Anatomy of a Scam: How "Verification Code" Scam Works

You should NEVER send ANY verification code you received to ANYONE ELSE. Verification codes are for you the recipient, and you ONLY. It verifies to the system that it is YOU who send the request. By giving the code to someone else, you just gave AWAY a part of your online identity... and worse.

With that said, here's how one way a verification code scam can work:

If you post anything for sale on Craigslist, you can be unwittingly enlisted by a scammer to be an accomplice, even if you don't accept the offer.

The scam usually goes like this.

A) You list something for sale on Craigslist. It doesn't matter what.

B) You get a text reply that goes roughly like this:

Scammer: I want to buy (insert product name). Is it still available?

YOU: Yes it is.

Scammer: I sent you a verification code from (X). Prove to me you are real by sending me the code.

(X) can be Google, Yahoo, Craigslist, Microsoft, etc.

C) A few moments later, you get a text message from a "short code" (4-6 digits only, not a phone number) or a phone number. It may or may not be in English.  It does contain a verification code.

At this point, you should cut contact with the scammer. 

The scammer is registering a new account on (X). However, instead of entering their own phone number for verification, they entered YOUR phone number instead. Thus, (X) is verifying that the request came from you. (Not the scammer)

If you give scammer the code, you have linked YOUR phone number to scammer's account. You also enabled them to get an account they shouldn't be able to otherwise.

This has various consequences when the scammer's account is eventually banned for scamming. You will be unable to register for any new accounts on (X) using that phone number. In the worst case, police may track you down instead. And you will have a hard time explaining why is your phone number used to register a scam account.

The effect of this differs by service.

On Craigslist, the scammer can now post ads for 90 days without further verification. And in the future, should you want to register on Criagslist, you may be blocked from doing so.

On Google, this can enable them to obtain a Google Voice number (for phone calls and text) and Gmail address.

For Yahoo and other email services, this allows their registration to go through.

So don't fall for this scam within a scam. 

ref: https://www.techwalla.com/articles/what-is-a-craigslist-secret-code

ref: https://www.kaspersky.com/blog/dont-send-codes/22448/

NOTE: Edited 11-DEC-2018 for wording and link to Kaspersky blog entry

Scam Spotting: Anatomy of a "free" premium headphones offer

Ever seen those offers: we're giving away (insert item) as a promotion, all you need to do is pay shipping and handling?

Let's dissect one and see how it really works.

Recently, someone brought this to reddit.com/r/scams attention. In the interest of NOT giving them any link juice, all names will be redacted, but you can easily figure it out.  Here's a screenshot of the top of their giveaway page.

They claim to be giving away all sorts of headsets and headphones for FREE. The catch is you'll need to pay about $13USD per item for shipping and handling.

However, are these headphones REALLY worth as much as they say? The answer is no. NOT EVEN CLOSE. Let's take that first headphone for example. They said "save $80", implying MSRP is $80.

Well, let's do a bit of digging via Google image search, and we got a $3 headset:

Oh, myyyyy. It's the EXACT SAME headset. For $2.99 with free shipping.  These headphones are NOT worth $80. They're not even worth $8. It's worth $3.00

Now you see why they are charging $13. For every order, they pocket $10, while making people believe they are getting something for cheap.

Let's pick another item, just to make a point.

Cognitive Distortions, i.e. when your brain is lying to you

You can trust your brain... in general. You have to, since your brain controls everything. But there are occasions when your brain will lie to you. Not intentionally, but call it... "miswired" or "misprogrammed". It's been fed some garbage data and it formed some connections that should not have been made.

And scams are basically intentional signals to encourage your brain to form a connection it should NOT have, to reach a decision that will hurt you, usually financially.

Our brain was created to form connections between vast sets of data and memories, and see patterns in every ing: thoughts, ideas, actions, and consequences, even when they make no sense whatsoever. Athletes and gamblers often have lucky tokens or special rituals, because they associated "winning" with those tokens and rituals. We did A, we get result B. That's the power of correlation. But we've been told time and time again "correlation is not causation".

Yet a cult (and by extension, MLM), and scams are very fond of presenting partial facts as a part of their mind modification techniques to increase your devotion to "the cause".

Here are sixteen of the most common cognitive distortions, and how they apply to cult mind modification. (NOTE: This list is long, so it will be continued in the next post).

1) Extreme thinking

Ever heard the expression: "you're either with us or against us"?  That's polarized thinking. There are no shades of gray. It's either good, or bad. It's great, or awful. There is no in between. This sort of thinking makes it impossible to discuss things with any rationality, as the real world is full of shades of gray.

Commercial cults often treat anyone who questions their favorite company/product as evil to be either avoided at all costs, or as objects of derision, when all the other side wanted is some honest answers. Commercial cults often throw out terms like "dream-stealers" or "naysayers" and use that to describe anyone who doesn't agree with their narrative, even when those narratives are full of holes. They don't want to deal with ANY questions about their own narrative, either you believe, or you don't. 


2) Overgeneralizing

Taking conclusion from one data point, and apply it to everything, is an overgeneralization. Get one "C" on a test, and the student is considered a dismal failure. Get paid once by a suspect scheme, and it must be a "good program". It's obviously not logical, yet you'd be surprised how many people do it.

Commercial cults members are often very fond of citing their own experience in trying out the product as if that validates everything they presented. They can't seem to see that it's just ONE datapoint... their own individual experience, they are are presenting, as if it's the universal truth. Commercial cults are often fond of asking its members to go after the low-hanging fruit first, i.e. friends and family, because those are the easiest to get, thus giving the members a false impression of "how easy it is", thus reaching "overgeneralization". When the members ran out of the easy pickings, they started to find out how the business is REALLY run.

On the other hand, it's more likely for the negative experience to linger and become overgeneralized, i.e. "I failed here, I'll always fail".

Ponzi Analysis: Suspected Australian and Canadian Ponzi Schemes show all the classic signs long before collapse

In 2017, there were lots of Ponzi schemes, and two of them caught my attention. One was the Pilbarra Ponzi scheme in Australia, and the other was Istuary Innovation Labs Ponzi in Canada. Both of them show classic Ponzi signs long before their collapse.

To recap, the alleged Pilbarra Ponzi was a real estate investment project on the island of Newman near Western Australia, and Port Hedland, also Western Australia. Over $120 million where raised from 1800 investors who were promised between 10 and 36% per year return, into what they thought where property-backed investment. Turns out, the largest property was a piece of undeveloped land on the island of population 7000. The group of companies went bankrupt in 2016, and the Australia agency ASIC charged the operator Veronica Macpherson of operating a Ponzi scheme, with the later joiner's money went toward paying the early participant's interests.

As for Istuary Innovation Labs Ponzi, it started in 2013 as "technology incubation platform" to link tech startups in Canada with customers in China. What was interesting was it promised to return FIVE TIMES what was put into the company in two years, alleged the victims suing the company. Several employees and contractors claimed they had not been paid for work or wages. One investor outright called Istuary a Ponzi scheme.

Let's ignore for now whether they are really Ponzi schemes or not. But what are the signs of danger both exhibited long before they started actually showing problems?

Scam Spotting: Is this kitten for sale page on Facebook legit or not?

Someone brought this to the attention of /r/scams... is this legit?

FB page claims to have Sphynx kittens for sale at $600 

The initial page is already problematic. Google photo search comes up with a for sale ad from south Australia town of Glenunga.

Scrolling through the cute photos shows they've been advertising these cats since January 20th, 2017.

A volunteer contacted them via Facebook Messenger, and they claimed to be in Dallas, TX.

Their first timeline photo is this cat:

While I cannot find the EXACT photo, it was pretty obvious it was a screencap from a video, as I was able to find this photo of the same cat, the same potted plant, the same plastic sheet on the same table, just different pose, but it's from a classified ad in Granada, Spain.  There's a video below (no longer available) so presumably, that's where the above "photo" came from.

Where do these MLMers get their "facts"? Certainly not from this reality.

In attempting to engage with some MLMers regarding their unbridled enthusiasm, I've since found out they seem to be armed with a lot of... nonsense from somewhere. They surely don't seem to have just... invented it. But where did they get such nonsense that they perceive as "facts"?

Here are a random sample of  several "not-facts" thrown out for sake of argument by these MLM supporters, all the while chanting "Worre pwn'ed Ramsey!" in the Youtube comments of a Dave Ramsey show where Ramsey provided some realistic outlook on MLM.

It makes one wonder, do they just make up "facts" as they go along?


S1. "MLM works for thousands of people around the world"

S2. "Amway Japan is the biggest company there and has been trading for over 55 years."

A1. I never said anything about "MLM doesn't work", but that's ignore that for the moment, as he did. He put up a strawman, then cited a non-sensical fact in support. "Thousands of people around world" found MLM to be working...

DSA estimates that there are 20.2 million (per 2015 fact sheet, DSA.org) in the US alone, and probably 100 million around the world, in MLM. If only "thousands" found it works, that would suggest TENS OF MILLIONS found it did not work, doesn't it?

Factualness rating: D, true, but not placed in context. A system that works for a tiny minority cannot be considered a working system.

A2. Even a modicum of logic should tell you this is impossible. The biggest corporations in Japan, the haibatsus are hundreds of billions big.  Toyota's revenue from 2013 was 224 BILLION dollars.  This guy seriously thinks Amway in Japan can beat 224 billion? How old did he thinks Amway is any way? Amway Wiki states clearly that Amway Japan opened in 1979. That makes it 37 years old, certainly quite a bit off from 55. And its revenue, as per Amway was 1.1 billion USD (2006) again, AmwayWiki.

Factualness rating: F, completely false in every facet

How to spot shady opportunities V2.0: a 10 item checklist

NOTE: This was a rewritten version of the guide back in 2014.

World is full of Shady Opportunities that want you to put in money with promises of payback. Here are ten signs of shady schemes. Obviously a scheme probably would not have all ten, but the more signs you spot, the more likely it will be a scam.

1. Clickbait-y Slogan
2. Misinterpreted results
3. Conflict of interest(s)
4. Correlation vs. Causation
5. Weasel words
6. Bad Samples
7. (Lack of) Control Group
8. Unverifiable testimonial and Improper disclosure
9. Cherrypicked and unreplicable results
10. Paid or fake media coverage and reviews

Clickbait-y Slogan

EVERYBODY hates clickbaits... They are headlines written with intentional hyperbole and tease to get you to tease. Shady opportunities are the same. Does the scheme make incredulous claims such as "On our team everyone makes money"? Or they somehow "Pay One time $289 and get a minimum of $1040 back Guaranteed!" perhaps?  Before you say "nobody is stupid enough to make this sort of stupid claims"... think again:

Screen cap of Google Search results, yes, someone promised and guaranteed that
$289 will magically grow to $1040 and more. It's obviously clickbait.

As Carl Sagan said before, "extraordinary claim requires extraordinary evidence".  If they made such extraordinary claim, then they should supply the extraordinary evidence to support their claim. And since there are so many ILLEGAL ways of making money... Making money in itself is no proof. 

It doesn't matter if the claims are repeated by the people you trust. They could have been duped and/or brainwashed. If they didn't ask for extraordinary evidence and is convinced of such, then you should not trust their judgement, esp. when they are in no position to evaluate such. 

Misinterpreted Results

We are all affected by confirmation bias to one extent or another. If we hear some evidence, we are going to interpret them based on your experiences, while someone else may see the same data and interpret them very separately. Here's another example:

Monty comic / Is it going to be McCain or Obama?  (old joke on confirmation bias)

The sales pitch is designed to say "just enough" so you think it applies to you, and NOT tell you that parts that "this may not apply to you"... so you can misinterpret the results to be relevant.

Your mindset affects how you interpret the results, and willful blindness, Dunning-Kruger effect, and self-serving bias will lead you down the wrong path. 

Conflict(s) of interest

Most MLM companies in the "lotions and potions business" (nutritional supplements and cosmetics) employ scientists to carry out and publish research... But remember, those scientists may have conflict of interest, and if they did not disclose so, that is a huge ethical violation, as research can be misrepresented for personal or financial gain.

The worst example of which is (former doctor) Darryl M. See, who previously was a researcher at UC Irvine. He wrote a paper touting a Mannatech (MLM) product that he claimed has proven results in his study, and got it published in pretty famous American medical journal on nutrition. However, he never disclosed that 1) he had resigned from UC Irvine months before publication to pursue a career endorsing Mannatech (and was paid thousand per day for speaking gigs), 2) his wife had been a Mannatech rep for years, and 3) he made dozens of audio tapes sold at Mannatech conventions and seminars touting Mannatech products  4) His father was a personal friend of the journal's publisher.

When the news broke, UC Irvine had NO RECORD of any such study had occurred, but Mannatech's president already announced such to its legion of reps. In the end, Mannatech sued See, who jumped to a different company, before eventually forced to give up his medical license due to multiple medical ethics violations.

If someone suggests MLM as a way to solve your financial needs, you need to consider... Are they really doing it because they think it's the right thing for you to make some money... or is it because THEY, by recruiting you, will make some money off of you joining?

Stay skeptical of any and all claims, esp. when it is done with the ultimate aim to recruit you. 

Correlation vs. Causation

When two things happen together, it does NOT mean one caused the other, despite how much you feel one *must* have caused the other.

XKCD... Did cell phone cause cancer... or did cancer cause cell phones? 

Don't get the joke? Following is a 100% true graph...

Is there relation between Autism and Organic Food? They correlate to the third decimal point!?!?!

Yep, that's right, Organic food sales correlate with autism over 10 year period. Real data. But of course there's no causation... Yet that's the point: just because two things happen together doesn't mean one caused the other. It likely to be a mere coincidence.

Yet many MLMers want you to believe that their nutritional supplement made them healthier, their magic rub took away their pain, their magic juice / tea / coffee took away their diabetes, and so on, because those effects "only" appeared when they started using those stuff.

For those of you who watch Stephen Colbert, this is related to the difference between the truth... and truthiness. Or as Colbert himself puts it:

Truthiness is 'What I say is right, and [nothing] anyone else says could possibly be true.' It's not only that I feel it to be true, but that I feel it to be true. There's not only an emotional quality, but there's a selfish quality.

If you BELIEVE it's causation, you'll never accept it's merely correlation. If you believe your nutritional supplements made you feel better, or that special widget increased your car's mileage by 15%, you'll never believe accept that the supplement's merely placebo effect, and the widget is relying on your lighter foot as you FEEL less need to speed and get better mileage. You believe truthiness (There is an effect and I caused it!) instead of the truth (It's just correlation and coincidence).

Correlation is NOT causation (until proven otherwise). 

Scam Psychology: Idiot's Guide to Idiocy... and how to avoid it

It is very often in scam psychology that the victim refused to accept that they have been victimized, and they often square off against the critics. However, here are some questions they should be asking themselves... Are they *really* arguing best evidence... or merely best "intentions"?

1. What exactly are you arguing for? 

Often, proponents of a scheme have very different arguments. The ones I've seen are:

(Scheme name) is [mostly] legal!
(Scheme name) pays me [and that's good enough for me, never mind legal!]
Go pick on some [bigger evil] and leave (Scheme name) alone!

Some folks even managed to do all three at once.

But think about it, only the first item is a real "defense" of the scheme. The other two are tacit admissions that the scheme may indeed be shady, if not outright illegal.


2. Are you arguing or merely denying? 

There's a big difference between arguing, and denying.

Arguing means both sides present their best argument, and analyzes the other side's argument for flaws.

Denying simply means you insist that the other side is wrong, wrong, and wrong, without analysis.

Don't see the difference? Watch this comedy skit "Argument Clinic" courtesy of Monty Python:

3. Does your argument SOUND weak? 

A lot of scheme defenders, when trying to defend certain potentially illegal parts of the scheme, end up sounding like a whiny cat, because their argument end up as...

"But you don't *have* to do that... It's optional."

For example:

"But you don't have to recruit more sellers (It's just that you make more money if people you recruited also recruit more sellers)"

"But you don't have to buy stuff every month (If the people you recruited buy enough so your "group volume" qualifies you for commission)"

Now repeat that in a whiny kid's voice, and you'll see how weak that argument was.

It's also a bogus argument, because it's tacit admission that the scheme has at least one potentially illegal / amoral component. It's roughly equivalent to "I smoked (pot) but I didn't inhale".  That's a VERY weak argument.


4. Are you arguing from "might" or "meek"? 

Are you using "might" or "meek" for your arguments? Or just whatever that suits your argument? Are they even relevant?

Many promoters often invoke bandwagon fallacy (i.e. X people joined, Y amount of money spent, Z celebrities endorsed, etc.) That's the "might".

Many promoters adopt the "meek" attitude when they whine about government persecution, conspiracy of rich, and so on and so forth.

They are NOT relevant! Those are WEAK arguments! Find better ones!

Scam Psychology: the echo chamber effect (and how it turns you into a recluse)

That's sheeple. Does that look familiar to you?
(Photo credit: hermetic hermit)

MLM is all about your "team", team spirit and camaraderie, don't let the team down, we'll be there for you, blah blah blah.

But have you ever considered the NEGATIVE effects of a team environment?  (Or is that merely "negativity" to be avoided?)

When you are in a social group such as a team, clan, whatever, you automatically try to fit in. You will conform yourself to the team, just as the team will conform to you. You will all have to same position, same opinion, etc. You may have differences in minor details, but you will go along on the "big stuff".

You are suffering from the "echo chamber effect", because you only hang out with people that you think have similar ideology to yours. Your ideas are echoing back to you, and other people's ideas are passing through you, and being echoed back to them. Soon everybody think alike, and like seeks like. Such things does NOT happen when you have a mix of people holding opposite views and have a nice proper discussion of the issues.

The advent of internet only made it EASIER for like to seek like. You can find all sorts of bull**** on the Internet nowadays, and forums hosting such. If you can't find one, start one yourself. People will agree on absurd topics such as "ISIS has infiltrated every church in America" to "school shootings were staged with shill mourners".

After a while in the echo chamber, you will suppress your own thoughts because you reasoned that the your group would never accept your "anti-group" thoughts. That's known as the Semmelweis Reflex.

That's fine when the ideas are logical and proper, but when they are not, it can be very dangerous.

Scammers have understood this for a long time. They are out seeking sheeple who hadn't gotten wise to the schemes, esp. when the scheme caters to one of an universal wants: trying to make one's life better.  However, scammers will pervert such wants into feeding your fears and sell you a bogus solution.

Scam Basics: Do you "Google" your upline, the company leader, and so on?

Do you Google your own name as well as those people you know? Come on, everybody does. People who go on dates google each other's name, or even the photo, just to make sure they're not being catfished.

So why aren't people Googling their MLM uplines, and businesses googling their customers, and so on?

(NOTE: Yes, I'm using "Google" as a verb, meaning "to search online, probably using Google search". You are welcome to substitute Yandex , Baidu, or whatever your favorite search engine may be. )

A few years ago I wrote about "due diligence", and the case of Janamjot Singh Sohdi and his scam, and how he managed play an investment advisor and defrauded about a thousand people out of 2.5 million dollars despite having a long rap sheet such as having investment broker license revoked, disbarred from NYSE, and so on.  All of which can be easily Googled.

In the same article, I also wrote about the suspect scheme of "Phil Ming Xu" called WCM777, and how Xu was linked to the "Vantone scam" in China. WCM777 was eventually closed by SEC.

How did I found out that Xu was linked to Vantone scam in China?

I "googled" it, of course.

And it seems that's way more due diligence than most people bother to exercise, even bankers who's supposed to be following Federal "Know Your Customer" guidelines.

Have you ever heard of Daniel Filho? How about his full name: Daniel Fernandes Rojo Filho? Still no? How about his company, DFRF Enterprises (named with his initials)?  Yes, it's a scam, closed by the SEC in June 2015.  But what ELSE did you find out through Googling?

Scam Tactic: Speak in Half-truths, or how Vemma is trying to create value out of bull****.

Speaking in half truths is the best way to scam. You sound as if you are telling the truth, esp. if that's all the truth you know. You can't be lying if you don't even know the other half, right?

That's why you should fact-check any PR claims, esp. those without any links for you to verify the claims, and if the evidence themselves need to be fact-checked.

Let's take one recent example, when a Vemma fan (what I'd refer to as a Vembot) posted basically a cut-n-paste PR speech "how dare you compare Verve to Red Bull". Okay, I made up that title, but that is accurate.  His words in blue, my comment will be in red.

For those trying to do a cost comparison with Red Bull, you are obviously missing the entire concept of Vemma.

Oh, I think we understand you all too well. It is you who don't understand Vemma... 

The clinically studied nutritional supplement Vemma cost about $2.00 per serving, if you purchased the stand alone Vemma product. 

But did you actually read the two "clinical studies"? (NOTE 1)

Verve has the same 2 ounces of Vemma, plus the components of the energy drink. Yes the price is about $2.80 a can, but $2.00 is the Vemma supplement. So the energy drink component is really only $.83.

You set your own prices. You can say it's worth $1000 if you'd like. There's nothing to compare it to. In fact, there's not even any proof that mangosteen has any benefit on the body. But more on that later. (NOTE 2)

You show me where red bull has 12 vitamins, 63 minerals, mangosteen, aloe vera and green tea. Show me where Red Bull paid 250000 to run full clinical studies to see exactly what happened in your blood after drinking it.

You show me what those "63 minerals" are, and what effect they have on the body. Show me how ECGC is not harmful to the body. Show me how two little studies in China, on self-reported results prove "what happened in blood". (NOTE 3 again)  

Until you can show me that trying to compare the to is like comparing a Ford Fiesta to a Ford Mustang. They are both Fords (energy drinks), but they are not the same thing and they dont cost the same thing.

Vemma is no-name energy drink with an unproven secret ingredient. The analogy is bull****. 

Now let's look at the footnotes...

Scam Tactics: How Do Scammers Identify What You Need?

How does a conman pick up on what does the victim needs, and thus, tailor the scam to fit?  There are five different techniques. If you are aware of these techniques, then you can watch out for when they are used on you.  Let MLMSkeptic explain the five techniques.

The techniques are:

1) Pre-screening

2) Probing questions

3) The tease

4) The Please

5) Trial Close / Seize


Pre-Screening

Your identity is known on the internet. Somebody out there has a profile on you, more than one if you have used multiple names and/or multiple identities. Credit agencies definitely have one on you (and there are several of them). If you're a professional you have professional profiles somewhere. And those can be accessed. That's just your public profile.

Then there's your "hidden profile". Your behavior online is part of your profile. If you give out your name and email address at capture pages that goes into a profile somewhere, and shady businesses will share that info (even if they promise never to do so) with other shady businesses and that's a part of your profile.

If you ever applied for a loan you will get solicitations for loan offers for MONTHS. They shared your info. And they're legit. Imagine what the ILLEGITIMATE scammers and conman will do...

If you ever asked for more info on suspicious "make money fast" type schemes, or clicked on teaser videos that says "sign up for my ____ for more info" and entered your email for "more info", your name is now on a "sucker list" to be marketed with more **** in a similar genre, because you have shown a preference for such topics. 

Scammers (and legitimate salespeople) pay $$$ to buy leads that may be interested in such things, and the lead list is pre-screened for people who are at least interested to whatever s/he's trying to sell. As the joke goes, you don't sell ice to Eskimos or sand to Arabs. By pre-screening the prospects, conversion is much easier.

The prospect generally doesn't see this step, as it's done long before the scammer meets the prospect. To counter this, simply don't be surprised when you got invited / solicited for sales pitch which seems to be exactly what you want. People already "know" you.

Probing Questions

Probing questions are pretty easy... Ask them what *do* they want. Due to pre-screening, you already have a decent idea on WHAT they want. However, there can be a little distance between what they say they want, vs. what they will settle for now. And asking questions will clarify that. 

If the presentation is pretty much a monologue, then the salesperson will be asking rhetorical questions, like "Are you looking for financial security in an insecure world?" "Are you looking toward better health?" then answer them him- or herself, "the answer is ________!"    And scammer will watch the reactions and see if s/he needs to change the speech. 

The salesperson will almost always frame the question so the answer is "yes". By answering things in the affirmative, prospect will have influenced him- or herself to answer "yes" later. 

The prospect should remain neutral for this part, not only to deny the presenter any clues on how to proceed, but to remain neutral mentally rather than "psyched up", in order to evaluate facts rather than emotions.

The Tease

The tease require a bit of mystery, and a commitment from the prospect to find out more. A "capture page" where the prospect watch a video and enter their info is such a tease if there's no details. The idea is to pique your interest, without telling you much. 

Tease works on relatively naive people who are not used to the various sales techniques, but not on veterans. Veterans will simply demand the information they need to make the decision, and will not waste time waiting for your "big reveal". 

The prospect should again, remain neutral when confronted with the tease. You are after facts, not teases with no solid info.

A Common Scam Defense: Similarity Between Homeopathy Advocacy and HYIP promotion

A frequent refrain among HYIP promotion are the following points:

• It's a conspiracy to destroy the alternative forms of income they don't want you to know
• You should be in control of your money, not limited to what "they" want you to know
• Various versions of _____ had been around since ______ and we do something like that

You can find this in almost every HYIP. If they were not outright stated, they were surely implied, or weasel worded like "new and profitable enterprise", often cloaked with buzzwords like cryptocurrency, penny auction, e-commerce, VOIP, and so on. 

We've seen the collapse of various scams using such cloaks. 

TVI Express, a huge international pyramid scheme that spanned several continents (India, Australia, US, most of Europe, several countries in Africa, China, Indonesia, Philippines...) claimed to be selling travel or travel club, and promoted itself as combining internet, e-commerce, working from home, and such. Little travel was provided. 

ZeekRewards, an international ponzi scheme was truly global with net winners (and victims) all over the world. It claimed to be earning huge profits through its penny auctions, but in reality it simply shifted money from last investors to the early joiners through facade of "profit sharing". It was shut down by Secret Service and forced into receivership.

Another scam was TelexFree, where owners claimed to be selling VOIP packages which lets you talk international voice calls over the Internet and avoid long distance phone fees (and for a while, they really did) but in reality is operating a Ponzi scheme based out of two separate countries: Brazil and the US, with investors form all over the world before it was shut down in Brazil, then the US, and even FBI and Homeland Security got involved in the raids.  It is estimated that company took in over 1 BILLION dollars from 1.9 million investors. 

In more recent news, UFUN out of Malaysia and Thailand enticed members to invest in its cryptocurrency UTOKEN, while claimed to be investing in various enterprises that will realize huge profit for its members. Thailand started a full crackdown weeks ago and had arrested more than a dozen high rankers, with wanted notices out for 200 more, with 300000 pages of evidence handed over to prosecutor's office recently, so there's obviously more to come. Its members were also arrested in Samoa and other places for fraud. 

They all implied that they are new ways to make money, that other people don't know or don't want you to know, and they can actually do what they promise. 

This sounds remarkably like homeopathy and alternative medicine advocacy to me, as they use the same arguments:

• It's a conspiracy of "mainstream medicine" to destroy "alternative medicine"
• You should be in control of your health, not have a limited vision forced upon you
• Various versions of alternative medicine had been around since _____

I'll leave the debunking of the homeopathy advocacy to Michael Vagg, while I tackle the HYIP promotion. 

Any one can be conned: 5 rules of recognizing a con

One of the most frustrating aspects of being a skeptic is the utter... "faith" a victim has in his/her ability to recognize a con, i.e. "it can't be a con... I'd know if it is a con"  usually followed by "I met the owner / officer / vendors and they are sincere and smart people, and answered my questions." then even more social proof ("_____ vouched for him/her/it").

Social proof can be faked, folks. In fact, here are 5 rules of recognizing a con. I've seen the 5 rules before, but never in a single place. This may be as well a time to mention them.


Rule #1: EVERYBODY can be conned.

Sure, people who are naive are considered gullible, but the exceptionally bright are also gullible. The moment you consider yourself immune to cons, you are vulnerable. The EASIEST victims to con are the ones who considered themselves too smart and too knowledgeable to be conned. They are too proud to admit they can be conned.

"I'm sorry I said you were proud. Just stop!" / (c) 2012 Kevin Spear

Is that you, too proud to look down?


Rule #2: You will probably be conned in your area of expertise

Yes, you'll be conned in what you know. Why? Because con-men target those who "know". Your mind, being familiar with the area, automatically fill in the details, and that saved the conmen work. Furthermore, you also feel invincible in your area of knowledge, further increasing your vulnerability. The really smart people know a lot of different things and know enough to be skeptical and cautious as they can't be experts in everything. Remember, most of Bernie Madoff's victims are other money managers who thought they knew what Madoff's doing.

I am an NMR expert. To save time, let's just assume that I am never wrong. (source: Zazzle.com)

Will you have faith in your knowledge of the field, and thus, not ask the questions?

(Humor) Classifying the Different Types of Network Marketing Douchebags

Let's face the reality: Network Marketing has always had an image problem. It's a thin blurry line away from an illegal pyramid scheme. Even the so-called "legitimate" companies now admit they sell more opportunities than products. Different companies are getting slammed around the world for being a pyramid scheme, esp. in Asia and Europe. AND they have a penchant for pushing woo on the unsuspecting public.

Therefore it is no surprise that network marketing attracts a LOT of douchebags who have somehow latched onto MLM as their ticket to success. This is my attempt to classify the douchebag traits. If you spot a trait you think isn't on this list, let me know via the comments and we can discuss them!

NOTE: It is possible for a douchebag to hold more than one (or even, ALL) of these traits

The Evangelist

The "evangelist" want to tell people that MLM (and their product, sometimes) is the greatest thing ever much like a preacher preaches religion. They are armed generally with propaganda (i.e. myths) instead of facts. They are very excited to tell you about the industry and their products, but their primary concern is sign you up as their downline. In general, they are all about the positive.

Subtype A: the Firebrand

The firebrand is an evangelist who has pure HATRED of any one who refused to be preached to or don't agree with their view (MLM is the greatest!)  Any disagreement will be pinned on "they don't understand", "they are doomed as wage slaves in a deadend J-O-B", or even "it's a conspiracy against _____".

Subtype B: the Fluffer

The fluffer is an evangelist who will also fluff you up (and only you) to be aroused to his or her ideas, so much so they are nuts about positivity. They'll tell you that you can be or already are special, you have potential, blah blah blah. The fluffier you are, the easier you are to pluck later, after getting your ego stroked (in more ways than one).

Subtype C: the Fear-Monger

The fear-monger is an evangelist selling fear. Actually they sell "solutions" to relieve people of their fear (that they caused) and their money.  They will preach to your existing fears (you'll die broke in a ditch, you'll amount to nothing in a dead-end minimum wage job, you'll die of broken health...) and they'll pitch you a solution (income opportunity or woo supplements) that will solve the fear they caused in you.

Subtype D: the Bling-Flasher

The Bling-Flasher is an evangelist who show the world the amount of bling (jewelry, fancy watch, fancy car, fancy house, etc.) s/he can afford and "share" this abundance with you through his/her gospel of prosperity. Car may even have vinyl wrap proclaiming their affiliation (Vemma logo cars like BMW, or the infamous Mary Kay pink cars) and generally talks about opportunities (and selling such) instead of selling products.  What they don't tell you is how many products they sold, or how much did they spend traveling around "inspiring" people (i.e. recruiting).



The Defender

The defender is out to "defend" his faith... uh his scheme against any sort of criticism or even doubt against critics or even members whose faith had been shaken by variou scandals or bad news. They fall into several types (though some defenders can exhibit multiple traits)  Defenders can be noobs or seasoned veterans.

Subtype A: The Credentialist

The credentialists want to show the world how "smart" they are by flashing their credentials around. Their message is "trust me" because "I was rank X in Y different MLMs", "I had bazillion downlines", "Acme MLM asked me to consult with them", or even "I wrote about / teach MLM at _____".  However, if you dig a little deeper you may find that a good portion of their credentials are made up or exaggerated, such as "a dozen years of network marketing experience" actually meant "jumped ship every year, amounted to nothing". Will often turn indignant when confronted.    (Also see Pseudo-Intellectual, Indignant)

Subtype B: The Pseudo-Intellectual

The pseudo-intellectual reacts to criticism such as "Scheme X may be a pyramid scheme" with neutral or condescending (you don't know what you're talking about, you can't talk about things you haven't tried...) wall-of-text, often copied from their upline's bogus explanations or Wikipedia without understanding what they posted. Generally they resort to bogus explanations like "all companies are pyramid-shaped", "pyramid schemes don't have products", and so on.   Their long-winded responses are filled with fallacies and bad arguments, instead of properly formulated reasoning or evidence. They usually don't even know what laws define a pyramid scheme in their own jurisdiction.  When confronted with their ignorance, they generally turn indignant or tried to flash their credentials to validate their view. (Also see "The Indignant" and The Credentialist)

Subtype C: The Indignant

The Indignant can be recognized by their indignant attitude, such as "how DARE you criticize my pet scheme?!?!"  They usually respond with ad hominem insults "whoever wrote the criticism must have a bug up their ***" or some such rather than pseudo-intellectual or credential responses. Also see "The Loan Shark".

More after this page break...

Scam Tactic: Love Bombing

Sun Myung Moon
 (Photo credit: Wikipedia)

This is the start of a new subtopic called "Scam Tactics" where I attempt to document certain approaches used by unscrupulous people on unsuspecting victims.

Today's topic: Love Bombing

The term "love bombing" originated in the 1970's from the "Unification Church" lead by Sun Myung Moon. If you don't recall the name, you may have heard of the Moonies cult. In a speech in July 23, 1978, Moon gave a speech, which is transcribed and translated below:

Unification Church members are smiling all of the time, even at four in the morning. The man who is full of love must live that way. When you go out witnessing you can caress the wall and say that it can expect you to witness well and be smiling when you return. What face could better represent love than a smiling face? This is why we talk about love bomb; Moonies have that kind of happy problem.

It sounds simple, but the way it works is a bit more insidious. As explained by professor Margaret Singer, a cult expert:

As soon as any interest is shown by the recruits, they may be love bombed by the recruiter or other cult members. This process of feigning friendship and interest in the recruit was originally associated with one of the early youth cults, but soon it was taken up by a number of groups as part of their program for luring people in. Love bombing is a coordinated effort, usually under the direction of leadership, that involves long-term members' flooding recruits and newer members with flattery, verbal seduction, affectionate but usually nonsexual touching, and lots of attention to their every remark. Love bombing - or the offer of instant companionship - is a deceptive ploy accounting for many successful recruitment drives.

Basically, the members fluff up your self-esteem by paying very close attention to your every action and appearance, and only give you positive feedback.

Scam Psychology: How Scammers Push Your Buttons through your personality disorders

The Age of Uncertainty
(Photo credit: Wikipedia)

As the MLM Skeptic, it is rather interesting to see many people who are defending their particular scheme from criticism suffer from personality disorders (not that I am a professional of any sort regarding psychology). They are often self-obsessed and arrogant as well as intolerant of ambiguity, and lack of empathy.

Many unscrupulous multi-level marketers and scammers play to these personality disorders by claiming they are VIRTUES, not disorders. These disorders are, instead, presented variably as confidence, conviction, certainty, and "they are not us".

People develop coping mechanisms when their self-image was diminished. One of the most common coping mechanism is retaliation: when they feel devalued, they devalue others as a response. Scams often play up this personality disorder by encouraging it with "they are not us; they don't think like us; they just don't understand us". It is then followed with epithets like "They have JOB -- just over broke", or "they will stay wage slaves while we achieve financial independence".

Any one who questioned the person's choice (the scam, in this case) will be devalued, even if they are best friends and family, and even spouse. That's why "intervention" when it comes to scams rarely succeed.

Another coping mechanism people develop is equating conviction with certainty. Conviction is a collection of your strong beliefs about the morality of your choice and/or behavior. If you don't really have much conviction, you'll often adopt certainty as if it is conviction. Thus you'll also develop certainty about other people (and what you believe to be THEIR conviction or lack thereof). This comes across as arrogance and intolerance. Scams play up this aspect by creating fanciful stories about the critics asking questions, such as "you're just jealous; you're just out looking for hits for your blog; you must have hated the owner; you're the 1% out to fleece us the 99%".  After Zeek Rewards ponzi scheme was shut down in 2012, some started floating fanciful stories about "SEC doesn't have a case because they privately admitted to our lawyers". Others even explained to newspapers that Security and Exchange Commission does not know what securities are.

However, what people don't understand is very often, certainty is an ILLUSION.

Scam Detector: What is "Cockroach Theory", and how does it apply to suspect schemes?

cockroach (Photo credit: TomSpinker)

Ever heard of the "cockroach theory"?

It's quite simple, actually. When you see one cockroach, there's probably a lot more hiding nearby.

When applied to investments and companies, it means when you see one problem, there's probably a lot more problems that you are not seeing. (And you should jump ship ASAP)

The theory is also applicable to potentially shady opportunities, actually. If you are smart enough to read the signs, and not ignore them.

Let's take one very obvious example: Zeek Rewards. They were shut down by the Feds in August 2012. But signs had been there for MONTHS that it was in trouble.

Zeekler, the auction, had been in operation since 2010 (as FSC auction and later Zeekler) without an auction license (required in North Carolina, their home state). They did not obtain an auction license until March 2012! But nobody checked. That may have been a roach but nobody saw it. Because everybody assumed it's all legal.

Did you know that Paul Burks, head of Zeek, was performing as "the singing magician" before he retired from performing and started MLMs instead? You know magic is just deception for entertainment, right? That may have been a roach but nobody saw it, because they've been distracted. 

In April 2012 Zeek Rewards suddenly banned a dozen or so European countries from participating, and gave several bogus reasons, one even blaming the US State Department Office of Foreign Asset Control (OFAC) uttered by the head Zeek Paul Burks himself. However, this was all proven to be lies only weeks later. Turns out they were both hit with thousands of stolen credit cards and by Denial of Service attacks. And their system can't handle it. The lie was pierced by BehindMLM within two weeks. Is that a cockroach you see? Did you miss it?  

By June 2012 they apparently got a local TV station to report on their "success", and even got the reporter to state that the North Carolina's Attorney General office had deemed the business legal. (Wonder whose palm they had to grease to have that happen?)  AG's office was so shocked, they demanded the video be taken down and the text changed on the TV station's website. Oh my, another roach! Did you miss this one too? Or is that "I see no roach (negativity)?"

How Does a Scammer Identify Your Needs and Scam You with Them?

Scammers are excellent psychological manipulators who can identify your needs and scam you with them by exploiting your needs as weaknesses. But how do they do it?

Abraham Maslow, who's a famous pscychologist, created the Maslow Hierarchy of Needs in the 1940's. It can be roughly represented as the diagram below, starting from physiological needs at the bottom, go slowly up to group psychological needs, then finally to self-psychological needs. Self-actualization means you fully realize the power of yourself and reach your full potential.

Maslow's Hierarchy of Needs (source: Wikipedia)

Noticed any trends? That's right, scams don't want you to actually get to "self-actualization".  They claim they will provide:

• Safety -- aka "financial independence", "fire your boss", JOB = "just over broke", etc. 
• Love / belonging -- your sales group / team is what you want, not your family and friends
• Esteem -- if you follow the system, you can get $$$ and esteem! Look at our "winners"!

But what do they ACTUALLY provide? 

Duke University's Free Coursera Course on Critical Thinking: Take it!

Duke / Coursera has a free course on critical thinking. It can even lead to a certificate if you take a couple other classes, but by itself it's a great intro to critical thinking and proper arguments, as well as detect improper arguments being used on you.

https://class.coursera.org/thinkagain-003/lecture

Class is free, though they're already on Week 8, so you'll have a bit of catching up to do!