Receiver: Vemma lost millions of dollars, only 14% retail sales
Robb Evans is no stranger to pyramid schemes.
Appointed Receiver in the Fortune Hi-Tech Marketing pyramid scheme case, on August 24th Evans was also appointed temporary Receiver of Vemma.
Since his appointment, Vemma claim Evans has
- summarily terminated all of Vemma’s business operations
- summarily laid off the more than 100 Vemma employees
- failed to pay any Vemma creditors (including employees) and
- given no meaningful explanation to the thousands of Vemma affiliates and customers affected by the Receiver’s actions, or if and when operations will continue
Assert Vemma, ‘the damage being done by the actions of the FTC and the Receiver is incalculable‘.
That aside, on the 4th of September Evans, in his capacity as Vemma Receiver, filed a report of his activities dated August 24th to September 4th.
If Vemma felt in any way they’d been hard done by prior, Evan’s report is perhaps the most damning indictment against them yet.
The report begins with Evan’s justification for the actions Vemma outlined above.
Writes Evan;
On August 24, 2015 the Temporary Receiver took control of the businesses and pursuant to this Court’s Temporary Restraining Order suspended all product sales and commission payments until the Temporary Receiver could determine if the businesses could be operated profitably and lawfully.
In an effort to determine if the existing business operation could continue lawfully, the Temporary Receiver evaluated the information and details it gathered to determine whether the company operated primarily to encourage Affiliates to recruit other Affiliates, or primarily to sell retail products and services.
The Temporary Receiver’s additional goal was to determine whether the company directly or indirectly represented that consumers who become Vemma Affiliates were likely to earn substantial income, which is contrary to the companies’ published 2013 and 2014 results in its disclosure statements.
The pursuit of discovering whether or not Vemma could be operated lawfully and profitably, saw Evans engage directly with Vemma management.
Vemma’s Chief Financial Officer and Accounting Manager were interviewed to gain a better understanding of Vemma’s financials.
The aspects of the business under discussion to restart were sales to consumers not identified as Affiliates in the companies’
database and foreign operations.
What better way to prove Vemma isn’t a product-based pyramid scheme, then to allow sales to the company’s plentiful retail customers.
Here’s how that worked out:
The Temporary Receiver requested that management produce information on 2015 sales to Affiliates and non-Affiliate consumers located in the United States and Canada.
The Temporary Receiver reviewed the preliminary information produced by the management and learned the sales to non-Affiliate customers were about 22% of the 2015 sales.
Inversely, that means 78% of Vemma’s product sales this year were to affiliates.
And that figure climbs even higher upon analysis of Vemma’s last two and a half years of sales data:
Approximately 86% in product sales was sold to Affiliates and only 14% was sold to customers between January 2013 and August 2015.
14% retail? If that doesn’t scream product-based pyramid scheme then I don’t know what does.
And as is par for the course in such schemes, the majority of participants in Vemma lost money:
More than 94% of the active Affiliates received less than $500 per year between 2013 and 2015, which represents less than 8% of the total commissions paid
For the affiliates who received commissions, more than 73% did not earn enough to recoup their investment in the Vemma programs.
But that’s not even the surprising part…
In addition, the Temporary Receiver obtained a consolidated income statement from the companies’ accounting department.
The income statement for the period from January 1, 2015 through June 30, 2015 shows a loss of approximately $1.4 million.
The Temporary Receiver also located Consolidated Financial Reports reviewed by McGladrey LLP (McGladrey), an independent accounting firm. The 2014 Financial Report shows a loss before depreciation of approximately $2.2 million.
These initial reports failed to disclose accounting from Vemma’s European operations. Upon inclusion of Vemma’s European financial data, the Receiver discovered
Vemma worldwide operations in fact incurred net losses of $1.3 million in 2014 and $4.1 million for the six months ended June 30, 2015.
To put that into perspective, in 2014 Vemma generated more than $200 million in revenue. And even with 22% retail activity, the company still running at a multi-million dollar loss.
The most significant expenses were commissions, salaries and wages, which totaled $19 million for first six months of 2015, representing approximately 45% of the net sales or 75% of the gross profits during the same period.
Furthermore these losses might indeed be even higher, as Vemma management
declined to include and consolidate the financial statements of the joint ventures in Taiwan and Hong Kong into the 2014 consolidated financial report, which was inconsistent with the financial reports in prior years.
Nothing suss going on there…
Despite Vemma and most of its affiliates losing millions of dollars, Founder and CEO B.K. Boreyko was paid handsomely.
In 2013 Boreyko (right) paid himself $7.2 million dollars. In 2014 that dropped to $3.2 million and thus far in 2015 Boreyko has collected $1.2 million.
In addition to this Boreyko also owns Arizona Production & Packaging LLC, who ‘receive and packed Vemma’s products, and shipped the products to overseas subsidiaries and affiliates of the Corporate Defendants‘.
Between 2013 and August, 2015, Arizona Production & Packaging LLC generated $46.2 million in “net payments”. How much of that Boreyko received in addition to $11.6 million through Vemma is unclear.
Taking into consideration Vemma’s ongoing multi-million dollar losses, the Receiver concluded:
in light of the restrictions in the Temporary Restraining Order against paying compensation related to the purchase or sale of goods or services unless the majority of the compensation is derived from sales to or purchases by non-Affiliates, restarting any form of business operations could no longer be considered.
In a nutshell, Vemma in its current state relied to heavily on non-retail sales, which meant the restart of business would go against the terms set out in the TRO currently in place. And even should they restart anyway, Vemma’s business operations were clearly unsustainable.
In presenting his additional findings to the court, Evans also pointed specifically what Vemma were doing prior to the TRO, which they could not do in light of its granting:
- paying compensation related to the purchase or sale of goods when the majority of such compensation is derived from sales to or purchases by persons who are Affiliates
- misrepresenting or assisting others in misrepresenting that consumers who participate in a marketing program will receive or are likely to receive substantial income
- furnishing materials to be used in recruiting new members and marketing programs that contain false or misleading representations
Point one is the hallmark of a product-based pyramid scheme. Points two and three are flat-out deception, if not outright fraud.
The bottom line?
Presently, the Temporary Receiver cannot operate the Corporate Defendants lawfully and profitably.
And so that’s where we’re at.
In all likelihood Vemma is a product-based pyramid scheme that over the last few years ran consecutive losses. Retail was insignificant, both in amount and being unable to remotely sustain Vemma’s ongoing business operations in any meaningful manner.
Several top-leaders in Vemma also abandoned ship over the last few months, claiming they did so because their teams weren’t making money. At least one of these affiliate leaders claims the decision to leave Vemma was made without prior knowledge of the FTC investigation.
Far be it for me to point out the obvious, but all of this is consistent with a pyramid scheme on its last legs.
On September 15th Vemma will get the chance to refute the Receiver’s claims, which the FTC no doubt plan to capitalize on.
Best of luck to them.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Vemma Receiver’s 4th September “Report of Temporary Receiver’s Activities”.
Is anyone actually surprised to learn that only 14% of Vemma’s sales were to actual customers?
THAT IS THE MLM MODEL.
Thanks to OZ (and other message boards), this information is now being made available for ALL to see.
An excellent summary of the receiver’s findings.
It had seemed likely that Vemma was going downhill when BK Boreyko was vague about 2014’s revenues after bragging about Vemma’s 2013 revenues of over $200 million.
I am sure the mighty OZ will censor this, but I maintain that caveat emptor applies.
Everyone involved in MLM is either a predator or a moron, so let them eat each other. Who cares.
Might I respectfully suggest a little research into the efficacy of DulcoGas® may be of some assistance with your problem.
Nihilistic paranoia, an interesting condition.
But there’s a reason why we need the scams to die… because they are scams. Do we really need a better reason?
Take no part in the unfruitful works of darkness, but instead expose them. — Ephesians 5:11, Christian Bible
He who cheats us is not one of us — Prophet Mohammed of Islam
Good has its reward and evil has its recompense. The payback is just a matter of time — Chinese proverb
i’m finding something OFF here.
the TRO order clearly recognizes self consumption by vemma members, as a legitimate end destination of vemma products, and prohibits activities which:
the order then goes on to address another ‘class’ – ‘members of the marketing program’ and says:
so, the court has used two distinct terminologies ie ‘members’ and ‘members of the marketing plan’. i would construe this to be a differentiation between vemma members who were not on autoship and vemma members on autoship.
receiver evans has changed the language from the order, and preferred to use the terms ‘non affiliates’ and ‘affiliates’, giving the ‘impression’ that majority sales have to be outside vemma only, for the program to be legitimate. but there is no caselaw that ordains this, and this is not the spirit of the vemma TRO order either.
in light of the burnlounge order, receiver evans should have broken down sales into three categories: pure retail, consumption by free members, sales to members on autoship.
i’m sure this breakup of sales would still make vemma an unviable business prospect, but it would be more reflective of the TRO, and less confusing as to the current standing of MLM law.
I was surprised. I didn’t believe Vemma had any retail sales to non-affiliate customers at all.
I would have checked those figures twice, and then I would have looked for alternative explanations.
I have pointed out that the 10 customer rule usually will produce fake customers (“not real sales”). It will help to disguise a pyramid scheme. It’s a part of the problem rather than a part of the solution.
It was pointed out in a different thread.
behindmlm.com/companies/vemma/babener-weighs-in-on-ftc-vemma-lawsuit/#comment-345890
It will train people to cheat on a regular basis, making it become a habit. It will also make it more difficult for people to sue the company — when they have been actively involved in the deceptive practices themselves.
@anjali
Not at the expense of retail sales.
Evans is asserting Vemma in its current state is a product-based pyramid scheme.
i may be wrong, but maybe the receiver has included free vemma members, who neither bought the joining pack, nor were on autoship, as non affiliates, as they were not on the marketing program.
this would explain the slight discrepancy i found in post#6, and explain 22% and 14% retail findings.
It’s a preliminary report. He can’t “produce” data himself, e.g. to make it more similar to the TRO. But as far as I can see from your description, he seems to have followed the exact order.
But I’m not sure you have interpreted it correctly.
How did you come to that conclusion?
I haven’t seen the TRO, so I have no idea about how you came to that conclusion.
i came to this conclusion because the TRO does NOT Prohibit sales to vemma members which is intended for self consumption and resale. this means the court recognizes self consumption as product sales. the TRO prohibits marketing which:
the receivers filing gives the impression that majority sales have to be to non affiliates [outside the program]. the receiver has not clarified whether he is including self consumption sales revenue, to the sales percentages.
the pure retail + non incentivized member self consumption, has to be higher than the sales to incentivized members on the marketing program.
this is what the court order says. vemma is prohibited from running a business that:
sales to persons who are not members of the Marketing Program = retail sales
purchases by persons who are not members of the Marketing Program = self consumption of members not on autoship
the problem with vemma is that both pure retail and non incentivized bonafide self consumption together, will not cross the 50% sales mark, since over 80% of revenue came from package purchase and autoship.
this is clear in my head, i hope i am explaining it properly! 🙂
Because it didn’t specifically say it? It didn’t specifically say anything about walking nude in the park either, so that must be legitimate too. 🙂
My point is that the TRO doesn’t need to specifically reflect your interpretation of something. It can use other descriptions and cover what it is intended to cover.
It will need to be understandable to the Receiver and to the parties.
If a group of “preferred customers” could be found, it would probably have been reflected in the report. But then it will also be about whether that group can be separated from the alleged illegal part — whether it can work as a business on a temporary basis while the case is being resolved in court.
It doesn’t “mean” anything. A court should normally not place any “hidden meaning” into a TRO, something that only will be understandable for the selected few.
If it hasn’t clearly stated it then we can’t apply that “meaning” to it either.
It can be his interpretation and it can be your own. But the statement is correct in itself — “something” can be found to be OFF.
RE: Members vs. “members of marketing plan”
It’s probably Vemma reclassification… any one who’s not “active”.
Their own lit says one can be “active” three ways: you and 2 downlines each buy 60 pv, your two downlines buy 120 pv each, or you buy 120 pv yourself. If none of these were met, you’re “inactive” and gets relabeled “customer” (i.e. got lost in the churn).
according to ted nuyten, vemma was Drowning in retail sales, but vemma CEO boreyko, just did not keep the records.
apparently ted nuyten has been consuming 300$/PM of vemma products, for his good health.
fie on receiver evans for looking for vemma sales in it’s company data. he should have just put an appeal out on the net – vemma purchasers! raise your hands!!
hmm i think vemma will ask the court to allow it to continue it’s business, with some tweaking.
vemma may ask the court to allow affiliates and customers to purchase the products on autoship or otherwise, without paying any commissions. they probably want to show that the vemma product has a strong demand.
at least this is what troy dooly’s post on ted nuyten FB page suggests:
troy dooly certainly has an argument, which should be heard in court, but blaming vemma’s troubles on political motivation is stretching it.
Someone who wants a discount and autoship but doesn’t want to participate in the income opportunity, can sign up as a wholesale customer.
Everybody else is an affiliate participating in the income opportunity, as per the affiliate agreements they signed.
Trying to pull weaseling around this (to justify what is otherwise a product-based pyramid scheme), is what has landed Vemma where it is today.
Shame on anyone who tries to defend a glaring compliance issue that the industry has neglected to address for far too long.
Or was a product-based pyramid scheme on the verge of collapse.
Using illegally gotten funds from 2012-2013 to cover the inevitable collapse in the interim is not the answer. The Receiver has already concluded legitimate retail orders are nowhere near enough to sustain the business.
Listen to the accounting professionals, not people continuing to make excuses for product-based pyramid schemes. Ted Nuyten wasn’t consuming hundreds of dollars in Vemma product each month.
He said it himself… Diamond ranked affiliate.
What he didn’t answer was how he got there. Obviously self-funded his commission qualification, then how many recruited affiliates did he have on monthly autoship versus retail sales revenue?
You know the answer is bad compliance because he didn’t give it.
So sign up as a preferred customer dumbass.
Nobody is saying you don’t have the choice to order Vemma products. Either do it in a legally compliant manner or face the consequences.
where did my post go?? :
the problem with this oz, is that preferred customers or wholesale customers are a ‘norm’ but not a ‘legal standard’.
in reality as it stands, the court will have to grapple with the theory of affiliates joining to enjoy the discount, which was established in amway.
vemma’s problem is the ‘almost’ mandatory autoships, which the court will have to solve, by deciding on the ‘primary motivation’ of affiliates.
maybe, if vemma presents data of preferred customers, the court will ask why other non recruiting affiliates were not just preferred customers, and hence establish a legal precedent?
i don’t think the court will do that, but who knows how lucky You will get? 🙂
in the long run, it is good, if all the defenses vemma puts up are struck down by the court. that will create solid guidance for the entire industry about what is unequivocally Illegal.
since such compliance issues have been ignored for so long, let the court address them with finality. who wants half resolved issues to plague the industry for the next ten years?
i’m saying, the court Will Not Accept the affiliates on ‘autoship’ for self consumption argument.
Now there’s a brilliant business acumen to follow: Join a money-making program and brag that you aren’t making any money as it is your choice.
Just like Herbalife… Sending a dozen people to Congress to talk about nutrition and opportunities it provided to the Latino community, while declaring that 72% of its members did NOT seek income in its Ackman rebuttal.
That’s correct for Herbalife. >70% of the people signing up as distributors in Herbalife never upgrade to become Sales Leaders, according to official data.
That’s why I looked at Shawn Dahl and Anthony Powell in the first place. The complaints reflected some “local” pyramid schemes in specific downlines, 100% recruitment driven / sale of leads / etc.
I believe Herbalife and others use manipulated data, e.g. showing a higher number of distributors than what they really have, e.g. listing distributors who have quit long time ago. I simply don’t believe in a high number of “self consumers”.
In Vemma wholesale customers are affiliates, so are irrelevant. Preferred customers are retail, which in MLM is legally avery much required.
Lest you be closed down for being a product-based pyramid scheme.
Troy Dooly says
I used to follow Dooly but after the Zeek fiasco, not so much. This paragraph (not taken out of context) makes me wonder if Dooly understands the obvious issue with Vemma and almost ALL MLM programs.
He refers to a company having profits as the litmus test for whether or not they are actually SELLING products. I had to read that several times myself.
Seriously?
I hope the FTC decides to finally put the industry on notice about the EXISTING LAWS OF THE LAND and how they apply to ALL Direct Sales companies.
If you are going to call yourself a Direct Sales company, then you are going to have to actually SELL YOUR PRODUCTS and compete on PRICE, just like every other Direct Sales company doing business in the USA.
MLM Companies and their distributors will NOT be able to shift the emphasis away from your OVERPRICED PRODUCTS and into that of a SELL THE OPPORTUNITY model any longer.
FOLLOW THE MONEY:
DIRECT SALES MODEL VS MLM MODEL
DIRECT SALES MODEL
1. Hire Sales Managers who Recruit Salespeople
2. Salespeople sell to consumer
Pay the salesperson the MAJORITY of the money set aside for client acquisition and pay the Sales Manager a reduced percentage to manage them.
MLM MODEL
1. Hire a Master Distributor who brings with them their downlines
2. Teach those distributors to recruit other MLMers
The Recruiters sell the OPPORTUNITY and the initial product package. Pay the Recruiters who recruit the most Recruiters the MAJORITY of the money. Since the company and the leaders never focus on actual client acquisition, the amount paid to them is of little consequence.
Any questions?
wait a minute…….you didn’t know about him pimping the buzzirk scam for his friend before that?
Whip – I wasn’t aware of the fact that Dooly (or don’t we) was getting paid a consulting fee by Buzzirk, while at the same time, promoting them on his website.
Plus, when I say “follow him” I should have said I “followed his remarks” and often found them to be “remarkably” off the wall and not based in fact. It wasn’t until later that we found out why (getting paid to do so).
Whip (and others), I would appreciate your comments on veracity of my previous post. Thanks
I have a screencap of the post that lead to this. have to find it on one of my other computers:
scam.com/showthread.php?120023-Where-d-the-Buzzirk-Global-Verge-Zer01-thread-go&p=867221#post867221
if MLM was forced to operate as normal businesses do and not having dealers (affiliates or whatever you want to call them….it’s the same thing)on top of one another, MLM would cease to exist for precisely the reason you state…..overpriced ‘products’.
And we haven’t even broached to subject of voodoo juice products. Only the way affiliates make money….from others signing up under them.
Yeah, that, and him having taken Zeek money and deflecting criticism for Zeek while not telling any one basically means he should be on everybody’s **** list rather than “MLM Advocate” that he goes by. It wasn’t until SEC busted him that we got confirmation of what we suspected all along.
It’s best to regard Mr. Dooly’s perspective as an alternative universe in a bubble that only occasionally intersect our universe.
Whip/K Chang – I agree 100% with you both.
Whip – I just read a few posts from your link to Scam.com about Buzzirk.
The Full-Time MLMers jumped on that deal because of the promise of two things:
EASY MONEY
QUICK MONEY
When their deals (most are money-games) are “running” they make a lot of money which funds their lifestyle. They take pictures in front of their newly leased cars and light up their Facebook pages with their over-hyped story, “You too can get this car – hit me up. BAM!”
The deal runs its course and everyone jumps into the NEXT HOT DEAL only to repeat the process.
This is the underbelly of the MLM world as they don’t even ATTEMPT to acquire Retail Customers – – just another MLM company with an OPPORTUNITY driven model.
Whip, I love ya bro, you’re a better man than I. If you have evidence that Troy took money from GlobalVerge/Buzzirk I will owe you an apology but I don’t believe he did. This is perhaps my favorite Troy Dooly video and it was published two days before the forum post you linked to:
youtube.com/watch?v=y9-ztqiLa90
Troy and I swap messages from time to time, nothing major but it’s pretty easy for me to tell when he’s talking about one of his clients. I assure you he doesn’t talk about his clients the way he talked about Buzzirk in that video. In public or in private.
I don’t think I’m violating any confidentiality in saying the following, Troy no longer makes videos like the one above. I’m going to butcher and fail to attribute this quote but “Journalism is printing what someone else does not want printed. Everything else is public relations.” Troy is sadly and significantly on the PR end of the spectrum.
The issue to me isn’t “blame.” it’s trying to understand why. On one level it’s easy to understand, MLM is a push me-pull you game with one hand washing the other. Troy or really almost anyone similarly situated needs to decide if they want to be an honest critic or if they want to earn a living in the industry.
On another level, almost no one here has any stake in PR and we can all do basic math. The MLM industry steadfast and adamantly refuses to self regulate and somehow musters up surprise when they find regulators stepping in. Again, there is so much I do not understand and that’s why I still try to build bridges.
I’ve told Troy before that not only does he have baldness but he also makes baldness contagious, I want to tear my hair out sometimes listening to him. But bridges are best before they’re burnt and subject to correction I do not believe Troy was being paid by Buzzirk.
The issue to me is when they’re pretending to be something they’re not, e.g. pretending to be independent, neutral sources while they have been paid by one of the parties to promote or defend a specific point of view.
“The lack of something”, and it doesn’t need to be about honesty or integrity, but it surely is “something”.
There are degrees to it too. It will need to be seen on a case-by-case basis.
kevin thompson, one of vemma’s attorneys, has responded to ted nuytens FB post, a little while ago:
why is thompson not talking about ‘AUTOSHIP’? everybody knows that the court looks at motivation behind affiliate purchases yada yada.
why is thompson not talking about the commissionable autoships which brought in the majority revenue in vemma? how do you explain the motivation behind this?
the 15th of sept is going to be a blockbuster day in court. vemma is going to educate the judge. and rap the FTC.
Because attempting to change the narrative is about the only option Vemma’s attorneys have open to them.
It’s either that or acknowledge retail was insignificant when compared to affiliate-generated revenue.
Stupid statements like this are why the industry is where it’s at today.
Zeek = closed down due to lack of retail activity.
TelexFree = closed down due to lack of retail activity.
WCM777 = closed down due to lack of retail activity.
FHTM = closed down due to lack of retail activity.
If any of the above had significant retail activity taking place, they wouldn’t have been shut down.
Vemma also doesn’t have significant activity, yet people would have you believe 2+2=5.
The primary factor for why those were shut down was because they were Ponzi schemes. “Lack of retail” doesn’t have anything to do with that.
You should have detected that yourself. 🙂
One of the requirements of a Ponzi scheme is a lack of significant retail activity. The same is true for pyramid schemes.
Think outside the box.
this is a true statement. there is actually NO CASE LAW which says majority of a company’s revenue has to come from retail sales.
vemma has 80% revenue from affiliate joining packs and autoship, and has been shut down.
herbalife has 70% revenue from affiliate [member] purchase, and will not be shut down.
both vemma and herbalife have less than 50% retail. the difference is in the ‘motivation for purchase’ by affiliates.
Oz – I watched a company realize this back in 1993. They had 350,000 members AND 350,000 sales associates. The service was determined to have “some value” yet the issue was the one-to-one relationship between associates and customers.
FAST-FORWARD TO 2015
Almost ALL MLM companies and their Top Money Earners SELL THE OPPORTUNITY. That IS the product.
Question for you, Oz. What is your take on the timing of the Vemma complaint by the FTC? Did it happen because the number of complaints caused the FTC and other regulators to investigate? Or, is this action by the FTC a signal to the entire MLM community to get your Retail Sales ratios in order?
A Ponzi scheme is a fraudulent investment scheme. You can’t fix that with retail activity. The whole business would need to change
You can’t fix it with thinking outside the box either. Everything would of course have changed if the reality had been different, but a reasoning like that won’t make much sense.
The problem is that you should have detected it yourself when you were writing it, so you probably “worked on autopilot” there. That’s not a good solution.
@M_Norway
And within the context of an MLM Ponzi scheme, why is that?
Because there’s insignificant retail activity taking place.
@MLM
We’ve seen increased activity from the SEC and various state Securities Divisions, so it follows that the FTC have finally stepped up their efforts.
Whereas the SEC handle securities fraud (which Vemma is not), it makes sense that the FTC are targeting pyramid schemes – that’s their thing.
I believe the investigation has been going on for some time, and is the first of others to come (similar to what we’ve seen post-Zeek with the SEC).
Personally I thought one of the MLM cryptoscams were next (OneCoin et al.), but if it’s going to be product-based pyramid schemes then have at it.
I’m pretty sure the SEC will move against one of the cryptoscams sometime over the next twelve months.
We can’t interpret everything “within the context of MLM”. That would be rather dysfunctional.
“The debt crisis in Greece? Some retail activity will probably fix it!” 🙂
It’s time to return back to reality. You most likely worked on autopilot there.
No, but we can certainly interpret MLM fraud cases within the context of MLM.
But it doesn’t change anything. The fact that you CAN interpret something within a specific context doesn’t make it more rational to do it.
The Ponzi scheme is the very core of the business. The MLM recruitment system is a secondary component, not necessary in itself. It only makes it more attractive to certain types of people, and often less attractive to others.
Ponzi schemes can work with or without an MLM recruitment system. It doesn’t really make much difference. A single level commission or no commission at all may work just as well.
Regardless, an MLM Ponzi scheme is different to a vanilla Ponzi scheme. And retail sales are most certainly mentioned in regulatory complaints filed against them.
@ Oz – Thanks for the reply. I thought the regulators would take action on the cryptoscams before the product-based pyramid scams too. I understand why some people still believe the product-based MLMs are legal and I suppose some of them are.
However, obvious money games like the cryptoscams are being promoted by a lot of people who know they are illegal and promote them anyway.
In ZeekRewards, the MLM reward system didn’t really work. It only generated some minor payouts. The 10% and 5% commissions worked, but The Matrix didn’t really work.
But we’re derailing.
It may be rational enough to review MLM Ponzi schemes within the context of MLM. But that doesn’t make your conclusion in post #36 become more correct. Retail sale wouldn’t have been any solution there.
“If they had removed the investment schemes and had replaced it with a retail sale component” isn’t very rational thinking. It’s an “Aliens from Outer Space” argument.
Yet if Zeek had registered with the SEC and had retail sales as the majority source of income (so much so that affiliate investment into the scheme was negligible and non-incentivized), they wouldn’t have shut down for being a Ponzi scheme.
…and pigs fly, and sun came out of the west, and Hell froze over…
Zeek’s main attraction was its daily 1+% payout, which mean it can ONLY exist as a Ponzi scheme. Without the payout, it cannot possibly attracted so much attention, and without attention it would have no retail
Basically, it can die with a bang, or it can die with a whimper. It went out with a nuke blast (and a ton of collateral damage).
Cryptocurrency scams right now are existing in some sort of limbo… it’s neither legal or illegal, and people like Steve Chen and Ruja use that limbo to insert their own fiction about their own crypto-coin’s so-called legitimacy, but mainly by attribute transfer: Bitcoin is widely accepted cryptocurrency… we’re cryptocurrency too. i.e. “We’re kinda like that.”
It’s clearly fiction because anyone can launch a cryptocurrency in a few minutes or hours. Most noobs don’t realize that. They think all cryptocurrencies are alike or equal.
It would have needed to do more than “register with SEC”. It would have needed to get rid of the sample bids, the Retail Profit Pool and the reinvestments — the core of the business.
If you need to seriously change the reality to make a theory work, then there’s something wrong with the theory. It will need to be replaced.
Your “MLM Ponzi scheme” idea could have been accepted if it had been closer to reality. But if I start to accept ideas like that, then I must also accept Troy Dooly’s “unique bid auction MLM” ideas. And it simply isn’t worth it. 🙂
continuing in the ‘yet if’ mode..
..yet if vemma had not had the joining pack and the [mandatory] autoship, then the FTC would not have come checking for its retail in the first place.
inventory loading is the ROOT of the problem, and retail is it’s subset.
Vemma didn’t have much inventory loading?
“Drink some, share some” is about self consumption and samples, e.g. people may prefer to taste the products before they sign up for a $500 purchase.
Roots are usually located underground, i.e. “not in plain sight where your normal focus is, you will need to understand where they are and what to do to be able to see them”.
It’s similar with bottlenecks. They are usually located near the top of bottles, yet corporate management will look everywhere else when they try to find them. 🙂
the joining packs and monthly autoships are nothing but inventory loading.
that vemma tries to explain this inventory loading as harmless self consumption and samples, is another matter.
when an MLM has any inventory loading it is obliged to prove:
1] where that inventory goes.
2] how affiliates recoup the money invested in the inventory.
in vemma since there is no emphasis on any retail, an affiliate can recoup his investment only by recruiting an affiliate under him with a joining pack and with autoship. this goes on and on creating a endless chain.
since most people don’t recruit, affiliates in vemma lose money.
thus this inventory loading is the ROOT of the problem, and i have a special X ray vision to see them, while you all play retail-retail 🙂
Personally I blame an overdose of Law and Order for this thread.
The receivers’ interim report clearly states:
(bolding mine)
The goes on to conclude in part:
See that???
A qualified and experienced, court appointed receiver tells the court he “cannot operate the Corporate Defendants “lawfully AND profitably” due to what he has discovered since gaining access to the inner workings of the company in question.
Anjalitroll “smells something off” and all that goes out the window.
Am-bloody-azing.
I tried to bring it back to reality, so don’t blame me. 🙂
personally i dont even watch Law and Order.
stop jumping to con- bloody- clusions.
blame it on the receiver, he ran around filing the something-bloody- OFF report.
Here’s a SCRIBD.COM source to the Receiver’s Interim Report, uploaded by Thompson Burton (Kevin Thompson).
scribd.com/doc/279284007/Vemma-Receiver-Report-9-4-2015#scribd
I had a quick look at it. It’s mostly based on Vemma’s own financial information 2011-2015.
It means that “22% customers (2015)” and “14% customers (2014)” are affiliates reclassified as customers, not real retail customers. It’s most likely people who have dropped out of the program, stopped buying more on autoship.
(bolding mine)
Its just a shame when the government gets in the way of scamming your fellow man.
(That’s sarcasm)
question : with all the heat on vemma and its autoship based model, why is no one talking about Big Boy nu skin?
nuskin has an ADR [automatic delivery rewards] which the company advises you to get on quick and fast!
this is what the official compensation plan of nuskin [2014] says:
this ADR requires a purchase of 50 PSV which can you self consume or retail. this ADR entitles you to:
duh, no ADR, no commission!
nuskin has the same program in place like vemma, join up and get on autoship.
there is requirement to make 5 retail sales a month to be eligible for bonuses, but this is randomly monitored by the company, i wonder what the FTC will find if THEY check?
so, bonuses are not paid for ‘recruiting’ but through the sale of products via ‘mostly mandatory autoship’.
now that the FTC has put out a warning for companies who do business like vemma, will nuskin be changing it’s comp plan?
message to ackman: if you were itching to go after a listed MLM, you should have picked nuskin! would have been in the bag by now!
when boreyko made the announcement in 2014, that he was reclassifying affiliates, as ‘affiliates’ and ‘customers’, kevin thompson, MLM attorney wrote an article about his views on vemma.
boreyko had stated that vemma was less like MLM and more like amazon, and in this context thompson has written:
today, kevin thompson as one of vemma’s attorney’s, is asking vemma reps to send in affidavits stating that they were purchasing vemma products [on autoship] for the ‘Value’ of the product.
this seems to be contrary to his his viewpoint about vemma in 2014.
this is not to blame thompson, his personal views could very well be at odds with the MLM clients he has to represent, in his role as an attorney.
but, it is telling , if one of vemma’s own attorneys has held a stand against the autoship requirements of the company.
thompsonburton.com/mlmattorney/2014/04/04/bk-boreyko-tries-his-hand-at-magic-does-he-pull-it-off/#more-1321
Amway had no requirements, and Amway safeguard rules includes 1) 10 retail customers, and 2) 70% reorder (i.e. you have to sell/consume 70% before you can reorder). Both of which are to prevent inventory loading.
Vemma’s “some to drink and some to share” slogan was apparently created to get around both by ignoring the 10 retail rule, and by self-consuming most/all of the 70% required consumption for reorder.
The facts are clear: Verve, at direct from Vemma, is about $3 per can. That’s HIGHER than RETAIL of equivalent drinks, such as Red Bull, in retail outlets such as grocery stores.
In qty similar to qty for qualification in Vemma, cost per can for Red Bull is as low as $1.50/1.60 with subscription and free shipping. (Pretty sure Vemma also charges for shipping).
The only logical reason any college kid would buy Vemma is not because it gave them energy… but it’s because they’ve been told they can make money from finding people to “buy” it, just like they’ve been found (by their upline).
And that’s a pyramid scheme. Looking for testimonials are basically looking for people who lie to themselves, and they will simply go to pieces under any sort of cross examination. Vemma would never dare to put them on the stand.