Monday, 1 September 2014

US regulators and law enforcement agencies unite to tackle international Pyramid schemes.

Beth Healy
Beth Healy

Given the current tragicomic situation with dozens of US-based, blame-the victim, 'MLM Income Opportunity' rackets ('Herbalife', 'Amway', 'USANA', 'Forever Living Products', 'NuSkin', 'Xango', etc.) still being allowed to steal from a never-ending chain comprising countless millions of people all over the globe, the article posted below might (at first glance) seem to be a piece of heavy satire; nonetheless, Beth Healy reports in the 'Boston Globe' (August 30th 2014):

'Authorities in talks to tackle online Ponzi schemes'

'US regulatory and law-enforcement authorities are engaged in discussions about how to stop the worldwide spread of Internet pyramid schemes, following criminal indictments in Massachusetts against the owners of TelexFree Inc., who allegedly conducted a $1 billion global fraud.

The talks involve creating a coalition of federal and state securities regulators, as well as law-enforcement agencies, who would in turn reach out to their counterparts abroad, according to two US officials with knowledge of the effort. The Department of Justice is among the parties participating in the process.

The discussions reflect a growing realization by regulators in the United States and overseas that greater collaboration is needed to fight a new breed of online financial scams that move seamlessly across borders and ensnare victims with unprecedented speed.

“They are beginning to multiply exponentially,’’ said Luis Guillermo Velez, superintendent of companies in Colombia, in a recent interview. In the past year, Velez said, he has shut down three large pyramid schemes in his country, including TelexFree and Emgoldex, outfits that also have thrived in the United States.

“It’s so difficult to identify the people responsible and to really capture them, that at some point there needs to be an international agreement on how to handle this situation,’’ he said.

Officials say today’s online Ponzi schemes can expand so rapidly they make Bernard Madoff’s brand of financial fraud look quaint by comparison. No longer does it take years to attract assets through word-of-mouth referrals. Fraudulent startups barely need an office, never mind banks of telemarketers like those in the boiler rooms of corrupt brokers in the 1980s. Launching an online money scheme appears to require merely basic Web skills, a target audience, and a few slick YouTube videos.

William F. Galvin
“Obviously, the days of securities regulation being done by jurisdiction, based on a geographical area — it doesn’t work any more,’’ said William F. Galvin, Massachusetts’ secretary of state and head of its Securities Division. His office filed civil fraud charges in April against TelexFree, which sold long-distance phone plans but relied on a constant flow of new investors for most of its revenue, according to prosecutors.
In Massachusetts alone, hundreds of investors believe they are owed $90 million by the company, according to Galvin’s complaint. Globally, the figure may exceed $1 billion, authorities say.
TelexFree is an example of how quickly alleged pyramid schemes can spread. Even though it was shut down by a judge in Brazil in June 2013, the company was able to set up shop in Marlborough and flourish here for nearly a year, reeling in hundreds of Massachusetts residents, particularly in Brazilian and Dominican immigrant neighborhoods. Participants were promised large returns if they opened accounts for about $1,400 and helped promote the company by persuading friends and family to join, and approving online ads that touted TelexFree.
Galvin and the US Securities and Exchange Commission started investigating TelexFree once they learned about it. But the company, registered as a telecommunications provider, stayed under the radar by not seeking a license as an investment firm. Regulators say better communication with their foreign counterparts could help prevent such alleged schemes from operating undetected for so long.
Galvin’s office is now investigating Emgoldex Team USA Inc. and its principals for selling gold online in an apparent pyramid scheme. He said the company promises investors large returns if they get other people to buy gold as well.
No one from Emgoldex returned calls seeking comment.
“At the root of it is, they’re promising returns that are just ridiculous. That’s really the essence of what most securities fraud is,’’ Galvin said.
Velez, the Colombian official, shut down Emgoldex in his country in May. He said victims there may have lost $25 million to $50 million. But because Emgoldex is an online entity with locations purportedly in Munich and Dubai, his office so far has found no assets to recover or people to charge.
“Nobody has shown up — no attorneys, no representatives, nothing,’’ Velez said. Panama’s banking regulator is now investigating the company, he said.
Velez has had no contact with US authorities, he said. But he agrees that greater international cooperation could help put a halt to online schemes.
The SEC in March froze the assets of World Capital Market Inc., known as WCM777, in California, charging it with raising $65 million from investors through a Ponzi scheme. The same company also allegedly defrauded investors in Colombia, Velez said. Galvin shut the firm down in Massachusetts in 2013. The company is now in bankruptcy.
Often, these outfits gain traction by preying on particular groups of people.
Madoff, who is serving a 150-year prison term for a massive Ponzi scheme, targeted the Jewish community and nonprofits. TelexFree in the United States focused on Brazilian immigrants. WCM777 pursued Asian-Americans and Hispanic-Americans, according to the SEC’s complaint in Los Angeles.
Even after such firms are shut down, their principals and top promoters often move on to new schemes, with different names. Several people formerly involved with TelexFree, including family members of the principals, are now promoting similar ventures.
One of TelexFree’s American owners, James Merrill of Ashland, is home awaiting trial on criminal fraud charges in the case. His business partner, Carlos Wanzeler, has fled to Brazil, and is considered a fugitive. Both men face up to 20 years in prison if found guilty.
Merrill pleaded not guilty to the charges against him. Lawyers for both men deny any wrongdoing by their clients.
Galvin said achieving international cooperation will require coordination at the federal level.
“If it’s a scam in Columbia, it’s a scam here,’’ he said. “If it’s a scam in Brazil, it’s a scam here.” '

Beth Healy (Boston Globe copyright 2014)


  1. When U.S. schemes are exported and deemed scams elsewhere, why aren't they deemed scams here as well? The FTC could have nipped these problems in the bud years ago, but decided to make Amway and their clones legitimate, when they weren't. It has given rise to the levels of fraud being reported today. I see the opportunity schemes now hiding behind the moniker of "buying clubs," where it is claimed people sign up, not because they want to profit, but simply to buy the products. This is being said because all the rules set up by the FTC (like the 70 percent rule and the sale to 10 different customers) is and has never been enforced. Apologists have to devise other methods to justify their recruitment opportunity scheme. Given this explanation, the chances that anyone can achieve financial freedom is infinitesimally more impossible. A person only desiring to purchase the insanely priced wampum doesn't then intend to go on a recruitment crusade. That wouldn't make sense. Of course nothing about any of these pyramid recruitment schemes makes any sense anyway. All claim to offer a product or service. Recruitment is the only thing that drives the influx of money, nearly all of which comes from those falling for the scheme. Sooner or later the shoe should fall on them all. To say that one operating on the same modus operandi as the others is a scheme and leaving the others untouched is illogical. The Federal Trade Commission is illogical. (They've been infiltrated by representatives of the very industry that they regulate.) Hypocrisy runs rampant.

    1. quixtarisacult - Your comment is an accurate brief analysis of the current situation, because the US FTC has long since become a significant part of the problem.

      The 'MLM' lie could easily have been stamped out in the USA back in the early 1950s. It came very close to exposure in the 1970s.

      That said, esoteric, cultic rackets have all been maliciously set up to be beyond the understanding of all but the most intellectually-rigorous observers.

      In theory, the FTC is there to protect the people from thieves posing as businesmen/women. In reality, in respect of 'MLM' cultic racketeering, the bosses of the FTC have refused to accept their own ignorance and have, consequently, been protecting thieves posing as businessmen/women to the detriment of the people

      Racketeers deliberately infiltrated traditional culture with their 'MLM' lie, knowing that once certain individuals were bought, and/or fooled, it would become impossible for them to face the truth.

      Perhaps the biggest irony in all of this, is that, lately, foreign-based criminals have been exporting their own re-vamped versions of blame-the-victim 'income opportunity' rackets to the USA.

      The failure of US 'regulators' to regulate has been the equivalent of an advertisement for criminals to come to the USA, but then the investigation/prosecution of this type of highly-organised crime should never have been the responsibility of ill-informed trade regulators armed with technical regulations drawn up by the de facto agents of thieves.

  2. Ironically enough, Amway and Amway distributors Barry Chi and Holly Cheni are getting sued in Superior court by lead plaintiff Longsheng Lei and eight other distributors who allege breach of contract, fraud, false advertising, unfair competition, unjust enrichment, conversion and negligent misrepresentation. Ironically, this scam was imported into the U.S. and targeted the Chinese community. The allegations basically mimic the recently settled dispute between Amway and disgruntled ex-distributors which Amway settled out of court to the tune of 150 million U.S. dollars.
    The allegation involve the misrepresentation of foreign nationals which worked to defraud citizens of the U.S. and the Chinese community.

    You have described how Amway seeks to hide behind a baffling arrangement of 'corporate structures' and this case exemplifies that description. Amway proponents have longed touted the Chen's success as something any aspiring distributor could duplicate. (The core of the Amway fraud). Of course we all know that anyone applying the tried and true Amway plan can follow in the footsteps of Dexter Yager, Bill Britt and the other Amway kingpins (heavy irony). (Don't you believe this David?)

    Sucker after sucker in the hundred of thousands have fallen for the same bullshit paraded in "Achieve" magazine where the Chen's have taken center stage, proclaimed now as most successful Amway distributors in the world.

    Amway corporate lawyers will seek to distance themselves from any wrong doing by it's top foreign kingpins--although they have profited exponentially by the Chen propaganda machine. This is an example of what happens when Amway gets imported into the U.S., and of how Amway has gone after ethic segments here and elsewhere. Other ethnic immigrants, Hispanics are targeted in like manor. They are preyed upon by members of their own ethnic origin.

    Off shore Amway proponents have sought to defraud citizens in the U.S.. This includes the likes of the Swedish shill who ironically proclaimed that there was an online war against Amway. "Lord Haw Haw" must be spreading himself thinly as his beloved MLM and clones are being pressured ever more relentlessly.

    Most likely Amway/Alticor Headquarters will dig into their pockets and settle this most recent of legal difficulties to the tune of millions and walk away still admitting no wrong doing.

  3. The Chens are classic 'MLM' shills - poor ordinary little humans who have (allegedly) tranformed into multi-millionaire superhumans by exactly duplicating a secret plan, and who are prepared (out of the kindness of their hearts) to share this secret plan with anyone (for a price).

    It's almost a certainty that when the Chens start to attract too much bad publicity ,and/or the interest of law enforcement agents, they will be summarily excommunicated from the 'Amway' cult for (allegedly) breaking the rules.

    In recent years, the 'Amway' racket has also gone after ethnic Chinese in France.

    'Amway' was partially exposed in France as a scam and a cult back in the 1980s, when the classic trick was pulled. i.e. Jean Godzich, the 'Amway' shill who was attracting the bad publicity, and the interest of law enforcement agents, in France, appeared to be excommunicated for breaking the rules. In reality, this was just a means for the billionaire 'Amway' bosses to avoid liability.

    The 'Amway' lie virtually vanished in France for more 10 years, but when it started to spread again, most new adherents were ethnic Chinese in and around Paris.

    I've traced the activities of numerous 'MLM' shills who, over the years, have been excommunicated from their groups in exactly the same way.

    You'd have to be pretty naive, and/or stupid, not to realize that this is a criminogenic system for commiting fraud and diverting investigation, which forms an overall pattern of ongoing, major racketeering activity.

  4. When Amway kingpins change scams, say from Anway to Xango, do they drag their downline over to the new scheme? I scratch my head as to how they remain kingpins with no down-line? Or is this another carefully orchestrated shell game? I don't mean to keep you overly occupied with my naive questions. Maybe you could enlighten you readers on this matter?

    1. This is a very important question which only someone well-informed (such as yourself), would think of asking. However, the answer is not that simple.

      I would advise anyone trying to understand 'MLM' rackets, to think of the 'kingpin' shills as being like actors and actresses all playing essentially the same (poor little guys turned superhuman heroes) roles in various productions of essentially the same pernicious game of make-believe.

      Sometimes these deluded performers choose to leave, or are obliged to leave, one 'MLM' racket. They then have reappeared playing the same superhuman hero characters, but in other productions of the 'MLM' game of make believe with different titles.

      On various occasions, these wandering 'MLM' shills have filed lawsuits against the 'MLM' instigators who have effectively fired them.

      Thus, sometimes these wandering shills have gone on to set up their own 'MLM' productions whilst, at other times, they have been head-hunted by other 'MLM' instigators - in the same way that star actors (with a loyal group of fans) can almost guarantee the success of a movie.

      The instigator of 'Herbalife', Mark Hughes, first learnt his crooked trade in a minor 'MLM' racket. The instigators of 'Amway' , De Vos and VanAndel, learnt their crooked trade in 'Nutrilite, Mytinger and Casselberry.'

      Elderly 'MLM' shill, Doug Wead, starred in the 'Amway' racket for years. Wead then temporarily starred in the French 'MLM' production known as le 'Groupement' This was after his acting pal, Jean Godzich, was excommunicated from the 'Amway' production in France. Godzich set up 'le Groupement' with his existing 'downline' i.e. around 8000 oobedient 'Amway' adherents in 1989. He then ran away from France rather than face prosecution for fraud.

      Wead and Godzich were both close associates of another deluded 'Amway' actor, Dexter Yager.

      Recently, Wead and Godzich were seen temporarily starring in the 'Xango' racket, but there is no evidence that either of them brought any significant personal following of adherents into the 'Xango' racket. They were presented as 'MLM legends' and, thus, used to attract new adherents.

      Recently, a number of 'Herbalife' shills have been excommunicated in the USA and Canada, because they too face criminal investigations. Like Godzich in France, they have set up their own new 'MLM' productions with their existing following of obedient adherents.

      One 'Herbalife' shill, Mr. Peterson (who was facing investigation for his 'lead' peddling activities) was not excommunicated, but last year, he was found with a bullet in his head. The 'Herbalife' bosses first pretended that this was a tragic accident, but then the death was reported as a suicide.

      In the case of the Austrian-based 'income opportunity' racket known as 'Lyoness,' various 'MLM' shills have been used to set up the racket around the world. Some of these 'Lyoness' shills are now involved in a lawsuit in Australia and have complained to the authorities, but they too have already set up another copy-cat racket.

      I have actually been contacted by certain former 'Lyoness' shills who are apprently in fear of their lives, but who have attempted to prevent me from naming them.

  5. Thanks for your assessment. In retrospect, Orrin Woodward might be termed a perfect example of a cult leader. When he defected Amway, he did drag with him hundreds of his Team followers out of Amway and into Mona Vie. These cultist show more loyalty to a leader than product or group of products. Considering that Amway and Mona Vie are business opportunity scams, what products offered are immaterial. Sales are driven by each cultist's desire to remain viable in the pyramid scheme and buy a minimal amount of product (which I have determined is stock piling since one person can only take so many vitamins or drink so many juices each month. My ex had enough Nutrilite vitamins, energy bars and drinks stashed in the closet to choke a whale, and she had no real plans on selling any of these, and indeed if she had wanted to, the suggested retail made their sell a near impossibility. The few people she offered them to declined. They eventually became stale and couldn't be returned for refund. I've noticed that these stockpiles many times find their way onto ebay and Craigslist and are offered well under their acquisition cost at a substantial loss.)

    All of these business opportunity gurus (Wead, Woodward, Godzich, Yager, Britt, Chen, Dunkin) market not only themselves, but their supposed secrets (tools) which in total amount to bullshit bad business advice (or at best self improvement guides). They lead followers down the path which gives rise to ever increasing loss, while they enrich themselves and drive sales of product for which ever cult business they shill for. They present themselves as successful business men who started at the bottom and teach that their success can be emulated by all aspiring newbies recruited into their trap.

    The companies that procure and sell the products generally all are monopoly 'price-fixers' selling to a closed market. The sins of all are equally bad. Those who are 'core believers' are significant prey in a carefully conceived pyramid scheme in which failure is all but certain. If a person claims they join to simply buy and use the products, they are significantly harmed by the price fixing cost which makes them just as victimized as if they were actively trying to sell the business opportunity to their family, friends and strangers.

    Amway and their clones like to hide behind their shills. As you say, the shills can be excommunicated and villainized to save face.

    I scratch my head trying to understand how so many thousands of people are so easily duped and preyed upon? Or, how easily they are brain washed to disregard truth and believe lies? In the end, the meaning of 'caveat emptor' serves place all the blame on the people who buy into any scam, ponzi scheme, or fake business proposition. It seems that governmental regulators and courts seem to hold to the same doctrine at times. Criminal intent to defraud is viewed as legitimate business and victims are viewed as poor businessmen.

    1. quixtarisacult - Recently, my Blog recieved a 'comment' from Nigerian con artists on a global 'physhing' expedition:


      'WELCOME TO THE POWERFUL BROTHERHOOD ILLUMINATI KINGDOM, WHERE YOU FOUND ALL KINDS OF HAPPINESS BLESSING JOY IN LIFE. Are you tired with the can of life you are living today do you want your life to be change totally, and for your to fulfill your dream then your story we be change immediately are you poor and you want to become rich in life ,like other people or you want to be famous in life, are you a graduate looking for job. you have to join now. or a business man or woman or star who want to be fame and powerful you don't have to waste any of your time, are you suffering in life, make up your mind and join the Illuminati kingdom to become a wealthy man or woman and also to become famous and powerful email us at ... or call us at ...'


      The cultic control fraud that numerous US-based 'MLM' shills have been allowed to operate in plain sight, has been essentially no different to that run by these gangs of Nigerian con artists.

      Once lured inside an 'MLM' racket, chronic victims have been persuaded by psychologically-dominant shills (pretending to have access to a secret knowledge), that anyone can achieve their wildest dreams if they simply abandon themselves to the authority of the group's leadership and duplicate a proven system.

      'MLM' shills present themselves as the living proof that what they are saying is true.

      No matter how linguistically, and mathematically, complex the external presentation, internally, this self-perpetuating, pay-through-the-nose-to-play game of cultic 'Utopian' make-believe, is always exactly the same.

      Cult victims are progressively deceived into handing over their devotion, time and property to the leadership, and into recruiting others to do the same.

      You and I, and millions of other people around the world, have seen the extraordinary effects of this criminogenic phenomenon first hand, but (to date) very few people have been able to explain it in accurate deconstructed terms.