One unexpected victim of Ponzi schemes: College Sports

Did you ever consider where are the ponzi scheme victims?  I mean, you usually think that the ponzi scheme victims are rich folks like Madoff victims, right?

You'd be very wrong.

ZeekRewards had an estimated 2.2 million victims all over the world.

TelexFree had almost TWO MILLION victims in US and Brazil

But here's a victim you'd never expect... College football.

You're probably exclaiming, "WTF? What does Ponzi scheme have anything to do with college football?"

OPINION: With HLF consenting to reforms, and Burks of ZeekRewards Guilty, justice prevailed, but work is never done

July 2016 has been a busy month.

On July 15, 2016, news was released that Herbalife has reached a settlement with the Federal Trade Commission where HLF agreed to a LONG list of reforms and pay a $200 million fine / reimbursement to the victims.

Then on July 22, 2016 Federal Court in North Carolina passed down the verdict... a Federal jury has convicted Paul Burks of ZeekRewards of all four counts of fraud and conspiracy to commit fraud.

MLMSkeptic has long criticized both schemes, both here on the blog, and on BehindMLM.com.

MLMSkeptic had analyzed the various comments, retorts, criticisms, and cheers of Ackman's epic short of Herbalife at end of 2012 and the subsequent PR war, and pointed out problems with such arguments.  Most of the critics of Ackman then believed that HLF was "too big to fail", or perhaps "not egregious enough to die, maybe fined".

So it is with much amusement and facepalming when "journalists" loudly proclaimed "FTC says Herbalife not a pyramid", when FTC said no such thing.

How did CNNMoney got it so wrong?
FTC never said HLF is not a pyramid scheme... 

You are welcome to search the actual FTC complaint and stipulation agreed to by HLF. "Pyramid scheme" was nowhere in the documents. Furthermore, when questioned by the press at the news conference, FTC Chairwoman Edith Ramirez was asked at least FOUR SEPARATE TIMES whether HLF is a pyramid scheme, and Ramirez repeatedly dodged the question (probably as a part of the settlement).

Q: I know that you’re not going to put any labels on this, but it seems to me if we look at the BurnLounge case, that while this complaint does not use the words “pyramid scheme”, would you agree that a prima facie case of a pyramid scheme is alleged with the allegations within the complaint?

A:  Again, I will leave it up to you to draw that conclusion. Our focus in this complaint was in addressing the core issues

When asked outright about HLF's own announcement... That FTC have determined HLF to be NOT a pyramid scheme...

Q: Did you review the language in their (Herbalife’s) press-release that sort of affirmatively said that they were not declared to be a pyramid scheme? Because they’re sort of having that as an outright headline.

A: I do not agree with that statement. The word “pyramid” does not appear in our complaint that is true, but um again the core facts that we’ve alleged, that we consider to be problematic with their compensation structure, are set forth in detail in our complaint. And again, I will leave it to readers to draw their own conclusions. But that they were determined to not be a pyramid… that would be inaccurate.

And indeed, checking the HLF website no longer shows any sort of language that claimed "FTC determined HLF not pyramid scheme"...

So you know which way the CNNMoney article was written... They were written from HLF's press release, not the FTC press release. It is... biased.  Shame, CNN. Shame on you for lazy reporting.

I am not listing all the changes that FTC managed to squeeze out of HLF. You can read the documents linked above yourself. It is a LONG list of reforms, and it will likely become a new standard much as Amway's settlement with FTC created the modern MLM back in 1979.  And that pretty much tells you the fact: HLF was a scam that required reforms so it is no longer operating as a scam. Any one who argues otherwise is simply denying reality.

I may do my own analysis later on these changes, but HLF is no longer the same company. They believe they can continue to thrive (or else they would not agreed to these changes), but we shall see.

Then we come to Zeek Rewards, and Paul Burks.

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.

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.

BREAKING NEWS: BLGM busted by HKPD, 5 arrested, office locked and dark

According to multiple media reports, Better Living Global Marketing, which operates "Bidder's Paradise" has been raided by Hong Kong Police Commercial Crime Bureau and 5 were taken into custody. Office is locked, and inspectors have confiscated cases of documents as well as computers into evidence.

BLGM basically operates as a Hong Kong clone of Zeek Rewardsd ponzi scheme, with various "winners" paraded as "proof" that the auction works, and then claimed the auction brought in so much profit that it needs investors to expand. However, according to BehindMLM, there were cash flow problems that was first discovered in 2014.

Apple News HK reports:  (translated, original linked below)

HKPD Commercial Crime Bureau has broken up an auction website alleged of using pyramid selling technique to defraud people. The affected company’s Tsim Sai Tsui office is dark and locked yesterday, with many victims knocking on the door looking for redress. Five arrested have made bail and will await trial. The founder of website, Luke Teng, 55, is son of HK’s most famous Christian Church leader Jing-Hui Teng.

The affected company “Bidder’s Paradise Ltd” office at XingWengHua center is locked. Only two people were observed enter. When confronted, one said “I’m a relative of Luke Teng, and the company’s active for two years, and said “We don’t cheat people”, and claimed there will be a press conference later to explain everything, and otherwise, no comment.

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.

NEWS UPDATE: Quite a lot of catching up with all sorts of news updates regarding Ponzi, potential Ponzis, and such

Okay folks, sorry for not updating the blog for a week or so. Had been busy doing some other stuff... like playing way too much Doctor Who Legacy. Any way, articles are coming back next week. In the meanwhile there are some news to tide you over.

Remember, I link to the source, so click through if you want more details. Don't believe random people telling you some sort of news, then provide a link to their own website with no further citings.

Howard Kaplan claims he cannot be negligent regarding Zeek Rewards

In June Zeek Rewards receiver Ken Bell sued Howard Kaplan (the tax attorney who advised Zeek Rewards at a widely publicized event) and MLM lawyer Kevin Grimes for legal malpractice. Kevin Grimes have been since ousted from what used to "Grimes and Reese PLLC", and the company renamed "R & R Law" with a new partner in his place. We learned, on in late July / Early August 2013, Howard Kaplan's attorney(s) has denied any responsibility and wants to case to be dismissed, not because they're not guilty, but because they argue that a guilty party (i.e. Zeek) cannot sue its consultants/lawyers for malpractice because of "in pari delicto", a legal term that roughly means "both are equally at fault". Zeek Receiver Ken Bell have since fired back a reply to the court that Kaplan's reasoning is flawed, and urge the case to continue.

See BehindMLM article:  http://behindmlm.com/companies/zeek-rewards/howard-kaplan-gave-bad-legal-advice-to-850m-ponzi/#more-19145

Which contains links to the actual court documents, courtesy of ASDUpdates.

News Update 07-SEP-2014: Herbalife problem in Norway; TelexFree Brazil Exposed; Zeek, TelexFree, and WCM ponzi updates

Remember folks, when you read "news", they better have a source, and it better be a reputable source (or links to a reputable source), and I do try to do that. If I don't, let me know and I'll fix it. If the sources you read don't cite sources... Well, maybe you shouldn't trust them.

I know I haven't updated this blog for a week, so here's some belated updates:

Herbalife Scandal in Norway; False Claims that former Norwegian PM joined Herbalife

Norwegian magazine Kapital broke the news that Gro Harlem Brundtland, former three-time Prime Minister of Norway and former director general of World Health Organization (WHO) was completely unaware that her name was used on the website "Herbashop Norway" where one of the replicated websites proudly claims "Welcome to Gro Harlem Brundtlands Herbashop! ... After only three months I had controlled my weight down and changed pant size from 42 to 36"

Screenshot of the said Herbashop Norway, courtesy of Kapital magazine
page has been since removed

The page had since been removed from the Herbashop website. However, there is no word on whether Brundtland will take further action against Herbalife or Herbashop, or whether Herbalife itself may take some sort of action against Herbashop, which is an independent operation based in Norway by affiliate Dan Ove Tuven. Herbalife has promised an investigation.

Norwegian news Dagbladet claims that several other Norwegian celebrities were also used in various claims regarding Herbalife products, probably without their permission.

In March 2014 Ray Liotta sued Nerium, when he found that Nerium affiliates claimed for months in late 2013 that Ray Liotta's skin condition improved due to use of Nerium products.

(First reported by BehindMLM)


Brazilian News Revealed Shell Companies Allegedly Used by TelexFree for Money Laundering

Coat of arms of Brazilian Federal Police
(Photo credit: Wikipedia)

Globo news in Brazil have published allegations from Brazilian Federal Police that they believe TelexFree has engaged in money laundering and concealment of assets through various shell corporations by using relatives of Carlos Costa, head of Ympactus, i.e. "TelexFree Brazil". At least two companies are registered to Carlos' daughter Leticia Costa: AgroFruta and Brasil Factoring, and their stocks are allegedly worth millions despite her only declaring income of 60K a year. It's also worth noting that Carlos' wife Jozelia is named as the biggest creditor in the original TelexFree US bankruptcy application.

Brazilian Federal Police suspect that money that was ordered frozen by Brazilian court back in 2013 may have been used illegally to fund these alleged shell companies in order to hide them from authorities. Many of the directors in these companies are TelexFree top promoters, said the police.

You can read the Globo report here in Portuguese

BREAKING NEWS: Zeek Receiver sued Kevin Grimes and Howard Kaplan for negligence, wants $100 million EACH for damages

According to documents filed by Zeek Rewards receiver Ken Bell with the court, he intends to file lawsuit against both Kevin Grimes, head of "Grimes and Reese LLC", and Howard Kaplan, renowned tax expert, for legal malpractice in their role to prop up Zeek Rewards, as it is clearly a ponzi scheme. Receiver is seeking over 100 million in damages against each defendant.

According to Zeek receiver Ken Bell, both Grimes and Kaplan should have know that the business model as presented by Zeek cannot possibly to be true based on their own expertise in their own respective areas, yet both allowed their name be used in association with Zeek Rewards and its parent company, Rex Venture Group.

Grimes created a "compliance program" for Zeek affiliates i.e. what can be said and what cannot. One such "certificate of completion" is reproduced below, from court document filed back in 2012 as part of SEC complaint against Zeek.