This commemorative poster of the concert Hank Williams never made it to is among dozens and dozens of items up for auction in the Zeek Rewards Ponzi scheme case.
UPDATED 7:42 P.M. ET (U.S.A.) Not only is the court-appointed receiver in the Zeek Rewards Ponzi-scheme case selling Zeek’s old headquarters (with attached coin-operated laundry) in Lexington, N.C., he’s also selling a hefty collection of country-music memorabilia and other entertainment keepsakes. Among them is a “Saturday Night Live Script featuring Johnny Cash and musical guest Elton John from April 17th 1982.”
There’s also a “Slam” grand piano with no working components and no top. The wooden shell is signed by Jerry Lee Lewis, a legendary keyboard pounder known as rock ‘n’ roll’s first wild man and “The Killer.” (Expect the piano to have “minor wood damage,” the receiver’s auctioneer says.)
The screen shot above is taken from an image of just one of the items up for auction: a framed poster advertising an appearance by legendary country performer Hank Williams in Canton, Ohio, on New Year’s Day 1953. (The poster appears to be a Hatch Show Print commemorative, rather than an original show promo. Even so, some collectors might want it to round out their Williams collection or for discussion value: Williams died on the way to his scheduled Canton performance, and the “if the good Lord’s willing and the creek don’t rise” line is a classic American idiom.)
The live auctions will open in Lexington on Dec. 16 and 17 and will be simulcast online. Bidders must register at the site of proxibid. The catalog for Day 1 is here; the catalog for Day 2 is here.
Day 1 items are described by Iron Horse as real estate (former buildings associated with Zeek), and as “Memorabilia from numerous country music artist[s], to include stage costumes by Nudie, autographed pictures & prints of NASCAR personalities, shadow boxes, reproduced Hatch Show Prints; record label awards & more
“Porter Wagoner, George Strait, Alabama, Willie Nelson, Kenny Rogers, Barbara Mandrell, Dolly Parton, Waylon Jennings, Charlie Daniels, Alan Jackson, Brooks and Dunn and many more.”
Day 2 items are described by Iron Horse as “Like new bedroom suites, couches, living room furniture, office furniture, electronics and more.”
These are screen shots from three different promotional videos or news releases for WCM777 online. The first reflects a claim that people who send $14,000 to WCM777 in a poor economy will fetch back $500,000, 35 times-plus the amount they sent in. This will be accomplished in 52 weeks through the rollover of earnings in 100-day cycles, according to the video. The text headline on the video page says this: “Investment WCM777 – The Power of 7 Units Raises over $ 500,000.” Below that, there is a link to Blog with the extension of “br,” which stands for Brazil.
The second screen shot shows World Capital Market, the purported parent firm of WCM777, saying it bought the Glen Ivy golf course in California. Meanwhile, the third shot reflects a pitch for WCM777 that rips off more than two minutes of footage from Sylvester Stallone’s “Rocky Balboa” flick (2006) with its inspirational message and famous musical soundtrack from the six-film “Rocky” franchise, suggesting internationally famous movie star Stallone (or Rocky Balboa) would endorse WCM777.
Unseen in the third screen shot is a text message that appeared below the video featuring Stallone. The message suggests that Brazil cannot block WCM777 or subject it to investigation, as it did with the BBOM, Priples and Telexfree “programs.”
Here is that message in Portuguese: “A WCM777 é um banco de investimento que usa como estratégia de venda do seu produto o marketing de rede ou marketing multinível, o produto da empresa é a tecnologia em forma de nuvem a mesma usando pelo dropbox, Skydrive só que os lucros pór indicação é em dolar além do produto e a empresa ser sustentável o Brasil não pode bloqueá-la como fizeram com a BBOM, Priples e TELEXFREE. Junte-se ao Marketing de nível Profissional!”
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On a side note, if the world of MLM investment schemes can rip off Sly Stallone and his fictional portrayal of the boxing world, why not the rip off the real world of the sport of badminton? BehindMLM.com is reporting that TelexFree appears to have appropriated the logo of the 2010 World Badminton Championship in Paris and made it its own.
The PP Blog sought comment from Delgado today, but the Blog’s email was returned undelivered. (Delgado’s inbox appeared to be filled to capacity, based on the response we received back from the server.)
Colombia already has opened a probe into WCM777’s business practices. In the United States, meanwhile, the state of Massachusetts has filed a consent order that bars WCM777 from operating there.
Google searches show that WCM777 has a presence in Peru.
Delgado is a founder of the Peruvian Association of Consumers and Users (ASPEC). His photo appears on the ASPEC site. He has served on several Congressional committees, including one dealing with consumer protection.
UPDATED 9:02 P.M. ET (NOV. 20, U.S.A.) There has been an arrest in the alleged shootings. The suspect has been identified by Reuters as Abdelhakim Dekhar. The PP Blog’s original story is below . . .
An extraordinary drama is playing out in Paris today, as French police search for a gunman or gunmen who allegedly shot a person inside the office of the Left-leaning Libération newspaper and opened fire outside the Societe Generale banking concern in Paris.
“Police are being sent to the offices of all national French newspapers, Interior Minister Manuel Valls announced,” CNN reported.
“French media say the suspect told the motorist he hijacked that he was armed with grenades,” the BBC is reporting.
Adding tension to the unfolding drama, DDoSers apparently hit the Libération website today. Service has been restored.
Whether the asserted DDoS attack somehow was related to the shooting incidents was not immediately clear.
Cyber analysts long have speculated about the possibility of a perfect storm of events — violence tied to political beliefs or political extremism with an accompanying cyber attack on media, banking or government sites, for instance.
TelexFree, an MLM “program” that requires participants to pay back the company 20 percent of their earnings in one fell swoop, is positioned on You Tube as “The Hotest [sic] Deal In The World.” There were earlier claims that the money did not have to be paid back.UPDATED 6:14 P.M. ET (U.S.A.) TelexFree members who wish to maintain their position in the “program” and are nearing their one-year anniversary dates will receive an invoice from the company for 20 percent of their program “income” and must pay it within 10 days, according to a recording of a Nov. 15 TelexFree conference call.
“On all the existing contracts, there is a 20 percent renewal fee, which will be based on your income generated from the previous year,” said TelexFree executive Steve Labriola.
“Just go into your back office [and determine] what you’ve earned and take 20 percent of it,” he instructed. “That will be the size of that invoice.”
But in a video dated May 11, 2013, and playing on YouTube, TelexFree members attending a company event were told by various speakers that the 20 percent fee had been removed from the contract. The claim raises questions about whether untold scores of TelexFree reps joined the “program” believing the contract requirement to pay back 20 percent to TelexFree had been waived.
“Certain people went to TelexFree and said, ‘Hey. This is America. This is the United States,’” a man addressing the audience said. “This 20 percent — this is ridiculous. And it’s been removed from the contract. Straight up.”
The May announcement of the fee removal, confirmation of which was attributed by speakers to Labriola in the “back of the room,” was met with wild cheers.
“You have to appreciate the heart of this company,” a second man said from the stage in the May video. TelexFree appears to have held a “Super Saturday” event at a Hilton hotel in Orlando, Fla., on May 11, the same date of the YouTube video.
One of those cheering the asserted news in May was veteran “opportunity” pitchwoman Faith Sloan, late of Zeek Rewards and Profitable Sunrise.
It appears, however, that TelexFree either never removed the fee or quickly reinstituted it when it recognized that millions of dollars of revenue it had anticipated when the “program” approached its anniversary date and first-in members approached their anniversary dates would vaporize.
Other offering materials suggest that some of the asserted leaders who once protested the fee as unAmerican and announced its removal now have emerged as champions of the fee. If their downline members pay, it could keep the leaders on the gravy train.
How much revenue was driven to the firm based on assertions the fee had been waived is unknown. Because some TelexFree promoters also pitched the alleged $600 million Zeek Rewards Ponzi scheme and may be targets of clawback lawsuits to return ill-gotten gains, their ability to address any invoice from TelexFree may be challenged. Some TelexFree promoters also pitched Profitable Sunrise, which the SEC described in April 2013 as a murky international pyramid scheme.
How TelexFree members who already might have spent their earnings will address the invoice is unclear.
TelexFree itself is under investigation in Brazil, amid pyramid-scheme allegations. In the Nov. 15 call, Labriola suggested some promoters will owe TelexFree sums ranging from $1,425 to $200,000. The more the earnings, the more owed TelexFree through the 10-day invoice.
The pyramid probes in Brazil were not addressed in the Nov. 15 call.
One of TelexFree’s electronic payment vendors limits individual transactions to $500, Labriola said.
“All you need to do if you’re paying a $1,425 invoice is do it in three different . . . you can pay it in three different amounts: $500, $500 and $425. And you can do it all in one transaction,” he said.
Members also can pay with back-office earnings that have not been withdrawn, by check or by ACH transactions, Labriola said.
Depending on the sums owed, however, all of the payment methods could trigger bank-reporting requirements to the U.S. government. Beyond that, any attempt to evade those reporting requirements could lead to questions about whether TelexFree and/or its members were engaging in structuring transactions. Structuring is a somewhat common element in Ponzi- and other fraud schemes. (Here’s an example from January 2013. Here’s an example from August 2013.)
TelexFree will introduce new products in the near future, Labriola said.
One of them will be a cell-phone product, but TelexFree members aren’t permitted to identify the four carriers, he said.
In the meantime, TelexFree members should continue to recruit, he said, suggesting that the new offerings could help members overcome the sting of an invoice for 20 percent of their earnings.
Labriola also warned members not to cross recruit, suggesting they’d lose their TelexFree distributorships if they do so.
Some members facing an invoice for 20 percent of their earnings, however, may see no other option than to dump TelexFree and take their downlines with them in favor of another company that does not require a 20 percent payback to the firm at the one-year anniversary of membership.
It is possible, though, that some members will pay the piper 20 percent, viewing it as the only means of protecting anticipated earnings and enabling continued payouts from TelexFree beyond their anniversary dates. If something goes amiss with TelexFree beyond the current situation in Brazil and investigations spread around the globe, the decision to pay could be one members live to regret.
Promos for TelexFree began to appear on the Ponzi boards roughly in the mid- to late summer of 2012. There are claims that more than 1 million participants joined. Given the dates of the early Ponzi-board pitches and the time it takes for a “program” to gain a head of steam, untold thousands of people now may be approaching their anniversary dates.
Christ the Redeemer on the stage at a June 17 WCM777 event in California. Source: Facebook
A photo of the Christ the Redeemer statue in Rio de Janeiro, Brazil, now has been used in a third recent scheme: WCM777.
The photo was displayed from the stage at a June 17 “grand opening” event for WCM777 at the Pacific Palms Hotel in City of Industry, Calif., according to a WCM777 Facebook site.
Images of the statue also have appeared in promos for TelexFree, an MLM firm under investigation in Brazil amid pyramid-scheme allegations, and Profitable Sunrise, an HYIP taken down by the SEC in April 2013. (See July 7, 2013, PP Blog brief.)
On Nov. 14, the state of Massachusetts said it halted WCM777 in the state, saying it was selling unregistered securities and that the scheme had been targeted at the Massachusetts Brazilian community.
URGENT >> BULLETIN >> MOVING: (10th Update 9:28 p.m. ET U.S.A.) Massachusetts has halted the WCM777 multilevel marketing scheme, saying it was associated with entities in Hong Kong, the British Virgin Islands and the United States and selling unregistered securities. In Massachusetts, the state said, the scheme was targeting the Brazilian community.
In a filing by the office of Massachusetts Secretary of State William Galvin, the state says it opened a probe into WCM777’s business practices in September.
Identified entities include World Capital Market Inc. of Pasadena, Calif., an asserted offshoot of a banking enterprise in the British Virgin Islands; WCM777 Inc., a dissolved Nevada business with an office in City of Industry, Calif; and WCM777 Limited of Hong Kong.
WCM777 purports to sell “cloud” Internet services. The investment scheme spread in part through weekly pitches in August and September by a WCM777 distributor using a “function room” at a Massachusetts hotel, the state said.
Investors were lured with promises they’d receive “profit sharing” and an ability to “purchase stock options” in the run-up to an asserted IPO in 2014, the state said.
The Massachusetts filing is a consent order. WCM777, according to the order, has agreed to cease business in the state and to provide refunds to all Massachusetts investors. The scheme netted at least $300,000 in the state from about 160 investors, the vast majority of whom were members of the Brazilian community, according to the order.
“Nearly all” of the investors bought into the scheme at the $1,999 level — the level that promised the highest daily payout, according to the order.
Promos advertised returns of “over 90 percent” in 100-day cycles, the state said.
WCM777 has neither admitted nor denied the allegations, the state said.
Attorneys for WCM 777 made the refund offer on Nov. 13 after presenting the state a spreadsheet on Oct. 14 showing information on Massachusetts participants, according to the order. The document does not say whether other states also are investigating WCM777. The nation of Colombia is known to be investigating WCM777.
Ming Xu is identified in the Massachusetts consent order as the founder and president of WCM777 Inc.
WCM777 promoters refer to Ming Xu as “Dr. Phil.” A Twitter account associated with the name of “Dr. Phil Ming Xu” displays WCM-related content and photos of Ming Xu with luminaries such as former U.S. Vice President Al Gore and Apple co-founder Steve Wozniak.
The photos appear to have been taken at a California business event earlier this month at which all three men spoke.
Meanwhile, there’s a photo of Ming Xu surrounded by adoring followers. The photo appears to come from the same meeting from which this video emerged:
Read Oct. 30, 2013, PP Blog story on WCM777, which appears to have promoters interested in pitching the purported opportunity to churches and their entire congregations.
David Robert Gilmour Ross, the 63-year-old architect of New Zealand’s largest Ponzi scheme, has been sentenced to 10 years and 10 months in prison, New Zealand’s Serious Fraud Office announced.
“More than 1,200 client accounts were affected by Mr Ross’ scheme, so his offending has had a devastating impact on many lives,” said SFO Director Julie Read. “The financial losses are not only significant to those individuals but they will have a flow on effect as those investors’ dealings in the New Zealand economy are impacted. It is important the SFO remains vigilant in fighting financial crime so we don’t see a repetition of this sort of scheme.”
Investors took a bath for about $NZ115 million, roughly $US95.36 million. Through accounting deceptions and false statements, “Mr Ross reported false profits of $[NZ]351 million,” SFO said. That’s roughly $US291 million.
Ross engaged in the “purported trading of the fictitious securities,” SFO said, noting that he admitted to “knowingly making a false declaration to [the Financial Markets Authority] for the purposes of obtaining authorisation as an Authorised Financial Adviser (AFA) and producing documents to FMA which he knew to be false or misleading.”
A resident of Wellington, Ross pleaded guilty in August to false accounting, theft by person in special relationship, providing a financial service when he was not registered for that service, making false statements and producing false documents, SFO said.
Ross was associated with an entity known as Ross Asset Management (RAM).
“Large portions of client portfolios shown as invested through a broker ‘Bevis Marks’ were fictitious and never existed,” SFO said.
BULLETIN: Federal prosecutors in the Western District of Washington have asked a federal judge to issue a final order of forfeiture against the property of AdSurfDaily figure and purported “sovereign citizen” Kenneth Wayne Leaming.
Leaming has agreed to forfeit the property, and a preliminary order of forfeiture already has been entered, according to prosecution filings.
The property includes six firearms, bogus law-enforcement badges and other false credentials, light bars, crime-scene tape, vests, handcuffs and nightsticks. It also includes documents related to Leaming’s “performance of legal services for third parties,” including “‘client’ files, counterfeit instruments, and similar materials,” prosecutors said.
At the same time, prosecutors are seeking the final forfeiture of “All digital devices, including computers, external hard drives, and other storage media” linked to Leaming
Leaming, 57, of Spanaway, Wash., is serving an eight-year prison sentence at the Federal Correctional Institution in Terre Haute, Ind. He was sentenced in May 2013 on charges of filing false liens against government officials involved in the prosecution of the $119 million AdSurfDaily Ponzi scheme, harboring federal fugitives from a separate scheme and being a felon in possession of firearms. His previous felony conviction was for piloting an aircraft without being licensed.
Leaming was arrested by an FBI Terrorism Task Force in November 2011, after he filed false liens against the officials. Agents also uncovered evidence that suggested Leaming intended to serve a writ on U.S. Chief Justice John Roberts by monitoring the school his children attended. Roberts presides over the U.S. Supreme Court and is America’s top judicial officer.
Precisely how many ASD clients Leaming had is unknown. In 2010, Leaming promoted himself as an attorney on the website of Cornell University Law School, advertising a fee structure and saying he practiced “Admiralty/Maritime, Business Law, Estate Planning and Native American Law.” Cornell removed the listing after the PP Blog reported that Leaming was accused in Washington state in 2005 of engaging in the unauthorized practice of law.
In 2009, Leaming filed involuntary bankruptcy petitions against the Washington State Bar Association and a Franciscan healthcare facility in the state. (Among Leaming’s assertions was that the bar association owed him $32 billion. Through a notary public in a different venue, Leaming earlier had asserted that the hospital owed him $9.24 billion. In short, Leaming sought to attach “all tangible and intangible property” of the hospital, including its fixtures, furnishings, motor vehicles, bank accounts, passbooks, saving certificates, stock certificates, lines of credit, inventories, promissory notes, office equipment, educational equipment — and even its mineral and water rights, according to records. The hospital serves several communities in Pierce County, including Lakewood, Spanaway, Steilacoom, DuPont, University Place and others.)
Judges tossed the preposterous claims, and a federal bankruptcy judge ordered sanctions against Leaming.
In October 2011, the PP Blog reported that a Leaming-associated company — American-International Business Law Inc. — was listed in records as the registered agent of at least 73 companies. One of the firms was known as “Presidential Detail.” Another was known as “Homeland Security Service.” Two others were known as “Federal Asset Management Service” and “Federal Fleet Management.”
At least two other Leaming-connected firms used the names of the famous JP Morgan banking concern.
“Sovereign citizens” are known to engage in what has been described as “paper terrorism” against the government and its officials, banks and litigation opponents. Earlier this year, Leaming asserted the judge presiding over his criminal charges in the liens, harboring and firearms case owed him 208,000 ounces of “fine silver.”
A purported “nutrition club” site visited by Bill Ackman’s team. Source: Pershing Square Capital Management LP report on Herbalife. (Red block by PP Blog.)
The PP Blog’s take on Bill Ackman’s take on Herbalife is that the Los Angeles-based MLM firm dupes prospects into believing they’re boarding the bus to Disneyland, but it’s really the bus to Jurassic Park. Latinos, African Americans and other vulnerable populations pile on bus after bus and become financial protein for the pyramid scheme of a voracious Tyrannosaurus rex.
Our take on Herbalife’s take on Ackman, meanwhile, is that if anybody’s a T.rex with a ferocious financial jaw, it’s Ackman. Herbalife, in business since 1980, is no pyramid scheme, it says.
Nearly a year has passed since Ackman showed the world photos of several purported Herbalife “nutrition clubs,” including one in which at least four trash cans and a discarded mattress were lined up outside a less-than-welcoming entrance. Through these clubs, Ackman suggests, Herbalife reps operate unlicensed restaurants by calling them places at which “social gatherings” occur, skirt local sanitation requirements and lure neighbors into becoming reps for the supplement manufacturer by offering “complimentary beverages” served in unbranded, disposable cups.
The clubs, Ackman suggests, symbolize the surreal point at which the Disneyland dream ends and the Jurassic Park nightmare with elements of black comedy begins. No legitimate business would describe these food-serving clubs with drawn blinds, seating and blenders as nonrestaurants. And a legitimate business certainly wouldn’t provide rules for their continued operation.
But that’s exactly what Herbalife did — and it did it while claiming it was an MLM company that not only wanted to tackle MLM competitors such as Nature’s Sunshine and traditional-retail competitors such as Jenny Craig, but also wanted to “go after” restaurants such as McDonald’s and KFC, Ackman contends.
If a nutrition club was located in a residential neighborhood, it was not permitted to “use exterior signage of any kind” under the Herbalife rules, Ackman says, quoting from the rules. Nonresidential sites could have a sign, but the sign must “ensure” that the “location is not perceived as a store, restaurant, franchise or similar operation.”
Say what?
Did Herbalife really signal to distributors that restaurants fit nicely within its business model as long as they weren’t called restaurants — and, in any event, to make sure they were well-hidden from the food-service police?
Ackman broadly asks his audience to ponder what would happen if McDonald’s pretended not to be in the restaurant business and published Herbalife-like talking points that operators actually were charging a “daily, weekly or monthly membership fee” to recover costs, not a fee that represented “the price or cost of products.” He specifically asks what would happen if McDonald’s instructed franchisees to go light on the signage and to pull down the blinds to fend off claims that a restaurant was operating in the shadows.
The nutrition clubs, among other Herbalife-related matters, caught the attention of the League of United Latin American Citizens (LULAC), which was none too pleased. LULAC says Herbalife needs to get a handle on its “bizarre” rules as they pertain to nutrition clubs and require them “to come into compliance with the law.”
Herbalife’s nutrition clubs are required to follow a bizarre set of rules that prohibit club owners from displaying the Herbalife logo on the outside of the store, posting prices for their products, having an open/closed sign and advertising. Clubs are required to cover their windows, sell only Herbalife products, destroy used containers, and keep products hidden until they are sold. These bizarre rules appear to be designed to bolster Herbalife’s contention that nutrition clubs are not retail stores, restaurants or food establishments when in fact that is exactly what they are because they are selling food at fixed retail locations. Herbalife distributors should demand that the company ensure its nutrition clubs are in compliance with local, state & federal health and business codes that apply to retail food outlets. Better yet the company should franchise the nutrition clubs as most other national brands have done when selling food at fixed retail locations. The “future of the company” shouldn’t depend on hiding from the law.
LULAC National Executive Director Brent A. Wilkes followed up with a Nov. 11 editorial in the Huffington Post in which he contends Herbalife engages in “predatory business practices” and “targets the Latino community in a methodical and calculated manner.”
“Somewhere between 60 to 83 percent of them are Latino,” Wilkes’ Nov. 11 editorial contends. “300,000 to 400,000 Latino distributors will quit this year alone only to be replaced by another 300,000 to 400,000 new Latino distributors. If left unchecked, Herbalife could recruit, defraud and dispose of as many as 4 million Latino distributors over the next 10 years.”
It seems that Herbalife is Jurassic Park to Wilkes, too.
The Nov. 11 editorial followed a Nov. 4 column on Fox News Latino by Rafael A. Fantauzzi, who spoke out in favor of Herbalife. Fantauzzi, according to his bio line in the piece, is president & CEO of the National Puerto Rican Coalition (NPRC) and a board member of the Hispanic Association on Corporate Responsibility (HACR).
This is among Fantauzzi’s contentions (italics added):
Herbalife has succeeded at something that quite a few companies, and the Federal government for that manner, have failed, and that is to achieve real Hispanic inclusion. Hispanics make up at least 60 percent of Herbalife’s direct selling workforce – better known as distributors.
Fantauzzi goes on to contend that “critics of Herbalife and multi-level marketing companies are confusing business ventures with a welfare program.”
Say what?
Fantauzzi explains on Fox News Latino:
Critics “assume that everyone must have equal outcomes, not just equal opportunity,” he writes. “If individuals want to become distributors/salesmen for these companies, their compensation and reward is based on the results of their effort. A worker that dedicated time and sweat and achieved high sales and promotions should be rewarded. His/her compensation should not be equal to that of an individual who did not put much effort or thought into this venture. Plain and simple, this is a business, not a charity.”
Earlier, on Oct. 29, NPRC congratulated Herbalife for appointing former U.S. Surgeon General Richard Carmona to its board. Carmona’s appointment occurred on the heels of Herbalife’s Sept. 5 announcement that it had hired former Los Angeles Mayor Antonio Villaraigosa as a senior adviser to chairman and CEO Michael O. Johnson.
In its news release introducing Carmona, Herbalife apparently felt the need to describe him in part as “[b]orn to a poor Hispanic family in New York City.” Villaraigosa, in an Herbalife-released statement about his appointment, noted that the firm has a “strong presence within the Latino community.”
It’s no secret why Herbalife is recruiting such prominent and influential Latinos for its team: The firm is under attack from Latino groups or politicians representing them, including LULAC and MANA, a national Latina organization. On Sept. 5, Tito Jackson, a Boston city councillor who said last year that children who speak Spanish as their first language or are of Latino/Hispanic descent make up 43 percent of the student body of the Boston Public School District, asked FTC Chairwoman Edith Ramirez to open an investigation into Herbalife’s business practices.
Among Jackson’s fears, according to his letter to Ramirez, is that Herbalife is a pyramid scheme that “pr[e]ys on disadvantaged populations.”
Ackman is a Harvard-educated billionaire who runs a hedge fund and is famous for upsetting Wall Street suits. He’s also an Herbalife short-seller who’d benefit if the stock price craters. Herbalife naturally detests him.
But if Bill Ackman is right — if Herbalife is Jurassic Park — it will be the greatest call since Harry Markopolos called Bernard Madoff a Ponzi schemer and federal prosecutors later called him an affinity fraudster with enough hubris to chomp down on human souls for decades.
If Ackman is wrong — if Herbalife is Disneyland or the government comes to believe it would create too much market uproar by even bringing a case or could lose any case it did bring — Herbalife might emerge as a category creator: an MLM company deemed too bizarre to fail.
FLASH: The South China Morning Post is reporting that an American and four others have been detained in a pyramid-scheme investigation involving HK$750 million (about U.S. $96.7 million). The publication did not identify the detainees. Nor did it identify the company, which is said to promote “cloud-based internet productivity and communications applications” and to be headquartered in the United States.
The arrests occurred Wednesday in the Hong Kong area of Hung Hom, after a police raid, the SCMP reported, citing unidentified police sources. (NOTE: The PP Blog has established a tentative identification of the company, but is not publishing the name until it can be fully confirmed.)
Investors were lured with the promise of lucrative returns and told the company had investments in information technology in various countries and plans for a public listing, the source said. (Emphasis added by PP Blog.)
Initial investigations showed each of them was required to pay a HK$25,000 membership fee to join the company, which in return would give them lucrative dividends when the firm was listed on a stock market,” he said.
The American “is understood to be from another firm,” and authorities are seeking to determine if the firms are linked, the SCMP reported.
Schemes in which investors are recruited based on assertions that they’ll receive a handsome payout when a firm later “goes public” may be on the uptick.
In October, the SEC charged five companies, three executives and eight promoters in what it described as a “worldwide” pyramid scheme operating through entities from Hong Kong, Canada and the British Virgin Islands.
At the center of the scheme were entities known as CKB and CKB168, the SEC said. Investors were told they’d accumulate “profit rewards points” that could be converted “into shares of CKB stock when the company conducts an initial public offering (“IPO”) on the Hong Kong Stock Exchange sometime during 2014, the SEC said.
“Despite Defendants’ representations to the contrary, the Prpts are worthless and cannot be meaningfully traded, sold or exchanged. Nor has CKB taken required steps to prepare for the promised IPO and, in fact, does not meet the Hong Kong Exchange’s current listing requirements. Even if the IPO were to occur, CKB would have to go public as one of the world’s largest companies in order to honor conversions of the ever-expanding universe of Prpts,” the SEC said.
