“Where does JustBeenPaid get the money to pay that kind of interest?” — Caller “Michael” from “San Francisco” in March 15 JSS Tripler/JustBeenPaid conference call
“Well, first of all, JBP or JSS Tripler is a revenue-sharing program, so that means some of the money comes from new members buying positions. Then, we are in the process of developing additional income streams, so that’s relevant. And eventually the additional income streams may be sufficient to pay the 2 percent — maybe not.” — Response by Frederick Mann, purported JBP/JSS operator, to “Michael’s” question, March 15, 2012
UPDATED 7:26 P.M. EDT (U.S.A.) In yet-another bizarre conference call for JSS Tripler/JustBeenPaid, the “program’s” purported operator told listeners from the United States and Canada (and possibly from Jamaica) that JSS/JBP is paying them with money sent in by “new members.”
Using “new” money to pay “old” members is the central element of a Ponzi scheme — although Frederick Mann did not use the phrase. Still, it was the white elephant in the conference room, and Mann’s explanations during the March 15 call became increasingly complex, vague and incongruous.
Mann, for instance, declined to say where the program was operating from, repeating his practice of nondisclosure from previous calls.
What’s important, he explained, “is that our programs are not U.S.-based. We don’t have any offices in the U.S. Our servers are not in the U.S.”
The explanation caused a chuckling U.S. caller to quip, “Yeah. I agree. Somewhere out in the galaxy.”
“Yes,” Mann replied to the caller’s “galaxy” remark. The caller earlier had described himself during the March 15 call as a “financial planner” for 22 years. In a previous call, the caller said he was in “California” and had family in Iowa.
And Mann advised listeners that it was OK to call JSS/JBP an investment program when they were recruiting new members — guidance that seemed to catch even the conference-call host off-guard.
“And I know that, in the [separate conference] room, we do try to say ‘purchase’ and ‘repurchase’ as opposed to ‘invest’ and ‘reinvest,’” the female host said.
It is common for HYIP scams and their purveyors to seek to avoid the language of investments when promoting “programs” — on the errant belief that avoiding such language insulates them from prosecution.
The female host did not say why the other room was giving one set of instructions and Mann another. Regardless, internal inconsistencies are one of the hallmarks of HYIP scams, and it is well-known that wordplay designed to disguise securities fraud cannot insulate purveyors from prosecution — rather like a robber who uses a gun to snatch the purse of an 80-year-old woman cannot avoid prosecution by calling the robbery an innocent exercise in arranging a loan and insisting that the gun was a harmless piece of metal that just happened to be at the scene.
Mann, whose name appears in 2008 materials identifying him as a promoter of the alleged AdSurfDaily Ponzi scheme, said nothing about whether JSS/JBP had any securities registrations or whether promoters of the “program” were risking a legal calamity by recruiting downlines into a scheme that does not identify itself with a nation-state and whose payout corresponds to a preposterous annualized return of 730 percent .
The bank accounts of some individual ASD promoters were seized by the U.S. Secret Service in the ASD Ponzi case, according to court filings. JSS/JBP purports to pay a daily return double that of ASD.
Income Streams Are Theoretical; ‘Free’ Members Dominate JSS/JBP
The most troubling explanation — among any number of troubling explanations during the 1:11 call — was Mann’s assertion in response to a question from “Michael” of “San Francisco” about where JSS/JBP gets the money to pay a return of 2 percent a day. (The exchange is noted in the breakout quotes at the top of this story.)
Conceding that the company uses money from “new members” who buy “positions” to make the payouts, Mann simultaneously acknowledged that the “program” was “in the process” of developing new income streams and that those still-theoretical streams may be insufficient to sustain the scheme.
But the company’s “restart” feature, Mann suggested, was enough to defeat any concerns that the firm’s liabilities exceeded its assets.
“The 2 percent that the company pays is effectively a liability to the company,” Mann said. “But what the ‘restart’ makes possible is to convert some or even all of these liabilities into assets in the form of JSS positions.”
Even so, members needed “to bring in new members with new money,” Mann said. He later asserted that only “about 25 percent” of new registrants “put in money.”
“Maybe 75 percent of people do nothing,” Mann said, a problematic response because the program advertises that it provides registrants a $10 credit (described during the March 15 call as a loan) for joining and pays them interest of 20 cents a day until they realize a profit of $5 after 75 days.
When JSS/JBP debits a member’s account to recapture the purported loan, which apparently is made at an interest rate of zero percent, the company still is on the hook for the $5 due the new subscriber.
Speaking with a South African accent but using an American baseball metaphor, Mann said the lion’s share of JSS/JBP new members (about 75 percent) do nothing after enrolling
If the JSS/JBP program were baseball, Mann suggested, “The pitcher would pitch the ball, and they would watch it go by, they would just stand there.”
If Mann’s assertions are true, it means that only 25 percent of JSS/JBP’s members are propping up 100 percent of the enterprise, including the purported $5 profit due new registrants in 75 days and much larger payments due other members. Even if JSS/JBP enforces a cash-out minimum higher than $5 to prevent a flood a small redemptions, such a device leads to questions about whether the purported $10 credit is just a smaller scam within a larger scam that permits accrued liabilities to be ignored.
Much remains mysterious about JSS/JBP’s purported restarts and its in-house accounting methods. Other HYIPs have used similar devices to duck the Ponzi issue. But with its “restart” explanation, JSS/JBP may be inviting questions about whether is has introduced Enron-like accounting tricks into the morass.
Enron’s 2001 collapse revealed one of the greatest financial scandals in U.S. history. It destroyed not only the company, but also the Arthur Andersen accounting firm. (See “Enron scandal” Wikipedia entry.)
Is JSS/JBP a miniature Enron-in-waiting?
Among the callers who asked questions during the call was a JSS/JBP member who described himself as “Earl,” a 79-year-old man interested in leaving money for his daughter.
Also on the line was a man who suggested he hailed from Jamaica and wanted to start a JSS/JBP account for a “nonprofit, for a school that I have, that I attended in Jamaica.”
Other callers identified themselves as residents of the Canadian provinces of British Columbia and Alberta and the U.S. states of California, South Dakota, Texas, Georgia, Missouri and Louisiana.
One caller asked Mann why electronic payments from JSS/JBP came from “Michael” at a BigBooster.com email address, not an email address associated with the JSS/JBP domains.
“Michael is a business partner, and he handles some of the finances,” Mann said. He did not identify “Michael” by a last name.
Mann also advised callers that JSS/JBP had two representatives in Italy, but did not speak to the JSS/JBP-related probe involving the program’s affiliates announced by the Italian securities regular CONSOB in January.
One caller informed Mann that his downline recruits has put in “substantial” sums. Another complained that his account had been debited weeks in advance of the anticipated debit. Another complained that the website was unattractive to potential recruits and looked like a scam. Yet another fretted that the site appeared to lack a secure connection (https). Still another complained that his “matrices” did not appear to be cycling properly.
HYIPs are infamous for creating one set of expectations and then changing the rules at midstream. They’re also infamous for their convoluted explanations and fuzzy — if not downright impossible — math.
Like ASD’s Andy Bowdoin — now under indictment amid charges that he orchestrated an international Ponzi scheme that had gathered at least $110 million — Mann has been accorded the description of “genius” in promotions for the program.