James Merrill out on bail
Kinda saw this one coming…
A federal judge has ordered that TelexFree Inc. co-owner James Merrill be released from detention while he awaits trial in the $1 billion fraud case.
Under the conditions of his release, Merrill, who was arrested in May, was placed in his wife Kristen Merrill’s custody and must live at his family’s home in Ashland. He is required to wear a GPS device, remain in his home every day from 8 p.m. to 8 a.m., and he cannot leave the state.
Merrill aos must put up a bond of $900,000 secured by his house, the home of his sister, Julie Merrill Wisell in Sutton, and another property in East Falmouth. He also must give up his passport.
Given the conditions that were proposed by Merrill’s own lawyers (most of which have been enforced as per above), I didn’t think there was much merit to keeping Merrill in jail.
On the other hand…
Federal Judge Timothy S. Hillman in Worcester ruled on Tuesday that “this is a close case,” but cited Merrill’s “strong family and community ties” in his decision, noting that he and his wife have been married for 23 years, have lived in Ashland since 1997, and are the parents of three children.
Hillman also cited Merrill’s record of coaching “youth sports teams in the community.”
Hillman said given “the inability of the government to more fully substantiate its contention that Merrill has the international funds and contacts that would allow him to successfully flee the country, this Court finds that Merrill should be released,” subject to conditions.
If Merrill does manage to escape, what a farce that’ll turn out to be!
What I did find a bit contradictory to that last statement above was this from the Judge:
Hillman said that while the government points to Merrill’s international network of supporters, “it has not offered proof that there are any individuals, with the possible exception of Wanzeler, who would actually help Merrill flee.”
So uh what, Wanzeler can help Merrill flee with the access to millions of undisclosed Ponzi funds but um, he doesn’t count?
Ball’s in your court Merrill, 20 years or flee. Your move.
No One will ever see him again
How long until BFFs meet again and start singing:
Amigos para siempre
Means you’ll always be my friend
Amics per sempre
Means a love that cannot end
Carlos Costa and Wanzeler are all excited, since after months posting nothing on TF/Ympactus FB page, they started posting those stupid messages again, feeding telexdorks’ hope.
The first one was a video trying to explain (to whom?) why TF is not a pyramid/ponzi scheme. The funny part is when Carlos Costa (voice only) says “What happen to people who sells nothing? They receive NOTHING”. LOL.
The last one is this:
Yeah… right. He was just released and found innocent, according to telexzombies’ blogs…
iG just reported that Paymony went down and the alleged company behind it, registered in Florida, is MIA.
http://economia.ig.com.br/2014-06-17/paymony-empresa-de-ex-lider-da-telexfree-sai-do-ar.html
I hope that the electronic monitoring device Mr. Merrill must wear as a condition of his release was inserted rectally!
Things are getting more interesting in Paymony’s world. Take a look at my comment here.
Interesting that the Trustee has lawyered up.
http://www.kccllc.net/telexfree/document/1440987140617000000000038
He’s also asked for the assistance of forensic accounting firm Mesirow Financial Consulting.
So much for Runge and his company…
He works for Merirow, IIRC.
Perhaps costa can send some money as a “gift” he stashed over from the hotel deals.
Senior Managing Director (Darr).
So this means Runge is officially out of a job then?
I’m also reading that the Brazilian Securities Commission are investigating the offering of unregistered securities by way of investment in TelexFree’s hotel interests (Best Western).
Like their US counterpart they don’t release information on investigations but it’s good to see them finally coming to the party (if albeit a little late and not for the AdCentral investment scheme, which was much bigger than any hotel offering).
http://gazetaonline.globo.com/_conteudo/2014/06/noticias/dinheiro/1489910-um-ano-apos-ser-bloqueada-fraudes-da-telexfree-vao-alem-da-piramide.html
difficult choice !! 🙂
Its standard. Darr can’t carry out his duties without adequate legal advice. He is assembling his team.
I’d guess he will fulfill his original purpose and move off stage. I think his role (along with MacMillan) is to provide an independent evaluation of Telexfree’s ability to reorganize. Darr will give their opinions the weight they deserve before making his recommendation to the Court.
If anyone spots some guy with a weird looking ankle bracelet laying on a hammock somewhere sipping pina coladas, he’s the guy this report is about.
All right, Merrill is out on bail. I hope it doesn’t mean Wanzeler can enter the US without going to jail. And I wouldn’t be surprised if some of the top promoters go to jail as well, like Sann Rodrigues, Faith Sloan, Crosby or De La Rosa. These top promoters are as poisonous as the big bosses.
Major promoters here in Brazil, specially the ones who continued recruiting Brazilians for the TelexFree branch in USA after the freeze in Brazil, are also target of the media here.
Just check how much interconnected such promoters are with TelexFree and several other scams:
http://gazetaonline.globo.com/_conteudo/2014/05/noticias/dinheiro/1487714-chefoes-de-piramides-como-a-telexfree-atuam-ha-muito-tempo.html
Unfortunately, there is still no action of Brazilian justice against top promoters. Only against the scam owners. At least the media is watching them.
That’d be just as good as in warning people against them, almost better than justice moving against them, but certainly not as satisfying.
Yes. The text I linked in my last comment was kind of a bomb in Brazilian MLM scam scene when it was published, like a month ago, or so. It exposed the major Brazilian promoters, gave their photos handling piles of cash, etc. It was a big of a warning at the time.
As a result, some of them (at least two) are no longer promoting any scam (at least not openly).
Yeah, I like Globo (or was it iG? I keep confusing the two) keeping track of every reload scam that the TelexFree hucksters have moved onto, like PayMoney, GetEasy, etc.
I guess both news portals are amongst the most hated by telexzombies. Simply put, because they usually report what’s been happening without sugar coating it.
Now there’s some Brazilian newspapers trying to increase their sales by playing nice with TF and showing how everybody, including poor, poor Wanzeler is just a victim of the (in)justice.
Conclusion: everyone is getting away with the money and nobody is going back to jail.
Look, Wanzeler in Brazil. Who got the BMW he crossed the border with? Remember he escaped the U.S. to Canada to catch a flight to Brazil. San Rodrigues, free and enjoying himself and his exotic cars, his downlines all fee and enjoying the money they money since NONE of it was confiscated.
Carlos Zombie Costa still promoting his Bullsh*t. etc. Sloan: not mea culpa! Merrill now free on bail.
Seriously, this is justice being served? Please, might as well close the case since nothing has come of it. Everyone involved has gotten away with fraud. Next.
It’s way too early to be throwing your hands in the air, Jamil.
The important thing is, Telexfree is stopped and no more money can be lost.
Now comes the fun part
This story is Gazeta Online, website of A Gazeta Newspaper, in the Vitoria/ES, Brazil. The website is linked the Globo. The Gazeta was one of the first newspapers to denounce Telexfree in Brazil.
Ernst young calls another 90 days to deliver the result of expertise. Informar íon no official.
Translation: We can’t believe the levels of fraud we found, so we need another 90 days to go through it all.
Or am I off-base?
Wanzeler’s filed his response to the SEC case.
It’s basically 140 paragraphs of denials with a few confirms thrown in.
^^ Lololol.
Santiago De La Rosa has also filed a Faith Sloan “I knew nothing” motion to dismiss:
An SEC response is no doubt inbound. And one would hope the Judge doesn’t buy any of this “we knew nothing” nonsense. The time to send a message to the MLM Ponzi underworld is long overdue.
Promotion of Ponzi and pyramid schemes is illegal, what you pretend to know or not know is irrelevant.
And the ultimate undoing is the fact that none of you Ponzi pimps sold VOIP to anyone. Yet you want to stand up in court and claim you had no idea was a Ponzi scheme? Please.
All the SEC has to do at the hearing is ask Sloan, De La Rosa, Crosby and Rodrigues how much they invested vs. how many retail VOIP packages they sold. Or they could just present the information to the court (they have the backoffice information) and watch the pimps try to explain their way out of the obvious.
Frankly, I’m surprised they haven’t called up anjali to write them an “but we have end-users!” defense yet.
Oz, the deadline is 120 days. EY failed to finish the audit by the amount of collected documents. The civil case has 10 thousand pages. The injunction that blocked Telexfree has 100 thousand pages.
http://gazetaonline.globo.com/_conteudo/2014/06/noticias/dinheiro/1490159-pericia-que-mostrara-tipo-de-negocio-da-telexfree-fica-pronta-em-120-dias.html
Is this interesting? In the new video, carlos costa show the companhy that Telexfree used to create the pseudo-voip.
At about 20:04 in the video, he show the logo of company.
So the company is IDT. It is very easy to see with the logo. It has their our wikipedia page. 😀
I just don’t understand, there where various other company?
I don’t know if E&Y would know fraud if they were staring straight at it. A similar occurrence happened with Herbalife a while back when their normal accounting firm’s executive was caught doing insider trading, and HLF had to find another company.
Even though Ackman gave them a laundry list of things to look for, the new firm said everything was okay. They mainly look to see if accepted accounting practices were being used and if all the numbers add up.
It appears the information may be very disorganized. When they are done, then both sides will be able to provide their interpretation of what the numbers mean.
Minor updates:
-Randy Crosby has filed a “I knew nothing!” Motion to Dismiss.
-Steve Labriola has answered the SEC case. For the most part, Labriola either denies the allegations or answers he “lacks knowledge and information sufficient to form a belief as to the truth of the allegations contained”.
-James Merrill’s entire immediate family’s passports are to be handed over to the DoJ, not just that of him and his wife.
-Darr has requested an extension till July 2nd to respond to the SEC case (as TelexFree’s Trustee).
Seemingly unhappy with losing control of their company, Darr notes in his request that
How many times did we hear Labriola, Wanzeler and Merrill insist they would cooperate fully with any regulatory investigation?
As usual, Ponzi lip service until shit hits the fan.
Full docs should be up at ASDUpdates.
You do realize labeling TF a Ponzi means the net winning distributors were victims, right?
net-winners != victims.
Read up on Zeek Rewards.
Madoff’s net winners were victims, and they had to give up the Ponzi profits to clawback, so what’s your point?
What are you getting at? If its labeled a pyramid scheme or hybrid scheme instead of a Ponzi do you think it changes something?
Yeah to the Complaint. This should be interesting.
My point applies to the MLM industry and how Ponzi schemes are pulled apart. There’s a distinction made between net-winners and victims.
Read up on Zeek Rewards if this is new to you.
What happens elsewhere I couldn’t care less about.
Oz, you mentioned something about java script changes a few days ago. I am having issues. Clicking on a Feedbacl link takes me to a blank page with the article header and nothing else. Then it hangs up indefinitely.
Is there a setting on my Win 8.1 that needs to be changed? Thanks.
That label simply makes it easier to understand. It doesn’t have any functions other than that. The charges will still be about the same.
The AdCentral contracts were of type “Ponzi scheme”. The recruitment based commissions were of type “pyramid scheme”. Both types are about violations of the same sections in Securities and Exchange Act 1934 and Securities Act 1933, about general securities fraud.
@Hoss
The changes I made were to the comment system (publishing comments). If JS is enabled then there shouldn’t be a problem.
The Feedback links should be fine (nothing to do with JS). Might be a browser cache issue (clear cache)?
I just tried in Google incognito and IE (as a regularo user) and couldn’t replicate the problem. See if the cache refresh fixes it. If others are having the same issue then I might have to turn off browser caching again on my end (I remember turning it back on about a month ago).
OK I will play with it.
I notice also that very short responses are no longer accepted. That seems new.
Now that I didn’t know. Seems to be part of the antispam. I’ll see if I can turn it off.
BMLM was getting thousands of automated (bot) spam comments a day. They were being placed in the spam folder but I routinely go through that folder to check for legit comments that were flagged.
After a month of this it was becoming a bit much.
Since making the change 0 automated spam has gotten through which has made admin a bit easier.
Hah. Of course there’s no option for disabling blocking of too short comments.
I think the threshold is low enough. Not sure if it’s words or characters based but it accepted “test words test” as a comment.
I think it’s designed to catch one word link spam.
Most net winners don’t have to pay back EVERY penny they “won”. Indeed, they generally come out better than the net losers.
In fact, only the largest net winners get hit with clawbacks. Below a certain threshold, you’ll likely get away scot-free.
Certainly, but they’re hardly victims. Not in the common-sense term of the word (I think this might be another legal vs. common-sense argument brewing).
It’s not all that different to “we’re not a Ponzi scheme because we haven’t been shut down by a court”.
People who make money in Ponzi schemes (>100% of their investment) are not victims.
The Madoff thing went on so long and was such a surprise I understand how even net winners felt they were victimized after being subjected to litigation, tax revisions and clawbacks but this isn’t Madoff.
Some of them will have to pay back EVERY penny they won, plus interests.
People can still make settlements (from zeekrewardsreceivership):
People can probably still make acceptable deals, if they have something to offer (something of value, preferrably money, but truthful information about why they can’t pay can also have some value).
Common sense = “The money will be safer with me than it will be with most of the others”. 🙂
And it’s probably true.
Only in the SEC preferred civil case.
The criminal case against Wanzeler and Merrill alleges Conspiracy to Commit Wirefraud (18:1349.F)
In a Ponzi scheme, the net winners are subject to clawback, but didn’t commit any crime. In an illegal pyramid, the net winners are subject to clawback, and they did commit a crime. The difference is in an illegal pyramid, the net winners can be fined, prohibited from participating in MLM activitites, put in prison, etc.
In a Ponzi scheme, all the government can do is get back the ill-gotten gains, in order to compensate the net losers. All the discussion about Faith Sloan and other net winning distributors is subject to the above issues. Do YOU think she and other net winners should be subject only to clawback?
It probably costs more than it’s worth to determine every single net winner and go after all of them. Plus, a net winner should be viewed from the perspective of previous MLM activity, whether the net winner was actually a net winner when overhead costs are considered, etc.
In the end, justice isn’t a surgical knife, it’s a blunt instrument, at best. Believe me, I have personal experience that I won’t mention here because, unfortunately, it will probably be removed.
The difference is not whether a scheme is a ponzi / pyramid, rather it is whether or not the charges are civil or criminal.
The SEC v TelexFree, Inc. JAMES M. MERRILL, CARLOS N. WANZELER, STEVEN M. LABRIOLA, JOSEPH H. CRAFT, SANDERLEY RODRIGUES DE VASCONCELOS, SANTIAGO DE LA ROSA, RANDY N. CROSBY and FAITH R. SLOAN is a CIVIL and/or administrative action by the SEC.
Under civil law, the SEC has only the power to ask for administrative fines and sanctions and disgorgement of any gains.
It CANNOT impose or ask for prison terms
The charges against Merrill and Wanzeler are CRIMINAL charges of Conspiracy to commit wire fraud NOT of running a pyramid or ponzi.
Criminal conviction CAN result in jail, fines, disgorgement
Even more important is the fact defendants charged both civilly and criminally can receive the full range of penalties from both civil and criminal charges.
Independent courts = independent penalties.
Just look up the case of the promoter of the Legisi fraud, Matt Gagnon who received both criminal and civil penalties for his efforts.
Remember also, this is only the beginning.
Wrong, there are both of these differences (Ponzi vs. illegal pyramid AND civil vs. criminal) involved.
I believe the SEC also has the authority to ban them from participating in future MLM and similar activities as well. This is important, in order to take these scumbags out of circulation.
The wire fraud is fraud ONLY because it is connected to Ponzi/illegal pyramid related activities. Otherwise, all of us are guilty of wire fraud.
I agree they can be charged both criminally and civilly, and the criminal case often goes first, as the Constitution provides for speedy criminal proceedings and the higher level of proof (beyond a reasonable doubt) in a criminal case makes the civil case much easier to prove (preponderance of the evidence – i.e., 50.1%).
Meanwhile net-winners still, by practical definition, aren’t victims.
Not sure what civil and criminal charges have to do with anything. Sounds like an anjali explanation.
You’re mixing up common expressions and laws. Ponzi and pyramid are also common expressions used for communication purposes, used to make things more understandable.
Pyramid schemes are defined in FTC’s rules and probably in some Lottery laws, but Ponzi scheme isn’t defined in any law. It’s simply a common expression.
Oh, go away you silly little man.
“We are all guilty of wire fraud”
Damn, you’re an idiot.
Securities and Exchange Act 1934 and Securities Act 1933 are both civil laws. It’s not about “preferred a civil case”, it’s about the type of laws.
None of this addresses your assertion that “net winners are victims.” To the contrary, you describe pyramid-net winners as victimizers and ponzi-net winners as those who received “ill gotten gains.”
In the accounting of net winners and net losers, (by convention,) one who has been unjustly enriched, is not described or viewed as a victim.
Its possible that a net winner could suffer substantial inconvenience and unrecognized expenses, but in the context of estate administration this is not recognized.
Time to make it clearer?
“SEC v defendants” is a civil case based on Securities Act 1933 and Echange Act 1934. The use of expressions like “Ponzi” and “pyramid scheme” in that case is only about “labels”. The case itself is about general securities fraud, with potential monetary penalties and injunctions.
Some of the rules involved:
NOTE:
I haven’t checked the rules, only the list of rules as it was mentioned in the amended complaint.
* “Merrill and Wanzeler” is about WHO rather than about WHAT.
* “General fraud” includes selling, promoting etc.
I forgot English is your second language.
That would be “preferred” as in:
not “preferred” as in:
IOW, the SEC filed the CIVIL charges as distinct from the CRIMINAL Conspiracy to Commit Wire Fraud charges which were filed (preferred) by the US Attorneys’ department
OK. I interpreted it as a type of choice, e.g. “the preferred choice of legal action”.
It will most likely fail logical tests, and fail to reflect how people interpret the realities in some cases, e.g. some examples from the Madoff Ponzi scheme.
The clawbacks in the Madoff case managed to wipe out several charitable foundations, investors that most likely had invested in good faith. That again led to changes in laws, to protect charitable organizations from clawbacks dating more than a few years back in time.
Net winners can clearly be victims of a Ponzi scheme. You have probably “super-imposed” some morality ideas and some biases, e.g. a bias in favor of net losers and in disfavor of net winners. That’s not a very rational method.
That is exactly right. Whether someone losses money by civil or criminal means (or both) is immaterial. Net win/loss is an arithmetical calculation.
Here’s one example, but not from the Madoff case.
theponzibook.blogspot.com/2012/04/legislative-protection-for-charities.html
Proffered?
Prefer: to file legal charges against someone [with the police]; to file a complaint or a charge against someone. The neighbors preferred charges against the driver of the car who ruined their lawns. I will not prefer charges against the driver, since it was partly my fault.
I really don’t get the Madoff waffle.
MLM Ponzi schemes have an open business model (compensation plan). There are no unknowns and therefore no net-winner innocent victims.
Madoff schmadoff.
Prefer as in accuse rather proffer as in put forward or present.
Nope. The Madoff net winners were victims of clawback law not of the scheme itself….which is why the clawback laws were changed.
I only managed to find examples about charitable donations, not about investments made by charitable organizations. They’re probably just like any other investor when it’s about investments.
Charitable donations have SOME protection in SOME states, e.g. Florida and Minnesota. Florida seems to have a 2 year limit for clawbacks.
Without protection rules, for profit organizations will have better protection against clawbacks than non profit organizations, because of “we delivered something of value” ideas.
* A for profit organization will normally have received payment for services or products it has delivered, and that’s not fraudulent in itself (not subject to clawbacks), not even the profit made from it.
* Non profit organizations don’t deliver the same type of “measurable values”. It will need to be measured by other standards, and those standards will need to be recognized by the law.
In a Ponzi scheme, they absolutely are victims. If they had invested their money with an honest company, they probably would have made money, instead of having the gains clawed back.
It also matters whether the charges are criminal or civil, they can be put in jail in a criminal conviction, which would send a much louder signal to other scammers. There may also be higher monetary penalties and longer periods of time to ban the scam artists from MLM and similar activities as well.
Your post reminded me of anjali. LOL
Completely out to lunch. NOBODY made a charitable conribution to a Madoff fund (including charities themselves.) The idea is ludicrous.
In both cases, they received stolen goods, or whatever the legal term is. I think the technical term is “fraudulent transfer”
For whatever it’s worth . . .
The sale of unregistered securities is not just a civil matter. It also can be charged as a crime under 15 USC 77e(a)(2). (Just ask Andy Bowdoin.)
The penalty provision is 77x:
PPBlog
Lost opportunity costs are not included in the net winner/loser computation. What rate of return would you use?
If I am a net winner what are my damages? Zero
If I have sustained no damage then how am I a victim?
Again I am only speaking within the context of money in and out of the scheme itself, not expenses incurred external to the actual investment.
If someone dumps a shitload of time and money into promoting a pyramid then too bad for them. It can be declared on taxes, but a trustee or receiver is not going to reduce net winnings by how much a person spent going to a RAH RAH meeting in Poughkeepsie.
Um, you do know what a net-winner is don’t you?
Clawed-back or not, they made money in the scheme which differentiates them from victims.
Not when it comes to defining net-winners and victims. Plenty of Ponzi schemes fly under the regulatory radar and collapse organically or are shutdown by their owners.
Legal definitions sometimes differ from practical ones. I tend to leave the legal stuff up to the courts and focus on the practical. That being, if you made money in a Ponzi scheme you’re obviously not a victim. You’re one of the ones ripping off victims.
Heavy
Yes. Net winners are deemed to be the recipients of fraudulent transfers and clawbacks are conceptually based on the idea that net winners have enjoyed an unjust enrichment which they are obligated to return upon demand.
I don’t think we should use the idea of “victim of clawback laws”? The idea is rather irrational in itself, even if it partly may reflect some truth. It indicates that there wasn’t anything wrong with the transactions, only with the laws.
They were victims of the scheme itself. That’s where the fraudulent transactions occurred.
Irrational people will probably LOVE your ideas, and you will find new groups of “victims of laws” all over the internet, e.g. victims of tax laws, victims of laws against drunk driving, victims of laws against drugs.
I didn’t mention any charitable contributions to Madoff funds either? I didn’t mention Madoff at all in that post.
Ideas will normally become weird when they have been processed through your brain. You will need to do something with THAT (your brain), e.g. make some changes to how it handle information.
M_Norway – You’re mixing up common expressions and laws. Ponzi and pyramid are also common expressions used for communication purposes, used to make things more understandable.
Pyramid schemes are defined in FTC’s rules and probably in some Lottery laws, but Ponzi scheme isn’t defined in any law. It’s simply a common expression.
No, I’m trying to get YOU to not mix them up, because while there are similarities, there are also distinct differences. If you mix up terms, you mix up other people, and mix up what penalties are applicable to the various participants.
Ponzi schemes are very well defined as investment fraud, with a very long list of case law behind them. Illegal pyramids, not so much of being well defined (the FTC lost part of their argument in BurnLounge, for example), and the case law is not nearly as extensive nor helpful to separate legitimate MLM from illegal pyramids.
K. Chang – In both cases, they received stolen goods, or whatever the legal term is. I think the technical term is “fraudulent transfer”
Obviously, that’s why clawbacks apply to both. But Ponzi participants don’t participate in the scam except as passive investors, in illegal pyramids, participants are scammers.
And neither are net-losers victims IMO unless diagnosed mentally challenged or elderly.
Consenting adults gambled their money. The winners made money and the losers lost – I see no difference as they all played. All recovered money should go to awareness of Ponzis and/or a charity.
They took a risk, they had a choice, they lost. They all had computers to research. Oz’s first review was July 2012.
hoss – Lost opportunity costs are not included in the net winner/loser computation. What rate of return would you use? >>> I didn’t say they were included in the computation, but this only makes it worse for the Ponzi victims.
The courts have held the interest of the net losers is higher than the net winners, and since often, much of the money is no longer available because it was spent, nobody is made whole.
Theoretically, one could use a similar class of investments from a group of mutual funds or whatever the original investment was directed towards, but again, this would not be fair to the net losers.
If I am a net winner what are my damages? Zero >>> Your damages are the opportunity cost of investing with a legitimate company. Just because the law sees the net losers as a higher priority doesn’t mean you aren’t a victim.
If I have sustained no damage then how am I a victim? >>> Again, you have sustained damage, but there are higher priorities to take care of first, the net losers.
This is similar to bankruptcy laws, the people at the end of the line may receive little to nothing for what they are owed. Just because they aren’t paid anything doesn’t mean they weren’t a victim of not being paid back.
Again I am only speaking within the context of money in and out of the scheme itself, not expenses incurred external to the actual investment. >>> Me too, but the other expenses are real dollars.
If someone dumps a shitload of time and money into promoting a pyramid then too bad for them. >>> It is bad for them, and if they aren’t aware they were promoting a pyramid, should you blame them or the people running the scam more?
It can be declared on taxes, but a trustee or receiver is not going to reduce net winnings by how much a person spent going to a RAH RAH meeting in Poughkeepsie. >>> They can get some of their expenses reduced, but they are still out money. Expenses aren’t a credit, they are only deductions.
I never claimed the trustee or receiver would consider expenses in the net winnings calculation, and I didn’t bring up the expenses to begin with, so I don’t know why you’re going there.
Um, I do know what a net winner is. If they were clawed back for their entire profit, they had an opportunity loss. People invest money with the intent of it growing, not getting clawed back.
I never said the definition of net winners and losers are defined differently by civil and criminal laws, I said the punishments available are different.
If you were a net winner in a Ponzi (as opposed to an illegal pyramid), you are a passive investor, and NEVER ripped off anybody. That is why words matter, and you’re butchering them.
I’m not the one with little/short in his name. LOL
You left out the context and selected part of the sentence.
I said, “The wire fraud is fraud ONLY because it is connected to Ponzi/illegal pyramid related activities. Otherwise, all of us are guilty of wire fraud.” THAT has a very different meaning, in fact, quite the opposite.
(Ozedit: Offtopic)
The more commonly used term is press charges, not prefer charges.
@Char
There are definitely more effective ways of checking out scams now than there used to be, but to blame the ignorant as much as the scammers is unfair and wrong, in my opinion.
Consenting adults gambled their money. >>> If the scenario is presented as an investment or business opportunity, it’s not gambling. You may make or lose money, but it’s not gambling. Gambling is illegal in most places, investing and starting businesses aren’t.
Well, one difference is the winners made money and the losers lost money, why can’t you see this as a difference?
Good luck getting that law passed. LOL
And if they were scammed, they are entitled to get at least some return, as the courts have said many times over.
And how many people even knew Oz’s site even exists, not to mention whether it is correct?
Tex:
In regard to your statement, and I quote:
you have no clue what you are talking about.
In Ponzi’s there are different level of participants. You have the players who think HYIP are going to make them rich, you have the shills who are paid to help start advertising the Ponzi on the Ponzi boards, you have the Ponzi promoters/pimps who know full well they are promoting a Ponzi, but it is all they do.
They like to call themselves Internet Marketers, but they are Internet Thieves.
The players constantly lose money, but seem addicted to playing Russian roulette with their money. The shills are in and out quickly as they only get paid for introducing the program. But it is the promoters/pimps that rake in the money and rarely lose any money.
As I said, they know full well they are promoting/pimping a Ponzi, but don’t care. They are in it only for the money, and despite all the claims of caring for the members of the Ponzi, they laugh all the way to the bank knowing they stole the members money.
And when the Ponzi goes south or gets shutdown, they all feign ignorance it was a Ponzi and they were victims like everyone else. Faith Sloan is just one of these major promoters/pimps and finally is going to get her just due.
Promoters/pimps can be charged criminally under the misprision of a felony statute. In the past for whatever reason the authorities have not used this provision of the law to prosecute them. From what I am seeing in the Zeek case and now with the TelexFree case, I think they will be facing criminal charges and it is long, long, long overdue.
There is much more that I could explain about each of the parties roles, but this is enough of a primer to show the error of your thinking.
There will most likely be SOME real victims among them, according to Einstein’s theories about the universe and human stupidity (both may be infinite, but he wasn’t quite sure about the universe).
Clawbacks in favor of the evil gub’ment will only add fuel to conspiracy theories, e.g. that the agencies delay shutdowns for as long as possible to be able to grab as much money they can.
I don’t believe that idea is very good. I don’t believe the idea of giving the money to charities is very good either.
Another point about many of the victims, they are increasingly people of lesser financial means, and don’t speak/read English, don’t have access to the internet, and/or trust their fellow minority members.
As was the case with TelexFREE, and is the case with many other MLM scams, large and small, short lived and long lived.
Gambled as in they took a risk with their money. I’m not aware of any investment or business that comes with guarantees.
No difference in that they were in the same business. Some won, some lost. The scammers at the helm ARE different than the ignorant. They are criminals.
It is up to the person to do their research, oz’s site, failure rate, owners history, market analysis, whatever. Their misjudgement and lack of research is their own fault.
Look at all the info on Amway and the 97% falilure rate. If you still decide to do it, it is your fault and your loss and a stupid decision at that.
It is time for people to accept responsibility for their poor decisions and lack of due diligence. There is too much info out there to claim ignorance. IMHO:)
This is really the point here.
Lynn, with all due respect, and I do have FAR more respect for you than virtually anybody on this blog and any other blog I’ve ever visited, YOU are wrong.
If you read some of the posts I’ve placed on this blog (assuming they weren’t taken down for being “off-topic” or some other silly excuse), you would know I think it is important to use the correct terms when referring to Ponzi vs. illegal pyramids, so all you have done with your comment is made MY point.
I referenced very well respected sources, which are all consistent with each other, regarding the similarities and more importantly, the particular differences between the two.
Also, you took a quick reply out of the context of the larger discussion, and I have neither the time nor interest in repeating the definition of every single word every single time I use it.
By DEFINITION, a Ponzi scheme is run by an individual, or very small group of individuals, and the passive investors are the participants I was referring to above, and they are indeed victims.
A good example is Madoff (discounting the issue that at least some of the investors knew something was fishy, but they thought it was insider trading, given Madoff’s past life as the head of NASDAQ).
In the discussion with TelexFREE, we should be using the term illegal pyramid, because many of the participant/promoters, (in addition to those running the company), are serial scam artists, not innocent passive investors.
When others interchange these words, they are sloppy with not only the language and definitions, but also with who has committed crimes. ONLY if you think Faith Sloan and the other high level distributor/promoters should be held blameless should you use the term Ponzi scheme and not illegal pyramid.
There is much more that I could explain about each of the parties roles, but this is enough of a primer to show the error of your thinking.
Char, you missed several of the points I made, and merely talked around them.
Tex:
You made your comment as a statement of fact, and it was not a fact. It has nothing to do with putting this in context with all your other posts and definitions. It was a stand alone statement and I treated it as such. It was a false statement and I explained why.
The word Ponzi is used to describe the methodology of the program. Fist in investors are paid from those joining afterwards. The “investment” doesn’t exist. To keep it going it then becomes an illegal pyramid scheme because that is what all Ponzi’s become once they start.
First you giveth, but then you taketh away. But thanks for telling me I don’t know what I am talking about. I guess I had better shut up now and defer to your superior knowledge on all subjects in this discussion.
I think at my next board meeting I should tell my board members I am incapable of running Eagle as I don’t know what I am talking about.
I’ll give them your name and they may want to contact you to see if you are interested in taking over for me since you are much more knowledgeable about Ponzi’s than I am. Don’t you think?
This seems like a suitable starting point for understanding the difference. A single individual, solely by his own efforts COULD promote and run a ponzi.
The same can not be said for a pyramid scheme which MUST, by its very nature be promoted by others.
However, as has been pointed out, our hypothetical single individual often employs legions to promote his Ponzi under different facades and artifices. This effectively blurs the difference between one and the other.
Was Telexfree selling ponzi securities or pyramid securities? I don’t think anyone could definitely say.
So while I agree with your basic definitions the bleed over between one and the other
I understand perfectly what you are saying but the likelihood that the Telexfree claims process will recognize such an opportunity loss is nil and no more likely than the IRS permitting a deduction for lost opportunity. We calculate gains and losses using real dollars not hypothetical or projected gains.
There is no way to objectively calculate opportunity loss. Its a personal expectation and assumption. As such there is no single expectation that can not be applied to all participants, and therefore it is applied to none.
Live with it.
So your opinion is that net winners are victims. Have you ever seen a net winner with an approved proof of claim? Ha! Its ridiculous. You need to rethink this.
If you do not know that people are very often victims of misapplied or outdated laws you must live in an opium filled bubble or you’re as naïve as a baby, I mean this seriously you need to look out the window.
Of course you did
Which definitions? It should preferrably be a legal source referring to the definition, rather than using it as a general term.
In SEC v TelexFree, both “Ponzi” and “pyramid” have been used as general terms. The same has words like “video”, it was mentioned several times in the amended complaint. “Promoter” was mentioned several times too.
Lynn, sounds good to me. Would you like me to be on the call?
hoss, I never said they should be compensated for the opportunity loss, as I agree with the courts that the net losers should be compensated first, and by the nature of the scam, the net losers probably won’t be fully reimbursed, so there won’t be any money left for the net winners.
However, the net winners DID suffer an opportunity loss, and they may not even get all of their original investment back.
Most of you look like (wannabe?) lawyers backing up your statements with legal gibberish, but in my eyes, ANYONE who “invests” money in any kind of fraudlent scheme CANNOT be considered a victim!
After all, putting money in these so called “businesses”, knowing or not that it’s fraudlent, is in fact giving money away to the promoters that use that same money to parade their supposedly “wealthness” to other greedy/desperate ones convincing them to “invest” too!
After authorities shuts it down for being a Ponzi/pyramid scheme and you’re a net winner, how tha hell you’re going to say you’re a victim?? Please
It’s like in that The Crow movie, “Victims,…aren’t we all?!”
@Tex
Here’s a picture of a Ponzi scheme definition (lower middle):
http://en.wikipedia.org/wiki/Concept#mediaviewer/File:Generalization_process_using_trees_PNG_version.png
Left to right, top to bottom:
1. The original scheme by Charles Ponzi
2. “Kubus” (“House of Cleopatra”), 1980-ies
3. Madoff
4. Zeek Rewards
5. Ponzi scheme definition
And this is why the term “Ponzi/pyramid hybrid” was coined circa Zeek Rewards.
TelexFree is a Ponzi/pyramid hybrid strictly speaking, or Ponzi in shorthand. The courts are another matter entirely. We deal with practicalities here, not legalities.
Seems to me… when all the semantics are hashed out here the bottom line is that if Telexfree is determined to be an illegal “business” what ever it is called in the end, people who handed over money in hopes of a large return are going to expect/hope to be “made whole”. That’s what this process is about.
Opportunity loss is not a variable in the re distribution of money to the participants. The winners have had a fun year to run around spending the ill gotten gains and will have to give back what they earned and perhaps sell what they purchased.
Perfect example is the fellow that came here and wrote about how we were pissing on his party by talking about Telexfree being an illegal business. He quit his job, bought a new house, car and was now having a 3rd child. He was thrilled that he could stay home and be with his family and not have to work.
Telexfree did what it told him it was going to do….”change his life” When I told him he was going to have to pay back the money and that he was setting a bad example for his kids by what he was doing of course he wasn’t to happy with me.
Fast forward to today…yes it did change his life and now he not only get’s his old one back but he’s in a bigger stink hole than he was in his old life.
The industry needs to be overhauled. Sell a product yourself and start your own business. Great. Recruitment is out or a one time small vin. I suggest someone to “appply” for a job with the company I work for I get $500.00 “if” they stay for 8 months.
Last company “I” interviewed for the person who suggested me got $1,000.00 “if” I stayed for 6 months. One time reward. I can’t make my living off it. It’s a perk.
Regulations are on the horizon my MLM fans.
Many schemes are designed to fool and deceive people. How does “anyone” and everyone know that they are being tricked? Will you be there to explain it to them?
Nonsense. Madolf had very intelligent people from all walks of life that invested with him. Law firms, doctors, celebrities. Perhaps there is the “I’ll look the other way in hopes that what seems to good to be true “is” really true” kind of mentality. Also in his case he had the best clients to be able to say….hey he’s doing it….must be ok.
His scheme was for the “Tiffanies” crowd. Telexfree is for the Walmart crowd.
And even then…they preyed upon those that wouldn’t even haven’t heard of Walmart. So, easy targets. Those are the ones that need to be “made whole” again. People who come from villages in poor countries that don’t have access to computers and the knowledge and information it can bring.
Note: no mention of pyramid, ponzi, intent of the defrauded, state of mind of the defrauded, what he defrauded should have known, could have known or would have known by carrying out a Google search.
No mention of previous similar or dissimilar cases, no mention of Madoff
This thread concerns James Merrill who has been arrested, charged with the discrete CRIMINAL offense of wire fraud and released on bail
So, did they use wire, radio, or television communication ??
Did they devise or intend to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, ??
Was there more than one of them ??
I just watched “Queen of Versailles”, about Jackie and David Siegel (timeshare king, Westgate Resorts) during the 2008 finance crisis (filmed through a few years, 2007 – 2011).
Rich people have much more problems than poor people, they have much more need for money than the poor ones. 🙂
Yeah like alcoholics have more need for alcohol than everyone else and vampires need more blood. Are you for real?
I’m not (wannabe lawyer). I do NOT study laws like a Bible.
One of the reasons for why you can assume there are some real victims out there (among those others) is because of the way people THINK. “If you want something, just BUY IT”.
That idea may work perfectly well on normal consumer purchases, but that doesn’t mean the idea will work if they want to earn money. It may look like it can work in some cases where enough OTHERS believe in the same idea, but that doesn’t mean the idea is good.
You will probably find hundreds of posts here from people who really WANT to believe in ideas like that, e.g. from people who just have bought a new life changing income opportunity where they won’t need to recruit anyone or sell anything.
You will probably need to SEE it (“Queen of Versailles”). 🙂
When poor people have money problems, it’s normally relatively small problems compared to the problems rich people have.
Wrong again.
It’s wire fraud because it was using “wire, radio, or television communication” and it is fraud because it was “devised or intended to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses”
Claiming Telexfree was a “communications company” when revenue from VOIP sales made up less than 1% of revenue was fraudulent.
A great many of the claims coming out of Telexfree were untrue and thus fraudulent.
The opportunity existed for members to earn strictly by recruiting, which many did – that is fraudulent
More than 99% of earnings earnings were paid from memberships – that is fraudulent.
IOW, false and fraudulent pretenses.
How many other “false and fraudulent pretenses” were made is yet undetermined, but you can bet your bottom dollar there are more than the few I listed.
Maybe in your world.
In the real world, both are used and in some countries “preferred” is used “more commonly”
M_Norway, I suggest you google FTC, SEC, illegal pyramid, and Ponzi scheme. Then you’ll see for yourself.
Oz, you deal with “practicalities,” I’ll deal with facts.
Been doing it for five years son. Jokes on you, the two are intertwined.
And it’s somewhat ironic that we come full circle and now have people not pushing schemes trying to dismiss common-sense practicality.
Dorothy, I wished I shared your optimism about regulations being on the horizon. What makes you think that’s true?
What any of this has to do with Merrill’s bail I have no idea, so I’ve left it there.
Tex, feel free to flesh out your definitions and why everybody else is wrong elsewhere. I’ve based BehindMLM on common-sense analysis and it’s not about to change anytime soon.
Are you talking about some general info to consumers? That’s DESCRIPTIONS, it’s not DEFINITIONS.
I have already pointed out that Ponzi is a commonly used expression. Of course you will find general info describing Ponzi schemes, but that doesn’t mean it’s defined in any laws.
Pyramid schemes ARE defined in laws, but Ponzi scheme isn’t. If it had been defined in laws, then the amended complaint in SEC v Telexfree would most likely have referred to the correct legal source (the correct Act, the correct rule).
I can point to several sources (laws, directives, regulations, etc.) where promotional pyramids are defined. I can’t do the same for Ponzi schemes, they’re like the picture I tried to show you.
Here’s from EU UCP Directive, Annex 1, rule 14:
That’s a DEFINITION of all the components of a promotional pyramid scheme.
* pyramid promotional = chain recruitment system
* where a consumer gives consideration
* for the opportunity to receive compensation
* that is derived primarily from the introduction of other consumers into the scheme
* rather than from sale or consumption of products.
EU UCP Directive is not a law in itself, it’s a directive about common trade rules in all the European countries.
Nonsense, Tex. A net win – clawback = 0, thus the original investment remains in intact. I am almost afraid to hear how you would calculate your hypothetical opportunity cost in today’s low interest environment.
hoss – What if the Ponzi owner spent ALL of the money?
There would be virtually no funds to administer the estate and virtually no way to fund an effective clawback effort. In that respect its the best thing that could happen to a net winner, and the worst for a net loser.
What’s your answer to the same question?
Doesn’t happen, because the owner usually buys assets, ostensibly as the investment he claimed to have made. Those can be confiscated and liquidated.
I need to admit what I was thinking a net winner is, was incorrect. A net winner is someone who received more back before the collapse than they put in. Therefore, their principle cannot be at risk, as it was, by definition, already returned to them.
Therefore, even if the owner has nothing, the net winners would have to return at least some, and probably all, of their gains (not including the amount they invested) to the net losers.
There is a good discussion here, based on the Madoff case, which appears to be typical of other Ponzi scheme resolutions:
http://www.lommen.com/Firm-News/Legal-Headlines/Net-Winners-in-Madoff-Ponzi-Scheme-Lose.aspx
hoss, I already addressed the opportunity cost loss in comment #81.
Ok We’re on the same page. The Madoff article you linked says it all and reflects the nomenclature and practice being followed by the Zeekler receiver. Other trustees and receivers throughout the country are likely to do the same.
Again referencing Zeekler, net winners who voluntarily agreed to repatriate funds to the Receivership estate have settled for about 50% of the amount of their winnings.
Those who have not cooperated are being sued by the estate for all net winnings + costs + prejudgment interest. How much these recalcitrant ones will actually end up paying back is an open question.
When the SEC intervened much of Zeekler’s cash was frozen. That cash is now dedicated to the administration of the estate (including clawback litigation.) Eventually all funds recovered from various and sundry sources will either be expended in administration or distributed to the creditors (net losers.)
It should go without saying that the more money the estate has at its disposal at the start the more aggressive it can be in attempting to recover every last dime from net winners and culpable third parties.
I never saw that before. If you highlight the words of the person you are responding to and then click the (Q)uote link following their handle it will show up green boxed in your reply.
Sometimes. It also occurs where the perp gets desperate and makes increasingly high risk and bad investments that only exacerbate the losses.
Hello Hoss,
This happens, I’m sure you’re aware, on a routine basis. And the sums available to victim-investors often also get eaten away by a Ponzi-schemer’s relentless boozing and partying expenses and expenses devoted to “companionship.”
The Trevor Cook Ponzi is a notable example of an affinity-fraud Ponzi targeted at conservative Christians and senior citizens. The victims were trusting people. They were horrified at how their money was used and how little was left over to compensate them.
Some of what little money remained was found stuffed inside a bathroom wall. Some other loot was found inside an airport locker. Large sums appear to have vaporized in Switzerland and the Middle East.
Cook and Madoff were affinity fraudsters and 10-12 percent a year Ponzi guys, both within the threshold of believability.
TelexFree was an affinity-fraud scheme and pyramid/Ponzi that provided purportedly guaranteed returns of about 20 percent a MONTH, figures that would make Madoff blush and recoil at the horror that any self-respecting Ponzi schemer ever could be that stupid.
There are other differences between Madoff and TelexFree, of course. One of biggest is that Madoff didn’t have to invest much time in HYIP brainwashing and pandering techniques and therefore didn’t have a need for a Carlos Costa in his organization.
Madoff never would have hired Costa or even partnered with him. He would have seen instantly that a loose cannon such as Costa or a flashy guy such as Sann Rodrigues or a serial huckster such as Faith Sloan could talk them all into the jailhouse.
When I imagine how the TelexFree case might roll out, I imagine a veteran federal prosecutor telling jury members they are about to hear witnesses tell “a story about Bernie Madoff — only times TWENTY.
“And this Madoff-like enterprise, the witnesses will relate, had an incredible collection of co-conspirators working on commission or for fees. Together, the witnesses will walk you through how this company and its co-conspirators engineered one of the greatest cross-border financial scams in history.
“They’ll tell you that this happened RIGHT HERE IN MASSACHUSETTS, right in our own back yard — and also in South America, the Caribbean, Europe, Asia and elsewhere.
And the cars and boats? The witnesses will tell you about the cars and boats and travel to exotic locations, some of it by private jet. They’ll also tell you about ‘extravaganzas’ and a key sports sponsorship and the YouTube videos that helped this scheme sweep over the world . . .”
The first witness will not be some dry government analyst or a numbers-cruncher or an expert in securities law; it will be an 87-year old widow walking haltingly but nobly under her own power.
She will testify in broken English that she’d never even heard the word “TelexFree” until the bank called her one day to politely inquire about why she suddenly had so much money flowing into the bank under her Social Security number and why so much of the cash was being removed at ATMs or used for purchases of jewelry and electronics and sports tickets and tickets to rock concerts.
“I nearly had a stroke when the bank called me,” she’ll tell the jury.
And she will be telling the truth. She’ll also be telling the truth about not owning a computer and never having made a purchase at BestBuy or Saks Fifth Avenue or Fenway Park or Gillette Stadium or TD Bank Garden. She’ll further be telling the truth when she testifies that she’d never even heard of the E Street Band or Bruno Mars or Lady Gaga.
And when the jury later learns that an MLMer “building a downline” and “creating wealth” through a “church” manipulated things to such an extent that he or she caused an 87-year-old widow on a demonstrable fixed income of $1,000 a month to incur $410,000 in tax liability, TelexFree will take its rightful place in the annals as one of the most wicked schemes ever to be exposed.
PPBlog
That puts a face on it. I wish I could be on that jury.
Hoss
hoss, the 50% settlement illustrates another major difference between Ponzi and illegal pyramid schemes. In a typical Ponzi scheme, large investments are made with the Ponzi operator, whereas in an illegal pyramid, very little, if any money, is invested with the illegal pyramid operator.
Add this to the growing list of reasons to be careful with using these terms properly, whether in a legal, business, or “practical” context.
On the other hand, you could design a scheme like Telexfree which contains elements of both pyramid and ponzi schemes to avoid being categorized by armchair experts such as Textex.
In fact, if you read any of the usual suspect HYIP forums, the promoters of similar fraudulent schemes capitalize on the confusion caused by said armchair experts by using terms such as our program is not a typical ponzi because……….” or “our program is not a typical ponzi because……….”
It’s fraud, whatever the promoters / armchair experts may like to call it.
Which is why the SEC concentrates on the pyramid scheme side of things and the DoJ uses terms such as fraud, and wirefraud and money laundering and conspiracy.
As I’ve already stated, active participants means TF was mostly an illegal pyramid.
The SEC concentrates on Ponzi scheme side of things because they are involved with stocks and other security related investment scams. The FTC concentrates on illegal pyramids because they are involved with business scams. The DOJ uses criminal terms such as fraud, wire fraud, and money laundering, including the fraud categories of Ponzi schemes and illegal pyramids.
Consider yourself educated from my armchair to yours. LOL
Goodness gracious,
how can one person be so wrong and so misleading to readers of his nonsense ??
Sad, really really sad.
I don’t follow how a settlement illustrates any difference at all.
In a proto-typical Ponzi in its most rudimentary form I suppose that is true. The money is invested directly with Mr. Charles Ponzi who “pays early investors with subsequent investor’s funds.”
It seems to me that you are saying that the money is NOT invested with Mr. Charles Ponzi (or his company…..DIRECTLY. I would agree. Its funneled to him (the operator) by more diffuse means, by a networked-multi-level pyramidal army of collectors (aka the sales force)
What ever way the money is collected, it is eventually redistributed.
For the foregoing reasons, any scheme that “pays early investors with subsequent investor’s funds.” may be regarded as a “ponzi” and it matters not how the money is collected, or the path it follows to reach the point where it is redistributed.
The use of Mr. Ponzi’s redistribution engine is what makes a scheme a Ponzi not the method of collecting the money. The collection method may make it a pyramid…or it may not and in this case Telexfree was both.
You 3-4 guys (Hoss, Tex, Littlefatman and Oz) with most of the posts here spend way too much time arguing over the semantics of whether TelexFree was a Ponzi, a pyramid of a hybrid.
You should focus more on whats going on instead of filibustering your over-inflated knowledge of the industry as speculative quasi-attorneys.
So little discussion on the events and too much BS. WHY?????
There’s not much going on in the TelexFree cases at present.
And yeah, we do get a bit restless.
Giving future victims at least a basic understanding of how things work in the online fraud / HYIP biz may be boring, even unpleasant at times, but, it sure as hell is better than NOT discussing it.
Oh, and it’s free and the little “x” in the top right hand corner of your screen will fix any boredom problems you may be having.
Then stop posting! LOL
hoss, the settlement is a “deal” between the government and the illegal pyramid scam artists. The 50% was probably based on the expectation that not all of the money made is still available because of:
1. The fact that there was overhead involved in creating the profit,
2. Much of it was spent on things like travel and other services that cannot be recovered or things like cars and boats, which depreciate in value,. Even a house purchased before the housing crash would have lost a lot of value,
3. It is better to get some money back sooner rather than potentially less, or even more, at a later time, as these things can drag out for years in the courts. Many of the net losers are hurting financially, so this makes more sense, and
4. The government doesn’t have to spend our tax dollars on going after the money, or pay someone else to do it, taking away from the “pool” of clawed back funding, and they can go after other scams with their limited resources.
However, the entire winnings are subject to the clawback, it’s just that 50% return now is better than even 100% much later, as people can literally die waiting to be compensated much later.
In a Ponzi scheme, the net winners give up all of their net winnings, but not any of their original investment. Unlike the illegal pyramid winners, they are not guilty of any crime, as they were merely passive investors, but they are still victims, as they have to give back their net winnings to the net losers.
For example, let’s say the Ponzi investor invested $1,000,000 and got back $1,200,000. Only the $200,000 is subject to clawback. But if the illegal pyramid distributor made $1,000,000, all of it is subject to clawback.
For the above reasons, the government may cut a deal, but ALL of it is dirty money.
So, in the case of the 50% compromise, the scam artist can give back $500,000 or spend his time and money paying a lawyer for a few years in court, and end up paying back anywhere from $0 to $1,000,000 (or potentially more, if there are penalties that can be applied).
In an illegal pyramid, the government can ban people from being involved in similar activities in the future. In a Ponzi scheme, they can’t, as no crime was committed by the passive investors.
Again, settlements in and of themselves do not illustrate anything about how the scheme operated. Telexfree and Zeekler did not operate like Amway so try to clear that perception out of your mind .
I have been using Zeek as an example, though Telexfree operated similarly. Zeek was a pyramid style recruitment scheme combined with a “Pay early participants with later participant’s money” type of Ponzi scam. Lets go over it.
There was no integrated tool scam to create profit for the uplines as at Amway and there was no soap to sell to enrich the owners as at Amway. There was no actual product to create economic “profits” at Zeek…. only new investments that were redistributed to earlier arrivers (so called uplines in MLM circles.)
In any event a settlement has been reached between a Receiver (not the government as you suggest) and a mere handful of Zeek participants (on the order of 150 out of nearly 18,000 net winners/potential settlers.)
Why those 150 settled is very obvious (you mentioned some of the factors) but why the other multi thousands have not is far more interesting…. though not for this writing.
Now, here is where it gets interesting. There have been NO allegations of criminality, nor administrative actions under civil law brought against even one of these 18,000 Zeek net winners, and yet they promoted (just like in a pyramid scheme. Not even the most notorious of them has been charged by the SEC for promoting illegal securities. The ONLY action brought by the receiver is for clawbacks. Let that sink in. The only action is for clawbacks.
Based on your own arguments, the Zeek receiver is treating the scheme as a Ponzi.
.
.
.
all you guys are doing is arguing over semantics for a week already. You also assume that folks in other HYIP programs are reading this discussion and will pay attention. That assumption is highly unlikely.
Tex, Lets stick a fork in this.
Excerpt from RVG Receiver’s Complaint seeking clawbacks, Document 1 filed 2/28/14
hoss, from the perspective that the participants were not passive investors, but active recruiters (along with lack of retail sales), these companies are identical and are therefore illegal pyramids, and not a Ponzi scheme. The differences are not meaningful in defining whether the scam is an illegal pyramid or Ponzi scheme.
The extra layer of an Amway-style tool scam would have been a RICO fraud on top of the illegal pyramid.
While the receiver is the entity in charge, receivers are appointed by a government judge, serving as a government proxy, and their actions are directed, monitored, controlled, and approved by the government court judge.
The 150 were probably the vast majority that actually made a profit large enough to make it efficient to go after, plus the lower level folks probably weren’t as aware of the overall illegal operation, and likely had net losses when overhead costs were factored in.
The receiver probably wasn’t given the authority to go after criminal charges. Be patient, I wouldn’t be surprised to see some criminal charges in the future, although I also wouldn’t be surprised if there is a confidential agreement to not go after them criminally. Let that sink in.
No, it’s not just semantics. I assume very few people read this blog at all.
The Zeek Receiver Complaint stated ” RVG operated a massive Ponzi AND pyramid scheme.”
I believe the Receiever’s assessment is correct and you are wrong. I’ve heard you out, but your assumptions and beliefs just don’t hold up.
Tex, AFAIK, TelexFree operated BOTH a pyramid scheme (99 TelexFree, where you buy TelexFree package, recruit other people who buy, and get paid in packages [with optional buyback]) and Ponzi scheme (AdCentral, where you post ads for TelexFree, pay X dollars for “ad package”, and get paid $$ over 12 months).
I’m going by memory here so details are bound to be missing something, but you are getting a bit pedantic splitting hair between Ponzi, pyramid, and hybrid schemes.
Personally, I think the modern pyramid scheme needs some new laws to address them, as the modern pyramid scheme has adopted a very good camouflage known as “product-based pyramid scheme” (or pyramid selling as it’s known elsewhere) which is indistinguishable from “legitimate” (yes, that’s in quotes) MLM.
As well as the pyramid scheme within the pyramid scheme.
The pyramid that pays Faith Sloan and the other so called “promoters” without whom Telexfree wouldn’t have been anywhere near as successful.
The pyramid scheme to which “normal” members have no access.
Does anyone really believe Sloan, and the other pimps, have any of their own money invested in Telexfree ? That they make those big cheques they like to flash based on their ponzi earnings ??
That they get paid the same rate as “normal” members for bringing in those large downlines ??
That they don’t get given positions and bonuses the other members don’t even know exist ?
That they don’t get paid a percentage of any large cash amounts their referrals “invest” ??
That they don’t know EXACTLY when to take the money and run ? (unless the SEC / FBI / DHS comes calling unexpectedly, that is)
Of course they do.