|Andrew Left of Citron Research|
August, 7th, 2012, the price of 'Nu Skin' shares fell as much as 12% on the New York Stock Exchange (before closing 9% down), after a damning-report was published by international, professional short-seller, 'Citron Research,' which clearly explains that the so-called 'direct selling' company is a 'cult-like' organization which has been hiding a blame-the-victim pyramid scam in China. However, as I have previously stated on this Blog, 'Nu Skin Enterprises Inc.,' has been the corporate front for a global 'MLM income opportunity' racket, the bosses of which have raised billions of dollars unlawfully by peddling effectively-valueless shares in a clandestine criminal enterprise (i.e. a dissimulated closed-market swindle and related advance fee frauds). In order to do this, the 'Nu Skin' bosses have, in breach of US federal securities laws conspired to withhold key-information about their true objectives from US financial regulators and from the public. However, this extensive securities fraud and obstruction of justice, are only parts of an overall pattern of ongoing major racketeering activity (as defined by the US federal Racketeer Influenced and Corrupt Organizations Act, 1970).
Consequently, I am baffled by the dangerous statement of the people at Citron Research that:
'MLM has become part of the economic fabric of the USA.'
and the absurdly-naive conclusion of the Citron report that:
'Nu Skin' can be reformed.
In the adult world of quantifiable reality, all so-called 'Multi-Level Marketing income opportunities' have merely been the mind-polluting chapters in an exploitative, self-perpetuating fairy story.
David Brear (copyright 2012)
On August 7, 2012, shares of Nu Skin fell approximately 9% to close at $44.36 after short-seller Citron Research published a report alleging that the personal-care products maker is operating an illegal multi-level marketing scheme in China. Citron alleged that Nu Skin's direct-selling business in China was actually "pyramid-selling" and was illegal under Chinese law. "We believe they violate laws regulating direct selling, as well as the prohibition on pyramid sales, specifically by supporting the creation of a multi-level pyramid compensation scheme, as well as requiring purchases in order to participate in sales commissions or salary," Citron said.
Those who inquire by e-mail are encouraged to include their mailing address and telephone number.
Bronstein, Gewirtz & Grossman, LLC
Peretz Bronstein or Eitan Kimelman, 212-697-6484
|stock ticker: NUS|
Introducing Nu Skin (NYSE:NUS)
- Greater China comprised almost 75% of Nu Skin's year-over-year revenue growth in Q2.
- Greater China represented less than 10% of the company’s revenue just 3 years ago, and is now 33.6%.
- The average distributor in greater China purchased roughly $1,200 worth of product in Q2, almost triple that of the U.S. and double the average levels of prior periods in China.
- The future of the company, and in particular, the growth story that underpins the value of its stock, is dependent on China. As CEO Truman Hunt just stated "Emerging markets, particularly China and South Asia, will continue to drive healthy overall growth rates…"
- Sales in North and South America contributed just 12 percent of revenue in the last quarter, with Europe just 7.7%.
What Nu Skin Says they Do: Direct Selling
What Nu Skin Actually Does: Pyramid Selling
Yes Or No
Computer Systems Needed to Implement an MLM Compensation Scheme
The Story in the Numbers
Avg Revenue per Distributor
Q1 – 2011
Q2 – 2011
Q3 – 2011
Q4 – 2011
Q1 – 2012
Q2 – 2012
Year over Year Distributor vs Executive Growth
Nu Skin’s Sales Driven by Promises of Achieving Massive Personal Wealth
MLM Impact on Culture and Cult-Like Behavior
- it is a cause for celebration to yearn for wealth regardless of the consequences
- any failure is the recruit’s own fault and responsibility, based only on their own lack of motivation to be rich and successful
- they should pervert relationships with their own families and friends by treating all of them as marks for sales and recruitment
Consequences of Violating the Law Prohibiting Pyramid Selling
- Ordering cessation of violating activities
- Investigation of anyone involved
- Carrying out on-the-spot inspections by entering into the business, training gathering places, etc.
- Copying, sealing, or seizing relevant contracts and records
- Sealing up business places suspected of being involved in pyramid selling
- Applying to the court to freeze unlawfully transferred or concealed funds
Political Conditions in China
- remove all income from China from Nu Skin's P&L
- write down the assets for capital spent in China to the business net of multi-level sales (which would be near zero)
- e.g. How many customers would walk into a Nu Skin store and walk out with a retail purchase? Would there even be any "Nu Skin stores"?
- reduce the company's growth trajectory to its realistic prospects with China revenues subtracted
- project the costs of replacing all management who definitively knew and actively abetted this business development in violation of China's laws …. and …
- set a revised price target for the company's stock, to account for the risk to operating an illegal business model.