MLM Attorney Jeff Babner Praises Oz At Behind MLM For His Investigative Work on Zeek Rewards And Share Some Deeper Insights Into MLM Penny Auctions.
August 20th, 2012 at 4:58 am (Quote)
And the Leaves that are Green Turn to Brown…MLM penny auctions
(An Open Letter to BehindMLM.com from Jeff Babener)
© Jeff Babener
And the leaves that are green turn to brown
And they wither in the wind
And they crumble in your hands….
-Simon and Garfunkel
Oz, MlmLegal.com, congratulations to BehindMLM.com on your investigatory skills and continuing analysis on MLM penny auction programs.
For a non U.S attorney, you have demonstrated keen insight into issues of Ponzi, Pyramid and Securities. We have represented leading direct sellng companies for more than 25 years, and we recognize “your journey”.
Apart from some potential lottery issues, can a MLM penny auction service be properly marketed through MLM/Network Marketing? Yes.
However, the revenue stream for payment of commissions should derive from bid sales to real retail customers, who in turn use the bids.
On the other hand, a program fueled by reps, who pay $10,000 for so called sample or giveaway bids, and recruit other reps to do the same, from which the commission pool is paid, is really not the marketing of a service… Rather it is payment into a pyramid scheme.
Ponzi and Pyramid schemes are, by case law recognition, viewed as unregistered passive investment securities offerings that carry deserved civil and criminal penalties for active promoters, whether they are company organizers or merely conflicted cheerleader media publishers with financial interests.
Such schemes really have nothing to do with Network Marketing, Mlm or Direct Selling. Hiding behind terms of legitimacy is a great disservice to a global direct selling industry that markets in excess of $150 billion in real products and services through 90 million plus direct sellers.
Such programs taint the recruiting environment and siphon finance and talent from “real” direct selling companies.
In an era when NY Stock Exchange companies, such as Herbalife and NuSkin, face short seller challenges in explaining the legitimate Network Marketing model, scams and schemes that parade as Nework Marketing merely confuse global markets as to the legality of legitimate Network Marketing companies.
Hiding such schemes behind terms like “freedom”, “entrepreneurial spirit”, “the American dream” or “free market capitalism” is an unfortunate high jacking of a truly major indigenous American business marketing model.
Unfortunately, too many MLM penny auction models may fit the illegitimacy tests:
1. Pyramid: Large upfront cash investments by distributors, who realistically pay for the right to recruit others to do the same….with a hope and prayer to make money off the subsequent recruits.
2. Ponzi: Payment of promised investment rewards to old investors with money from new investors.
3. Securities: Inducing passive investments with the expectation of return arising from the managerial efforts of the promoter or third parties. In addition, pyramids and Ponzi schemes, by definition, are also securities.
You have a story to tell to corporate owners of existing and startup companies. On behalf of MLMLegal.com, we invite you, at our expense, to speak at our next national conference in Las Vegas, October 25, 26, 2012, “Starting and
Running the Successful MLM Company”.
It is the 61st such national conference sponsored by our law firm, Babener & Associates. Please let us know. Over the years we have started many global companies, including U.S. operations for Nikken, Usana, Melaleuca, Amazon Herbs, and advised major companies such as Avon, NuSkin, etc. Many such companies have started at this conference.
We will follow up with a more detailed analysis of MLM penny auctions at mlmlegal.com
Babener & Associates