Lot Flow Review: Cash-based penny auctions
There is no information on the Lot Flow website indicating who owns or runs the business.
The Lot Flow website domain (“lotflow.com”) was registered on the 16th of October 2014, listing “Zhuhai Yingxun Keji Limited” as the owner. An address in Guangdong, China is also provided.
Further research reveals Zhuhai Yingxun Keji Limited as the owners of thousands of web domains, with the sample that come up in Google search being somewhat questionable (porn, pharmaceutical, knock-off goods, “fake banks” etc.).
Far more probable is that the owner(s) of Lot Flow are based on Russia. This is based on available languages on the site being Russian and English, and the company having a page on VK, the largest Russian social network site.
Marketing videos that feature on the Lot Flow website are also in Russian, as are the tweets made by the official Lot Flow Twitter account.
As always, if an MLM company is not openly upfront about who is running or owns it, think long and hard about joining and/or handing over any money.
The Lot Flow Product Line
Lot Flow has no retailable products or services, with affiliates only able to market affiliate membership to the company itself.
Once signed up, affiliates can then make deposits with Lot Flow and participate in the company’s income opportunity.
The Lot Flow Compensation Plan
The Lot Flow compensation plan sees affiliates big for lots of money via a penny auction platform.
Lot Flow puts up cash amounts, which are then auctioned off via unique bid and express auctions.
Unique Bid Auctions
A unique bid auction sees affiliate place “bets” for 50 cents each.
The auction is considered to be completed, if the minimum bet amount is placed for the total bidding period.
In the last 30 seconds of the auction, each new bid increases the auction time by 15 seconds.
When the timer runs out (no bids are placed within the last 15 second period), the winner of the auction takes the “pool”.
Any leftover funds (bids spent in excess of the auction amount), are divided up between the next top 5 or 10 bidders (depending on how much money is in the pool).
An Express Auction sees each bid made increase the prize pool by 5% of the previous bid amount.
Ie. If the last bid price was $5, the next bid price will be $5.25 (5% of $5 + $5).
Each bid placed in an express auction increases the bid timer by 30 seconds. When the timer runs out, the last bidder wins the prize pool.
After paying a $10 fee to their upline, Lot Flow affiliates are able to run their own auctions through the company’s penny auction platform.
These can be either unique bid or express auctions.
A commission is paid to the affiliate who started the auction by way of receiving the initial funds they put up for the prize pool, as well as the amount the winner placed on their last bet to win the auction.
Note that Lot Flow take a 13% commission out of the amount paid out.
Referral commissions in Lot Flow are paid out when recruited affiliates purchase bids, win an auction and receive a commission upon starting their own auction.
Referral commissions are paid down three levels of recruitment (unilevel), paying 7% on level 1, 4% on level 2 and 2% on level 3.
Joining Lot Flow
Affiliate membership with Lot Flow is free, however affiliates need to fund their account to participate in the company’s income opportunity.
How much an affiliate chooses to fund their account with is up to them, but the minimum would appear to be 50 cents (the cost of one unique bid auction bid).
Note that Lot Flow charge a 10% fee when affiliate’s fund their accounts.
As per the Lot Flow website “Rules and Marketing” page:
Lot Flow is a high-yielding investment program based on an auction, operating in real time online.
The most accurate way to describe Lot Flow’s business model is that of a series of money games, tied to what is essentially a Ponzi scheme.
Affiliates invest either directly from their funded account (express auction) or via 50 cent bids (unique bid auction), on the expectation of winning the pool.
This pool is funded by affiliate investment, as Lot Flow has no other revenue-sources.
The company did introduce an advertising platform last month, but at the time of publication I didn’t see any ad inventory on display. Furthermore, it’s pretty obvious that the only advertising customers Lot Flow would have would be affiliates themselves.
In any event, the bids placed, in the hope that the prize pool was won, would constitute the security being offered here.
The money game, by way of time extension on the auctions, adds an unconventional money game layer to the scheme, but it’s still just affiliate funds being shuffled around to pay affiliates.
In essence investors are paying for a chance to “win” a ROI.
And if enough investors fail to invest in any given auction (ie. Lot Flow would lose money covering the auction), this happens:
If the amount of bets placed is less than the minimum amount required for the auction to be held, the pool is given to the last participant, who has made the last bet.
The organizer of this auction gets the initial price of the item in this case.
No excess bids = no auction organizer commission, further evidencing affiliate funds simply being shuffled around.
Far more clear-cut are the affiliate-run auctions, which literally see affiliates returned the funds they put up, along with a ROI matching the last bid placed.
The game-like structure of the scheme means Lot Flow doesn’t necessarily rely on newly invested affiliate funds, but rather the funds are far more likely to originate from existing investors. At least when compared to a traditional “invest and do nothing” Ponzi scheme.
In that sense it’s akin to gambling, without the regulation or legality… and you have no idea who’s behind it.
Regardless, once new and existing affiliates decide to stop “playing” (injecting new funds into the scheme), Lot Flow will collapse.
Due to the penny auction business model deployed, what we’ll see when that happens is a stall (auctions being run but nobody participating).