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

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DSA (US) Logo
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?





So basically, who moves first, and who moves more, is like to win more. If you gotten there first (or had insider connections), or move twice as often, you're likely to be "twice as successful" as that other MLM grunt.

Thus is born the myth of "if they fail, they didn't work hard enough".

But that just prove that you all are stupid, doesn't it? That nobody is trying something to IMPROVE their odds, work smarter not harder, and all that?

And have you considered that so-called 'sales aids' are just methods to reach MORE people, and thus, go through recruits even faster, instead of smarter?

Oh, I'm sure someone tried... Like embellished the power of their product a bit... But here's the problem, you see. You are SEVERELY LIMITED in what you *can* say about your products and your company, lest you get the company into trouble with the FTC or various State Attorney Generals. Mannatech was sued several times by Texas Attorney General for making unverifiable claims. Trivita was just slapped by FTC for making unsubstantiated claims. And that's assuming the company is actually watching. If the company actually let you make outrageous claims, it's likely to be a scam. Burnlounge, another scam closed by FTC, was well known for its top affiliates making fake income claims (some of which were recorded as evidence for trial).

So you can't really sell the stuff better than any one else.

Well, there is one way... You can promise them money... The SAME THING your upline promised you. It's another script you replicated. That if they join under you, and go out and recruit (like you are trying to recruit them), and keep themselves eligible via autoship (just like you), they can hit the jackpot (like you will be, if you recruit them).

You're no longer selling. You're RECRUITING.

Congratulations: you're on your way toward a product-based pyramid scheme. You're making your upline money while you desperately seek someone you can step on to make you money, the same way your upline's stepping on you (but you don't feel it, since you're "learning something", or "part of a team").

You're up **** creek and you probably don't even realize it.

Your success is purely random chance dice roll (landing the recruits who may be vulnerable to your recruitment efforts), and the ONLY thing you can do is play more often... by PAYING to keep playing (monthly autoship to keep yourself "eligible") and hope you hit the jackpot (enough recruits to get a cut of their commission) before you go broke.

You are now the consumer of the product you're supposed to be selling... BECAUSE you can't sell them. You are making your upline money. Just as you hope to recruit someone to make you money.

As the joke goes, **** flows
downhill. And you are definitely
at the bottom, kid. (source unknown)
Welcome to the bottom rung of the pyramid, where you're the layer being stepped on by EVERYBODY above you. And the ONLY way you'll "win" this game is by finding people you can stuff UNDER you, so you can step on them. As the joke goes, s*** flow downhill.   (see illustration to right)

You start seeing EVERYBODY (friends, family, total strangers in supermarkets, pharmacies, bookstores, even gas stations) as prospects to be recruited. You go out and buy Kiyosaki books or CDs (recommended by your upline, who may have even sold them to you for a small profit) and hand them out to random strangers with your business card... Call you about a "job" when it's a recruitment seminar...

Soon you chased away all your friends and family. You're just too creepy and nag-y. They don't understand your need to recruit more people, maybe you don't even understand yourself.

So how do you get off this treadmill?  Two ways:

a) you manage to hit "recruit" enough times that you built a small 'team', lucky you. But some of them will quit so you can't ever stop recruiting; or

b) you quit when you ran out of money or when you figured out the game (as I have already explained it to you except you never listened), just like most of those you recruit will quit.

well, technically there is a third way;

c) you got so depressed you got committed to a mental institution or commit suicide. No, I wasn't kidding. People *have* committed suicide for MLM, even top level sellers.

So, still want to play?



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

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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".




Your drawing will probably resemble something like this if you haven't seen a bicycle recently, or actively biked recently:

Before you start laughing, I should tell you that a SIGNIFICANT NUMBER of the public got it wrong. You can read the whole article on "Science of Cyclology"

The point is simple: most people, who have seen bicycles all their lives, have no idea where certain things are or how they work.  That is the power of "illusion of explanatory depth". They *think* they know how bicycle works... until they are asked "so how does it work"? And until they are asked, they have NO IDEA the depth of their ignorance... and their ignorance of their ignorance.

Scams are out there to take full advantage of your illusion. They always present something that "seems" to make sense to you, and to make you feel good and comfortable so you gained a full "feeling of knowing" even though you have no details.  You feel you know how the business works through this illusion, when you don't actually know.

Pyramid schemes are out there to make you an accomplice by having you FEEL you know what the business is, and recruit your friends and family and total strangers because you FEEL the business will be profitable (for you).

The scam is also there to KEEP you ignorant. 

Any one who will ask you questions (and thus, expose your ignorance) are described as "dreamstealers". and are to be AVOIDED in the name of "avoiding negativity".

Any one who persist in asking you questions are characterized as "they don't understand" and you walk away from them, where actually you just invoked "pigeon chess" argument.

Your scam leader are there to stoke your "feeling of knowing", so you don't feel you need to verify what he said with outside independent and verifiable information. Soon, you are solely dependent on your scam leader for all information.

You're basically in a commercial cult.

So what can you do about it? 

1) Ask questions, even if it's to yourself, so you can research them later, AWAY from the leader and the group.

2) Ascertain attitude regarding questions. If the leaders do not tolerate questions, acts dismissive toward questions, or gives technobabble explanations, nod politely and note that too.

3) Seriously consider the possibility that you had been lied to, whether intentionally or through negligence

4) Figure out how things are supposed to work... Both from YOUR end, and from the BUSINESS end. BOTH have to make sense. If only one side makes sense, clearly something is wrong (perhaps your "facts" about the business are wrong)

Don't live an illusion.


References:
http://scienceblogs.com/mixingmemory/2006/11/16/the-illusion-of-explanatory-de/
http://www.yale.edu/cogdevlab/aarticles/IOED%20proofs.pdf%201.pdf

Scam Post-Mortem: TelexFree location lies confirmed by authorities

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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!




It surely did not help when their own "top promoter" Sann Rodrigues (not his full name) decided to walk through the entire building speaking Portuguese with a cameraman and pretending the whole thing belong to TelexFree.



This is downright fraudulent misrepresentation.

And this was not Sann Rodrigues' first rodeo. Back in 2008 he had already been sanctioned once by the SEC for a ponzi scheme involving franchises to sell phone cards.  Swap phone cards for VOIP, and you pretty much have TelexFree.

And now up to a million people in up to 190 countries are victims of TelexFree.

The saddest part is the process of repatriation will take YEARS, not months, according to the trustee.

What's the lesson? When someone tell you the truth, you have to be willing to listen.


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

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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.



According to witnesses, the victim was walking on Jeronimo Monteiro Avenue when a silver VW Golf pulled up behind him, and two man got out, and one shot the victim twice in the back. The victim was hit once in back of the head and bullet went through the victim's face. The other shot hit the victim in the arm. The suspects then got back into their car and fled. Victim was transported to hospital via ambulance, condition unknown. Police did not note when this investment had occurred, but they will investigate the case in further details.

(WARNING: Link contains aftermath of graphic violence, view discretion is advised)
http://gazetaonline.globo.com/_conteudo/2014/08/noticias/cidades/1494817-homem-atira-em-ex-colega-de-trabalho-que-o-convidou-para-entrar-na-telexfree.html


Suspected Fraud Leader Gunned Down in Redinha

Joao Batista Gomes Silva was gunned down on Monday (11th) in Upper Tower of Redinha, after getting off a taxi to go to market. Police stated that men had been following him for a while, and the ambush may have been over "multilevel marketing"

(WARNING: Link contains aftermath of graphic violence, view discretion is advised)
http://portalbo.com/materia/Empresario-do-ramo-de-marketing-multinivel-e-executado-na-Redinha

According to other sources, Joao was believed to be a part of many different suspected Ponzi schemes in Brazil, which included TelexFree, BBOM, Unetenet, Mister Colibri, Publika, and many others. This has not been confirmed.


MLMSkeptic Commentary

When the people believe the courts are not acting fast enough, some may resort to vigilante justice.

If you want the police to do their job, HELP THEM by providing evidence and rally for the prosecutors to act faster.

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

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

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...




Network Marketing is NOT Franchising

A lot of MLM Noobs (or bad coaches) claim that joining a network marketing company is like owning a franchise. It's NOT the same. There is a LEGAL DEFINITION of franchising as per "FTC Franchising Rules" (in the US). A franchise has three parts:

  • (1) Franchisor Trademark -- the franchisee got a license to use the franchisor's trademark. You see that like McDonalds, Snap-on Tools, Subway Sandwiches, and so on, 
  • (2) Franchise Fee Payment -- the fee paid by franchisee to franchisor,  can be called franchise fee, consulting fee, royalty payment, training fee, etc. Goods purchase are usually exempt if company did provide a bonafide wholesale price and minimum qty is not excessive
  • (3) Franchise Business System -- in general, franchisor have a carefully laid out marketing plan / business system on how the franchise should be run that limits how the franchise and trademark can be presented and how the business should be run. 
So why is MLM NOT franchising? Because MLMs don't charge distributors large free payments for signup or continue to charge maintenance fee, or ongoing training fee or such, thus does not fit #2 above. Typical franchises starts at 20000 (twenty thousand) dollars and for something significant like a McDonalds can go up to millions of dollars. 

Bad MLM coaches and recruiters are known to make this sort of fraudulent misrepresentation to make what they are doing sound LESS like recruiting. They will talk about "income", "own your destiny", "be a business owner", and so on. They may be trying to channel Robert "Rich Dad" Kiyosaki and his Amway-derived lessons... and they may be misrepresenting the opportunity. 


Network Marketing is NOT the Same as Direct Sales (merely related to it)

A lot of bad MLM coaches and recruiters will claim that direct sales and MLM are synonyms and thus interchangeable. They are NOT. MLM is ONE SUBTYPE of Direct-Sales, where the participants are paid two ways: by direct retail profit, and by commission generated by sales generated by his/her "downlines". Pure direct sales means direct retail profit only. 

It's worth nothing that MLM industry organization is "Direct Selling Association" (DSA), which predates MLM by about 70 years. DSA was originally founded as "Agents Credit Association" (for door-to-door salesmen) back in 1910. MLM did not exist formally until the FTC. vs. Amway decision in 1979. (Though it may have been around informally for a decade before that). 

It's also worth noting that most modern MLMs have lost the direct sales component, due to advent of drop-shipping. Customers order through the agent, or through agent's website, and the orders are then fulfilled directly by the company and shipped directly to the customer. The agents are no longer expected to carry inventory (except what's needed to conduct demonstrations or samples to hand out). 


Network Marketing is NOT the same as Referral Marketing (merely related to it)

Some MLM noobs, or bad MLM coaches, often refer to network marketing as referral marketing or referral sales. This is a very dangerous mistake and represents a fundamental lack of understanding of both the actual meaning of the term, and the legal issues.

Referral marketing is usually done by individuals who simply want to share a great product with friends and family, and NOT after financial gain. Primary motive is altruism, not profit. The referrer have a personal relationship with the new customers.  Some bad MLM coaches advocate this aspect by encouraging you to make a list of everyone you know, friends, family, etc., and go after them first, but if you are doing it for profit, then it's NOT referral marketing.

What most MLM noobs call referral marketing is actually AFFILIATE MARKETING, where affiliates and new customers do NOT know each other, and the affiliate's primary motive is financial gain. He is referring products to people who need it because he gets paid doing so.

If you still don't get it, here's an infographic from ReferralCandy.com that explained it very clearly.

Furthermore, there's a specific version of referral marketing called "referral sales", which is illegal. Don't EVER refer to network marketing as referral sales. 

If a company offers you a discount to a product you purchased, contingent on you referring other people who also purchase the product, that's a referral sales and that's ILLEGAL, because you basically paid a fee to "join", then was promised payment (discount) for every person you recruit (who also paid a fee to "join"), making it a pyramid scheme.

EX: You bought a furnace, and the seller tells you that the price is $1000, but if you can find more people who like the furnace, for each one he sold a furnace to he'll knock $100 off the price. (I.e. find 10 people and your furnace is free).

Here's the Iowa version of the law prohibiting referral sales: Iowa Code 714.16(2)(b)
      The advertisement for sale, lease or rent, or the actual
      sale, lease, or rental of any merchandise at a price or with a rebate
      or payment or other consideration to the purchaser which is
      contingent upon the procurement of prospective customers provided by
      the purchaser, or the procurement of sales, leases, or rentals to
      persons suggested by the purchaser, is declared to be an unlawful
      practice rendering any obligation incurred by the buyer in connection
      therewith, completely void and a nullity. 
Yes, this is ILLEGAL, in ALL FIFTY US STATES. I'll let MLM lawyer Jeff Babener explain why MLM is NOT referral sales.

Now, you're probably asking, wait, don't companies pay referral fees all the time? Like banks offering "refer a friend to open an account here and both you and him gets $10"? Ah, but you don't purchase an account from a bank. So it doesn't count. And you can't get rich from these tiny little referral fees, as there are limits on them, like max 5 per month or something.


Network Marketing is NOT the same as Affiliate Marketing (merely related to it)

As mentioned before in referral marketing, affiliate marketing is NOT referral marketing. In affiliate marketing, each affiliate is rewarded for each customer (or prospective customer) brought to the merchant. It is a type of performance-based marketing, and network marketing (or MLM, if you will) is like that as you are compensated by sales done by your downlines (i.e. customers brought in by your downlines), not the same, as in affiliate marketing, you are compensated by sales done BY YOU (not your downlines).

There are many ways to abuse affiliate marketing, esp. those merchants who pay small fees for referrals on the Internet. eBay, back in mid 2000's, was paying a lot of referral fees without auditing much, leading to many schemes to cheat eBay that only recently lead to convictions.

Most modern network marketing companies do NOT have their members sell directly any more (i.e. they no longer have a 'direct sales' component) when companies dropship stuff straight from warehouse, so many of them have adopted the "affiliate marketing" moniker, most notably, Vemma, which does NOT expect its members to retail their Vemma and Verve drinks. Instead, Vemma expects its "affiliates" to let "customers" order more drinks through the affiliate's online storefront, and the orders will be fulfilled directly by Vemma. However, each affiliate is expected to order drinks for themselves every month, both for self consumption and for "sharing" (i.e. demos, giveaways). This has lead to charges of potential pyramid scheme, since their purchases are counted for commission by their uplines, and they are also encouraged to recruit others who do the same so they can earn commissions.


Network Marketing by any other name is still Network Marketing

Network marketing companies, attempting to distance itself from the negative connotation of network marketing, or as some form of new marketing campaign, often resort to inventing new terms such as "dual marketing" (Mary Kay), "concentric marketing" (Burnlounge), and "inline marketing" (Nutraceuticals Inc.) but when you examine their comp plan they are still network marketing / multi-level marketing. The alleged differences the company claimed, if any, from "normal" network marketing, are non-existent, or are so trivial it is not worth noting.


Network Marketing and Pyramid Scheme: the good and evil twins

Network Marketing's evil twin is the infamous pyramid scheme. The problem is how to tell them apart, as they are twins... and they look virtually identical, and they often act the same. So how do you tell them apart? By their "intentions" as inferred from their actions.

According to the court that ruled on FTC vs Burnlounge, the difference between network marketing, and a well-disguised pyramid scheme (i.e. product-based pyramid scheme) is one of intent. Are the rewards paid out "primarily" for recruitment, or sales? Are (distributors) motivated by opportunity to earn rewards from recruitment, or sales of items? The following 5 factors were discussed:
  • Purchasing patterns -- when distributors bought premium products while non-distributors don't, AND the rewards for premium products are greater, there's likely "pay to play" involved 
  • Lack of value -- product value is not commensurate with rewards paid, thus motivation for purchase is to maximize rewards, thus "pay to play"
  • Requirements to buy premium products to increase earning potential -- instead of paying reward strictly on sales amount, high reward levels are only unlocked through purchase of premium products, would indicate people would not have bought premium products except to unlock higher rewards, thus, "pay to play"
  • Lack of consumer safeguards -- lack of refund mechanism or rules, lack of protecting against inventory loading, etc. would indicate possible pyramid scheme
  • Emphasis of the Marketing -- if the marketing effort is mostly on recruitment, rather than on the products offered, it is likely a pyramid scheme. 
Conclusion

Network Marketing, i.e. multi-level marketing can be extremely dangerous to the unwary due to its evil twin, the pyramid scheme, that are very difficult to tell apart. As one financial writer wrote: "what is not clear is the point at which legitimacy disappears and scumbaggery takes over". The different alternate names surely does not help, when they are often completely different marketing strategies that are barely related to network marketing, or are just new words made up to sound different, but is still the same (old wine, new bottle). Add badly trained or unscrupulous members and coaches out to score a quick buck through recruitment (which is often illegal) and you can wander into a minefield without realizing it.

Educate yourself, and don't be distracted by fancy names.


References

http://www.sequenceinc.com/fraudfiles/2012/01/inline-marketing-scam-same-mlm-scam-different-mlm-name/
http://seekingalpha.com/article/2270643-battle-over-burnlounge-both-sides-claiming-victory

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

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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:




Note the URLs:

  • backend is where you login as affiliates to handle your listing and such. 
  • ppc is some sort of pay per click scheme (I wasn't even aware that AiYellow had)
  • mysite gets redirected to main website
  • wp is some sort of a name search engine that also searches social network profiles
But that's really at the PPC subdomain? As expect, it's a pay per click scheme:

AiYellow's DataClick program: paying people to
click on the ads that other people have bought...


Basically, you view ads, get paid a token amount. When you've viewed enough you can exchange the amount for some other virtual goods... the "codes" that the AiYellow people are supposed to be selling to merchants for a listing on AiYellow.

Yes, AiYellow is PAYING people to click on its ads, Not that I've seen the ads, but that would explain why are there so much traffic between the two.

But that also explains that a SIGNIFICANT portion of people who visit AiYellow are NOT people looking for a business to buy something from. They are here to fulfill their click to pay obligations or to check the status of their codes, and whether their "downlines" sold any "codes" yet.

This corresponds with the fact that only 15% of AiYellow's visits came from search engines. The other 85% must then be from people who are visiting AiYellow for OTHER purposes... such as pay to click or just checking on their earnings, or maintaining their website, wondering where are the visitors, either real or virtual.

So what does that all mean? It means a listing in AiYellow or an ad may NOT be the most efficient investment of your money. Vast majority of people who visit AiYellow are interested in MAKING money, not in SPENDING money, which makes them worthless to merchants looking for customers. Indeed, advertisers buy advertising to look for prospective CUSTOMERS, not people who click on their banner expected to be PAID.

Yet AiYellow reps are dropping comments like:
Does the website rank on top pages of search engines? Does the website get 6 million visitors per month? Traffic and exposure of such a magnitude to any business signed up?? Does the website have a world ranking of 5000th most visited website? Is the website backed by major brands, endorsed by the ICC, BBB, Trustguard?
Let us examine the claims one at a time.

"Does the website rank on top pages of search engines?" -- Depends on the keywords uses. If you're looking for stuff in Rand, South Africa , like "branded clothing rand" I imagine it's come in near the top. For anywhere else? About anything else? Rather unlikely.

"Does the website get 6 million visitors per month?" -- yes, most of them expecting to MAKE money, not SPEND money

"Traffic and exposure of such a magnitude to any business signed up??" --- negligible, since they are NOT on there to look for merchants and merchandise, as shown by analysis of Alexa results and the subdomains that were sources and destination of visits.

"Does the website have a world ranking of 5000th most visited website?" -- not any more. As of today it's 7100's. (See first screen shot on top)  And it's falling steadily.

"Is the website backed by major brands?" -- no. In fact, I wonder if they actually allow AiYellow to use their trademark and logo next to AiYellow logo to imply an endorsement. What it REALLY means is someone sold AiYellow codes to them. They are not AiYellow backers. They are AiYellow CUSTOMERS.

"endorsed by the ICC, BBB, Trustguard?" --- this needs some explanation.

ICC, i.e. Internet Chamber of Commerce, is a "business network" that lists businesses. They are a FREE LISTING place. They don't "endorse" coompanies.

BBB, or Better Business Bureau, is a consumer protection organization that verifies businesses, provides unbiased reviews, and help consumer resolve problems. They do NOT endorse businesses. either.

TrustGuard is a third-party verifier that verifies the business does exist at the location it says it's at, nothing more. It does not "endorse" businesses either.

So basically, this AiYellow rep seems to have a fundamental misunderstanding on how AiYellow works, how the marketing speech he had been reciting actually means, and so on.

But is this AiYellow's fault, or the rep's fault? Perhaps the rep that left these misinformed comments were simply taught wrong, or were overzealous?

I wondered about that, until I saw AiYellow's "About Us" page, which looks like this:


Note the sentence I underlined in red:
Our service is certified by the most renowned regulation entities at a global scale: TrustGuard, W3C.
As explained before, TrustGuard is NOT a "regulation entity" regarding business services. They certify that the business is who they say they are, and the website is reasonably secure from hacking. But what is W3C?

W3C, or World Wide Web Consortium, is the organization that standardizes web stuff like HTML. W3C is not a "regulation entity" either regarding business services. Claiming AiYellow's "service" is "certified" by W3C is like saying "our website is certified by Oxford Dictionary".  It makes no f***ing sense.

Based on its own About page, AiYellow seems to have a fundamental culture of making things sound more impressive than they actually are. Thus, it is no wonder that its affiliates have adopted a similar attitude: talk up all the "virtues" (that are NOT virtues, because they have been "embellished") and never learn about the truth of their ignorance.

It is my personal opinion that you would be much better off with a well designed website, even if it's very simple and only contains a few pages of information. Search engines tend to ignore "listings" or "content farms" and AIYellow is both. AiYellow's web popularity stems from its promise to pay people, not from its search engine visits. Thus, touting how popular will you be on search engines, if you buy a listing in AiYellow would be at best, a fib, or at worst, a total lie.

So in conclusion, AiYellow is mostly for grins, and only a little bit for real. As for whether it's worth your money and efforts... that's up to you.

(If you want to debate this, present FACTS, not marketing material. If you spot a mistake, point it out and I'll fix it. Diatribes along the lines of "you just don't understand" will be dissected for amusement and ridiculed if found wanting of logic. )

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

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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:




Missouri Government Revoked TelexFree's telecom license

Missouri Public Service Commission back in March 2014, approved TelexFree's telecom license on the recommendation of ISG Telecom's Joe Isaacs, promising rosy financials to support operations, only to find eggs on their respective faces when TelexFree abruptly declared bankruptcy in April 2014, and then was raised by SEC and the rest for alleged operation of Ponzi scheme, and had one of the owners fled to Brazil. Joe Isaacs has since apologized to all telecom commissions across the country in an open letter and cut all ties to TelexFree, even called TelexFree "alleged crooks" and claimed he was deceived as well.

Missouri PSC has now formally cancelled TelexFree's telecom license effective August 1st, according to documents found by PPBlog.

Speaking of consultants...


WCM Receiver Says Lobbying firm took 750K and did nothing, wants it back

Court appoint receiver for "WCM / WCM777" ( a Ponzi scheme based in California headed by Phil Ming Xu that was closed by SEC earlier in 2014) stated that a lobbying firm called "Governmental Impact" based in California received 750000 from Phil Ming Xu and did no work, and wants the money back for the victims. The contract was signed in January 2014, days after it was issued a "desist and refrain" order by California Department of Business Oversight.

Two months later SEC closed WCM for good, and appointed a receiver to clean up the mess. And she's find more money paid out by PMX (Phil Ming Xu).


And finally...

More Lawsuits Against TelexFree

A Brazilian Attorney Living in the US adds another racketeering / fraud lawsuit against TelexFree and all its officers, executives, accountants, consultants (legal or otherwise), AND financial vendors.

http://patrickpretty.com/2014/08/21/urgent-bulletin-moving-brazilian-attorney-living-in-united-states-calls-telexfree-a-massive-pyramid-and-ponzi-scheme-and-becomes-co-plaintiff-in-racketeering-and-fraud-complaint-against-telexf/






The Woo Files: MLM Viagra Coffee (no, I'm not kidding, and it's illegal)

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There are all sorts of "fortified"coffee, containing all sorts of stuff that's allegedly good for you, from Asian mushrooms (Lingzhi) to various uber(woo) fruits like Acai berries, goji berries, to various forms of vitamins. So it's really no surprise when someone made coffee with allegedly "all natural herbs" to raise your libido, eh? 

Meet "Magic Power Coffee", world's first (and last?) aphrodisiac coffee.


Now, you may say, this is cute and stuff, but what does it have to do with MLM? Ah, but look at the words "income opportunity". Yes, this is a MLM.

Quoting from a recruitment website :
Start Your Magic Power Home Business Today Start as a Standard Associate for only $70.00 plus a one time $15.00 administration fee. Quickly break even, operate for FREE, and build your Home Based Business part time until it exceeds your primary income source
Furthermore:
The Magic Power Coffee Home Business Opportunity provides multiple income streams. They are covered below.
Personal Enrollments:
Each time a member joins the home business opportunity via your invitation you are awarded $15.00 to $45.00 depending upon their membership level... To keep it simple and free, enroll three.
Matrix:
When you introduce and invite others to become members they too establish their own Home Business. You are accredited through a 3 X 10 matrix system for those who fall within the three positions below you. ...
Matching Bonuses:
Matrix Bonuses are percentage matched down 6 generations of each individually sponsored member
Retail Sales:
Retail sales of Magic Power Coffee and the Magic Power Product line generate commissions...
Leadership Pool:
3% of the entire company product are sales set aside and distributed proportionately as you reach certain milestones. The Tour will explain this best, but the award amounts are substantial.

Thus, there is no doubt this is MLM, right? Except the product is ILLEGAL, as it is NOT all natural, as it claimed.




The product claimed to contain only aphrodisiac herbs like goat weed, ginseng, yohimbe, and such, thus claiming to be all natural, but a test in a lab by the US Food and Drug Administration revealed that it actually contains a VERY unnatural substance... a tweaked form of Viagra. Specifically, it contains hydroxythiohomosildenafil, which is a tweaked version of Sildenafil, the drug name of Viagra (which is a "marketing name").

And this is VERY dangerous, because this drug (yes, it is a DRUG) has the same warning of Viagra, and because it's NOT LISTED on the label of the coffee, drinking this coffee may lead you to have an adverse, possibly DEADLY drug interaction if you're also taking other drugs, such as heart medication. Combination may lead you to have VERY VERY low blood pressure, possibly fatal.

So much so, FDA issued an OFFICIAL WARNING against the product and company in 2010, after asking the company to issue a voluntary recall (and got no answer).

http://www.fda.gov/downloads/ForConsumers/ConsumerUpdates/UCM216888.pdf

http://www.npr.org/blogs/health/2010/06/21/127984213/magic-power-coffee-s-secret-revealed-viagra-like-ingredient

A few days late  the company FINALLY issued a nationwide voluntary recall.

A formal warning letter was sent by FDA to the company behind this illegal stuff dated August 23, 2010:

http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm225432.htm

Which basically means this stuff is going to be ILLEGAL no matter how the company will tweak it. From there the company's basically dead.

Yet idiots (yes, I meant that) are STILL hawking this ILLEGAL substance TODAY, well after the warning.





If they had done some research, they would have found (confirmed by Troy Dooly and Len Clements) that the coffee company was owned by an Adult Entertainment company (i.e. porn) who apparently went to some lengths to hide the direct association.

If you search for the product name you'll still find tons of videos, presentations, and even websites online as proof that tons of people fell for this scam.

What's the lesson? Don't believe in the "all natural" label. It can be fake (Also see the O.M.G. link below. There are MANY companies that put drugs in the "all natural" products so they can claim it works.


MLM Basics: Is MLM considered entrepreneurship?

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A recent discussion regarding a certain suspect MLM already fined in Europe for pyramid selling brought up an interesting point of discussion... Is participation in MLM considered entrepreneurship?

But first, what exactly is entrepreneurship?

BusinessDictionary.com defined it as "The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit."

From the surface, it does appear that participating in network marketing could be considered a business venture, but again, we have to look a little deeper: is becoming an IBO / affiliate a "business venture"?

Same place defined "business venture" as "Start-up entity developed with the intent of profiting financially. A business venture may also be considered a small business."

Ah, here lies the problem.

Most network marketing company deal with you as a hybrid... You're not a business (so it's not a business to business) but you're NOT an employee either. You are an "independent contractor". Here, for example, is Amway's agreement on this specific topic:
3. Independent Contractor Status. You agree this authorization does not make you an employee, agent, or legal representative of Amway, your sponsoring IBO, or any other IBO. As a self-employed independent contractor, you will be operating your own independent business, buying and selling products and services available through and by Amway on your own account. You have complete freedom in determining the number of hours that you will devote to your business, and you have the sole discretion of scheduling such hours. Amway will not provide you with a place of business, and if you desire a place of business other than your own residence, you will be responsible for procuring, furnishing, and paying the rental for such place of business. As a self-employed independent contractor, you are responsible for complying with any provincial licensing requirements and Municipal Zoning and Business Licensing By-Laws. With respect to services performed by you under your IBO Contract, you will not be treated as an employee for federal or provincial tax purposes, and you will be responsible for
payment of any self-employment and other income taxes
Well, Amway certain wants you to think you own an "independent business". In fact, they refer to all of their distributors as "IBOs"... Independent Business Owners. And you are REQUIRED to print that on your business card.

So what's the problem? The problem is in the PROFIT motive. Being an entrepreneur means you intend to profit.

Yet for a MAJORITY of participants in network marketing, apparently profit is NOT a motive.

You're probably going, WHAT?!  Let me give you examples:


In the Herbalife rebuttal to Ackman's charge back in 2013, Herbalife did a survey and quoted the survey results. I'm working from a summary of such rebuttal:
Herbalife Reply: According to the Lieberman survey, only 27% of former distributors joined to make supplementary income. The remaining 73% joined for product discounts. Further, 44% of distributors expected to earn no money.
Yes, you read that right: only 27% of FORMER distributors joined for income / profit. 73% only joined because they want the discount. Most expect to earn NO MONEY.

A MAJORITY (over 2/3rd, almost 3/4th) of people who joined Herbalife expect NO PROFIT, and that's the OFFICIAL WORD from Herbalife.

And the Herbalife 2012  income disclosure confirmed this.
"The compensation chart below indicates that 434,125 Distributors (88%) received no payments from Herbalife during 2012. "
Since majority of Herbalife distributors joined without expectation of profit, joining Herbalife can NOT be entrepreneurship.

How about that OTHER company we mentioned at the beginning? They never did a survey, but as shown in their recent shift of language to "affiliate marketing", the "affiliates" are NOT expect to make any retail profit, and any one who don't "cycle" (i.e. made "sales") are considered "customers" for their uplines.

Well, you can read the income disclosure yourself, but let's just say that 78% of "affiliates" (which is only 30% of all participants) made less than 1600 a YEAR, and 70% of participants (246388) did not 'qualify' and thus are considered customers.

Customers are not expected to make money. That's why they are called CUSTOMERS.

But when a company started to reclassify distributors who did NOT meet sales goals (or recruited enough downlines with autoship commitments) as 'customers', it really makes you wonder: just how profitable is the business for the affiliates?

Thus, you should question the rhetoric that MLM is entrepreneurship. Two of the better known companies have clearly demonstrated they are NOT entrepreneurships for participants. Perhaps you should be skeptical of such claims, and ask how many "distributors" (or whatever term they use) actually expect to profit (and how many actually do).

BREAKING NEWS: Australia authorities sues Lyoness; alleges pyramid scheme and referral selling

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According to press release from ACCC (Australian Competition and Consumer Commission) has launched a lawsuit to shut down Lyoness and related entities from operating in Australia. According to ACCC: 
The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers. 
Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.
... 
“Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity," Mr Sims said. 
The ACCC also alleges that the conduct by Lyoness breached the ACL prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.
First hearing is set for September 16, 2014 in Australia. No word from Lyoness just yet.

(Thanks for BehindMLM and PatrickPretty for the heads-up)


Scam Alert: Bitcoin as disguise for Ponzi scheme

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EDITOR'S NOTE: I counted the difficulty wrong. It's FAR MORE HOPELESS than I ever imagined. See revision throughout the last half of the article.

In the past 6 or so months there has been a plethora of suspect Ponzi schemes that involves Bitcoin as its disguise. Some of them are basically pure HYIPs (BitClub Network, Bitcoin Zones), while others are existing schemes that decided to incorporate Bitcoin as part of its various schemes (GetEasy, Paymony) Here's description from one of them:
XXXXXXX costs $99 for your membership. 
You can then buy shares in their three mining pools for $500; $1,000; and $2,000 per share respectively. 
Every share you purchase will pay you daily payouts for 1,000 days.
This, gentleman, is an unregistered security, as defined by US law known as the Howey Test.

A security in the US is defined as:

  1. investment of money due to
  2. an expectation of profits arising from
  3. a common enterprise
  4. which depends solely on the efforts of a promoter or third party

You "buy shares", you expect "payouts", you buy into "pool" which is obviously a "common enterprise", and payout solely depends on some unknown "mining pool".

This is OBVIOUSLY an investment security, and it's ILLEGAL to offer in the US of A.

"Now wait a minute", I hear you ask... "Are you telling me Bitcoin mining is illegal?"

NO! You see, in a *typical* bitcoin mining operation, you contribute CPU POWER ONLY (think of it as labor or material), not actual money. For example, this is how you join the BitMinter pool:
1. Register
2.  start bitminter clientBitminter client: Hit the start button to start Bitminter client. You get bitcoins for the work it does. Works on Windows, Linux and Mac. Requires updated Java. Other clients: bfgminer, cgminer, etc. Connect to the pool at stratum+tcp://mint.bitminter.com:3333. As user name put your Bitminter user name, an underscore, then a worker name, e.g. DrHaribo_asic3. In case you have firewall issues, port 443 and 5050 (Stratum) are also available. There is no password check, any password is accepted.
3. Get a wallet to transfer your coins to. Make sure you secure your wallet.
Other actual MINING pools are the same: you join by contributing CPU / processing power, NOT actual money.

In fact, you can join one now, using your regular desktop PC. It won't do much compared to dedicated hardware that costs THOUSANDS of dollars, but you can do it for FREE (and your payout will be negligible).

Ah, but you say, but *maybe* they really are buying the hardware to do the mining with the money you gave them?

Then it'd be a stupid investment, and I'll explain to you why by crunching some numbers.




Let's take an example... That bull**** offer above... They allow you to buy into the pool in $500, $1000, or $2000 chunks. How much is the ROI? Good question.  They haven't revealed it. Let's do it for real now...

Currently, the best hardware for Bitcoin mining seem to be AntMiner S3+ (-B8) which costs... 0.58 BTC, and guarantees speed of 453 GH/s (some will go up to 500 but not guaranteed).

Current Bitcoin value as of this post is 499 USD, let's just call it $500. So 0.58 BTC is $289. Let's round it up... 7 of these AntMiner S3+'s, total processing throughput of 3.15 TeraHashes, or 3150 GH/s, okay?

But how much Bitcoin will you mine with that much power? According to BitcoinX chart...


That's how much money 1 GH/s is expected to generate in 24 hours... 0.01074 dollars. Just over a penny, and it's FALLING.

So 3150 GH/s will generate... $33.83 a day... and it'll be less every day.

Wait! We haven't counted electricity yet.

How much is average electricity in the US? According to Energy Information Agency (US Department of Energy), the average US cost is 0.1314 cents per kilowatt hours.

Okay, how much power does one of these AntMiner S3+ ? They said it's 355 Watt at the wall.

So 355*7*24 = That's about 60 kilowatts a day (dang) or about $8 dollars.

Wait, the profit is $33 a day, wow, 1/4 of the potential is eaten by electricity alone, and this is one of the MOST EFFICIENT rigs EVER.  Still, profit is profit. Eh?

---REVISED---

WRONG AGAIN. You see, BitCoin calculation difficulty increases by about 15% every 15 days or so. I'm using calculator at BitCoinWisdom

DateDifficultyRevenueProfitReturn
2014-4
9-2 – 9-12 (11 days)27428 M0.46060.4514-3.549
9-13 – 9-25 (24 days)31817 M0.40880.4007-3.148
9-26 – 10-8 (37 days)36907 M0.31950.3131-2.835
10-9 – 10-21 (50 days)42813 M0.24240.2376-2.597
10-22 – 11-3 (63 days)49663 M0.1760.1725-2.425
11-4 – 11-16 (76 days)57609 M0.11880.1164-2.308
11-17 – 11-29 (89 days)66827 M0.069450.06807-2.24
11-30 – 12-12 (102 days)77519 M0.026910.02638-2.214
12-13 – 12-25 (115 days)89922 M-0.00976-0.009565-2.223
Yes, bitcoin mining *may* be profitable if you have the best hardware... IF you own the hardware. After all, you may as well buy the miners yourself, run them yourself, make back your investment in about 2 months, and profit thereafter yourself rather than have the ROI end in 100 days by "buying" into their pool. AND never worry about your money going to some unknown people in danger of being shutdown by SEC or whatever their foreign equivalent agencies are.

And the bitcoin mining difficulty levels goes UP periodically when to make sure the coin are mined at a near-constant rate rather than someone figured out how to mine them more "efficiently" and flood the market with them. So your profit will steadily decrease.

--REVISED--
In fact, you NEVER even earn back the 2000 you used by buy the equipment with. According to the chart (fee free to go play with the numbers yourself), by day 110 you don't even make enough to power the rig, much less profit.
--REVISED--

But as an investor? Don't be crazy. Not only is this unregistered security, some of these schemes don't even tell you what pool are they using, how much processing capacity do they have, and stuff like that. In fact, there's no proof that they are doing ANY Bitcoin mining! (some, on the other hand, are actual mining pools)  The entire website could have been an "HYIP" site where they just talk about put money in, get money out for X days, had Bitcoin not been mentioned! In fact, swap out Bitcoin for something else and the site will be mostly the same! Also, they only pay you back for 1000 days when they should be paying you for LIFE if you're really buying a "share" of the processing power!

In fact, this is so potentially illegal, one of the foremost Bitcoin developers have came right out and said these "cloud mining pools" are likely ponzi schemes!

So if you want to play with Bitcoins, then buy a mining rig (or 7), or join a mining pool with your existing hardware.

--REVISED--
Consider this alternative angle... If they have the spare capacity... Why aren't *they* mining with it? Clearly, it's more profitable for them to "rent" you the capacity than to mine themselves. So how can YOU achieve ANY profit?
--REVISED--

Do NOT "buy" into cloud mining pools. GIVING people money in hopes of financial return is INVESTMENT, and that sort of stuff requires government approval, no matter what sort of fancy terms scammers slap on the thing. If you do, then don't cry when they take your money.

In Summary:
  • Bitcoin Mining: okay, but getting worse  logically makes no sense
  • Buying a Share of Pooled Bitcoin Mining: bad, potentially illegal offering of securities, likely Ponzi scheme according to Bitcoin experts. 

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

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

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

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

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

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

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

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

(First reported by BehindMLM)


Brazilian News Revealed Shell Companies Allegedly Used by TelexFree for Money Laundering
Coat of arms of Brazilian Federal Police
Coat of arms of Brazilian Federal Police
(Photo credit: Wikipedia)

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

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

You can read the Globo report here in Portuguese




Progress in TelexFree, Zeek, and WCM777 Ponzi schemes

One at a time... First Zeek

Zeek Rewards executive team Darryle Douglas, who had not been seen since a few months before Secret Service raided Zeek headquarters back in 2012, has been hit with a 2.2 million "default judgment" for not even bothering to defend himself.  That's about 2 million of the money he got, plus another 300K for interest. And the amount will continue to accrue interest until it's paid or settled.

A few months before the end of Zeek (August 2012) Douglas dropped out of sight, citing "health reasons". Before then, he had participated in several MLMs, and is believed to have joined Burks through his creation of "MyBidShack" penny auction website which later merged into Zeekler.

See http://behindmlm.com/companies/zeek-rewards/darryle-douglas-hit-with-2-2m-default-judgement/


In other news, "Phil""Rockefeller" Ming Xu has signed a consent to judgement that barred him from ever messing with securities, defraud anybody, etc. etc. He will serve no jail time, but he will have to cough up (disgorge) any ill-gotten gains (to be determined later).

However, in a recently discovered blog entry in Chinese, Ming Xu may not be done just yet. He claimed to have reached a settlement (well, I guess signing a judgement is sorta settlement) with SEC and his master plan shall continue, and he'll create a multi-national economic zone with some sort of new currency. Here's the translation of the first portion of the blogpost
谢谢弟兄姊妹的关心和祷告。
Thanks to all the brothers and sisters for the care and prayers.
前一段时间万通系列公司被美国政府调查,公司停顿。
Recently the Wangtong (Vantone / WCM) series of companies was investigated by the US government, and company was stopped.
目前我和美国证监会刚达成和解。
At the moment, I have reached a settlement with the American SEC
真相会大白。
The truth will be revealed.
真理使我们得自由。现在正在恢复。
The truth will make us free. Now is recovery.
我会站出来,承担我应付的责任,挽回大家损失。
I will step forward, and shoulder my responsibility that is mine, and recover everybody's losses.
我的计划就是把大家的投资损失转化成国度爱币,类似比特币系统,建立国度经济社区。
My plan is to turn everybody's investment losses into KingdomLoveCoin, similar to Bitcoin, and establish a Kingdom Economic Zone. 
That doesn't sound like he's done, does he?

And finally... TelexFree US case is so complicated Authorities Needs More time and wants to prosecute criminally first. The filing also revealed that TelexFree first got investigated by Homeland Security back in June 2013... probably around the same time they got frozen in Brazil. Six months later SEC launched its own separate investigation, until TelexFree filed for bankruptcy and forced both agencies to conduct the full raid fearing destruction of evidence and dissipation of assets.

This means the criminal case may not start trial until 2016... And that's assuming of neither party files for more delays.

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This concludes the update. It sure has been an interesting week! Stay tuned.


Due Diligence: Does the Business Model Make Sense To You? Are you sure?

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As the MLM Skeptic, one comes across all sorts of alleged businesses, and many of them makes sense as a business, but not so much as an affiliate/distributor. Some makes sense as an affiliate, but makes no sense as a business. Obviously, a real business have to make sense to both the business itself and to the affiliates/distributors. 

In a typical retail business, the business model is very simple: buy low, sell high, sell much. There is no separate model for the participants, as participant is the owner of the business. 

In a direct sale business, we have to examine both layers, and they should coincide. Business buy the inventory at low prices, then sends out the direct sales people to sell them at higher prices. The business model for the participants, the direct sales force, are the same: buy low, sell high, sell much. 

However, with newer technologies a variety of schemes have appeared to entice participants to put in money or sign up in order to reap benefits...  Yet its business model makes no sense upon closer examination. 

Remember, for a business to succeed, both its own business model and the business model of its participants must both be sensible AND profitable. 

Today, we shall examine one business whose business model makes no f***ing sense upon closer examination. 

Or to put it another way: If it's so profitable why are they paying you?


GetEasy is registered in Macau but seem to be ran out of Portugal. While they claim to operate everything from Cryptocurrency to GPS locators to Music Venues, they all the signs of running multiple Ponzi schemes. Today we will just look at the alleged business model of the "GetTracker" part of the business. 

GetEasy's compensation plan (i.e. participant business model) is pretty simple: 

1) Buy a participation pack (360, 720, or 1200 Euros)
2) Get paid every month (40, 100, 200 Euros depending on specific pack purchased)
3) But only if you manage to recruit two others who also bought participation packs



This is OBVIOUSLY a pyramid scheme / Ponzi scheme, yet some people seem to be enthralled by the promises of money they started defending the scheme, claiming that the company is SHARING its profits. 

But does the business model they claim GetTracker runs on actually make any sense? 

According to the participants, your money (360, 720, or 1200 Euros) actually buys certain number of GPS trackers for the company, which are then LEASED to actual users who pay a monthly fee, thus deriving the profit. The 1200 Euros package claims to have funded 21 trackers, one of which will be delivered to the participants. The other 20 is what allegedly generates the monthly pay of 200 Euros

Does that make any sense business wise? No. 

a) There is NO PROOF that the company actually have that many customers who wants to rent GPS trackers. 

Company has never provided any proof that the "extra" trackers were leased out to others. The only "proof" are from the extra GPS tracker received by the participants themselves, who then convinced themselves that the other money must have went to extra trackers, which must have went somewhere. They can't even consider the possibility that there are NO extra trackers and they've been lied to. 

b) The money payout is ridiculously high given estimated cost of trackers and monthly service. 

According to the largest plan, 1200 buys 21 trackers, which generates 200 Euros per month, or 10 per tracker per month. 


If that's the case, where is GetEasy making any profit? And if they are charging 20 euros a month for plans that others are charging 10 for, then where are they getting these customers? Esp. when other companies are just SELLING the devices outright? 

c) Why don't they just get a loan and BUY all the GPS trackers they want rather than share half or more of their profits? 

This is question none of the participants care to answer, yet the most important. A company does NOT want to carry debt if it can help it, esp. not such a debt that it had to pay 200% interest over 12 months, when it can go to a bank and get a loan for merely 15% interest (and that's an already outrageous rate). 

This is where participants mutter "you just don't understand" and walk away shaking their head, not realizing that it is THEY who don't understand the company business model... because it made no sense. 

Think about it, what sort of a stupid business would "crowdfund" their money by promising 200% interest over 12 months to its participants when they can get 15% interest (or less) over 12 months from a bank? 

Clearly, there is something very wrong here... Possibly fraud. And the obvious conclusion (Occam's razor) is it's a Ponzi scheme. 


Another example would be BitClub Network, which claims to take your money to buy cloud capacity for Bitcoin mining as part of a mining pool, and pays you for 1000 days. AND there are additional recruiting bonuses based on percentage of amount into the pool. 

The problem is Bitcoin mining is NOT profitable. The difficulty of Bitcoin mining goes up by about 15% every 16 or so days. I ran a scenario where I found that if I put in $2000 to buy the MOST efficient hardware available, I will not even make back what I put into it. I will make back about 900$, then by day 110 I won't even make back enough Bitcoins to pay for electricity to run the rig

The claimed business model is not feasible, and therefore must be a fraudulent disguise. The ONLY way this scheme would work is as a Ponzi scheme. 



In summary, when you examine an opportunity, you have to check it both for ITS OWN business model making sense, and the opportunity makes sense FOR YOU to participate in. 


BREAKING NEWS: TelexFree investigation in Colombia

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There has been little news out of Colombia after their Twitter-announced shutdown of WCM777 Ponzi that involved tweets from both the President AND the Police Chief. Now, the Superintendency of Companies in Colombia has apparently shut down TelexFree Colombia.

The Agency has published a public notice, based on the authority given in the financial emergency act of 2008 that given the government authority to investigate and close down scams in the wake of DMG and other pyramid schemes that almost destroyed the country's economy.

The public notice listed names and ID numbers of multiple individuals, with surnames of Lopez, Sierra, Moreno, and Vergel, with specific reference to "TelexFree Colombia"

A Colombian News article also pointed out that Colombia had recognized the existence of DMG-style pyramid/ponzi scheme in TelexFree.

It's also worth noting that TelxFree had been shut down in Brazil back in 2013, and is also shut down by Federal authorities in the US in 2014 after attempting to declare bankruptcy.

Thanks to PatrickPretty.com for the heads-up


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

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

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


Howard Kaplan claims he cannot be negligent regarding Zeek Rewards

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

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

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




Herbalife Wants to Settle Bostick Class-Action Lawsuit

Back in April 2013 Dana Bostick filed lawsuit against Herbalife, alleging racketeering, fraud, pyramid scheme, and other things against Herbalife. Herbalife then responded with variety of delaying tactics, including "motion for dismissal" which basically means "this lawsuit is not worthy of the court's time (it's bull****)".  US District judge Beverly Reid O'Connell disagreed in October 2013 and allowed the lawsuit to proceed. Since then, Bostick has managed to find several other victims who were willing to speak up against Herbalife, and now in September 2014 comes the news that Herbalife may be willing to pay them off (i.e. "settle"). However, it seems that Bostick wants to make a "class action settlement" that would cover 1.5 million people. Negotiation is still in progress.

It is worth noting that the top distributors in the lawsuit claimed to have lost at least $10000 dollars, and that Herbalife have inserted a clause that bars participants from suing the company or even joining existing lawsuits in 2013, requiring the participant to go through arbitration.

Keep in mind that with 1.5 million participants (people who joined Herbalife after 2009, but before the arbitration clause got inserted) even $1000 per participant would mean 1.5 BILLION dollars had to be paid out. THAT will sink Herbalife stock like the Titanic.

See BehindMLM for coverage. http://behindmlm.com/companies/herbalife/herbalife-looking-to-settle-bostick-class-action-2/


Serial Ponzi Participant Faith Sloan Claims to be Poor, keeps joining more possible Ponzi schemes

Those who track the shady world of possible Ponzi schemes (endless chain recruitment money games) should be no stranger to the name of Faith Sloan... Who had a hand in most of the big name Ponzi schemes in recent history, esp. TelexFree.  She's under an asset freeze order after TelexFree due to potential asset dissipation, as she was one of the top promoters of the scheme and net winner (to the tune of over a million) and specifically named in the SEC lawsuit.

Recently she filed a motion claiming financial difficulty with the court pleading for partial release of her assets to pay her lawyer. However, on social media, she's busy promoting Dubli (with a trip to Dubai, where she appeared on stage) and RE24/7/365 (where alleged screenshots of her backoffice leaked showing she should have made thousands through recruitment), both of which are suspect recruitment-based schemes.

See BehindMLM for details: http://behindmlm.com/companies/telexfree/faith-sloan-unable-to-support-herself-financially/





BREAKING NEWS: Zhunrize closed as $100 million ponzi/pyramid scheme by SEC

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Breaking news: Zhunrize, an alleged e-commerce platform that was pitched as "Internet store you can own" for $3000 a pop has been closed by SEC as a pyramid scheme where joiners are encouraged to recruit more joiners and get paid if they do so.

SEC has obtained a full Federal money freeze order from court in Georgia and have frozen all assets belonging to Zhunrize, and cited stats of up to 70000 victims who handed over 105 million dollars.

http://www.courthousenews.com/2014/09/23/71668.htm

Behind MLM had previously done a review of Zhunrize where it concluded this can only be a ponzi scheme. I have provided additional comment that this is just "Skybiz" pyramid scheme reinvented for 21st century... using the same lure: ecommerce.

http://behindmlm.com/companies/zhunrize-review-a-3000-e-commerce-platform

This marks the THIRD major Ponzi scheme shut down in 2014 ... TelexFree, WCM777, AND now Zhunrize.

BREAKING NEWS: SEC shuts down eAdGear (GoFunPlaces / GoFunRewards)

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According to latest article on BehindMLM, eAdGear, the folks behind GoFunPlaces / GoFunRewwards are done... shut by SEC, with help of FBI, and authorities in Hong Kong, China, Canada, and United Kingdom.

This would mark the FOURTH Ponzi shut by SEC in this year alone (WCM, Zhunrize, and TelexFree)

See http://behindmlm.com/companies/sec-shuts-down-eadgear-gofunplaces-gofunrewards/


BREAKING NEWS: Massachussetts calls iFreeX "rebranded TelexFree fraud"

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According to Massachusetts Securities Division, the first agency to pound on TelexFree fraud, iFreeX is a reload scam targeting TelexFree victims. It even has the same ponzi pimp: Sann Rodrigues (who's actually "Sanderley Rodrigues de Vasconcelos")  People who have verifiable information are urged to call MSD at 1-800-269-5428 to assist in the investigation.

http://patrickpretty.com/2014/09/30/urgent-bulletin-moving-massachusetts-issues-warning-on-ifreex-scheme-ifreex-appears-to-be-nothing-more-than-a-rebranded-telexfree-fraud-for-mobile-phones/

BREAKING NEWS: Moolah goes bust, CEO missing with 1.5M worth of DogeCoins; other cryptocoin scams shut

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According to _The Guardian_, Moolah, a cryptocurrency exchange that specialized in Dogecoin (and even sponsored a car in NASCAR racing series), headed by "Alex Green", had apparently gone bust and all the customer funds (believed to be 1.4 to 1.5 million pounds?) are gone.

Alex Green allegedly told everybody that he was previously named "Ryan Kennedy" after running several business into the ground, including Flirble (a web hosting service that ran only 2 months) and Lemon (a bitcoin mining firm that shut down in 2013), according to _The Guardian_.  And because this company is also done, he's taking the money and he's gonna run.

In July 2014 "Green" and his company Moolah bought a competitor "Mintpal" after Mintpal was hacked and lost $2M worth of bitcoins. However, nobody had even apparently saw "Green" in person outside of Moolah's offices.



See _The Guardian Coverage_

http://www.theguardian.com/technology/2014/oct/23/british-serial-entrepreneur-missing-bitcoin-apparently-stolen?CMP=twt_gu

The risk in virtual cryptocurrencies are unacceptably high to "normal" investors. You should avoid any and all schemes that purports to "invest" in such currencies, esp. if you're buying "mining contracts" or in firms that allegedly does so. They are likely to be Ponzi schemes.

The Consumer Finance Protection Bureau, and official US government agency, urges any victims of such fraud in the US (if the firm's in the US, or the victims' in the US) to report their problems. For those who have not been victimized, please gain better understanding

http://www.consumerfinance.gov/blog/consumer-advisory-virtual-currencies-and-what-you-should-know-about-them/

A different company, called BitCoin-Trader.Biz, had also gone bust a week ago, claiming they got hacked and that's it for them. It is actually an HYIP (i.e. Ponzi scheme)

https://www.cryptocoinsnews.com/bitcoin-trader-goes-rogue-hyip-exposed/

BREAKING NEWS: Massachusetts filed civil fraud charges against Emgoldex "Team USA"

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Massachusettssecurities division (MSD) has filed civil fraud charges against "Emgoldex Team USA" and its four members of selling unregistered securities, pyramid scheme, and general public fraud. The lawsuit can be viewed here:

http://www.sec.state.ma.us/sct/current/sctemgoldex/EmGoldex-et-al-Complaint-Docket-No-2014-0056.pdf

If you promote an alleged scam, you can be targeted by your local regulators, regardless of whether you "own" the scam or not. "Emgoldex Team USA" and the four members are certainly not owners, but if that's what local authorities can get their hands on, then the local authorities will do so.

Thanks to BehindMLM and PatrickPretty for the headsup.


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