To date not one revenue-sharing MLM company has managed to generate any significant revenue from retail customers. Thus the common Achilles’ heel that holds true in all of them is that if affiliates investment slows down, the daily ROI paid out to earlier investors starts to drop.

Despite the facade of “external revenue sources” that are never publicly revealed and other smokescreens put up to mask the reliance on affiliate money, when the daily ROI drops, those familiar with how your typical affiliate funded investment scheme do what usually occurs in this situation.

They start to withdraw as much funds out of the scheme as they can.

Typically a reduced ROI signals the beginning of the end of the company and with new affiliate money already reduced, it propels it towards the inevitable “we don’t have enough money to pay out our affiliates” conclusion.

Over the last few days we’ve been watching this exact situation develop over AddWallet, with a log of the daily ROI paid out to affiliates showing a sharp decline from the 23rd of May (figures sourced from an AddWallet affiliate):

20-May-13: 1.21%
21-May-13: 1.32%
22-May-13: 1.49%
23-May-13: 0.41%
24-May-13: 0.70%
25-May-13: 0.50%

Prior to May 23rd AddWallet was paying out affiliates a daily ROI between 1.09% and 1.67%.

With Ponzi schemes what usually happens in these situations is the emergence of excuses, with reasons such as “our site is being DDOS’ed”, “aliens abducted our founder”, “hackers hacked our site”, “a dog ate our compensation plan” etc. being trotted out.

AddWallet is no different, with AddWallet blaming the plunging ROI on a “large attack”:

As most of you know we have had an unusually low profit share for the past few days. This was due to a large attack on our servers and slowed revenues of the company. Once all the servers are fully functional then revenues will begin going up once again.

This will correct itself over the next couple of days and everyone will see restored activity. We are an online business and we will experience such things from time to time so please, just be prepared for it and don’t panic.

We do have a talented group of people behind the scenes that help us through online attacks, so know that nothing will be permanent.

Some AddWallet affiliates weren’t reassured by this however, with a few contacting VP of Sales and Marketing Brandon Bradshaw personally. Something Bradshaw wasn’t too happy about:

[18:50] All of our new members if you’re on the call, pardon me, you may just want to not listen to what I have to say (laughter) cuz I’m kinda gunna go on a rant.

Guys I usually come on the call to give you updates, housekeeping items, to talk about technical issues, exciting features… none of that tonight.

Um, the one thing I will make a statement about is the low payout today and, I’m gunna get to that in a minute.

Other than that, I want to talk about feelings, right? My feelings, your feelings, our feelings. You may laugh when I say this but I’m not laughing – and I’m gunna tell you why.

[19:37] Last night, in the middle of the night my phone started going off like crazy. Text messages, emails, calls you name it.

And guess why? All because members, some members were upset and mad actually about the low revenue-share we paid out overnight.

Okay guys, let me ask you something. Do you know what revenue-share is? Do you know what it means? I never thought I would be on a call explaining it, but I am.

Revenue-sharing means that we are giving you a portion of our revenue.

So guess what? When revenue is down, so are your payments.

Now most of you are used to seeing higher payments and I understand that when you see a small one like that, you think something is terribly wrong. The sky is falling, AddWallet’s going out of business… so I’ll tell you what was wrong.

We were under a massive, massive company wide DDOS (distributed denial of service) attack. What that means is we didn’t make any money. We were frozen.

We were unable to make money (laughter). We still kept the site up. So, we did not get paid.

But guess what? We still paid you. You not only got paid your weekly commissions but, you also got retail profit pool.

So why am I upset? I’m upset because of how the situation was handled by some of our members.

Most of you know that I’m a very laid back, easy going, fun, smiling type of guy. But what I found in my email this morning and what I listened to on the phone today was so insulting and downright rude, that it took all of my motivation away to even open any more emails for the rest of the day.

You know, it was everything I could do to keep answering phonecalls. You know I know I have a job to do and this has never happened to me before.

So guys, I never thought I would have to get on a call and spell it out like this:

When you start a business, you have expenses. When you start some days you have great days, some days you have bad days.

You guys right now are in the best position possible, because you guys don’t carry the responsibility and expenses that we carry. But you have to understand how our revenue-sharing program works.

When there are bad days in the business, it will reflect in your payout.

And guess what? If you don’t feel you can handle this, if you can’t live with this type of business model – then this is not the program for you.

I have said this before and I will say this again. There are so many awesome and amazing programs out there, find the right one.

[22:38] If you can’t handle the ups and downs of a revenue-share program, you have to move on. I will not get upset, I promise.

What I do get upset about is being used as a punching bag and being threatened in emails and help-desk tickets. That is where this stops.

[23:33] When I get emails that tell me how to run this business, and when I get emails that tell me that the AddWallet world is going under just because one day the revenue-share has been down – Guys, that is when I draw the line and say, “This has to stop”.

Despite Bradshaw’s request that affiliates not happy with the business model “move on” (set their cash withdrawal to the maximum with 0% reinvestment), some AddWallet affiliates do not share his views and have urged their fellow affiliates to now withdraw and  keep their money in the “program”:

The AddWallet earnings have been down two days in a row due to the hacking attack to it’s (sic) and other companies servers (Ozedit: Liberty Reserve?).

This caused Brandon (Vice President) of operations to shut down Tuesday night. We were all given however a half of a percent for the problem by the company itself, their own pockets.

However, horrible emails went out to Brandon based on common fears that we have of this opportunity or, program, going down, this is not true, but if you freak out and start taking too much as it builds, it just might.

For those who are putting their commission up to 75%, stop. I have yet to do that and will not jump from fear. I am here to make money, not jump at every sign of failure.

Money we can burn, friends we can’t, and if you continue, you just might.

You forget, that new business is coming in fast and the repurchasing is also a part of the building process, if you freak out and start taking that much before you can really take advantage of the system, you hurt everyone.

I do not mean to sound upset, I am not…but I would be if a whole bunch of fear mongering destroyed something so simple for all of us…so stop. Tell your down lines to stop.

I spoke with Brandon and other high ups, and returns will be low until people stop, relax, and resume with some simple common sense.

Your credits are at more risk if this is kept up, so please let your downline know…

Despite AddWallet’s insistence that they source revenue from “external sources”, it seems affiliates aren’t buying it and are urging their downlines to keep as much of their money in the system as possible (via daily re-investment).

Mind you, it’s worth keeping in mind that if one was trying to get as much money out of the system as possible, ethics aside, urging others to keep their money in the system would serve your own interests nicely (less affiliates pulling their money out = more money for you).

What’s interesting to note is the abrupt timing of all of this. No doubt those who follow the industry are aware by now of the shut down of Liberty Reserve by US and Costa Rican authorities. This occurred over the last few days and with Liberty Reserve accounts being inaccessible a few days prior to the shutdown yesterday, coincides remarkably neatly with the problems AddWallet are having.

That said it is noted that AddWallet do not pay out or accept money from affiliates via Liberty Reserve, however whether the company itself stores revenue with Liberty Reserve is not known.

The disappearing of a reserve account held with Liberty Reserve would explain the sudden drop of revenue-sharing percentage over the past few days.

Another possibility is the residual effect the shutdown of Liberty Reserve might be having on a large proportion of AddWallet affiliates. As Bradshaw is only now finding out, alot of the seedier side of the MLM industry participate in these programs, with a good number of them having funds spread out across a number of schemes and payment processors.

The disappearance of funds from Liberty Reserve will undoubtedly have a residual effect on the flow of funds between payment processors and the various companies that use them over the next few weeks.

It’s also worth noting that at the time of the recorded conference call (May 24th), nobody knew Liberty Reserve had been shut down, with a few HYIP tracker blogs claiming the processor was down for maintenance.

Again looking at the timing of AddWallet’s revenue-sharing percentage drop, it wouldn’t be all that far-fetched to hypothesise that at the time, Bradshaw believed Liberty Reserve was going to return over the next few days and things would get back to normal.

Another recent email sent out by AddWallet to its affiliates certainly suggests as much:

As most of you know we have had an unusually low profit share for the past few days. This was due to a large attack on our servers and slowed revenues of the company. Once all the servers are fully functional then revenues will begin going up once again.

This will correct itself over the next couple of days and everyone will see restored activity.

Now that we know that Liberty Reserve is gone for good and with AddWallet’s daily ROI remaining well below previous averages, the “our servers got DDOS’ed” is starting to wear thin.

AddWallet’s next daily ROI is due out in a few hours… Stay tuned.