MLM Absurdities: Why Do New MLM Businesses Just End Up Cloning Old Scams? (Is Lucrazon a scam?)

Lucrazon logo via CrunchBase

In studying network marketing and its illegal cousins, the pyramid schemes and the Ponzi schemes, it is sometimes rather disheartening to see that some people just end up reinventing old scams, or are treading so close they may as well as claimed to have reinvented the wheel. Here's one of those cliche quotes to throw around:

Those who cannot remember the past are condemned to repeat it. -- George Santayana

Perhaps in the modern times, it's necessary to add a corollary:

Those who cannot research the past are doomed to repeat it

And today, we shall examine one such biz... a seemingly very upright one... except it seem to be a business model that's a copy of a scam that was closed by the FTC 13 years ago.

That business is called Lucrazon.





Lucrazon, headed by Alex (aka "Alexy") Pitt, claims to be a merchant ecommerce solution provider, and indeed, Mr. Pitt claim to have worked for a major solution provider of such services. According to Lucrazon's own website, what you pay for is:

Lucrazon maintains a payment gateway that provides network connectivity, technology and security for a payment platform that allows its customers to access end-to-end electronic payment processing solutions. 

It provides a managed technology and security infrastructure, payment applications, web services, and connections to the TSYS payment network. 

The Lucrazon platform allows its customers to offer credit and debit card processing, ACH processing, gift card programs, electronic check processing services, secure hosted virtual terminal, hosted secure payment page, reporting, web services, and support for brand terminals and devices for payment processing.

Translation: replicated e-store website with shopping cart and payment processing. 

How much do you pay? $1795 (discounted to $1000 until end of year), and $99 a month.

IMHO, this is overpriced when compared to similar services such as Shopify.com, with plans starting as low as $14.95 a month and no fee upfront, but that's not the point of this analysis. It's this NEXT step that can potentially get Lucrazon into trouble.

You see, Lucrazon allows "stacking"... as you can buy up to 15 websites. Stacking for what you ask? Stacking so you can get paid by recruiting others.

Lucrazon pays its members (who had already purchased up to 15 websites / positions) through multiple ways, al all of them had to do with signing up even MORE affiliates, except "merchant commission" (i.e. you get 50% of what Lucrazon charges merchants per transaction)

There's the "20% referral commission, plus 3% up to 6 levels down" on recruited affiliates, PLUS binary commission (another 6% if you get two recruits to "pair up", thus binary).

You can read a review by Oz over on BehindMLM, and their "community relations manager"rebuttal.

When I first saw this, I thought... this sounded familiar, but I can't remember where I've seen it. It wasn't until Christmas Day, when I looked over the topic again, that I recalled the case... Skybiz.

Skybiz started in 1998, when it promised riches to the masses to join the plethora of companies selling things online... if they buy one or more online storefronts, and also recruit yet MORE people who want to do the same thing. In other words, you earn through recruiting people, not through selling stuff through your online stores. The company, based in Tulsa Oklahoma, spread and was outlawed in multiple continents (North America, Australia, Europe, Asia, and Africa). FTC finally slammed it shut in 2001, and appointed a receiver to sell off what it can after seizure of assets and repay those who lost money... with cooperation from police all over the world.

MLM Attorney Jeffrey Babener wrote about Skybiz:

In particular, it is the business model in which distributors are encouraged to purchase multiple replicating web sites, and then are encouraged to cause others to buy multiple replicating web sites, all of which are used primarily for recruiting rather than e-commerce, that is causing the greatest concern.

This describes Lucrazon PERFECTLY: multiple replicating websites (up to 15), encouraged to recruit others (all the payments except once are tied to recruitment) to also buy multiple replicating websites, all of which are used for recruiting rather than e-commerce.

I don't know Alex Pitt, so I don't know whether he sought to recreate Skybiz, or even he had heard of Skybiz before starting Lucrazon. But he had effectively reinvented the Skybiz scam, 13 years after it was closed.

The biggest achievement Lucrazon did thus far is adding a former Small Business Administration head, Mr. Barreto, to their board of directors (see below for related links). But that doesn't really prove anything, except more ammo for people who insist on using "legitimacy through association" bad argument.

The fact that Lucrazon seem to trigger 7 out of 8 warning signs on Mr. Babener's "Dot Scam" article is a major problem.

Lucrazon may not be intended as a scam, but it is effectively a clone of a PROVEN scam. Thus, you should not even get CLOSE to it until proven otherwise.

And "Alex Pitt" needs to consult a lawyer ASAP.