Scam Psychology: Don't be a GIMP (Good Inexperienced Money People)

Carl Sagan, famous scientist, who said
"extraordinary claims require extraordinary proof"
 (Photo credit: Wikipedia)

There are many types of people looking for additional income, and vast majority of them are GIMPs i.e. "good inexperienced money people" (my thanks to M_Norway on BehindMLM for introducing the term). There really is no formal definition for a GIMP, but its closest synonym is "money sheeple", i.e. people who are just not savvy with money and scams, and thus, invested in scams and shady businesses with their hard earned money.

GIMPs are typically people who know little about network marketing, internet, and scamworld in general. They don't understand that anybody can make a website in hours, and meeting rooms can be booked and sleek presentations can be done for minimal costs nowadays. Even income claims can be faked or exaggerated. Claims are worthless without a basis for comparison, and to quote the great scientist Carl Sagan, "extraordinary claims require extraordinary proof", most of which is not forthcoming.

Part of the problem stems from our daily use of money, which leads us (through self-serving bias / optimism bias) to believe that we are far more savvy with decisions about money than we really are.

BREAKING NEWS: ZeekRewards receiver filed civil suit against "insiders" and net winners

According to PatrickPretty.com, Zeek Rewards receiver Ken Bell has filed lawsuit against the "net winners" of Zeek Rewards, alleging that they had long conspired to defraud others. This includes all of the major players in Zeek Rewards, including Paul "The Singing Magician" Burks, Dawn "HippieDiva" Wright-Olivares, Alex "I married Dawn" deBrantes, Dan "CIO? Me?" Olivares, and Darryle "Who? Me?" Douglas, as well as the estate of the late Roger Anthony Plyler.

This is a separate lawsuit from the charges filed by the SEC, and it is unknown if other agencies will bring criminal charges against the heads of the largest Ponzi scheme (in number of victims) in US History.

http://patrickpretty.com/2014/03/03/urgent-bulletin-moving-zeek-receiver-sues-alleged-insiders-winners-emails-skype-chats-helped-expose-fraud-weve-already-attracted-a-great-many-big-fishes-wright-olivares-exci/

More details on BehindMLM

http://behindmlm.com/companies/zeek-rewards/clawbacks-filed-against-zeek-insiders-winners

Scam and MLM Absurdities: Why do Scams and MLMs do "Same Wine, New Bottle"?

Looking at history of network marketing, and scams and an interesting pattern emerged.

Most people who start network marketing companies were former grunts in network marketing... And sometimes, these alleged network marketing companies turned out to be outright scams.

First, let's get the more legitimate (compared to the scams) folks listed...

• Cambridge Diet top distributor Sandra Tillotson went on to co-start NuSkin
• Natural Health Trend's high-ranker Terry LaCore went on to start bHIP (and later, Rippln)
• Herbalife member Roger Daley went on to start Omnitrition International

Given that NuSkin is in trouble in China, Mr. LaCore had a run-in with the SEC, and Roger Daley's Omnitrition was slapped down by 9th Circuit Court of Appeals... Well, let's just say they are NOT egregious scams (except maybe NuSkin in China)

Then there are the outright scams... Where participants of MLM or scams went on to start and/or continue to participate in scams.

BREAKING NEWS: Dawn Wright-Olivares and Dan Olivares to appear in Charlotte NC Federal Court Wednesday Feb 5th 2014

WXII-TV (Photo credit: Wikipedia)

According to WXII TV Channel 12 report, Dawn Wright-Olivares, former CMO of Zeek Rewards Ponzi, and her stepson Dan Olivares, former CTO of Zeek Rewards will be appearing at the Charlotte North Carolina Federal Court to plead guilty to criminal conspiracy to commit fraud, coming Wednesday, Feb 5th, 2014.

Zeek Rewards is the largest Ponzi scheme in the US in terms of victims involved, with up to 1 million victims all over the world, and current figures puts it at $850 million, primarily middle-class victims.

Both Dawn and Dan had already plead guilty to the civil charges by SEC and agreed to cough up almost 11 million dollars, the amount they got from Zeek during its run, as a part of the plea deal.

US Attorney's office has no comment on the case, citing ongoing investigation.

Scam Psychology: Intelligence is NOT Rationality

Many people have asked... How can intelligent people, lawyers, doctors, people who got rich through their own efforts, and so on, end up joining a scam? Aren't they intelligent enough to avoid such things? Some even use this as a bad argument that I termed "association with authority" argument, such as "X is not dumb or stupid, therefore he could not have joined a scam. Thus, whatever he joined cannot be a scam."

Turns out psychologists knew about this problem for a while, and the explanation is very simple: intelligence is not the same as rationality.

Intelligence is usually defined as "ability to acquire and apply skill and knowledge"

Rationality, on the other hand, is  "the state of having good common sense and sound judgment".

The two definitions can overlap, butare not required to overlap. It is possible to have no sound judgment, yet have ability to acquire and apply skill and knowledge. A savant, for example, esp. an "idiot savant", has the phenomenal abilities such as mental math, perfect recall, photographic memory, and so on, yet has virtually no judgment or social skills outside of his/her expertise.

Of us the common people, we are just as guilty of what appears to be irrational decisions, caused by our various cognitive biases, and often, what we WANTED to be true. We are intelligent, but we are NOT always rational.

And scammers are very quick to convince us that being intelligent is being rational... and it's rational to join their scheme. And scammers are often amateur psychologists exploiting your cognitive biases to coerce you (without you realizing it).

Scam Absurdities: A Leopard Can't Change His Spots, A Scammer Can't Change His Ways

It is sometimes painfully obvious why would any one fall for a particular scheme, when all you need to do is look at the people involved in the scheme, and what were they doing before the scheme. Were they involved in scams? And if so, in what role? With power of Google and a few minutes on a computer, you can find a lot of information that can only save you from possible crooks.

Recently, TelexFree's "International Marketing Director" Steve Labriola released some sort of a video assuring there is no US investigation (that he knows about). About 3 minute in, there's this some sort of "assured revenue" thing:

In other words, you pay TelexFree, then you pay LifeRevs to do some work for you, and TelexFree will pay you big bucks. Pay in 15125, plus $924, and you get back 57200, and they even said it's "income claims", something that is very much verboten in the MLM industry.

But who runs LifeRevs? And this AdAssureLite? Turns out, it's related to Zeek Rewards ponzi.

Breaking News: Former Zeek Bank, Four Oaks Blank, settled with DOJ for being negligent regarding Zeek Ponzi Scheme

Seal of US Department of Justice
 (Photo credit: Wikipedia)

Breaking news out of North Carolina: Four Oaks Bank, which held money for Zeek Rewards, as well as a payment processor called NX Systems, settled with the Department of Justice for its role in the Zeek Rewards ponzi scheme and other scams that processed funds through Four Oaks bank, and agreed to fine of 1.2 million dollars without admission of guilt.

DOJ charged that Four Oaks Bank granted "Automatic Clearing House (ACH)" check processing access to Rex Venture Group, parent company of Zeek Rewards Ponzi, despite multiple warning signs such as no visible prinpals and unverifiable or suspicious address (one of which is a vacant lot).

BREAKING NEWS: How Many Corporate Entities Does Dawn Wright-Olivares Really Have?

According to reports by PatrickPretty.com, Dawn Wright-Olivares's agent / attorney for corporation in Arkansas had been disbarred back in May 2013, and may be responsible for more than one of Dawn Wright-Olivares's corporations.

Dawn Wright-Olivares (just "Dawn" from here on) is owner of "Wandering Phoenix LLC", an entity registered through N. Donald Jenkins Jr. of Arkansas.

Search through Arkansas corporate records shows that Dawn is also owner of "Wandering Rex LLC".

Dawn was COO of "Rex Venture Group", operator of Zeek Rewards, for years before changing to Greg Caldwell 2 months before RVG was closed by SEC (August 17, 2012) as a Ponzi scheme.

N. Donald Jenkins Jr. , the register agent, was apparently disbarred in May 2013, which may have resulted in a disciplinary investigation that started on Aug 17, 2012, same day SEC closed Zeek. While this could be a coincidence, it could also be a coordinated effort between the disciplinary board and SEC as not to tip of the culprits that they are under investigation.

(Thanks to PatrickPretty.com for the lead  http://www.patrickpretty.com/2014/01/05/special-report-attorney-linked-to-zeeks-wright-olivares-has-record-of-disbarment-and-suspensions-possible-co-agent-spent-time-in-federal-prison-for-credit-card-swindle-and-was-charged-in-arkansas/ )

BREAKING NEWS: Dawn Wright-Olivares found in Clarksville, Arkansas, owns restaurant there

According to 5News report out of Fayetteville, Arkansas, Dawn Wright-Olivares, former COO of Zeek Rewards, the largest Ponzi scheme to hit the United States, soaking $850 million from about a million victims, has settled in Clarksville, Arkansas, and owns a restaurant there called "Healthy Hog".

(Thanks to lead from patrickpretty.com  http://www.patrickpretty.com/2014/01/03/from-zeek-to-the-healthy-hog/ )

BREAKING NEWS: Zeek Ponzi "Determination of Claim" letters going out now

Zeek Rewards Receiver Ken Bell has released a new letter on the official website http://www.zeekrewardsreceivership.com/ dated 27-DEC-2013.

Determination of Claims basically confirms that you have a claim against Zeek Rewards (i.e. it owes you money). How much you will get back depends on how much he was able to claw back from the net winners... 15000 of them, 9000 of whom live in the US.

Even if you don't receive one (and as first batch is going out, and it'll take the remainder of the year just to finish the first batch)  that does not mean you don't have a claim. Some claims are harder than others to document and verify. If you have met the deadline to file your claim on the official website, you will eventually get a notice.

Here's some most interesting facts:

Scam Post Mortem: How Long Had Zeek Been Investigated Before They Were Closed?

When did US Secret Service start
investigating Zeek Rewards?
(Photo credit: Wikipedia)

With clawback lawsuits about to start against the "net winners" in the Zeek Ponzi scheme (there's still time to settle, lest you enjoy being served with a lawsuit) one the the questions burning on the minds of the victims (besides "when do I get my money") is how could the Zeek ponzi scheme lasted as long as it did? When did they, the insiders (Paul Burks, Dawn Wright-Olivares, etc.), knew they were being investigated? Why did they continue to perpetrate the fraud rather than shutting the whole thing down?

Part of the answer on how long the insiders had known about the government investigation was hinted in the SEC press release on Dec 20, 2013 where they announced that SEC has brought charges of various securities law violations against Dawn Wright-Olivares and her stepson, Dan Olivares, respectively COO and CTO of ZeekRewards ponzi scheme, that they knew and covered up evidence of wrongdoing. The civil charges has been settled with both of them paying about 11.4 million dollars together, but the CRIMINAL charges being filed by the US Attorney's Office is still pending. 

Let us then put several more documented dates in a timeline so we can visualize it more clearly:

• circa early April, 2012 -- Zeek Rewards suddenly cancelled all members from certain European countries with a bogus explanation and only offered original money back
• April 18, 2012 -- Zeek Reward red carpet event in Lexington, NC
• circa end of May, 2012 -- Zeek posted a profit share of 8.9%, then told everybody they had a manual decimal displacement, it's really 0.89%. This basically proved that the percentage was not calculated, but manually entered
• May 28, 2012  -- over Memorial Day weekend, Zeek suddenly announced that all Zeek checks have to clear before June 1st or they are void. 
• June 4th, 2012 -- in a "training call" hosted by Dawn, she announced that 700 Zeek members in Montana can no longer participate due to some legal problems. 
• June 5th, 2012 -- in another "training call", Dawn announced eWallet through NxPay, then claimed that unless other affiliates put more money into Zeek's eWallet, Zeek cannot pay people. 
• June 6th, 2012 -- Zeek announced they no longer accept personal checks 
• June 6th, 2012 -- Dawn attempts to white-wash eWallet issues with now infamous "burger Analogy" (i.e. if you buy from BK you can't pick up your burgers at Wendy's, so if you buy bids with STP you can't get paid from NxPay)
• June 8, 2012 -- Dawn Wright-Olivares appeared with Troy Dooly on ACES Radio hosted by Jim Gillhouse. Dawn claimed that Burks "manages all that" when asked how was daily profit share calculated. 
• July 7th, 2012 -- North Carolina Office of Attorney General issued an information request to Zeek, but this was kept secret by both parties
• July 24th, 2012 -- Keith Laggos, Zeek consultant, "fired" for promoting Lyoness, revealed to be receiving 40K a month through Zeek as a Zeek member.
• July 30th, 2012 --  Darryl Douglas, major insider at Zeek, dropped out of sight
• August 1, 2012 -- North Carolina OAG request of Zeek documents was made public
• Circa August 6, 2012 -- training classes and red carpet event scheduled for August 22 cancelled
• August 16, 2012 -- Secret Service agents closed the doors of Zeek Rewards and RVG. 

Now, when did the Feds start investigating, and when did RVG / Zeek became aware of the investigation? 

BREAKING NEWS: First Zeek Co-Conspirators Plead Guilty to Federal Charges (updated)

online fraud (Photo credit: ivers)

According to Times-News of North Carolina, Dawn Wright-Olivares, former COO of Zeek Rewards, and her son stepson Dan Olivares, former CTO of Zeek Rewards, have accepted a plea deal with the Federal prosecutors regarding criminal fraud charges against them. It is not known if they will receive jail time, but according to documents filed with the court, together they have received over TEN ELEVEN MILLION dollars from Zeek, and have agreed to restitution as a part of a separate deal with SEC's civil fraud charges.

It is now known if other "insiders" will also get similar deals. Other Zeek insiders includes Paul Burks, Darryl Douglas, Alex deBrantes (Dawn's new husband) and possibly many other individuals.

According to PatrickPretty.com, the charges were tax fraud, conspiracy to commit tax fraud, investment fraud, and conspiracy to commit investment tax fraud. Wire fraud was also alleged but have been dropped as per the plea deal.

Furthermore, the document suggests that Dan Olivares had been negotiating with Federal prosecutors since JULY 2012, almost a MONTH before SEC closed Zeek for good.

Scam Absurdities: A Top "Net Winner" of Zeek Ponzi whines on Facebook about persecution... I mean prosecution

Previously we've reported on how the ZeekRewards Receiver Ken Bell has filed civil motion against the top "net winners" of the 700 million Ponzi scheme shut down in 2012, and among the top winner list is Dave and Mary Kettner.

Usually, the best way to deal with this sort of publicity is to simply clam up: "no comment", as anything you say can and will be used against you in a court of public opinion. Unfortunately, (or perhaps, fortunately for the people who study scammers and their psychology, such as the MLM Skeptic here)  some people just can't keep their mouth shut. And in this, Mary Kettner is believed to have posted certain "whine-y" comments on Facebook, which was forwarded to Oz over at BehindMLM

Well I am listed as a net winner. What a laugh… its not because of the amount but because i stuck out my neck to defend what we were doing as a business and got a big old target on my back… 

I didn’t even earn half a million in the year and a half that we were doing the penny auction business..and because it was a business I was running I paid my taxes…which was just over 50 % of what my company earned. 

We paid state, federal, and employee type taxes… Add in expenses, cost of business, travel and training of my team…and there is very little left…and alot of that went to lawyers when Zeek went down….

What a laugh? I fail to see the humor in facing a lawsuit for about one million dollars. Why one million? She claimed did not even earn half a million... AFTER taxes. That suggests her take from Zeek is 1 million dollars over about 18 months (by her claim).

And she whines about having no money... hahahahaha.

BREAKING NEWS: Top "Net Winners" of Zeek Rewards Has Been Made Public!

ZeekRewards is back in the news, with pending auction of their building in North Carolina, and now, the receiver has gone ahead and made the list of the worst "net winners". They are:

• Todd Disner (as himself and as trustee of Kestrel Spendthrift Trust)
• Trudy Gilmond and Trudy Gilmond LLC
• Jerry Napier
• Darren Miller 
• Rhonda Gates 
• David Sorrels 
• Innovation Marketing LLC 
• Aaron Andrews, Shara Andrews 
• Global Internet Formula Inc. 
• T LeMont Silver, Karen Silver 
• Michael Van Leeuwen 
• Durant Brockett 
• David Kettner and Mary Kettner.

These folks have yet to cough up their ill-gotten "profits" by paying back the receiver, and are top of the list of "net winners". Basically, if you profited by $1000 or more, expect to see a clawback lawsuit.

BREAKING NEWS: SEC slaps Troy Dooly of MLMHelpDesk with fines regarding Zeek ponzi

SEC tweeted on 30-SEP-2013

This is none other than "Troy Dooly" of MLMHelpdesk.com (one of the sites listed in "resources" section of this very blog).

Mr. Dooly, self-proclaimed "MLM Advocate", claims to be advocating for the rights of the affiliates and MLM industry in general. However, in the SEC cease and desist, it was revealed that under two successive contracts between Rex Ventures Group, parent company of Zeek Rewards, and Troy Dooly, Dooly was being paid $6000 USD A MONTH to improve the company's image, counter negative press, conduct interviews, and so on and so forth.

And SEC slapped him with a fine for failure to disclose, and actively mislead the public of his involvement with the largest Ponzi scheme in the US (in terms of number of victims).

This is PROFOUNDLY disappointing, not merely to the MLM Skeptic, but to the MLM community at large. Can Mr. Dooly, claiming to advocate for the affiliates, actually be taking money from a company to hide, suppress, belittle, and obfuscate the truth regarding a fraud? According to the SEC, that's EXACTLY what he did.

Can such a trust EVER be regained?

Bad Argument: "Focusing Bias" used as "proof" of viewpoint

Focus Bias (also known as Focusing illusion, Focusing effect, or Spotlight Effect), is a type of cognitive bias where the mind emphasize the portion of the issue they have exposure to (personal experience, personal calculation or consideration, etc.) and ignore / de-emphasize the portion of the issues that they don't see / understand, and thus cannot evaluate. This very often happens in MLM. Supporters of a scheme tend to overemphasize the importance of portions of the MLM system they have been exposed to, while ignoring the portions of the system they know little about.

One way this manifests itself is the supporter thinks because they experience ONE PART of the scheme, and that part seem to work fine, the entire scheme must be fine (and legitimate!)  I termed this "it paid me!" argument.

For TVI Express pyramid scheme, it would be the website, or sometimes, the actual trip that came with the membership, and for a few, the actual payout at one or two levels of the matrix. They don't care about the obvious pyramid scheme aspects of the scheme.

For Zeek Rewards, it would be the penny auctions, the "giving away bids", watching their "cash account" build up, and for some, real money in their bank. They pay no attention to where the money is really coming from, are there enough auctions to generate that much profit, and so on.

For Lyoness, it would be the how shopping build up their "accounting units" therefore they conclude that Lyoness works great, and they pay no attention to the part where you can BUY your units and recruit others to do so and thus benefit from it.

For each of these scams or suspect schemes, the supporters basically had the focusing bias where they focuses almost EXCLUSIVELY on the parts they have been exposed to, and they somehow feel that is the ONLY part that mattered (to them), while ignoring any other parts they had not been exposed to or know about.

That is a very dangerous position to be in, as there's more than a few ways a MLM business can cause you trouble.

Zeek Claim Process Ends; 550 Million In Claims Received

Zeek Rewards Claim Process has ended at midnight, and soon after, Zeek Rewards receiver Ken Bell posted a letter that shared some interesting details:

• Total amounts claimed is over $550 million
• Total number of claimants number almost 200000 (average loss of $2750)
• Lawsuits against net winners, as well as those who knew and did nothing are coming soon

http://www.zeekrewardsreceivership.com/pdf/ZRWUpdatefromReceiver9.6.13.pdf

Why Zeek Rewards Was Such a Successful Scam

Magic ball toss (Photo credit: backofthenapkin)

Zeek Rewards Ponzi, closed by SEC last year, is the largest Ponzi scheme in the US, involving up to 2 million victims (due to some people having multiple accounts, the actual number is closer to 1 million) for 700 million dollars. How did it get so big? Don't people care about the warning signs? Are they all so blind? These aren't the smartest people in the world (we are talking the average Joes, not the elites like those Madoff soaked) but surely there are SOME smart people in that million victims?

It is a combination of factors, and it had everything to do with psychology, by taking advantage of your cognitive biases.

Your brain, due to millions of years of evolution, tends to form thoughts in certain ways, and a successful scammer can take advantage of that.

Think about magic. A lot of magic relies on misdirection. The magician tosses the ball up and down, up and down, followed it with his eyes. Then he tossed the ball up... and it vanished.

No it didn't. He didn't actually throw the ball up, but his eyes went up as if he did. And you, expecting him to do the same thing again, didn't actually look at his hand with the ball.

In other words, you were "trained" by the magician to follow his eyes, not the ball itself, so you were amazed at the ball vanishing into the air... when it never left his hand.

Zeek did the exact same thing... It showed the victims enough of a legitimate business that the victims never bothered to follow the IMPORANT item... the money.

Is it any wonder that Paul Burks, head of Zeek, is a trained magician? 

But wait, there is more!

Zeek Winners May NOT Be Able to Dodge Receiver Lawsuit By Filing Bankruptcy

As the deadline to filing Zeek Rewards Ponzi scheme claims draws to a close (you need to file before September 5th, 2013!)  the day of reckoning is getting closer for the net winners to cough up their "winnings" (it's not their money!) to avoid getting SUED by the receiver.

Thus far, it seems that vast majority of the winners believing they are untouchable, possibly on the advice of some "Zeek advocates", who, to this date, still maintained that Zeek is a real business, Burks is not a crook, and SEC stopped a good thing ("there was no victims until SEC stepped in") who we have covered before on this very blog, many of them either worked for Zeek, lied about Zeek ("we have evidence that will exonerate Zeek"), liked about SEC ("we heard that SEC doesn't really have a case"), and tried to silence its critics through the use of bogus takedown notices.

There's no doubt that many have adopted a wait and see attitude, as they believe they can always go for the ultimate endgame: bankruptcy. It seems at least one coupon in New Mexico have taken that route, albeit, not for Zeek, but a different Ponzi scheme. However, it's not that simple...

BREAKING NEWS: If You Got Net "Profit" of $1000 from Zeek, You Need to Contact the Receiver!

According to the settlements thus far, and statement from Zeek receiver Ken Bell's update to the court, if you own as little as $1000 (i.e. you're a "net winner" and you got $1000 or more profit from Zeek) you need to settle with the receiver or he's going to SUE you!

Yes, as little as $1000.

And indeed plenty of people have settled, usually at 60% rate, i.e. if you owe $1000, you may be able to settle for about $600.

Those still dreaming about getting away with their illicit gains can expect to sweat quite a bit more.