News Update 22-AUG-2014: More TelexFree Lawsuits, Zeek Lawsuits, and Phil Ming Xu (WCM) lawsuits

A lot of developments regarding various closed ponzi schemes in recent months...

According to an expert tracking ponzi scheme, a new Ponzi scheme was discovered every 5 days in the US. That's right, every five days, just during the first 6 months in 2014, with over 1 BILLION dollars in potential losses.

But here's some news...


Court Approves Zeek Receiver to Sue International Winners

US Federal Judge overseeing the receivership of Zeek Rewards has approved the receiver's request to start suing "net winners" who do not reside in the United States. Previously, receiver have already sued most net winners in the US who has gained 1000 dollars or more from Zeek Rewards. Many have already settled for a lesser amount, though a few notable exceptions are the really top winners, who have gained anywhere from 500K to well over a million dollars from Zeek.

It is worth noting that several prior top promoters of Zeek has indeed fled the US to various countries, including the Dominican Republic and the Philippines.

Speaking of foreign countries...


Federal Prosecutors Allege Extremely Complex International Fraud Regarding TelexFree

According to documents filed with Federal court overseeing the TelexFree case, Federal prosecutors asked the judge to designate the case as "complex case" which will make it exempt from the "Speedy Trials Act" that requires the indicted defendant to be tried within 70 days, because there are significant portions of fraud linked to Brazil and will require foreign investigation / testimony, and subpoenas.

Prosecutors asserted that they have seized 400 TERAbytes of data spanning 46 servers, 26 separate computers from TelexFree and 3 more from grand jury subpoenas containing yet more records.  There are total of 185 grand jury subpoenas issued for evidence related to TelexFree such as business records. They have not yet compiled catalog of existing evidence, and there are strong possibilities that they will need to travel to Brazil to interview yet more witnesses and/or gather more evidence there. Thus, there's no way this can be done in less than 70 days.

Judge has yet to rule on this motion.

In related TelexFree news:

An 2014 Update on AiYellow: Is this thing for real or for grins?

Recently, there seems to be a resurgence of comments, on AiYellow, probably because my previous blog post on AiYellow is somehow now #3 on Google search when you search for AiYellow, as of today, 18-AUG-2014.

Wow, how did that blogpost got to #3 search for AiYellow?

This, inevitably, has drawn in various defenders of AiYellow, who copy-paste a bunch of marketing material, without understanding the CONCERNS I had brought up almost two years ago regarding the legality and utility of AiYellow.

So far, it seems nothing has changed regarding its business practices, and the products are being marketed with the wrong emphasis, with its utility (i.e. how effective it can be) in further doubt.

Let's study one aspect of the problem... "Alexa Ratings". Feel free to check it yourself, as I can only offer you a snapshot of the information as I see them today, 18-AUG-2014.

Alexa rating for AiYellow can be found here: http://www.alexa.com/siteinfo/aiyellow.com  It's the 5th most popular link regarding AiYellow, as shown by Google search above. You should see something like this:

Alexa Overview of AiYellow.com, part 1, red lines and words are my comments

Global rank 7117th, yet in South Africa 135th. Why is it so much more popular in South Africa than elsewhere where global rank has dropped 2000 places in last 3 months? Let's keep looking.

Why is AiYellow more popular in South Africa and Thailand,
than where it started: Argentina? Colombia? 

The audience geography is strange. Normally if a website started in a particular country its countrymen would have embraced it first, so it should be more popular at home than abroad. AiYellow is exactly the opposite: it's more popular in South Africa and Thailand than its home in Argentina. This is a very weird growth pattern, keep that in mind while we keep looking.

Only 15% of AiYellow's visitors came from search engines
(but there's an upward trend)

According to Alexa, only 15% of visits to AiYellow came from search engines, and the most popular search terms seem to be South African. However, most visits seem to have came from the parent company, AmarillasInternet.com.

But it is where the visitors actually go that is the most interesting:

MLM Basics: Why are there so many names for MLM?

Have you ever wondered why are there so many different names for multi-level marketing? Here are most of them:

• 

  Network marketing? Multi-level marketing?
  Home-based Franchising? Direct Sales?
  Concentric Marketing? Affiliate Marketing?
  Referral Marketing? Inline Marketing?
  WTFIsIt Marketing?
  (Photo credit: Wikipedia)

  Multi-level marketing, the main term
• Network marketing (most often used alternative)
• Home-based Business Franchising -- WARNING: franchising is NOT multi-level marketing
• Direct sales -- selling direct to consumers, related to but NOT equivalent to MLM
• Affiliate Marketing -- now used by Vemma, often plagued by fraud
• Seller-Assisted Marketing -- mostly a "business opportunity" scam
• Referral Marketing / sales -- marketing via word of mouth; some forms may be illegal
• Dual Marketing / Dual-Level Marketing -- mainly used by Mary Kay, still MLM
• Concentric Marketing -- used by convicted pyramid scheme Burnlounge, replaced "levels" with "circles", but otherwise, the same as MLM
• Consumer Direct Marketing -- the consumer is doing the marketing, potentially illegal if recruitment heavy, as it becomes recruiters recruiting more recruiters. 
• Inline Marketing -- trademarked by "Nutraceuticals Inc", it's still MLM

There are probably a few more I missed. If you spot some new ones not on this list, as a something-marketing, feel free to let me know via the comments.

Any way, why are there so many fancy names for the same thing?  Fraud experts, such as Tracy Coenen say this is an attempt to obfuscate and distract from the bad reputation multi-level marketing had picked up over the decades it had been in existence. However, I think this is also a symptom of how the decentralized nature of MLM became a sin, not a virtue. People are just appropriating terms that sounds SOMEWHAT similar to multi-level marketing, and in some cases, inventing them out of thin air.

First, let us define multi-level marketing... a marketing strategy where the sales force is compensated on multiple levels... direct sales profit, and portion of sales profit achieved by other salespeople they recruited (downlines). Remember, MLM = direct sales + commission based on downline sales.

But first, we have to clear up a few myths...

Breaking News: Brazilian TelexFree promoter shot, one killed; Peruvia TelexFree promoter arrested

Peruvian Arrested at Airport for TelexFree Fraud

Peruvian alleged fraudster who recruit people into the TelexFree ponzi scheme was caught at the airport airline counter by Peruvian authorities, according to trome.pe and taken into custody.

Detectives of Peruvian Judicial Police arrested Yoel Alexander Sandoval Mamani (age 24), better known as "Uncle Manrique of Cusco" at the airport. When confronted, he initially denied being the person sought for million P$ fraud, and was carrying a hidden bag with six thousand P$ "that were products of the fraud that was Telexfree International". Then he confessed that he intended to go to Brazil "to safeguard his financial integrity" after one of his fraud accomplices was arrested in Cusco.

http://trome.pe/actualidad/callao-detienen-sujeto-acusado-realizar-estafas-internet-2019202


Ambush in Brazil over TelexFree losses

A man was ambushed in Brazil when walking to work on Wednesday (13th) for his graveyard shift (10PM) and shot through the head. Police stated this was due to the victim having enticed the shooter previously to put 3500 R$ into the TelexFree fraud. The alleged shooter is still at large.

Scam Post-Mortem: TelexFree location lies confirmed by authorities

Back in July 2013, LONG before TelexFree got raided (April 2014) by DHS, FBI, etc. MLMSkeptic had warned the readers about how TelexFree office is a virtual office, and its co-owner, James Merrill, is allowing misinformation, such as "TelexFree own the whole building" to be perpetuated by its members in multiple languages on multiple continents.

Today brings an end to that chapter of the TelexFree lie; the bankruptcy trustee has terminated the $5944 per month lease of the TelexFree office, which only started January 2014 and is scheduled to run through March 2015. By forfeiting the deposit and a portion of the furnishings, the lease has been terminated, saving tens of thousands of dollars that can be repatriated to the victims of TelexFree.

In other words, it took another 5 MONTHS (July to December 2013) of constant pressure by "promoters" to convince TelexFree that they need a "real" office rather than the virtual one they had been touting. And they are willing to pay THOUSANDS of dollars a month just to keep up appearances, with office staff that does nothing except to smile and look busy, and there were only 7 of them for a company that allegedly did 1 billion dollars of business a year, according to themselves.

It is further alleged that in 2013, TelexFree reported sales of $1.016 billion, while known sales of the TelexFree VoIP product represented less than 0.1 percent of TelexFree’s total revenues.  --- FBI press release 

But TelexFree — whom some affiliates say is a $1 billion company with a VOIP product — has only seven employees at its Marlborough office, according to regulatory filings in Tennessee. These employees work in “administration, sales and marketing, accounting, and operations positions.”  -- PatrickPretty.com

That can't be legit.

But wait, there's more!

Scam Psychology: The illusion of explanatory depth (especially about MLM)

One phenomenon that initially puzzled the MLMSkeptic is the SEVERE LACK OF UNDERSTANDING by most MLM participants about their own industry. They seem to be completely unaware of the facts, and instead believe in misinformation, such as

• Harvard Business School teaches/endorses MLM (NO THEY DON'T!)
• MLM / Network Marketing Created the Most Millionaires (NO THEY DIDN'T!)
• Having a product means the scheme cannot be a pyramid scheme (WRONG!)

And many more.

It is as if many participants are relying on... "folk wisdom" passed down by their uplines, who are passing misinformation, whether by design or negligence, leading to a game of "telephone" where after a few generations / levels there are no facts left, only misinformation.

That's when I discovered yet another cognitive bias... "the illusion of explanatory depth".

Basically, most people only *think* they know something. This is termed "feeling of knowing" by psychologists, or "FOK". They only follow correlations, and form their own idea about what caused what, even though those can be elaborate ruses or illusions designed to trick them. They actually have NO IDEA how whatever they observed actually works.

Here's one example. Do you know how bicycles work? Are you sure? (Those who can look at a bicycle or ride a bike several times a week can probably skip this test)  Without looking it up, draw the bicycle frame, wheels, where are the pedals, and where does the chain go.

Go ahead, draw it. When ready, click "continue".

MLM Basic: Why Do So Many MLM Noobs Fail? Because They Don't See their TRUE role in MLM (as consumer, not seller)

DSA (US) Logo (Photo credit: Wikipedia)

Do you know what's the medium income of a direct-selling agent in the US, i.e. MLM participant? 

The median annual income for direct sales consultants in 2011 was $2,400, according to Amy Robinson, spokesperson for the Direct Selling Association.  (quoted from Forbes article)

Yes, that's ANNUAL.  That's $200 a month.  Most people make NO money from MLM, despite their hopes and dreams, car bonus, financial freedom, blah blah blah. Lots of "retire young, have fun", millionaire by 30, blah blah blah recruiting around. 

Do you know WHY they fail? They don't understand their role in network marketing. (And often, neither do you.)

Network marketing is still marketing, and marketing means SALES.

In sales, the objective is to introduce the product to people who may want it, then convince them they need it (without lying)

Finding the people who may want it is known as "lead generation" (and I don't mean recruiting downlines, just retail customers).

Convincing them that they need it and get them to open their wallet is known as "closing the sale".

As a salesperson, your job is to add value to the product, and value is more than just price.

Do you know why Avon and Mary Kay and NuSkin succeed? It's NOT just because their products are good. Their sales people were able to DEMONSTRATE the quality and value of their products successfully, at a competitive price and most have stock to be sold then and there. AND they often consult on what color goes with what skin tone, plus more makeup tips. Despite the cliche, products do NOT sell themselves, at least not at the beginning.

Are you adding value to the products
you are selling? Can you do more? 

Their sales people ADDED VALUE to the products through demonstrations and local retail and order taking and such.

Think about it. The entire act of retail is to add value. Even your local corner store added value by making products available to you just around the corner instead of some supermarket or club store miles away. You will gladly pay a little more for the convenience of walking around the corner than driving 15 minutes to get the same thing at a supermarket.

Sometimes, you may choose to buy local rather than through Internet vendor because you know you can almost instantly drop the broken item off at a local store and pick up a replacement instead of hassle of shipping returns. The local stores are adding value by their physical proximity.

As a MLM salesperson, what value are YOU adding to the products? (as opposed to your competitors, i.e. other MLM grunts just like you? )

Very often, the answer is... absolutely NOTHING. Remember, a lot of the MLM uplines emphasize replication, i.e. make clones of themselves. They teach talking scripts (either in person or Youtube videos), not sales techniques, not customer service, etc. And since everybody is selling the same products, NOBODY STANDS OUT. And with Internet, there is not even any geographical exclusivity. You can and WILL find more than a few MLMers trolling the same pool for "customers", since they tend to spawn from the same social circles.

You are the Borg drone. You... all of you, talk the same, sell the same, act the same, move the same.

Thus, you all have the same odds, nothing to stand apart.

So what does that do to your bottom line?