Bid With Integrity served cease and desist, fined $50,000
Bid With Integrity launched in late 2012 and sought to capture what remained of the MLM penny auction niche at the time.
The entire focus of Bid With Integrity appears to be signing up to the company on a paid membership, signing up others on monthly paid memberships and earning money on their monthly fees via the 20×3 matrix.
After it launched, Bid With Integrity never really went anywhere. The company website is still up, however traffic statistics reveal the opportunity has likely stalled.
The scheme didn’t go unnoticed by the South Carolina Securities Division though who, albeit somewhat late, last Friday served the company with a cease and desist.
Authorized by the Securities Commissioner of South Carolina, the Division’s notice names BidWithIntegrity, BuyWithIntegrity and Shawn Wheeland (CEO and President) as respondents.
The Division filed the notice after they ‘received information regarding alleged securities-related activities of Shawn M. Wheeland, BuyWithIntegrity.com and BidWithIntegrity.com (collectively the Respondents)‘, opened ‘an investigation to determine whether the Respondents had violated, were violating or were about to violate the South Carolina Uniform Securities Act of 2005′, and ‘determined that evidence exists to support the‘ issuing of a cease and desist.
On the Bid With Integrity website, here’s how Wheeland (right) describes himself:
Once you meet Shawn, you realize he was born for Networking. His charisma, desire to help others and natural sales acumen is legendary in our industry.
After 20 years of developing leadership within the Direct Sales industry, he is introducing a truly unique opportunity with BWI.
Meeting someone who changes your life can take a while. Often times, people can go years between moments when they say, “My life was changed when I met [insert name].”
Shawn is one of those people that make you take account for your life and make you realize you can be better… you can do better.
What isn’t revealed is that one year before the launch of BWI, Wheeland was served a cease and desist ‘related to his operation of an entity called JGO Financial‘.
You won’t find mention of JGO anywhere on the Bid With Integrity website, but in 2011 South Carolina issued Wheeland with a related cease and desist order.
The Order, which became final by operation of law, directed Wheeland and JGO to cease and desist operating as an unregistered investment advisor and offering and selling unregistered securities.
A year later and in the wake of what was the biggest MLM Ponzi scheme bust at the time, it seems Wheeland couldn’t resist the temptation of once again getting into the unregistered securities scene.
Subsequent to the JGO scheme, Wheeland devised BWI as an alleged online penny auction site where customers could bid on “real life, practical items”.
In order to the fund the operations of BWI, Wheeland offered and sold so-called “Master Distributorships”.
The Master Distributorships offered and sold by (Wheeland) constitute both stock and investment contracts and are therefore securities as defined by the Act.
Founder positions (or whatever name a company comes up with for them), are often unregistered securities in disguise. A company charges a fee for a position that offers the purchaser some kind of ongoing reward, with the idea being that over time the purchaser will recover their initial fee and turn a profit.
In the case of Bid With Integrity,
Each Master Distributorship entitled its purchaser to “a one-four hundreth undivided interest” in BWI, and “one-four hundreth of the commissions and bonuses” generated by BWI, and that such “commissions and bonuses… shall be divided among [investors] according to their respective ownership interests.”
Naturally the more spent on these positions, the larger an investors “respective ownership interest”.
Retail activity in MLM penny auctions is notoriously absent, so naturally any commissions and bonuses were likely to be close to 100% affiliate-sourced revenue.
That isn’t the issue here though. The problem is, quite clearly, Wheeland, through these Master Distributorships, was offering unregistered securities (again).
Wheeland offered and sold at least twenty-six Master Distributorships to investors in and outside of South Carolina.
However, neither Wheeland nor the Master Distributorships were registered with the United States Securities and Exchange Commission, with the Division, or exempt from registration.
In addition to the act of offering unregistered securities itself, the Division notes that, in making the offering, Wheeland additionally ‘omitted to disclose numerous material facts’ related to the offering.
In particular, Wheeland omitted the disclosure
- of the (previous) Order, and its direction to Wheeland to cease and desist from offering and selling unregistered securities
- that the Master Distributorships could not legally be offered for sale; and
- of the significant contingent liability faced by the Respondents in light of their failure to register the Master Distributorships and the lack of applicability of any exemption from registration.
In a nutshell, Wheeland was up to his old tricks and had failed to inform any of his new investors of his past activities or what it would mean if he was caught out again.
For his part in violating South Carolina securities law for a second time, Wheeland has been ordered to ‘pay a civil penalty in the amount of $40,000‘.
Wheeland has the option to request a hearing to clear his name within 30 days of the order (which is dated 31st October, 2014), but it is unclear at this stage whether he will exercise this option.
Wheeland did not contest the previous JGO cease and desist order. He was ordered to pay a $10,000 fine and $5000 towards the ‘reimbursement of (the) costs of the investigation‘.
Should Wheeland request a hearing and lose, he faces a fine of up to $10,000 for each violation of the Act and legal costs.
I suspect the reason the fine might seem on the lesser side is that BWI as an MLM opportunity was a flop.
From the BWI website;
Shawn has decided it’s truly time. Time to develop a company with a long term vision.
“I know the industry is full of companies with a ‘get rich’ mentality… Trust me, I’ve worked with most of them.
I realize that people are tired of all the moving around. It’s time they found a home.”
So much for bidding with integrity then…