Australian Lyoness affiliate complaints revealed
On the eve of the ACCC’s lawsuit against Lyoness being heard in court, ABC News Australia have interviewed some of the affiliates who’ve lost money in the scheme.
Unfulfilled promises, unrealistic AU maturity projections and using well-known merchant names to lure new AU investors in is apparently all in a days work for those sitting at the top of Lyoness Australia.
Three Lyoness affiliates were interviewed by ABC News, as well as Tom Godfrey from local consumer group Choice.
Affiliates Tom Zeaiter and Paul Maait share the all too familiar story of new recruits being coaxed into signing up to Lyoness via investment in account units:
Tony Zeaiter and Paul Maait each invested $3,000 in Lyoness to become premium members of the Australian arm of the company.
“When it launched in Australia, they said ‘You’ll have a minimum of 500 people under you, and you’ll get a percentage of whatever these people do’,” Mr Maait told the ABC.
“[They told us] ‘You don’t have to go out and sell, you don’t have to go out and recruit people. We will give you 500 people and, you know, you’ve really got it made if you get in at this time’.”
Exactly who gave the presentation is unclear but if it was Lyoness themselves, the consequences aren’t likely to play out pretty in court.
Mr Maait said both he and Mr Zeaiter were impressed with what they saw at the presentation about the company in Sydney.
“There was literally thousands upon thousands of people joining and when they told us like Woolworths were able to get six million people to join their rewards system, it was quite believable that this could actually happen,” he said.
But partnerships with major retailers such as Woolworths and Harvey Norman did not eventuate.
As part of their recruitment efforts (and engaging in discussion about the company), Lyoness affiliates regularly name-drop well-known merchants.
The usual spiel is that they are just about ready to jump on board, that Lyoness have “partnered” with the company in question (when in actuality all they did was purchase gift cards), or just plain old attempts at legitimacy by association (“why would (insert reputable well-known company name here) get involved if Lyoness was a scam?).
“They haven’t been able to deliver on the promises that they made to people like us in order for us to work hard and put the effort in and get some return on the money that we put in,” Mr Maait said.
“And I don’t know of anyone else who at the time who was involved who has actually made any gain of any kind out of it.”
The men hope the ACCC’s court action could help them to eventually get their money back.
It’s likely that the only people who made money off of Maait and Zeaiter’s initial investment are the Lyoness affiliates they (and purportedly thousands upon thousands of others) signed up under.
Affiliate Grant Powell meanwhile shares his story after he invested in emerging Lyoness markets.
Australian businessman Grant Powell bought a premium membership for himself and two others, and invested in the company to help start the business in Asia and the Middle East.
He said that investment has not paid off.
Lyoness regularly entice existing affiliates to invest in new markets they wish to break into, in exchange for offering them lucrative positions at the top of local markets.
The idea is that a bunch of local investors get on board and invest in account units too, thus paying dividends for the existing members who initially invested in the new market.
If Lyoness fail to attract a significant number of new investors however (read: enough to perpetuate the scheme at a local level), those who invested in the new market lose out.
Their invested positions stall, regardless of how much shopping does or doesn’t take place.
“They’ve done wrong by so many people, so many people that were really struggling and really hoped it would ease their debt burden, they’ve just lost more money,” he told the ABC.
“They’re crooks, they need to be pulled into line.”
Mr Powell said he tried complaining to the company, without success.
“Knowing what I know now and looking back it was, I think that it was definitely a pyramid scheme,” he said.
Mr Powell also hoped the court case would help him get his money back.
Exactly how many affiliate complaints the ACCC received prior to launching their investigation into Lyoness has not been publicly disclosed.
Tom Godfrey from consumer group Choice said people should be wary of any business that relies on so-called “referral selling”.
“I think it’s deeply concerning that there’s a company out there that’s relying on individuals to essentially enter a scheme, to drive money into a scheme to reward people at the top of what some are alleging is a pyramid,” Mr Godfrey said.
“Referral selling is where you as an individual get money from other people signing up to a scheme. Basically, no products or services are sold – it’s literally about pouring more people in.”
At the center of the Lyoness Ponzi scheme is the fact that an affiliate invests money directly with Lyoness (account units). After enough new investments have been made, they then collect a >100% ROI.
No actual shopping takes place.
Despite this, Lyoness maintain that
benefits were exclusively generated by “shopping activities within the Lyoness community”.
“Members receive benefits when they shop, whether they introduce other members or not,” the company said.
For reasons unknown, Lyoness simply refuse the acknowledge the inherent accounting unit Ponzi scheme embedded into the company’s compensation plan.
Here’s hoping the Judge hearing the case won’t be so willing to gloss over the finer details of Lyoness’ business model. In particular, how the bulk of money flows in and out of the accounting unit scheme.
As per ABC News,
The Australian Competition and Consumer Commission (ACCC) will tomorrow begin its case against Lyoness, alleging it is operating a pyramid scheme.