Lyconet: Separating AU investment from merchants?
Up until now you had to invest a lot of time building your international shopping network. Networking and making appointments to introduce Lyoness took a lot of effort as well.
These networking contacts had to be updated while taking care of your existing members. This was very time-consuming.
Well, that’s why we’ve developed MyLyconet.
-Lyconet marketing video, official Lyconet website
If one was to take Lyoness’ Lyconet marketing video and website at face value, it’s presented as a backoffice redesign to simplify the network marketing arm of the business opportunity.
Ensure more growth, team-spirit, strength and sustainability! With this many services, MyLyconet is the perfect tool in consistently helping you, expand your Shopping Network.
Be even more efficient and effective in taking advantage of your full Network potential!
What Lyoness don’t tell you though is that, not surprisingly, there’s a bit more to the story.
As reported by Austrian newspaper Kleine Zeitung on February 4th,
On the criminal side (of things), Lyoness has dealt with an investigation into the business for more than a year. The Economic and Corruption Prosecutor’s Office (WKSTA) has cast suspicion of Lyoness running a fraudulent Ponzi scheme; allegations Lyoness has consistently and vehemently rejected.
Confronted with (ongoing) criminal investigations, Lyoness has separated their shopping network from their sales. Over the weekend the new name Lyconet was officially presented.
Turns out that while Lyconet might make it a bit easier for Lyoness affiliates to manage their downlines, the separation is seen to be a move to protect the merchant network from lawsuits filed by disgruntled affiliates:
(The) important part (of the separation) is the elimination of the sales channel (within Lyoness), from which the company has faced lawsuits from disgruntled members who want their money back.
Lyoness wanted to make clear that this was a “multi-brand strategy,” entailing a “Business-2-Business” backend with “Lyconet” presented to the outside world, company spokesman Mathias Vorbach said Wednesday. “Lyoness” is thus only the consumer brand – “where it purely comes to shopping, the customer cards and customer loyalty for the retailer”.
At this point you might be wondering why affiliates are filing lawsuits against Lyoness if it’s free to join and based on shopping with third-party merchants. What money are they demanding Lyoness pay them back?
That’d be their investment into the Lyoness accounting unit investment scheme. According to Lyoness CEO Herbert Freidl, getting affiliates to invest in account unit “positions”, on the promise of a >100% ROI if enough subsequent positions are then bought by other affiliates, is the core of Lyoness’ MLM business opportunity.
Problems arise though when affiliates invest in units, and not enough new units are invested in thereafter. Under this scenario a Lyoness affiliate’s money remains in limbo, and that’s why affiliates are filing lawsuits demanding their money back.
Having used their money to pay off earlier accounting unit investors, this puts Lyoness in a bit of a dilemma. Thus the company is proposing to pay off affiliates with vouchers.
Lyoness has for several months been trying to do away with claims from “legacy” (affiliates). These are affiliates who want a refund of their paid-in capital and, after involving a lawyer, are then paid out by the company.
(Lyoness is proposing that) these affiliates should get back 75 percent of their investment in vouchers or promotional campaigns.
A few dozen affiliates had filed lawsuits against Lyoness. Viennese lawyer Eric Breiteneder has so far obtained seven judgments against the company, (with) two of them still not resolved.
Except for a Klagszurückweisung, Breiteneder has won all cases filed.
And there it is. The real reason behind the Lyconet launch.
The “official fanpage” for Lyoness Canada on Facebook puts it even more succinctly, stating that the ‘split will create stability legally and protect the Lyoness brand‘.
Protect the Lyoness brand (Freidl’s money), and sell Lyconet to the affiliates as a backoffice upgrade.
Lyoness appear to be retaining their MLM business model and compensation plan, so despite the backoffice changes, things are likely to remain just as complicated for affiliates. This is mostly due to the fact that in presenting Lyoness as a business opportunity, most of the time affiliate’s have to skirt the obvious investment-like nature of the pre-loading of account units.
No amount of backoffice tweaking and reorganization will change that.
Lyconet is also being launched as an additional revenue stream for the company, costing affiliates 25 EUR a month. I believe this is primarily due to the previous lack of separation of Lyoness affiliates and non-affiliate shoppers.
What will be interesting is whether or not Lyoness will then disclose the number of non-affiliate shoppers and monthly fee paying affiliates. While they’re at it it’d also be great to see a breakdown of how many accounting units are generated company-wide via shopping versus those directly invested in by affiliates.
Yeah, one can dream.
Update 16th December 2014 – After finally tracking down a copy of the Lyconet US compensation plan, I’ve now published a review of the Lyconet MLM business opportunity.
The Norwegian Gaming Board (Lotteritilsynet) may potentially be interested in this article.
Apparently this also includes hiring many cheerleader consultants, eh?
I don’t understand how Lyoness is able to get away with the “booking” program. Here is what one of the top USA distributors sent out recently to his downline:
The distributors “invest” tens of thousands of dollars and passively received a return on that investment. They are touting a 6-7 times return over the next 5 years.
What makes this any different than the Zeek Rewards deal?
Better for the regulators to shut them down with, perhaps.
There’s a difference in the PRIMARY FUNCTION.
Zeek paid a false positive ROI (not supported by money), 1.5% per day over 90 days, “reinvest 80:20”. The investments were “pooled” into a huge “pool of VIP points”, supported by a much smaller “pool of money”.
* Zeek: “You’ll get paid to advertise, you don’t need to recruit anyone or sell anything to earn money, you can simply post 1 ad per day to get paid”.
Lyoness will only pay a negative ROI if you don’t recruit anyone (minimum 4 directly recruited). You will primarily be rewarded for recruitment, from investments made by people you have recruited directly or indirectly. The investments are organized in matrice systems rather than in pools.
* Lyoness is actually paying out LESS to the individual investor than it gets in from investments. Money is being distributed upwards in the system, rather than being paid out to the individual investor.
@ M_Norway
I should have explained my question and point further (What makes this any different than the Zeek Rewards deal?)
I was referring to the “Passive Income” approach.
In other words, just make a one-time investment of $10,000 and then sit back and make money.
I get your point though about Primary Function. Keep in mind, I am ONLY referring to the BOOKING PROGRAM. From what I understand, in order to earn income/profits, all you have to do is complete the paperwork and send them your money.
How is this any different from the Flexkom model? How can that be legal in the USA?
I see Oz covers the Accounting Unit concept in his review but I didn’t find anything about the Booking Program. I am not saying it is illegal or legal. But their Booking Program does appear to be “similar” (as explained above) to that of the Flexkom model.
ZEEK
In ZeekRewards, the passive income was calculated from the MONEY you had invested / reinvested, the VIP Profit Points. You could compound your investment by reinvesting the payouts.
People could clearly make a positive ROI without recruiting anyone or selling anything, without actually doing any work (of some significance).
In Lyoness, the income is calculated from the Accounting Units bought by yourself (passive), and bought by people you have RECRUITED directly or indirectly (not passive).
The most significant part of the income in Lyoness will come from the recruitment, only a tiny fraction will come from your own investment.
Payouts will be distributed upwards in the system rather than to the investor who invested in the units. If you don’t recruit minimum 4 other investors, your ROI will be negative.
I haven’t analysed each and every part of Lyoness. It has a “potential Ponzi scheme component” = people can reinvest the Loyalty Credits and probably other payouts.
Reinvestment of payouts to back office only (not really paid out as money), is one of the most common signatures for Ponzi schemes.
I have used a spreadsheet to simulate most of the known payouts, for $3,000 investments. You will need minimum 4+16 recruited investors before you have received more than 100% ROI in cash payouts.
The ROI (Cash and Credit) for each matrix without recruitment will be appr. 14.6%. You will simply not be able to earn a positive ROI if you don’t recruit anyone.
In Lyoness, you send the $3,000 and sit back and earn NOTHING, nothing other than your cash back rewards from your own purchases, for a very long time.
* A few units will be added from your Loyalty Benefits (part of the cashback program).
* A few units will probably be added as spillovers from your upline.
* “After 8-10 years”, you will receive $675 maturity payout from the first matrix, and maybe a $1,225 maturity payout from the second matrix a few years later.
Lyoness simply won’t work for passive investors. The AUs will EITHER require shopping or investments to be generated.
The “8-10 years” wasn’t an exact measurement. Active shoppers will probably receive the payouts much faster, e.g. after 2-3 years.
From my understanding of it, BOOKING PROGRAM and the Accounting Cathegories are different names for the same system. I have asked some questions about it in 2012 to Lyoness members.
BOOKING PROGRAM can include more than one system, e.g. you have “Personal program”, “National program”, “International program”. I haven’t focused on any of those other programs.
I have mostly focused on Premium Membership, e.g. $3,000 down payment for 7+3+3 units in the 3 first matrices, with a $600 gift card purchase before you can make the investment. I didn’t try to calculate any indirect payouts from “Friendship Bonus”, but I included most other parts of the CP.
The Compensation Plan is referring to “booked”, “rebooked” and similar terms in some parts. It’s the same parts I have checked, but I tried to ignore most of the terminology. From my viewpoint, the terms are designed to create confusion, making it difficult for people to analyse the details.
As I understand it the booking program is just AU investment in new Lyoness markets to get the ROI ball rolling. Once they’ve sucked a few locals in then it the regular AU investment scheme starts up.
Eg. I saw promotions for Lyoness opening up in India mid 2014, so right now you can “book” AU units in that market, on the expectation gullible Indians will invest in AUs after. It’s not much different to Ponzi admins preloading schemes and then releasing them to the public.
I see Apple and Microsoft are now online merchants in Lyoness Australia. Is this good or bad? Has someone told them about the AUs?
I noticed that both Apple and Microsoft AU store were added back to back ID number wise (they are consecutive).
Also no address is provided, with the only contact details being an identical phone number between the two entires (presumably Lyoness?) and the Lyoness customer service email.
I checked some other merchant entries and they all have actual business addresses and contact numbers. Why aren’t either Apple’s or Microsoft’s details provided?
Looks to me like this might just be some sort of regular affiliate program Lyoness have piggy-backed onto. I doubt if one were to call MS AU or Apple that they’d even know what Lyoness is.
ANYONE can be an affiliate. Lyoness has NO direct relationships with retailers. NOR do any of the other 1000 MLM deals that are trying to get into the e-commerce game. It takes WAY more backing, credibility and infrastructure to accomplish that.
Most companies that compete in this space have over 700 employees from IT, SEM, SEO, Sales, Marketing, Contract negotiators, R&D departments, etc etc.. These 2 bit MLM deals and ponzi schemes have NONE of that, and never will. Innovation wins the race, not imitation.
For a company to start on the e-commerce bandwagon 22 years after its already been done puts them just a little behind, wouldnt you say? What does that say for the reps that believe in people telling them they they are ahead of the curve?
I have tried to check some other sources, but they didn’t clarify much.
The Eric Breiteneder legal actions in Austria referred to a “Marketing Campaign”. It’s probably about booking units in newly opened markets.
Troy Dooly has a report from an unnamed MLM expert, referring to other investment amounts than the $3,000 investment for Premium Members. It seems to be about multiple investments in specific markets, e.g. $10,800 – $33,200 investments in North American AC, Asian AC, and other specific markets.
Ponzi schemes will typically offer reinvestment options as a method to prevent too much money from being withdrawn. Lyoness clearly has potential Ponzi scheme components. “Potential” means that they can’t be clearly identified.
I have mostly tried to focus on the parts I have been able to identify relatively clearly.
“Ponzi scheme” is a CONCEPT rather than a precise definition, “a collection of different ideas grouped together in one group”, similar to concepts like “cars”, “trees”, “women”, “people” and other unspecific ideas.
The individual PERSON can clearly be identified, e.g. by hair color, weight, height and other measurements. PEOPLE can’t be identified in a similar way, “people” is a concept.
It will be a rather ridiculous idea if I look at my own characteristics for weight and height to define “people”, if I try to SPECIFY a definition for “people” using a method like that.
* some type of investment and reinvestment
* “robbing Peter to pay Paul” methods
* fraudulent misrepresentation of a profit source
* fraudulent transactions (payouts)
“Ponzi schemes will normally involve …” will be a more correct METHOD (in logic) than exact definitions, e.g. “Ponzi schemes are fraudulent investments, where the organizers use money from new investors to pay the old ones”.
In communication, the exact definition will usually be preferred. Communication will normally have a different priority than plain logic. Communication has many unwritten rules that can be applied, e.g. the “good enough” rule.
CONCLUSION
It doesn’t make much sense discussing whether Lyoness is a pyramid or a Ponzi. Both those “concepts” CAN be applied.
CORRECTION: My response to M_Norway above should read, “How is this any different from the Zeek Rewards Model?
I do see problems with the Flexkom model as well, btw.
I’m not familiar with Flexkom, other than that I have read the review long time ago.
I have sat down and after several hours managed to build a spreadsheet that calculated an exact unit production total for a predetermined number of members spending a predetermined average dollar figure per week through merchants.
All the figures I got to make the spreadsheet were readily available through Lyoness, and yes I do have to say that there is a very very complex method of calculation used to make the system self-sustainable.
The main part I believe everyone has missed here is the fact that Merchants who wish to be part of the program pay a commission to the company for the acquisition of members sales. This commission is broken up into parts and allocated to the Lyoness Foundations, and the Company, and the first and second level recommenders, and of course the shopper. Some of the components amounts vary depending on what the merchants are comfortable paying.
This commission payment when you add it up from global payments worldwide works out to quite a large figure, put that figure into an interest earning account and you have an additional income to help support the company and its required payouts (I am not saying that Lyoness holds money in interest earning accounts, but if I had to hold onto money to provision payouts to members I would be making sure the business got interest on it to help make payouts and profits more affordable).
The other big issue is that Lyoness or Lyconet is not a get rich quick scheme, if you want the big dollars and the fully paid residual income lifestyle then you need to work your ass off like there’s no tomorrow.
If you don’t recruit people and businesses and show them how to shop and share using Lyoness then you won’t get any volume bonus or friendship bonuses.
Pretty much like your day job, your boss isn’t going to pay you for being a lazy shit and doing nothing all day, so why should Lyoness?
Merchants have nothing to do with affiliates investing in Lyoness and then receiving a 100%+ ROI from Lyoness when enough new investments have been made.
What you want to call it is irrelevant.
Investing in AUs and recruiting others who do the same has nothing to do with shopping.
OK, Lets hear it. How many “investors” do you need to have in an organization, producing WHAT per week/month in sales to earn 100K per year?
You’re barking up the wrong tree / defending the wrong fort.
NOBODY had ever doubted shopping with Lyoness’s legitimacy (whether it’s “effective” is a different question).
It’s the ABILITY to buy units directly (i.e. pay Lyoness directly) WITHOUT SHOPPING that is the problem.
So many people are BLINDED by how much money they will make by backing up units.
The Leaders keep feeding this information to the NEWBIES coming in. SHAME on them.
Lyoness is the only onE making interest on your hard earned money. All the banks are over seas in Malta.
And right before the launch of Lyconet/Lyoness rebranding extravaganza on November 8, Rik Walrab, the creator of the now infamous Lyoness video encouraged everyone to “back up, back up your units”.
And why wouldn’t he?…he is one of the first in on the scam here in America and swindled more people than anyone in Lyoness America. He stands to gain a lot of money from people who back up their units…
I was promoting Lyconet for 5 years, invested myself around 50k Euros, spend wxtra tens thousands on event’s, flights and whatnot. Build community few thousand costumers and it was never worth it.
My Units been dormant years, always changes this and that, clouds never made me money, msp points useless, I did not do something in time so they give nothing.
Full shit company.