HILARIOUS: The evasive deflection of reasonable questions to MLM

May 19, 2013, 12:04 am

≫ Next: China hands out Death Sentence to Ponzi Schemer (not the first time)

English: Speech balloons. Question and Answer. Icon for FAQ or Help. (Photo credit: Wikipedia)

There are some perfectly reasonable questions to ask an upline that tries to sponsor/recruit you, and some folks out there, "veteran MLMers" have written answers to them.

Frankly, some of the answers are total crap. They are evasive deflections that may work on naive and gullible sheeple, not genuine prospects that you hope to turn into sales leaders that will sell a lot of stuff and make you rich in NMLM (if NMLM works the way it was supposed to work, but that's another story).

I ran into one such article, titled "Handling the Top 6 Questions People Ask About Joining a MLM company" written by a Melanie Michelle, and it's truly hilarious. Virtually every one of her answers could be cited as a "bad argument". Let us examine her article here:

Question: How much money are you making?

Her Answer: It’s really is none of their business. However, this is a great way to answer that question: “My lifestyle requires a different dollar amount than yours does. I am very happy with what I’m making. Don’t focus on how much I’m contributing to my household, but focus on how much you want to make and we can both work towards your goal.”

Why this answer is wrong: This can be roughly summed up as "How much do you want to make?" And answering a question with another question is a deflection. Here's the same sort of Q&A, albeit about a much older profession...

Q: What's your name, pretty one?
A: What do you want it to be, sugar?

A Much Better Answer: I think what you meant to ask is... How much can YOU make, realistically, in the first year, right? Honestly, I don't know. I am not you, I don't know how good you can sell, though I know you like the product(s), and that goes a long way....

Bonus Brutally Realistic Answer that no upline would give: First year? Almost nothing after expenses, perhaps not ever.

Chance of that answer being given? Zero.

Question: Why do I have to pay money to join?

Her Answer: What business can you get for free? If you start a traditional business you have to pay for a business license, storage, rent, overhead, and much much more. When you pay to join an MLM company you are starting your own business. It’s almost like paying for a franchise except that your investment is much smaller and you have minimal expenses. Don’t worry about why or how much does it cost, but rather ask how much it can make you.

Why this answer is wrong: The answer doesn't answer the WHY. Her answer is an evasion: "but a 'real' biz cost money too, then a half-lie 'you have minimum expenses', then a deflection 'think about how much it can make you'. Sheesh!

A Much Better Answer: (I am assuming this is a legal business) The signup fee is $X for membership paperwork and setup. The rest is for a "starter kit" that contains ____, ____, and ____ that you can try out and start demonstrations almost right away.

Question: If I join, how much money are you going to make off me?

Her Answer: Think of it this way: Your boss is making serious money off you now. The only difference between your job and us is they don’t care about you, but we do because we work as a TEAM (together everyone achieves more). If I help you make more money, I make more money. It’s a win-win situation. You could even start making more money than me!!!

Why this answer is wrong: deflection again, then psychological manipulation: they don't care about you, but I do! I WANT you to succeed! False portrayal of win-win as it can be win / neutral or win / lose.

A Much Better Answer: Nothing. I make off you NOTHING, that is UNTIL you sell things, and when you sell thing, you make money. I make a LITTLE BIT off of you only when you do that.

NOTE: I am assuming here that company does not count starter kit as commission-able item. Otherwise this thing is potentially illegal.

Question: What If I Don’t Make Any Money?

Her Answer: Sounds like you are afraid to take risks or you just lack the confidence in your abilities. Nevertheless, if you think that way, those are the results you are going to get. Maybe you meant to ask, what it is that you have to do to make money. The key to success is mindset, taking action, and being consistent.

Why this answer is wrong: Oh, God, where do I start? Are you in elementary school? You start an answer with a "neg" by calling her wussy / chicken / yellow / afraid to take risk? Sheesh! Then the answer goes back into psychological manipulation: we're in this together, you have to be positive... Bull****.

A Much Better Answer: Then I was not a very good teacher, but I doubt that. You wouldn't lose much money though. You can return the inventory for a refund (check return policy). If you are willing to learn, I am willing to teach. Together we can show the world.

Question: What Is My Guarantee?

Her Answer: There is no guarantee. I’m sorry, the only things guaranteed in life is death and taxes. Work hard and you can leave behind generational income.

Why this answer is wrong: while factually correct, it's also irrelevant. The question is about risk, and the answer is an irrelevant red herring deflection.

A Much Better Answer: I guarantee I will teach you all I know, and that the company will issue a refund for unused inventory in X days for Y% of value paid if this doesn't work out for you. Other than that, there are no guarantees.

Question: Is this a pyramid scheme?

Her Answer: A pyramid? Yes, of course it is, I’m not going to deny that. However, a scheme? Nope. Were you looking to join one of those get rich quick schemes? Anyways…did you know your job is a pyramid? Let’s see, a corporate structure goes something like this: CEO, SVP, RVP, manager, supervisor, then you…..Or maybe you are a manager or supervisor but when will you ever get to become the CEO of the company you work for?

Why this answer is wrong: It invokes the old "everything is a pyramid" bad argument, and tries to manipulate the other side "you'll never make it if you do it that way".

A Much Better Answer: No, because a pyramid scheme pays upon recruitment. I don't get paid when I recruit you. I only get paid when you make sales (or I make my own sales).

NOTE: Again, I am assuming a legal MLM.

Conclusion

Frankly, "Melanie Mitchell" is one of the dumbest "networkers" I've ever encountered. Her arguments are lame and inept, and relies on psychological manipulation through intellectually dishonest techniques and outright lies. Why lie when the truth is available?

This sort of a "networker" is what gave network marketing a bad name.

Just in case she ever changes her page, here's her original, archived.

http://www.scribd.com/doc/141576957/Handling-the-TOP-6-Questions-Skeptic-People-Ask-About-Joining-an-MLM-Company-the-Networker-Next-Door

↧

China hands out Death Sentence to Ponzi Schemer (not the first time)

May 20, 2013, 2:18 am

≫ Next: Zeek Rewards Receivership Updates Claim FAQ

≪ Previous: HILARIOUS: The evasive deflection of reasonable questions to MLM

Wenzhou in China (Photo credit: Wikipedia)

As reported by court website in Wenzhou, China through Nasdaq news website, Haiyan Lin, 39, has been sentenced to death for her role in leading a $428 RMB ($70 million USD) Ponzi scheme since 2007. The scheme came apart in October 2011 and she was arrested.

A different woman in the same region, Ying Wu, had her death sentence commuted to life without parole recently when an outcry over equivocal evidence presented at the trial. She was accused of running a $60 million USD Ponzi when her attempt to expand her nail salon franchise tanked.

China regards economic crimes as tantamount to treason, due to a very centralized economy. However, this also means banks are not well-regarded and much of the money being lent was from private hands, without regulation and sometimes, the ventures do fail, and some of those failed businesses were charged as Ponzi schemes by overeager officials wanting to look "tough on crime". It is very difficult to determine what is normal business failure and what is Ponzi scheme fraud, outside experts pointed out.

However, in this case, Ms. Lin apparently did present herself as an investment company and issued fake statements of earnings and such while the company actually lost money, making her a mini-Madoff of China.

http://www.nasdaq.com/article/china-sentences-woman-to-death-over-ponzi-scheme-20130517-00421

↧

Zeek Rewards Receivership Updates Claim FAQ

May 20, 2013, 10:04 am

≫ Next: CNN and AllVoices Spammed by Fake University Report

≪ Previous: China hands out Death Sentence to Ponzi Schemer (not the first time)

Any one who is filing a claim should read the FAQ

http://www.zeekrewardsreceivership.com/claim.php

↧

CNN and AllVoices Spammed by Fake University Report

May 20, 2013, 10:21 pm

≫ Next: What If Online Scams are Real People At Your Door?

≪ Previous: Zeek Rewards Receivership Updates Claim FAQ

CNN has a feature called iReport, where it engages regular netizens into helping CNN with certain coverage of hot events as well as some local or national interest stories. Unfortunately, it seems that scammers have managed to infiltrate a fake article advertising a nonexistent university (so-called "empty diploma mill") called Riverbanks University.

Below is the CNN iReport, as shown at 10PM, 20-MAY-2013

This alleged report was posted in March, and was the ONLY report ever posted by this user.

A quick check of the photo provided shows it's just a stock photo from iStockphoto

There is no record of this university physically existing anywhere in the world. Its only presence is a website, and it's a .COM, not a .EDU.

Searching Google revealed that a different blogger also infiltrated AllVoices.com and left an article about this nonexistent Riverbanks University as well.

Strangely, a week later there was another iReport from CNN about a "Riverbank Academy", except this one stated clearly it's in Malaysia and it's an IT training firm, not a university. However, it also used a stock photo (this time, from Fotolia, an European stock photo site) It is unknown if this is related or merely a coincidence.

Checking the university website itself reveals a properly designed website, but completely absent of names, location, or such details, with text and photos that could have been copied or "spun" from any real university website.

And what do we find at the University website? Links to those two reports.

They reference each other. It's a circle-jerk.

They say they are accredited by UCAIS. UCAIS accreditation is NOT recognized by US Department of Education as DoE have no listing for such an agency.

Link to the UCAIS website shows that this supposedly "accreditation agency" can't even spell its own logo correctly.

This is a FAKE school, using a fake accreditation agency, who then through shills created FAKE PROOFS of itself by abusing news outlets' "local news" reporting.

Fake schools costs thousands of dollars for a diploma that's not worth the paper it's printed on. Don't you fall for the same tricks.

↧

What If Online Scams are Real People At Your Door?

May 21, 2013, 12:47 am

≫ Next: Bad Argument: The Open-Mindedness Strawman

≪ Previous: CNN and AllVoices Spammed by Fake University Report

Hapstance Film made this short film called "The Inbox", and it's absolutely hilarious. Imagine all those online scams in your Inbox... except they're real people in your home... And this is what it would look like.

http://gizmodo.com/what-online-scams-would-look-like-if-they-were-real-peo-508003494

↧

Bad Argument: The Open-Mindedness Strawman

May 22, 2013, 12:38 am

≫ Next: MUST READ FOR MLM-ERS: What CAN You Say (and NOT say) In Online Ads

≪ Previous: What If Online Scams are Real People At Your Door?

Open-minded image
(Photo credit: Wikipedia)

When promoter of a questionable scheme that claims to have something new and exotic, cannot refute your logical criticism, they will often summon the "open-mindedness strawman". Basically, they accuse you of being closed minded and not accept their idea of business or product.

Here are a couple examples, all real comments posted to BehindMLM:

I’M AN OPEN MINDED OPPORTUNITY SEEKER. This sounds like a good opportunity.
We give away FREE “membership” cards to open minded people we choose to invite to share in our good fortune.
Open your mind! Maybe, just maybe, life does not have to be crap? You do not HAVE to LOOK FOR NEGATIVES in truly amazing opportunites?
Since you are not ready to open up your minds and accept the new thing you will not be able to cherish this new concept
and many many more.

The problem is their definition of open-minded is NOT the dictionary definition. The dictionary definition of open-minded is "willingness to entertain new ideas". It means to consider and evaluate new ideas. It does NOT mean ACCEPT new ideas without evaluation and deliberation.

To promoters of questionable schemes, open-minded means "accept whatever I said as the truth, and ignore everybody else".

Never mind any proof or logic that points the other way.

Don't quite see it? Here's an example:

A: I believe in T because of X, Y, an Z.
B: T is wrong because of I, J, and K. Your use of X, Y, and Z are wrong because of _____.
A: You are just close minded! You refuse to accept T as real!

If A had analyzed B's position, and can explain why his rejection of X, Y, Z proof are not correct, and/or explain why I, J, and K does NOT disprove T, and they are all solid logic, not fallacies, then he would be open-minded. However, in this case, B was the open-minded one because he had studied A's position and have rejected it due to evidence and logic. A's refusal to even CONSIDER B's position is all the more ironic in that he's the close-minded one, yet he accuses B of being close-minded.

This sort of argument is a variant of equivocation fallacy... they use a word that seem to be advantageous to them (accusing your side of being not open-minded), but their use of the word is wrong. They are abusing the word as they are not using the word as it was actually supposed to mean.

Very often, this was done as a "preemptive strike", as the people who tell you that you are not open-minded, are themselves not open-minded, as they are the people who are not changing their mind when faced with evidence disproving their position.

If you believe A+B=C, and I have evidence in front of you that says A+B=D, and you refused to accept my incontrovertible evidence, does that make you open-minded, or close-minded?

Real open-mindedness requires a person to have thoroughly examined both sides of the issue, carefully considered both SIDES without using intellectually dishonest debate techniques, and chose a side based on his own belief system. Imagine debating against yourself, honestly.

That is the polar opposite of most people engaged in suspect schemes, where they only know the side that is advantageous to them, and anything NOT supporting their side are to be ignored and avoided as "negativity".

That is closed-minded person pointing to his/her opponent(s) and accuse the other side of being close-minded.

That's why it's a bad argument.

Reference:
http://www.psychologytoday.com/blog/ambigamy/201304/who-s-more-open-minded-you-or-them

↧

MUST READ FOR MLM-ERS: What CAN You Say (and NOT say) In Online Ads

May 22, 2013, 10:03 pm

≫ Next: MYTHBUSTING: The myth of "reward for promotional giveaway", and why it's illegal

≪ Previous: Bad Argument: The Open-Mindedness Strawman

Ever created your own capture page, online ad, website, banners, and so on, for your "online business"?

Did you just throw in whatever you think would capture a click, or are you aware of the LEGAL implications of what you write?

Oh, but you're thinking, there are LEGAL implications?

Of course there are, silly. Else you can be charged with false advertising, making deceptive claims, and not only get yourself in trouble (such as termination of your enrollment in the company), you may even get the company in trouble for allowing you to make such schemes!

Never happen, you say? Don't be a moron. FTC have gone after PLENTY of people who made bogus claims, and others have sued companies for allowing their affiliates to make such claims. Mannatech was sued by multiple Nobel laureates for letting its affiliates falsely associate the Nobel laureate to Mannatech products. Kevin Trudeau was sued multiple times by FTC for making fake claims selling various products.

Ah, but you ask... What do you need to know?

I'll bet this is something one of you or your uplines would know! They can't help you (probably).

What you need to do is read this article from Kevin Thompson:

http://thompsonburton.com/mlmattorney/2013/05/22/ftcs-disclosure-guidelines-for-online-marketing-how-to-get-it-right-part-1/

↧

MYTHBUSTING: The myth of "reward for promotional giveaway", and why it's illegal

May 23, 2013, 9:09 am

≫ Next: Fake Biwako Bank HYIP Goes Dark, Was Pitched to Zeek and Profitable Sunrise Victims

≪ Previous: MUST READ FOR MLM-ERS: What CAN You Say (and NOT say) In Online Ads

Don't You Lie to Me (Photo credit: Wikipedia)

The best type of lie is a half-lie, in which truth is combined with lie so you don't know which is which and accept the whole thing is true.

There has been several businesses in recent years that claims to 'reward' its affiliates for promoting the business by buying the the products (by the affiliates) and giving them away to the public (free). The more they do this, the more they are rewarded.

This particular explanation is only half true, but do you know which half?

Let us first examine how one such scheme works.

The "Promotion Disguised Ponzi"

The best known example of such in recent years is Zeek Rewards, a Ponzi scheme that was shut down in August 16, 2012 by the Security Exchange Commission, believe to have sucked in over 700 million dollars from about a million members, making it the widest spread Ponzi scheme in US history. For comparison, Bernie Madoff's Ponzi involved BILLIONS of dollars, but only about 10000 victims or less. This sort of Ponzi is more insidious because it went after the "average Joe", the everyman, whereas Bernie Madoff went after the "fat cats", people who can afford to lose such money.

NOTE: The following is a short summary on how Zeek Rewards worked. If you want detail history how what was Zeek Rewards, please refer to my "investigation" piece.

Zeek Rewards allegedly "rewards" its affiliates for affiliate's purchase of "bids" in its Zeekler penny auction (a sister business, owned by the parent umbrella corporation Rex Venture Group) and giving them away to "potential customers" (usually nothing more than an email address). For every bid purchased and given away the affiliate gets "VIP Points" that entitles them to "revenue share" at rates of up to 1.8% per day, compounded daily. There are a couple wrinkles like the VIP points expire after 90 days, and the rate varies between 0.5 and 1.8% daily, but the overall idea is the same: the more you buy (and give away), the more revenue you share.

You have two balances in Zeek, a "cash" account, and a "VIP Points" account. Every night, based on how much VIP points you have, the "daily profit share" is added to your cash account. For example, let's say you have 1000 VIP points. And the daily profit share is 1.5%. At midnight, you will have 1000 VIP points and 15 dollars is added to your cash account. Then the cash account is distributed as you wish, as you can repurchase the bids (rollover) from 0 to 100%. If you do 100% repurchase, you will have 0 in cash account and 1015 VIP points, for example. Your cash account can be "cashed" once per week, but you are encouraged to "repurchase" bids for compounding.

There is very little documented genuine purchase from customers who buy bids as bids, not as VIP points that entitle them to revenue share, affiliates are paying each other, thus, Ponzi scheme, albeit a rather fancy looking one. Indeed, when Zeek Rewards was shut down, and SEC court document was made public, it was revealed that Zeek had virtually NO profit in July 2012 (took in 172 million, paid out 170 million) and would have gone insolvent very soon.

Yet Zeek Rewards is hardly the first company that encouraged its affiliates to buy their product and give it away for free to participate in the comp plan and got slapped hard for it... One of those prior offenders was Omnitirtion International, in a case that rocked the MLM world in 1992.

Omnitrition was a nutritional supplement company that was sued by its affiliates in 1992 as a pyramid scheme. The comp plan starts with a normal level where there is no minimum sales required, but that level does not receive multi-level commission (i.e. commission from sales made by downline), only the retail profit (20%) by buying wholesale and sell with markup. Next level up, "supervisor", requires 2000 monthly purchase, but is eligible to receive MLM commission. The affiliate lost in district court, but appealed to Circuit Court of Appeals, where a judge panel ruled in 1996 that several issues were unresolved and the lower court was mistaken in dismissing the lawsuit, thus reverting it back to district court.

The case was landmark because the case have apparently outlawed "self-consumption", in that an affiliate's purchase of products cannot be counted as retail sales to fulfill the Koscot Test. Esp. not when the intent of the affiliates purchase of the products is not for use or consumption, but to merely qualify oneself for the multi-level commission. Quoting Spencer Reese, a well-known MLM attorney:

...A key factor upon which the court focused was evidence that under the Omnitrition program, distributors were encouraged to buy large amounts of merchandise ($2,000.00 per month) and simply "give them away" in order to participate in Omnitrition's "proven plan of success." The message in this practice is that the product is irrelevant - all that matters is getting people enrolled. Once enrolled, new distributors will make their required purchases whether they can sell the merchandise or not. These mandatory sales drive the compensation plan. In the Ninth Circuit's view, companies operating under this scenario are promoting inventory loading. Although there is a sale of a legitimate product involved, the court will regard the product as nothing more than a facade to camouflage a pyramid scheme.

Is that clear enough? If an affiliate's purchase is indeed for self-consumption, then it's retail purchase. However, if the purchase (esp. in large quantities) was "given away" merely to qualify the affiliate for compensation (and his/her downlines have the same incentives to 'qualify'), then it's considered disguise for pyramid scheme even though it's a sale of legitimate product.

And this was established back in 1996! Now, almost 20 years later, AFTER another such scheme was smashed... would any one be dumb enough to repeat the scam, or at least give the appearance of doing so? Sure they would...

Meet JubiRev / JubiMax:

And what's the verbiage that follows this video?

With JubiRev JubiMax, the more you give the more you get.JubiRev JubiMax shares up to 50% or even more of its daily commissionable sales volume with all of our qualified promoters.As you give samples to customers, you earn JubiPoints. The more samples you give away, the more JubiPoints you will earn. The more JubiPoints you earn, the more your daily potential rewards.After determining the total revenue that will be shared that day, this amount is divided by the total amount of JubiPoints in the system.We then pay our daily rewards with what we call JubiBucks. You can convert up to 60% of your daily JubiBucks rewards into commissions

Same thing: affiliates buy stuff (in this case "JubiBucks" that you give away to people who use it to buy stuff), and the same affiliate gets "rewarded" for spending their own money (and giving the stuff away).. .and the reward is a share of the revenue... from their own money.

This is both a pyramid and a Ponzi scheme. And they just had a webinar where they claimed they are NOT such a thing.

Denial of reality doesn't prevent reality.

↧

Fake Biwako Bank HYIP Goes Dark, Was Pitched to Zeek and Profitable Sunrise Victims

May 23, 2013, 11:46 am

≫ Next: Bad Argument: "Don't Blame Me (even though I told you to join a scam)"

≪ Previous: MYTHBUSTING: The myth of "reward for promotional giveaway", and why it's illegal

According to report on PatrickPretty.com, the "Biwako Bank" HYIP apparently has gone bust.

This particular Biwako Bank was a fake website setup to assume the name of a former Japanese bank that had been merged into another bank in 2010. It's identity fraud on a different scale.

This fake bank was clearly setup as an HYIP with multiple "plans" that offered up to 3.05% PER DAY. Yet some promoters are touting it as "NOT an HYIP, but a REAL BANK!"

Some reports indicate it apparently went bust two weeks ago and stopped paying out, and earlier this week the website went offline completely.

It was pitched to Profitable Sunrise victims as well as Zeek Rewards victims as a way to recoup their losses, making it a "reload scam".

http://www.patrickpretty.com/2013/05/22/update-pushed-to-profitable-sunrise-victims-biwako-bank-limited-appears-to-be-doa

↧

Bad Argument: "Don't Blame Me (even though I told you to join a scam)"

May 24, 2013, 12:21 am

≫ Next: BREAKING NEWS: Liberty Reserve payment processor closed, owner arrested for money laundering

≪ Previous: Fake Biwako Bank HYIP Goes Dark, Was Pitched to Zeek and Profitable Sunrise Victims

Don't Blame Me (album)
(Photo credit: Wikipedia)

Scammers are often an extremely egotistical bunch, and supreme narcissists. Even when caught, they will refuse to take responsibility of their own actions, but instead, rationalize some reason to deflect the blame from themselves. In case of multi-level Ponzi schemes, where "investors" are recruited in order to enrich the people who are already in, the recruiters will often bring up the "don't blame me" excuse.

One of the most egregious excused was uttered recently by Paul Burks, operator of the $700 million Zeek Rewards ponzi scheme that ensnared a million people around the world. When asked by Associated Press...

Asked if he had anything to say to victims, he shook his head.

"I never told anyone to invest more money than they could afford," Burks snapped. "I didn't tell them to do that. Never."

He said if they lost money, "it's their fault. Not mine. Don't blame me."

http://www.usatoday.com/story/money/business/2013/03/30/authorities-600m-scheme-incubated-nc-town/2037975/

He blamed the victims for giving him money. In his mind, it was given to him of free will, and he had "warned" them, so if they're too dumb to understand the warning, it certainly ain't his fault.

It's victim blaming. It's a stupid tactic.

Narcissism is a recognized personality disorder in psychology and some psychologists have added a subtype, known as unprincipled narcissism, to described the scoundrel type that see themselves above the rest and everybody else deserve to be fleeced.

He's hardly alone. Dennis Bolze was another who tried this excuse. The difference is Bolze tried this in court, in front of a judge, trying to get his 22 year sentence reduced. Why did he get 22 years? For cheating millions of dollars out of seniors. The judge didn't buy it at all. Bolze said the SAME THINGS that Burks did: that his victims knew what they were doing and were investing discretionary income (i.e. money they can afford to lose).

But what about the lower-level recruiters, who were not near the top, but merely feeding people into the maw hoping to benefit from the ponzi (and in many cases, did)?

If the scheme hadn't been declared illegal locally, they can use two more arguments:

They did it wrong (i.e. people in other places must be doing it wrong, the company's fine)
Caveat Emptor (buyer beware)

And if they play their cards right, they will be forgiven, so that they can then recruit people into some OTHER suspect schemes that catch their eyes next.

And they never learned THEIR lesson, that all their "conviction" that it can't be a scam, was wrong. It sure *could* have been a scam.

Don't you miss that same lesson: don't trust someone just because they say so. They may turn around and blame you later.

↧

BREAKING NEWS: Liberty Reserve payment processor closed, owner arrested for money laundering

May 24, 2013, 9:10 pm

≫ Next: Is Network Marketing a cult? Good Question! The Answer is Yes (keep reading)

≪ Previous: Bad Argument: "Don't Blame Me (even though I told you to join a scam)"

English: Coat of arms of Costa Rica (Photo credit: Wikipedia)

Liberty Reserve, a darling among the HYIP and suspect schemes due to its international nature (send money to it, and use it to remit money anywhere in the world, no questions asked) was raided by police today at its two locations (office and home) in Costa Rica, and its owner, Bodovsky, was arrested on charges of money laundering.

As reported by TicoTimes:

Arthur Budovsky Belanchuk, 39, on Friday was arrested in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica.

Costa Rican prosecutor José Pablo González said Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.

Local investigations began after a request from a prosecutor’s office in New York. On Friday, San José prosecutors conducted raids in Budovsky's house and offices in Escazá, Santa Ana, southwest of San José, and in the province of Heredia, north of the capital.

Budovsky's businesses in Costa Rica apparently were financed by using money from child pornography websites and drug trafficking.

Liberty Reserve had always been a rather shady outfit that earned money through transfer of money. TVI Express, a well known scam around the world, took in a lot of money through Liberty Reserve. So much so, even its clones used Liberty Reserve. It charged all sorts of fees for conversion, transfer, cash out, and so on. It also has special clauses that requires you to keep a credit card number on file that if you tried to dispute a transfer funded by credit card, it will charge you $250 "dispute fee" (from what I heard).

There are interesting questions for companies that deal with Liberty Reserve... How clear a record does it keep and does the government have the records now? And are they holding any money that don't belong to them? Given that most Ponzi scheme judas goats join one opportunity after another, some of the net winners from Zeek no doubt have some money in LR or other payment eWallets.

↧

Is Network Marketing a cult? Good Question! The Answer is Yes (keep reading)

May 25, 2013, 5:10 am

≫ Next: Bad Argument: Absence of Evidence / Argument from Ignorance

≪ Previous: BREAKING NEWS: Liberty Reserve payment processor closed, owner arrested for money laundering

Born into This (Photo credit: Wikipedia)

There had been charges for many many years from critics of Amway (and MLM in general) that some MLM meetings resemble cult meetings. Indeed, it was documented that at one time, Amway's own "Infocenter" FAQ contained an item where it attempted to answer the question that why do MLM meetings resemble a cult meeting (FAQ no longer available).

The answer is "Yes, some factions of Amway use cult tactics". Indeed, many MLMers found it much easier to use cult tactics to grow their downline than to do real sales.

But first, let us define what are cults, and cult tactics.

Cult: A system of religious veneration and devotion directed toward a particular figure or object.

In this case, the "object" is the business, or the "ideal" of the MLM business.

Cult tactics are designed to not only recruit more members to the cult, it is also designed to keep the members in the cult and never leave.

MLM "cults" are especially destructive due to the monthly autoship and/or monthly "qualification" purchases. Those add up to a continual drain of bank account of the afflicted.

Cult tactics are designed for "coercive persuasion", and it goes far beyond "training" and "inspiration" in that they involve the following 4 factors:

The reliance on intense interpersonal and psychological attack to destabilize an individual's sense of self to promote compliance
The use of an organized peer group
The use of interpersonal pressure to promote conformity
The manipulation of the totality of the person's social environment to stabilize behavior once modified

The difference between this and a job is a matter of choice. If you don't agree with the job, you can leave. You are not psychologically manipulated into staying with the job. A cult, however, will do everything that it can to prevent you from leaving, including sending so-called "friends" into guilt-tripping you. A cult will also seek to distance you from your pre-existing social environment and substitute their environment instead.

Indeed, MLM do use those four factors, whether intentionally or accidentally, to recruit and keep members

1) MLM often use various psychological attacks on the prospective members, usually by belittling the member's existing status, such as "you're stuck in a job and be a wage serf for life (and MLM can save you)".

2) MLM relies on "sales groups" to motivate each other, and very reliant on real or virtual meetings, such as conference calls, recordings, "training calls", and if possible, local meetings where a leader will organize the "peer" group to pressure wavering members into compliance, as well as indoctrinate potential new recruits.

3) MLM injects personal relations (social norms) into what should have been a purely business decision (market norms), i.e. earning money. By using shame and guilt, wavering members are pushed back in line.

4) MLM often uses additional psychological attacks on the members to keep them from friends and family, by insisting their friends and family don't understand (but MLM peers do). In one documented instance, after the husband quit the MLM in disgust, the wife continued to go to MLM meetings to humor a friend. The "friend" asked the wife why is she sticking with a loser/quitter with no ambition.

MLM is declared cult-like by several cult experts, including Rick Ross and Steven Hassan.

Here's a video interview between Eric and Steven Hassan on "commercial cults". It's a 3 part series.

If you want to read a long study on all aspects of a cult, and how Amway resembles one, you may want to read this study.

http://www.cocs.com/jhoagland/amcult.html

So to conclude, yes, MLM often use (whether they mean to or not) cult tactics, and thus many are effectively commercial cults.

THAT is something they don't tell you about network marketing.

↧

Bad Argument: Absence of Evidence / Argument from Ignorance

May 26, 2013, 7:50 am

≫ Next: BREAKING NEWS: 5 MORE Digital Currency Changers also went offline along with Liberty Reserve

≪ Previous: Is Network Marketing a cult? Good Question! The Answer is Yes (keep reading)

"Absence of Evidence is Not Evidence of Absence"
CSI: Crime Scene Investigation
(season 2) (Photo credit: Wikipedia)

When supporters of a suspicious scheme ran out of defenses for their particular scheme, they will often trot out the "absence of evidence" as somehow proving that their scheme was not a scam. There are several variations on this theme, such as:

The company was never charged with a crime!
The company was never investigated!
The company only has insignificant number of complaints!
and so on and so forth

This is the inverse of the bandwagon fallacy. In bandwagon fallacy, a large number of people believe in the idea and somehow this is construed as into "numbers make it true". The inverse is "lack of numbers makes it false".

In critical thinking, this is known as "argument from ignorance", though it is often misunderstood or misinterpreted, because "ignorance" here means "absence of evidence to the contrary".

Those who watch CSI or related shows may remember one of the crew say something to this effect:

Absence of evidence is not evidence of absence

Wikipedia gave the following example: imagine a person in a house with a tin roof. Upon hearing no rain on the roof, he declared it is NOT RAINING without looking out the window, even though it had been drizzling. Absence of evidence (sound of rain on tin roof) is not evidence of absence (of rain).

Or in case of CSI, just because you didn't find certain evidence of the suspect at the scene, doesn't mean he was NOT there. (There may be other types of evidence you didn't look for).

In the case of suspicious schemes, absence of record of wrongdoing does not prove there had been NO wrongdoing.

There could be no record of wrongdoing for several reasons:

The investigation is still ongoing (investigation often takes years, and not always public)
The company was too new (just opened weeks / months ago)
The company settled the complaints behind closed doors and sealed them with NDA
Arrest, prosecution, and conviction takes time
The records were sealed as part of a plea deal
and so on

Supporters of suspicious schemes will often follow this with its variants

One variant is the "It's legal until it's convicted" bad argument, where supporters try to claim "presumed innocence", i.e. a business is presumed legal until declared illegal, never mind all the evidence in their face. They are confused as to the definition of "illegal" vs. "convicted". One can have done illegal things without being convicted.

Another variant is often used when the supporters were confronted with evidence of wrongdoing by the suspicious scheme in a different location. This one is known as the "they did it wrong" argument, as in "those who got caught must be doing it wrong (and we're doing it right)", without even asking if that other group did anything differently.

This argument is frequently followed up by "moving goalpost". It goes often like this

You explain this thing is illegal.
They say "show me the proof"
You give them proof.
They say "so what, that's just you."
You show them government investigation.
They say "so what, investigations are common."
You show them conviction in another country
They say "so what, they must be doing it wrong (we're not)"

Note the moving goalpost... First it was "show me proof", then "show me investigation", then "show me conviction". They lost three times, and they simply step a few steps back and demand the other side to prove it all over again.

It is very easy to fall into this sort of logic trap, into thinking that absence of evidence of wrongdoing is somehow indicative of how "legal" the company is. Don't fall for such trick.

↧

BREAKING NEWS: 5 MORE Digital Currency Changers also went offline along with Liberty Reserve

May 26, 2013, 8:12 am

≫ Next: When MLM Meets Psychology, very bad things ensue

≪ Previous: Bad Argument: Absence of Evidence / Argument from Ignorance

According to Krebs on Security, 5 more Digital Currency Changers were taken offline (apparently seized by court order) along with Liberty Reserve as reported yesterday.

It is not known if additional arrests have been made around the world, but this may be indication that a press conference or news release will be made on Tuesday (this is Memorial Day weekend in the US) that US have executed a large takedown operation on various unlicensed e-Currency exchanges as major enablers of crime and cybercrime.

UPDATE: Further research on Internet shows that 5 more domains were likely ALSO ran by Arthur Budovsky. AsianaGold and others can be found referred to in various TalkGold and DreamMoney forum posts and linked right back to Gold-Age, ran by Budovsky himself.

Many doubters and denialists have surfaced insisting that this was a "hack attack" by whitehat hackers and blackhat hackers vowed revenge, while denying any sort of government involvement, in US or Puerto Rico. At least report, Shadowserver's homepage seems to be under DDOS attack.

Those denialists may want to watch this report from Puerto Rico's channel 7 news:

https://www.youtube.com/watch?v=UH1ryOM-iyk

NOTE: Link is in Spanish, turn on closed captions, then translate to English (or whatever language you prefer)

↧

When MLM Meets Psychology, very bad things ensue

May 27, 2013, 12:04 am

≫ Next: BREAKING NEWS: Amway India Chairman and 2 directors arrested in India for "financial irregularities"

≪ Previous: BREAKING NEWS: 5 MORE Digital Currency Changers also went offline along with Liberty Reserve

Amway, not always associated with ethics...
Amway Center (Photo credit: Wikipedia)

Those who read a lot of entries on this blog will note that a LOT of the entries involve psychology, such as cognitive bias, coercive persuasion, mental manipulation, and so on and so forth. It could almost be said that a psychologist would be the ultimate MLM salesperson, as he knows all the triggers to push in people. Fortunately, most psychologists have professional ethics code that would stop them from exploiting their... talent.

Or so I thought, until I came across this old case in California.

In 1999, a Dr. Tom Allison was found to have been severely negligent when he recruited a couple, the Brannans, whom he had been counseling for three years (one's dissociative, the other schizophrenic), into his Amway downline. Not only did they join as his downline, he also paid for quite a bit of their training and travel expenses to various events. As a psychologist, these are indeed patient boundary violations and professional ethics violations. He apparently tried to argue that the trips were "therapeutic", and he only let them join because they needed money, never mind the fact that he stands to benefit from their sales of products.

His explanation was rejected. His license was revoked, then the revocation stayed, and he was given 5 years probation (on his California medical license). He was also fined $11500 for investigative expenses.

http://www.californiamedicallicenselaw.com/ca_psychology_board_licen/2010/02/the-danger-of-dual-relationships-for-psychologists.html

This sounds like the board was rather hard on him, but a different version of the story painted a dramatically different picture.

Those who actually read the board decision would be surprised that any punishment was taken, as the board basically concluded that the psychologist was himself coercively manipulated by the couple he was counseling, esp. the wife, into violating his ethics code and breaking the patient boundaries. Quoting from the RecordNet report by Michael Fitzgerald:

The board said the Brannans -- Marie in particular -- manipulated Allison into social and business relationships because they envied his lifestyle. They wanted to be part of it. They wanted his friendship.

Allison, who should have known better, not only enlisted the Brannans into Amway, he sold them Amway products, took them to Amway parties, drove them to Amway functions, loaned them personal items and hired Sam to do odd jobs, the report said.

I'm surprised he didn't f*** the wife too.

The couple's now divorced, according to the article.

http://www.recordnet.com/apps/pbcs.dll/article?AID=/19990109/A_NEWS0803/301099965

The problem here is MLM itself is designed to break boundaries. Normally, we have separate lives: a business / work life, and a personal / family life. MLM is specifically designed to break the barrier between the two. Take your work home? Heck, your life IS your work, and vice versa!

Make sure your life is in order before you even THINK about MLM, because you will cause some severe turbulence when you introduce MLM into it.

↧

BREAKING NEWS: Amway India Chairman and 2 directors arrested in India for "financial irregularities"

May 27, 2013, 10:02 pm

≫ Next: BREAKING NEWS: Liberty Reserve head Arthur Budovsky may have obtained Puerto Rican citizenship fraudulently

≪ Previous: When MLM Meets Psychology, very bad things ensue

Breaking news from India: Amway India Chairman and CEO William Pinckney and 2 directors have been arrested by Kerala, India police for financial irregularities.

Previously several Amway IBOs in India have reported to police in 2012, filing "FIRs" (initial crime complaints) prompting further investigations. Amway have cooperated fully with the investigation, according to their official statement, and the 3 people here have even been interviewed by police. They were asked to come down to the station for another chat, and was arrested and taken into custody when they arrived.

India is in the midst of a total MLM reform in trying to control the the spread of economic crimes such as Ponzi schemes, Pyramid schemes, and hybrid schemes, by fully redefining the rules. A flood of such schemes in recent years, such as TVI Express, SpeakAsia, and even emu farm and goat farm ponzis have fleeced tens of thousands of people.

http://economictimes.indiatimes.com/news/news-by-industry/services/retail/amway-india-chairman-william-pinckney-two-directors-arrested/articleshow/20294140.cms

Thanks to the tip on BehindMLM.com

↧

BREAKING NEWS: Liberty Reserve head Arthur Budovsky may have obtained Puerto Rican citizenship fraudulently

May 28, 2013, 12:57 am

≫ Next: Romance Scam Gang Out of Nigeria Busted

≪ Previous: BREAKING NEWS: Amway India Chairman and 2 directors arrested in India for "financial irregularities"

According to TicoTimes, Puerto Rican officials stated that Arthur Budovsky married a Puerto Rican woman in 2008 to obtain PR citizenship, and formally renounced his US citizenship in 2011. However, Puerto Rican officials cannot find any evidence of Budovsky entering Puerto Rico prior to 2011.

This seem to suggest that the marriage may be a sham marriage solely as a business arrangement for Budovsky to obtain PR citizenship in order to get away from US law. Sham marriages are considered serious fraud and can lead to revocation of citizenship.

TicoTimes also reported that the top players in Liberty Reserve have all used aliases when signing and/or creating corporate documents, and thus investigation into the company is often stonewalled, leading the PR financial authority SUGEF to deny Liberty Reserve a license to operate in PR in 2011. Liberty Reserve continued to operate any way, but slowly moved its servers and its bank accounts to Europe, trying to get away from PR authorities.

For the full article see
http://www.ticotimes.net/More-news/News-Briefs/Liberty-Reserve-A-cyberweb-of-intrigue_Tuesday-May-28-2013

↧

Romance Scam Gang Out of Nigeria Busted

May 28, 2013, 2:07 am

≫ Next: BREAKING NEWS: Confirmed Liberty Reserve Closed as $6 BILLION Money Laundering Operation

≪ Previous: BREAKING NEWS: Liberty Reserve head Arthur Budovsky may have obtained Puerto Rican citizenship fraudulently

According to report out of Benin City, Nigeria, authorities have arrested 20 suspects who had banded together as a scam group targeting widows on various social networks using false identities and other scam tactics. Police raid confiscated 48 laptops, 20+ phones, 8 wireless modems, and one vehicle. When questioned, they confessed to primarily engaged in dating scams targeting foreign widows, and have them send money with promises of love and marriage.

http://naijagists.com/20-yahoo-yahoo-boys-internet-scammers-arrested-in-benin-city-edo-state/

This is a growing problem as seniors, especially widows, are starved for attention and some simply are too naive to realize that "On the internet, nobody knows if you're a dog" (or a scammer). At least one Australian pensioner was found dead in South Africa after traveling there to find her "true love". Another was stopped TWICE at the Australian airport trying to travel to Africa, which horrified her daughter and the police detectives working the fraud cases.

http://www.heraldsun.com.au/lifestyle/relationships/police-rescue-woman-from-flying-to-africa-to-meet-online-scammer/story-fni0dpm6-1226648699654

Ah, but what do these scammers have in common?

Religion: vast majority of fake dating scammers claim either they are Christians, or religion is very important in their lives.
Looking for Women: According to the U.S. Federal Bureau of Investigation, the most common romance scam target is a woman over 40
Widower: Over 60 percent of scam profiles surveyed say that they're widowers.
Education: no scam profile surveyed claimed only high school or bachelors. In contrast, significant number of them claim to have graduate or Ph. D. degrees.

http://www.scienceworldreport.com/articles/6811/20130513/trust-people-dating-websites-signs-show-scammers.htm

Watch out for scammers, not only in your life, but those of your relatives and friends.

↧

BREAKING NEWS: Confirmed Liberty Reserve Closed as $6 BILLION Money Laundering Operation

May 28, 2013, 10:02 am

≫ Next: How to Fake Being Infallible (and how to spot such fakes)

≪ Previous: Romance Scam Gang Out of Nigeria Busted

People who visit Liberty Reserve domain and all of the other domains related to Arthur Budovsky today will be greeted by a huge warning sign:

Or in text form "this domain name has been seized by the United States Global Illicit Financial Team"

URGENT UPDATE: At least 5 of the 7 principals have been arrested in a multi-nation operation.

URGENT UPDATE: And the Feds have indeed released an indictment against 7 people, including Arthur Budovsky, as 6 BILLION DOLLAR money laundering scheme.

The charges, which include conspiracy to commit money-laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business, were confirmed this morning by the office of U.S. Attorney Preet Bharara.
Liberty Reserve founder Arthur Budovsky was using the aliases “Eric Paltz” and “Arthur Belanchuk,” according to the indictment.
Co-conspirators, according to the indictment, include Vladimir Kats, also known as “Ragnar”; Ahmed Yassine Abdelghani, also known as “Alex”; Allan Esteban Hildago Jimenez, also known as “Allen Garcia”; Azzeddine El Amine; and Mark Marmilev, also known as “Marko.”
Marmilev also is known as “Mark Halls” and “Maxim Chukharev,” according to an affidavit that accompanies the indictment.
Liberty Reserve and its co-conspirators “intentionally created, structured, and operated Liberty Reserve as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” according to the indictment.

http://www.patrickpretty.com/2013/05/28/urgent-bulletin-moving-liberty-reserve-founder-others-indicted-in-new-york/

Mark Marmilev, i.e. Chukharev, had been arrested in Puerto Rico and is likely to be extradited to the US to face charges, according to earlier news out of Puerto Rico. Arthur Bukovsky had been taken into custody in Spain earlier. It is not known if others had been taken into custody, but likely. Kats is believed to be in the US, while Ahmed Yassine Abdelghani and Allan Esteban Hildago Jimenez are in Puerto Rico and may have also been taken into custody, but so far Puerto Rican authorities have only confirmed that "Chukarev" was taken into custody.

Here's the indictment itself:

http://www.justice.gov/usao/nys/pressreleases/May13/LibertyReserveetalDocuments.php

Reuters is reporting that 5 principals have been arrested in the US, Spain, and Puerto Rico, two are still at large in Puerto Rico.

In addition to Budovsky, who was arrested in Spain along with his deputy, Azzedine El Amine, co-founder Vladimir Kats was arrested in Brooklyn, New York. Two technology designers, Maxim Chukarev and Mark Marmilev, were also arrested, Chukarev in Costa Rica and Marmilev in New York.
Two more company employees were still at large in Costa Rica according to officials: Ahmed Yassine Abdelghani and Allan Esteban Hidalgo Jimenez. According to the indictment, almost all of the men used the alias, Eric Paltz.

http://www.reuters.com/article/2013/05/28/net-us-cybercrime-libertyreserve-charges-idUSBRE94R0KQ20130528

↧

How to Fake Being Infallible (and how to spot such fakes)

May 29, 2013, 12:49 am

≪ Previous: BREAKING NEWS: Confirmed Liberty Reserve Closed as $6 BILLION Money Laundering Operation

Derren Brown at the Garrick Theatre, June 2008 (Photo credit: Wikipedia)

Ever run into some guy who claims they invented a system that will do absolutely great in the stock market or foreign exchange market or commodities market or whatever market that involves trading, and he'll reveal the secrets to you for a price? You'll probably dismiss him as crackpot. He offers to sell you the secret, but only for 72 hours (3 days).

What if he mailed you a prediction, and next day, he turned out to be right?

And the next day?

And the next day?

Do you feel a need to buy his system now? As he's withdrawing his offer?

Don't. This is easily faked. And I'll explain why it's fake.

Darren Brown is a well known magician who did a video in 2008 called "The System", where he demonstrated on camera, one continuous cut with 2 angles, that he managed to flip a coin 10 times in a row, and they ALL turned up "heads". This is not done with a trick coin or camera trick or post-production.

Sounds impressive, yes?

What they didn't show you (unless you watched the full episode, which is not in the video), is that he filmed over 1000 coin tosses, over period of 9 HOURS, to create this "10 heads in a row" video.

Not so impressive now, is it?

These "infallible trading system" purveyors have a similar trick.

They offer you a system that they claim offers an infallible signal for trading, probably stocks. And just to show you it works, they'll predict that a particular stock will go up or down the next day. They'll even show you some blah blah screen that says it does predict so (just not the logic behind it). And it's a limited time offer. The price starts REALLY low, goes up every day until at the 4th day it stops being available.

And they send you proof every day that their system works. And it's easily verified that the stock went up or down as they predicted.

So you're feeling that maybe they really did create such a system. Evidence don't lie, right?

No, but your INTERPRETATION of the evidence is wrong. This is how they did it.

Start with a poll of, say 10000 potential people who may be interested in such a thing.

To half, they predicted stock will go up, and the other half, stock will go down.

Next day, they stop sending email to the half that was 'wrong'. And they repeat the process.

Next day, they do the same thing AGAIN.

Now they have 1250 people who believed that this bogus system worked 3 days in a row. That's uncanny accuracy, but only if you're not aware of the overall campaign of 10000. Then you realize it's just randomness and probability at work.