EDITOR’S NOTE: Payza seems to have taken an important step Friday in the battle against online fraud. The payment-processing company perhaps deserves an accolade for that. But it’s too soon to heap praise on Payza. We are particularly concerned about the phrasing of a specific line in Payza’s altered User Agreement. More on that below . . .

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UPDATED 7:29 A.M. EDT (JULY 17, U.S.A.) Is Payza, the payment processor operating in Canada that recently changed its name from AlertPay, finally doing the right thing?

Or is it just lip service?

Payza has announced on its Blog that it is banning programs that show “[a]ny indication or demonstration of a literal rate of return on a contribution, payment or investment, while not being licensed to sell or solicit.”

Notice the phrasing (emphasis added): “any indication of a literal rate of return  . . .”

What, precisely, does Payza mean? That expressing a literal return rate no longer is OK, but all can be cured if Payza’s current HYIP purveyors and Ponzi-board hucksters hide veiled or direct references to the return (perhaps in the back offices of HYIP affiliates or someplace else out of view of the public and search engines) or somehow find a word combination that avoids a literal expression of a return and instead relies on a deeply couched expression?

This is an important question because the HYIP “industry” cannot exist without the financial vendors that enable it, either by turning a blind eye or choosing not to peel back a single layer of the onion because choosing to see is bad for profits.

The last thing the “industry” needs is an invitation to become even more clandestine in its dealings, even more clever in its use of linguistic deception, information suppression or outright misinformation. The threat to individuals and the world’s financial infrastructure posed by con men and teams of accomplices in the thousands or hundreds of thousands already is untenable.

Payza needs to reassess its use of the phrase “literal rate of return.” Left untouched, that phrase easily could turn what’s already a dangerous, wink-nod “industry” into even more of one, thus providing scammers a new back door and actually making the problem of international financial chicanery on the Internet even worse.

Because AlertPay basically chose for years to gorge itself on HYIP fees and not to take the clues offered by the prosecution of e-Gold in the United States (by members of the same team that prosecuted the AdSurfDaily autosurf HYIP, BTW) and the disintegration of e-Bullion (while its operator stood accused of arranging the brutal contract slaying of his wife, a potential witness to e-Bullion’s Ponzi-sustaining fraud), we cannot yet offer Payza three cheers.

Owing to AlertPay’s history of choosing in e-Gold and e-Bullion-like fashion to see no evil, we question whether use of the word “literal” is just a means of signaling the scammers to do a better job of using language to disguise an investment program as something else or to hide and/or otherwise bury language that speaks to the investment elements. In the past few weeks, for example, the Payza-dependent JSS Tripler/JustBeenPaid “program” suddenly changed the language on its home page to say it offers a “LEGALLY COMPLIANT & PATENTED SYSTEM.”

Let’s pause for a moment to state the obvious, something that somehow often gets overlooked by HYIP apologists: Real people — living, breathing human beings  — are being sucked into these utterly contemptible “programs” that are being enabled by processors such as Payza and SolidTrustPay.

And suddenly — out of the blue — JSS/JBP announced it was using a “WORLD RENOWNED LAW FIRM” to assure compliance. These things bizarrely clashed with recent claims by Frederick Mann, the purported operator of JSS/JBP, that attorneys could not be trusted, that government employees weren’t welcome in the “program,” that registering with securities regulators was a sign “you’ve signed up to be a slave, part of the slave system, and then they have jurisdiction over you and can shut you down” and that JSS/JBP members had nothing to fear because the “program” had no presence in the United States.

Now, all of a sudden, JSS/JBP has found the religion of compliance — or at least the language of the religion of compliance.

The New Religion Of Compliance

The Payza-dependent Zeek Rewards MLM “program” also is preaching the religion of compliance, even as it plants the seed that it can provide a JSS/JBP-like annual return of between 365 percent and 730 percent without being the Bernard L. Madoff Investment Securities LLC of multilevel marketing.

Part of what Zeek appears to be doing falls along the lines of not expressly stating a literal return. Welcome to the world of vomitous MLM in the year 2012. The players are eager to tell you what they’re not, less eager or completely unwilling to tell you what they are, and can bring a virtually unlimited supply of Stepfordians to the fore to help them cloud the issues.

Zeek has told the public it is not a “pyramid scheme.” It now says it will ban members who describe the “opportunity” as an investment program, despite the seed Zeek plants that participants can earn a return of between 1 percent and 2 percent a day. Some Zeek affiliates are practically tripping over themselves these days in what strikes us as a bizarre race to see how many times they can fit the words “attorneys” and “compliance” in their forum “defenses” for Zeek.

This Blog has not seen one instance in which a Zeek attorney has described the “program” as legal. Even so, we’ve seen plenty of examples in which Zeek affiliates implied that attorneys had given Zeek the all-clear and at least a few examples in which affiliates implied that agencies such as the SEC and FTC had scrubbed Zeek for compliance and found it in fine fettle. There have been hugely disingenuous claims from Zeek affiliates in this area — everything from describing the lack of any action against Zeek by the SEC or FTC as evidence that the agencies had examined Zeek and found nothing lacking to planting the seed that the lack of any action by the agencies is proof that Zeek is operating lawfully.

Zeek itself played this miserable game. In June, a North Carolina television station carried a report that suggested Zeek had been found to be operating lawfully by the office of North Carolina Attorney General Roy Cooper. Zeek linked to the TV station’s video report on its news Blog and certain Zeek promoters pointed to the report as proof of Zeek’s legitimacy.

But Cooper’s office said it never said Zeek was operating lawfully. After the TV station was contacted by Cooper’s office, which was concerned about the clarity and accuracy of the video report, the station removed the report. The incident produced one of those awkward moments that too often accompany the MLM trade: Zeek plainly liked the TV report because it construed Zeek as operating lawfully. The report then became a tool in Zeek’s PR arsenal — and Zeek wanted to make sure its affiliates had the same tool. It used its Blog to point affiliates to the video, and some of them predictably used it as evidence the Zeek critics were wrong and to plant the seed that Zeek had passed muster in North Carolina.

By linking to the report, Zeek tried to maximize its PR hand. When the report was removed, Zeek had nothing to say. The post on Zeek’s news Blog in which the company originally crowed that “Zeek Makes the Channel 2 News” now has been removed. Although the precise date and time in which Zeek removed the post are unclear, a Zeek affiliate with his own Blog sought to capitalize on the TV station’s report in a post that still remains.

That post featured a three-tiered headline that screamed, “Zeek Reward [sic] featured on Chanel [sic] 2 News[.] Zeek Reward [sic] featured on Chanel [sic] 2 News[.] Zeek Reward [sic] makes it on TV. Get In On the Action!”

The affiliate’s post included a graphic that described Zeek as a “Passive Income!” opportunity. One link on the site pointed to the now-removed TV station video. Another link, however, pointed to post that included a YouTube version of the TV station’s report. That YouTube report included a headline and “crawler” in a language other than English.

Like the post that included the three-tiered headline about Zeek’s TV appearance, the second post included the graphic that described Zeek as a “Passive Income!” program. The claim about passive income speaks to the heart of the issue of whether Zeek is selling unregistered securities as investment contracts and trying to disclaim its way out of an encounter with regulators.

The Culture Of Willful Blindness

Confusing messages appeared repeatedly when the AdSurfDaily Ponzi case was playing out. All of it was monumentally embarrassing to MLM. In one instance — while it was awaiting a key ruling from a federal judge in October 2008 on whether it had demonstrated it had sufficient income and was not a Ponzi scheme at a hearing it requested and the judge granted in the interests of justice — ASD insiders leaked a story that ASD expected a revenue infusion of $200 million from a penny-stock company.

The ASD Stepfordians immediately raced to forums to spread the good news. But skeptics immediately questioned the claim, pointing out that Praebius Communications — the penny-stock firm that supposedly was going to provide ASD a $200 million injection — did not even publish audited financials. SEC records later showed that, in October 2008, the same month ASD was awaiting the court decision and claiming a new $200 million was coming on board, Praebius stock was being pumped in a fraudulent-touting scheme.

Over time, serious questions were raised about whether certain MLMers within ASD were engaging in bids to obstruct justice. Rumors were planted that federal prosecutors had secretly admitted ASD was not a Ponzi scheme but were clinging to the case as part of a bid to save face. In 2008, ASD members who did not even question the bizarre claims coming from ASD or ASD insiders raced to forums and spread a false report that Ponzi charges had been dropped against ASD in Florida. That development prompted the attorney general of Florida to issue a statement that, not only had Ponzi charges not been dropped against ASD in the state, they’d never been brought to begin with. Indeed, Florida charged ASD with operating a pyramid scheme.

The names of both AlertPay and SolidTrustPay appear in court filings in the ASD Ponzi case. It is hardly coincidental that both Zeek and JSS Tripler/JustBeenPaid also have ties to the same processors, which are offshore from a U.S. perspective. These processors are the e-Golds and e-Bullions of Canada. They also are referenced in the Pathway to Prosperity Ponzi case, which the U.S. Postal Inspection Service called a global fraud affecting 40,000 people from 120 countries. In December 2010, the federal prosecutors handling the ASD case made the first public filing that referenced e-Bullion in the context of ASD.

In 2011, e-Bullion operator James Fayed was convicted of arranging the contact slaying of Pamela Fayed, his estranged wife who was found slashed to death in a Los Angeles-area parking garage. There is absolutely no doubt — zero — that e-Bullion was enabling Ponzi schemes. James Fayed has been sentenced to death for arranging the brutal killing of his wife, a potential witness against him.

It is beyond the pale — and almost beyond belief — that certain MLMers continue to insist there is something noble about these miserable money games, that they somehow represent the best of the free market and the entrepreneurial spirit, that they’ve somehow succeeded where other MLMs have failed.

What they are are recipes for financial and personal destruction that operate as slow-motion Ponzi schemes. They need to be destroyed, not duplicated. Far from being exciting, new niches — as some MLMers tell the story — they are form-shifting monsters that spread the greatest financial cancers devised in the history of mankind. They are so dangerous that external fraudsters target them as a means of unloosing secondary frauds — everything from the issuance and passing of bogus checks to organized credit-card fraud. Some of them have been linked to narcotics-trafficking or money-laundering operations. Some of the investigators who assisted in the ASD Ponzi case also developed this case.

From our May 16, 2010 report on the EMG/Finanzas Forex case (italics added):

Research by the PP Blog suggests the purported investment program was so sordid that promoters even claimed some of the funds were being used for the “humanitarian” purpose of assisting kidnapping victims in Colombia. In a sickening display of marketing theatrics, a claim was made that investors could “adopt” kidnapping victims for a payment of $1,000 and that the company would set aside $500 in corporate funds for each victim so that their families could have bright futures if the victims ultimately were released by their captors . . .

The HYIP scheme allegedly was associated with an entity known as Evolution Market Group (EMG), which purportedly had a Forex component known as FinanzasForex. Investigators alleged in January that there were schemes within schemes in a tangled web of domestic and international deception that featured dozens of bank accounts, shell companies and various fronts for money-laundering enterprises, including companies purportedly in businesses such as real estate and car washes.

The scheme was so corrupt, according to court filings, that some investors were told that, in order to leave the program whole, they had to recruit new investors, have the new investors pay them directly — and use the proceeds from the new investors to “recover” their initial outlays . . .

A Glimmer Of Hope

We do find a glimmer of hope in Payza’s announcement because Payza’s use of the phrase “any indication” implies it actually intends to exit the fraud-enabling business and intends to protect its reputation moving forward and make it harder for viral scammers who use its service to rob people without the aid of a gun.

A return — plainly stated or implied  — would seem to fall under the “any indication” umbrella. Another indication is the presence of a “program” on the Ponzi boards. (Like ASD and EMG/Finanzas Forex, Zeek and JSS/JBP have a presence of the Ponzi boards.)

Yet another indicator of fraud is disclaimer language that seeks to cloud regulatory issues by planting the seeds that payouts are not guaranteed and that joining a “program” with a plainly stated or implied return does not constitute making an investment.

Much of the HYIP fraud “industry” exists because of the wink-nod deal and the willful blindness of the purveyors, including serial scammers with global reach and payment processors that gorge themselves on fees while serving what effectively are criminal combines consisting of like-minded individuals and “teams.”

Also banned, according to the Payza Blog post, is the the “[s]elling of Unregistered/Unlicensed Stocks, bonds, securities, options, futures, or investments in any entity or property, including (but not limited to) corporations and partnerships or sole proprietorship . . .”

Meanwhile, Payza says this (italics added):

“Solicitation, marketing campaign, direct selling or any other comparative effort will be considered a violation of the User Agreement. If you are registered or licensed to take such action, you may be requested to present documentation demonstrating authority to do so from a Securities Exchange Commission, Commodities Futures Trading Commission or other equal and comparative agency.”

Language in the full, six-paragraph announcement is exceptionally formal, bordering on the florid. But if the aim is for Payza to say no to fees and wrest itself from the wretched, pain-producing universes of HYIPs, autosurfs, cycler matrices and other “programs” that reach across national borders and fleece people on a global scale, the ornate language will become only a tiny footnote.

What’s far more important is that Payza will have said no to the scammers and a subculture of eager, greedy pitchmen who help financial crime spread globally and line their pockets on the current (or pending misery) of their marks.

It is possible these days for a scammer hiding in the darkest corners of the Internet to pick the pocket of a “customer” and contribute to a mortgage foreclosure or even the failure of a bank a continent away. Such “programs” often are pushed in the purported name of freedom itself, as a purported means of helping a neglected Everyman escape the shackles of poverty and become a free man who’s escaped his tyrannical captors.

But because the scammers’ schemes constantly evolve and because they often rely on overblown prose to disguise the fraudulent nature of their “programs,” it is going to take more than just words from Payza to incorporate any real change.

For example, could an “opportunity” that simply comes up with different naming conventions and avoids the traditional language of investments fool the checkers at Payza? Or could an “opportunity” that shields Payza from information perhaps by publishing it only in the back offices of the “opportunity’s” members escape scrutiny?

And because HYIPs and their willfully blind, serially disingenuous promoters already are infamous for wink-nod presentations, the use of disclaimers and even outright denials that an investment program of any sort is being offered, will the criminal minds who dominate this cancerous space go into overdrive to come up with new and more clever ways to disguise fraud schemes?

What To Watch For

Will panic engulf the HYIP sphere because of the Payza annoucement? Here are some things to look for:

• Masked investment “programs” — perhaps aware they are under scrutiny — taking once-public forums offline and engaging in bids to further compartmentalize information and scrub negative information.
• Management and affiliates of such “programs” making veiled or direct references to “attorneys” and “compliance” as a means of suggesting they are wholly lawful and embrace responsible corporate citizenship.
• Increased lead times between “program” payment cycles, perhaps initially explained away as “growing pains.”
• Payment bottlenecks to develop as “programs” horde cash or cash equivalents and become fearful that once-reliable enablers are hopping off the wink-nod fraud train because they realize the real world no longer is going to tolerate international lawlessness so a scammer on the TalkGold or MoneyMakerGroup forums can get rich by picking the pockets of senior citizens, deaf people, the unemployed and the struggling. (Also known as the AdSurfDaily problem.)
• An uptick by scammers in the use of floridspeak as a means of talking around serious legal issues and masking the investment elements of a “program.”
• The creation of bogus “regulatory agencies” and “trade groups” to create the appearance that a responsible party with legal authority is monitoring the store. (Note: A bogus regulator was an element of the George Theodule Ponzi scheme in Florida.)
• The sale of purported memberships in these purported “regulatory agencies” and “trade groups.”

Read the Payza post, which was made Friday at the close of traditional business hours in the Eastern United States.