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!

Blind Men, Elephant, and MLM, Revisited

Previously, I've discussed how many scheme participants have evolved rather convenient holes in their logic, by insisting that their experience of the company, which by their admission is not a complete experience, proves the company is legitimate, like three blind men, depending on which part of the elephant they touch, describe the elephant in very different terms.

Here's a revisit, on a different type of selective blindness, that the belief that as long as the product or service is legitimate, then the company itself must be legitimate. This is often used by affiliates of a company being suspected or accused of being a product-based pyramid scheme.

8-ball pyramid scheme model. (Photo credit: Wikipedia)

A regular pyramid scheme is a pure exchange of money. You pay to join the pyramid at the bottom. Additional joinees push you up the levels. When you get the top you grab all the money gathered up and leave. No product was involved. This was also known as the "airplane game".  The wikipedia picture on the right shows the 8-ball version, which has captain, co-pilots, crew, and passengers.

So what is a product-based pyramid scheme? A product-based pyramid scheme is a regular pyramid scheme that was disguised by purchases of products or services. However, to explain that, we have to discuss the definition of pyramid scheme, i.e. the Koscot Test.

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: NY AG sues Trump and Trump University. Who's Next?

Donald Trump, who's getting sued
 (Photo credit: Wikipedia)

New York's Attorney General have just announced a lawsuit against Donald Trump and Trump University, alleging fraud. Attendees paid thousands for "real estate investment lessons" from instructors hand-picked by Trump himself, supposedly, though vast majority have yet to complete a single transaction, according to NYAG.

Trumps reaction is indignant, and he countered with allegations that NY AG is running an extortion scam on him, abusing his power of office to retaliate against Trump who apparently didn't donate enough to his campaign (elected in 2010).

http://www.sfgate.com/news/crime/article/NY-AG-sues-Trump-Trump-University-claims-fraud-4758939.php

Frankly, this is a very simple pattern of alleged fraud... And quite popular. Find a field. The field had to be complicated enough and variable enough that you can always pointed at a few success stories and say "it worked for them, you must be doing it wrong." Line up a bunch of "instructors", promote the heck out of the free seminars, celebrity would be great. Do a bunch of FREE seminars, but they're just teasers to sell the books and upsell them on $2500 special long seminars of dubious value.

Possibly applicable fields? Internet income, multi-level marketing, real estate, precious metal, forex, etc. Anything that involves making lots of money by doing little, that's for sure.

Hey Rippln, Dr. Seuss wants their game name back!

Rippln, the vaporware income opportunity, apparently finally made something real, as they announced that their game "Guessaroo", had been approved by iTunes store, and they are about to roll out their "Rippln Communicator".

Right now, I'm at the "I'll believe it when I see it, but that name "Guessaroo" sounded familiar...

Turns out it's from Dr. Seuss game... ALREADY IN ITUNES!

Stealing names from Dr. Seuss? What a Grinch you are, Rippln...

When Scientists are Skeptics, We All Win (Yes, this is Related to MLM, sort of)

Alan Sokal is a physicist that read the journals where his papers (and tons of other papers) are published, and wondered... Does someone actually read all that stuff? So he proceed to write the WORST paper he could possibly write. It's complete bull****, filled with buzzwords ("quantum gravity..." Ooooohhhhh! Aaaaahhhhhh!" )  but completely bull****. The paper was called "Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity", and it was submitted to a journal called "Social Text", an academic journal of postmoderncultural studies.

It got published in 1996. When Sokal revealed the whole paper is pure bull****, and he basically "trolled" that journal, the feedback was definitely mixed. Some are horrified at the "lack" of vigor the editors of the journal demonstrated. Others are angry at Sokal for ridiculing other "scientists". There's also question on what exactly is "postmodernacultural studies", and why would a physicist try to troll them, and so on. The whole thing was dubbed "Sokal Affair" and even has its own Wikipedia entry.

The point is a scientists was skeptical of something, and he built a test to test that something.

How many of you would be willing to do that, or have done that, and I mean really test it, not merely "I tried it, it works, I got paid"?

Alan Sokal just struck again, when he and some friends took apart two psychologists, Fredrickson and Losada, who attempted to apply Lorenz Equation (huh) to "positivity ratio", and how feeling too happy will lead to a happiness inversion (what?) when the positive emotion to negative emotion ratio reached the tipping point of 2.9013 (huh?)  Sokal, along with Nicholas Brown, and Harris Friedman basically destroyed that other paper for all of the various reasons, including bogus math, bad logic, and much more.

Now you say, what does *that* have to do with MLM? Ah, but you see, this "positivity ratio" was a popular topic among the various "motivational speakers" who often show up at MLM events to "inspire" the crowd, and it was simply never challenged (cited over 1000 times, according to Google Scholar).

So what exactly is this "Positivity Ratio", how motivational speakers are citing it, and why is it bull****?

More Bizarre TelexFree Affiliates In Brazil: TelexFree Ice Cream

What would you call this ice cream concoction?

The creator of this flavor in Rio Branco, Brazil, named it after "TelexFree", the embattled scheme alleged pyramid / Ponzi scheme (at least that's what the article seem to have implied).