, in their own defense, claimed that 73% of their own distributors DID NOT JOIN FOR INCOME. This is one of their own slides released as rebuttal of Bill Ackman's claim that Herbalife is a pyramid scheme.

Herbalife, in 2013, claimed that 73% of distributors did NOT join for income as primary reason

Thus, MLM can be an income opportunity... for a tiny minority of people who made it to the top. The rest of you are likely to lose money or earn minimum wage, or not even that, as you get no benefits or even income security, unlike a minimum wage job.

Verdict: MLM in general is not income opportunity (with small exceptions)

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: 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.

Bad Argument: The Evil Twin Did it

When confronted with the news that their pet scheme may be a scam, victims of a scam react in various ways to deal with their cognitive dissonance, when two sets of facts collide as they can't both be true.

Some recoil in horror, realize they've been scammed, and quickly attempt to withdraw their money (which are usually stonewalled, leading to further desperation.)

Some are doubtful but vowed to stop taking their upline's word and do some honest research on their own

Some recoil and hide, denying that any "negativity" exists, and you should shut up because they don't want to hear about how they are wrong.

Some react with indignation and attempt to defend their scheme, but when they are armed with little more than PR material and fallacies like "I got paid so it's not a scam (to me)" they rarely have much success convincing anyone but themselves.

Some goes for "special pleading", i.e. come up with reasons why their scheme is the exception, not the rule, i.e. it fits all the definitions of a scam, but it's not a scam

Some go for a "no true Scotsman" gambit, claiming that the company itself is fine. It's only a few "rogue reps" that ruined things for everybody else.

Though recently, in span of a week or two, I saw a new variation on "no true Scotsman"... which I will call...

"The Evil Twin Did It!"  aka "They stole our name!"

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.

Scam Tactic: Redefine Common Words / Doublespeak

The term doublespeak was introduced to the world by George Orwell's book "Nineteen Eighty-Four", where it was defined as "using language to introduce ambiguity and confusion to block out facts and aims that does not fit in the program." (slightly paraphrased)  It is no surprise that it is among the arsenal of the scammers.

One such example of doublespeak is the appropriation of the term "sharing" to mean promoting / selling, and "selling" as buying.

According to the Vemma promotional material updated in late 2013, members are no longer representing the brand as "brand ambassadors". Members are instead, "affiliates" in affiliate marketing where member affiliates refer customers to the company, and earn some commission for sales they brought in. And affiliates are encouraged to buy some products as "some to enjoy and some to share". There are special bonuses for those who buy large starter packs.  The following screencap is how it was explained on most Vemma affiliate sites:

Screen cap from a Vemma "affiliate" website explaining what you need to do to get paid: BUY STUFF FIRST!

Did you see the problem yet?

HINT: Your upline (who recruited you) gets commission for the stuff YOU buy, both the starter pack, and the monthly autoship.

Let that sink in for a moment.

5 Reasons Pyramid Schemes Are Worse Than You Thought (Cracked.com)

Cracked can be relied on for controversial and irreverent take on some topics, and their supposed "5 Reasons Pyramid Schemes Are Even Worse than You Thought" was no exception.

Let's just say they gloss over a lot of the details, like calling MLM Pyramid Schemes without noting the legal distinctions, then backpedal and claim everything is just shy of illegal. However, the other points are quite salient and worth a read, if just for the style.

The More Things Change, the More They Stay The Same: Scammer Joined More Scams

Apparently once you joined the seedier side of MLM (i.e. the pyramid and Ponzi scheme side), you get addicted to the easy money and you can't get out.

Kevin Trudeau apparently started cheating his way through life right after he finished high school, and quickly got into bank and credit card fraud.

Paul "ZeekRewards" Burks apparently operated multiple MLM businesses before shifting over to Ponzi scheme business model.

And this is hardly a Western practice, as apparently scammers are the same world over: it apparently is the only thing they know, once they had a taste of easy money.

Meet Yoshio Matsuura (松浦良夫), of Japan, and his link to at least two scams: Skybiz... and Interush.

How Much Is a Scam Like a Cult: 2015 Edition

Previously MLMSkeptic have discussed the similarities between a cult of believers (about a common theme) and a large scale scam such as a pyramid or a Ponzi scheme (and in certain cases, multi-level marketing).

The Outcast (1954 film) (Photo credit: Wikipedia)

A new article on ScienceBasedMedicine.org brought an alternative viewpoint... on how believers of a scam act much like believers of  various alternative medicine modalities. And it is a report on an WIRED article called "An Alternative-medicine Believer's Journey Back to Science", where a doctor (MD and PhD) and wife and two autistic boys fell for the "autism biomed" industry where members tell each other about treatments that nobody had proven to work, but "try it any way", many even promoted by other doctors. After years of such, and a lapse while in Disneyland, they found that none of what they did actually had ANY effect, and the boys actually IMPROVED when they were removed from the supplement regimen, or at least did no worse. After further tests over months and years, he publicly renounced his involvement in the autism biomed movement and denounced unproven treatments and such. As a result, he'd been branded an apostate and had received death threats.

An apostate is someone who had examined the beliefs in detail, even followed those beliefs for a time, then had an epiphany and chose to REJECT the belief instead. As a result, he's now considered an outcast.

There are many apostates among network marketing. Indeed, due to the amount of churn rate, it can be argued that there are many more apostates than believes in Network marketing. According to Robert L. FitzPatrick of PyramidSchemeAlert.org, of the 10 million people that had estimated to have joined Amway since its founding, 9.3 million had been "churned" through and quit. Thus, the alleged apostates should vastly outnumber the believers. (9.3 million vs. 700K)

However, the similarity between network marketing a cult (or religion) is how they treat the apostates: very badly.

OLD NEWS: World Ventures busted in China, Taiwan, and Malaysia back in 2014

According to Chinese news (Hunan TV) World Ventures, i.e. "WV", was investigated by Changsa Public Security back in October 2014. Other sources indicate that World Ventures was also met with legal challenges in Taiwan, and Malaysia, where it was accused of operating illegally.

Ministry of Labor and Commerce Enforcement Agents along with Public Security raided a facility that had a huge sign with the WV Logo and slogan outside, and asked the two present, a male and female, to show the business registration papers for WV. The two refused, claiming they had nothing to do with WV, but is instead a university career training workshop, and thus is not licensed and not for profit.

When confronted with the sign outside, the male "supervisor" deny any and all knowledge about the banner, claimed they had nothing to do with the banner. During the search, a business card was discovered with the supervisor's name on it, and even had the WV logo, but the man still refused to admit he runs a local WV branch, but instead tried to explain "I merely suggested some trip ideas to my friends and relatives."  PS personnel then found the documents saved on the company computer and printed them out, which contains WV promotional material and comp plan. When confronted, the man continue to deny, claiming it was left by visitors. He was then confronted that his own printer printed those off his own computer. Then he had nothing else to say.

Labor and Commerce enforcement bureau spokesperson explained that WV is suspected of illegal pyramid selling, but most of the websites used to promote such are located outside of China, and thus making investigation and enforcement difficult.

MLM Basics: Critical Thinking for MLMers -- Errors in Perspective

Previously MLMSkeptic have pointed out various reasoning problems of many participants in MLM, but someone pointed out why don't I have a guide on what *should* be done instead?

So here's the effort, called it "How not to argue for MLM" series. You can also think of it as "Critical Thinking for MLMers".

Many of these have been covered previously as "Bad Arguments".

There are many kinds of errors in your thinking process. As the old saying goes, "To err is human." However, one must learn from the errors to improve oneself. Today, we will discuss "Errors In Perspective".


What is Errors in Perspective?

Errors in perspective basically means you have a biased perspective of the world; you don't see the world as it really is, but only as you saw it. It's as if you've been wearing a bad set of tinted glasses all your life that you didn't even know it was there. And that's why they are very dangerous for you to think critically... You may *think* you are doing so, but you're doing it from the wrong perspective / viewpoint.

If you are not in MLM, keep in mind that many MLMers will accuse you of having the wrong perspective, with bad argument such as "unless you're in it you don't have the right perspective" (i.e. "you have to try it to know it / criticize it")

There are many different types of errors in perspectives.


Unwarranted Assumptions

One of the hardest errors in perspective to detect are unwarranted assumptions, because they are usually implied, rather than stated outright, and thus, you almost have to read between the lines to see them. A lot of "folks wisdom" or "commonly held facts" are actually unwarranted assumptions.

Not all assumptions are unwarranted, as you can't live a life without some assumptions, like the guy you pass on the sidewalk is not going to jump up and stab you, or your car will start in the morning, and so on. You may be wrong sometimes, but most assumptions you made every day are based on your knowledge or experiences. It is when you assume too much, more than justifiable by the circumstances or experiences, that you get unwarranted assumptions.

One of the most frequent unwarranted assumption held by victims of scams is "because Scheme X paid someone, therefore Scheme X will pay me (in the future)." When you think about it, this is basically "the sun will come up tomorrow" assumption. It makes sense for the sun, but it makes no sense for Scheme X, no matter how good / honest / rich Scheme X appears to be.  Furthermore, pyramid schemes and Ponzi schemes always pay a few people and make them "judas goats" to draw other people in. Some people (even you) getting paid does not prove everybody will continue to get paid indefinitely.

So how do you stop making unwarranted assumptions? First you have to FIND the unstated assumptions, THEN you have to logic check them to determine if they are warranted or not.

MLM History: DSA Killed a Bill in 2010 That Would Have Saved MLM

Network Marketing is in an identity crisis, and it had been for decades.

At the beginning MLM was really about selling stuff. It is in the past 3 decades that MLM had morphed into an industry no longer cares about retail. And their industry organization, Direct Selling Association (DSA) does not even bear the MLM or NM name.

(Frankly, DSA had existed LONG before existence of MLM, and was basically "taken over" by MLM companies. But that's a different story for another time. )

Previously I've addressed how DSA managed to condemn FHTM in 2012, a pyramid scheme, mainly by dissociating itself far from FHTM and claimed FHTM was denied membership 3 years in a row. My conclusion then is DSA is not making any efforts to clarify the differences between its members and a pyramid scheme, and it may not like how FTC will shape the industry in the future.

I've also addressed that DSA has basically ignored the existence of product-based pyramid scheme, and this action is clearly deliberate, because it needed to defend Herbalife in 2013 amidst Bill Ackman's long and epic short. DSA should instead lead the effort to stamp out product-based pyramid schemes and lead its members to strive for retail volume. But it won't.

Later, I discovered a DSA position paper where it basically denied the existence of legal precedents (i.e. just ignore it) and everybody can self-consume to their own riches. That, I predicted, will lead to the eventual destruction of MLM itself, if not by Ackman, then by the government.

But what surprised even me was the DSA's reluctance to even nail down the definition of "customer"... and how they killed a legislative bill in Tennessee back in 2009/2010 that attempted to separate a legitimate MLM from a product-based pyramid scheme. It wasn't launched by a "crusader" who's out to kill MLM. It was launched by a MLM insider.

And it went down in flames, killed by DSA lobbyists.

Is "Wake Up Now" heading for eternal slumber?

After that "This American Life" expose on Wake Up Now, it seems there's an internal revolt going on, and the company had ground to a halt, if you believe the postings from various WUN affiliates. Highlights include:

• Eric "Seemore Green" Turner claimed WUN owe him $300K and he hadn't been paid since August 2014.  (You'll recall Eric was heavily mentioned in the TAL episode)
• Another affiliate, Logan Shippy, uploaded an video claiming the company had "let you guys down", "burned so much trust with so many people", and he's not going down with the ship. 

Previous reports stated that WUN had lost 8 million in 2012 and 2013. 

BREAKING NEWS: India FINALLY moved against SpeakAsia Ponzi, SIX ARRESTED

Those in the US never heard much about SpeakAsia, because it was a hybrid pyramid/Ponzi scheme in India. And it ensnared a LOT of people and money back in 2011.  The current estimate was the SpeakAsia involved 2276 crore Rs (366.5 million USD) and 24 lakh (2.4 million) victims. 

The scheme had collapsed years before, and its head Manoj Kumar had fled the country and is believed to have died in a hospital in Singapore in January 2014. However, the wheels of justice turns slowly in India, and it was just announced that 6 arrests have been made involving this case in India on Feb 1, 2015. 

(A crore is 10 million, so you're looking a 22760 million, or 22.76 billion Rupees, roughly 366.5 million USD in today's exchange rate. And a lakh is 100000, so 24 lakh is 2.4 million)

SpeakAsia started operation in 2010, and claimed to be a 'survey organization' that were recruiting "panelists" for their opinion that can be sold to large companies for huge profit, but they need the panelists to put in money, usually explained as "tests and qualifications" and "e-newsletter subscription", and are encouraged to purchase "additional panels", up to 9.  "Panelists" are paid on the surveys they completed and on recruiting additional panelists. In fact, recruiting ONE panelist is worth 10 "reward points", while completing one week's survey only earns 7 reward points. This was clearly a pyramid/Ponzi hybrid scheme with the money cycled out to pay members who got in early. 

The scheme quickly spread from India into neighboring countries like Bangledesh, Malaysia, and so on. 

News Update 19-DEC-2014: Zhunrize Plea Deal; PlanB4You Busted; Zeek Money May Be Stolen; FDA Admonishes Herbalife

Lots of little news this week... Remember folks, don't accept random news items without attribution. I link to my sources, and you should click through to make sure I didn't lie to you (unlike others)


PlanB4You Ponzi Busted in Europe

PlanB4You was reportedly busted by local police (Google Translate of refdag.nl article)  when a seizure order was issued and bank account containing 2.5 million (?) have been frozen and multiple locations raided. Several luxury cars were apparently seized. And challenges to court have been denied.

PlanB4You (review by BehindMLM) is a virtually exact copy of Ad Surf Daily ponzi busted in the US in 2008, with 25% ROI in 25 days.


Zhunrize reaches Plea Deal with SEC, may go into receivership

Previously we reported that Zhunrize has been closed by SEC as a ponzi scheme, and at least one shill or troll claimed it was not true, and they had reopened. Seems every Ponzi scheme claimed this at one time or another, as there are reports this also happened with PlanB4You reported above.

Any way, to nail that rumor shut... (reported by BehindMLM) Zhunrize and owner Pan have reached separate deals with SEC to pay fines and disgorgement of ill-gotten gains. The judge has yet to sign the deal but is expected to.

There may be criminal cases pending later. Receivership will be appointed if the deal is accepted and that's the end of that.

Bad Argument: Distributors can't lose money if they enjoy the product (WTF?!)

One of the contentious issues between MLM proponents and critics is the definition of a "customer" vs. a "distributor".

Logically, the differences are crystal clear:

Customer spends money, buys stuff (from distributors).

Distributor earns money, sells stuff (to customers).

However, in the MLM world, things are never so clear. And one of the arguments proponents often use is "if the distributor enjoys the product for internal consumption, they could not be considered having suffered financial loss".

Or as someone argued on reddit /r/vemma...

Because even those "poor souls" who join the business but don't earn commissions still aren't losing money, just like when you buy anything else in life that you ultimately consume or use you don't think of it as losing money. 

This is bogus logic. Can you imagine a bar owner drank all his own stock of liquor, and need to close the bar, and then tell himself, "I didn't really lose money because I got drunk"?

There's another reason though... consuming the stock prevents distributor from getting a refund.