pyramid schemes – MLM, Network Marketing, Direct Selling News, Videos, Articles, Legal Updates, and More.

New Video! Know the Signs: Pyramid or Legal MLM Company

Charity — Mon, 13 Aug 2018 15:22:10 +0000

Conversations with Jeff Babener: Know the Signs: Pyramid or Legal MLM Company

A Conversation with Jeff Babener Video Series: Educate yourself on the difference between a legal MLM company and a pyramid scheme. Learn the keywords, such as front-end loading. Distributors should not be required to buy thousands of dollars’ worth of product. Expect a reasonable presentation of the opportunity with no earnings hype. And have reasonable earnings expectations. No distributor should expect to make $10,000 a month. Watch the video.

To learn more, visit www.mlmlegal.com.

Visit us at www.mlmlegal.com to learn more.

Watch out for Pyramid Schemes! Some Warning Signs

Charity — Thu, 10 Nov 2016 18:38:07 +0000

How can you tell if a company is an pyramid scheme, unintentional cash gifting pyramid scheme, or otherwise downright illegal? Well, there is no single authority on the on the subject. There’s not really one single definition either. However, there are certain warning signs that can cause law enforcement agencies to investigate a company. Here are a few warning signs to look for when starting, joining, or even investing in a direct selling, MLM company:

– Promotions where the business opportunity is the product. If no legitimate product or service is being sold, but only the opportunity itself, chances are that the company is operating a pyramid scheme.

– Products are sold at inflated prices. Pyramid promoters try to mask their true intentions by selling a product. Often, the product will be vastly over-priced, and unlikely to generate much retail activity. This is a sure tip-off that the real “product” being sold is the compensation opportunity.

– Programs that require inventory “loading.” A legitimate network marketing opportunity doesn’t require you to buy unreasonable amounts of inventory to launch your business.

– Programs that require substantial initial cash investments. Many states consider $500 or more to be a “substantial” up-front investment. A multilevel (MLM) company requiring such a high investment is likely to attract the attention of law enforcement agencies.

– Programs that require the mandatory purchase of peripheral or accessory products or services. Some pyramids seek to hide their true face by charging a minimum price for a “startup” kit, but then compel the participant to buy more expensive items, such as training or demonstration materials. Legitimate network marketing companies sell their business startup kits and selling aids at their cost, or just slightly over their cost.

– Companies that don’t offer a”buy-back” policy. Any company that does not agree in writing to repurchase a reasonable percentage of unsold inventory or unused sales materials from its distributors for a stated time after purchase should be avoided. This is often a sign of a pyramid scheme.

– Programs that pay fees for recruiting. A legitimate network marketing company bases compensation on product sales, not recruiting. If money is paid for signing up new distributors rather than for product sales, the business is likely to be a pyramid.

– Recruiters who misrepresent earnings. If the opportunity is sold as a “get-rich-quick” scheme, beware! The only people who do well in such companies are those who can sucker others into buying into a criminal confidence game.

– You give money, then have your friends give money, and so on. This is a sign of a ponzi scheme. When you give money to a company, it should be for a tangible product or service.

If you want to learn more about the warning signs of pyramid schemes in the direct selling industry, browse the vast collection of articles and videos at mlmlegal.com, such as this video: Jeff Babener explains the difference between a legal MLM company and a pyramid scheme:

Visit us at www.mlmlegal.com to learn more.

Top MLM Headlines, Scam Reports, Videos, Articles, and More – September, 2015 Issue of MLM News Global

Charity — Thu, 03 Sep 2015 17:14:40 +0000

The MLM News Global E-Newsletter offers top MLM news, recent scams, videos, company profiles, and timely articles delivered to your inbox on a bi-monthly basis. The e-newsletter contains top news stories in the network marketing industry, the most recent MLM scam alerts, timely articles on the direct selling industry, and so much more. Make sure that you’re not the last to know about top MLM news stories, or to hear about the latest MLM scam reports. Our timely headline reporting will keep you up-to-date on stories that affect everyone in the network marketing industry. In addition, important press releases, directly from MLM/network marketing/direct selling, party plan companies, will keep you current on trends and direct selling company developments in the industry.

Looking Forward to 2015 – 63 New Videos Being Launched at MLMLegal.com

Charity — Thu, 12 Mar 2015 20:41:43 +0000

MLMLegal.com is famous for squashing MLM myths, spreading knowledge about the network marketing industry, and distributing resources to anyone who visits our website.

Teenage Mutant Ninja Turtles (depicted here in true Babener-fashion by Jeff Babener’s grandson, Sammy) are famous for battling petty criminals, evil overlords, mutated creatures, and alien invaders. MLMLegal.com is famous for squashing MLM myths, spreading knowledge about the network marketing industry, and distributing resources to anyone who visits our website.

Every year MLMLegal.com adds a comprehensive project to its website. Whether it is videos on network marketing, well-researched articles, library of legal cases, or a video miniseries, each year our website is expanded upon. This year is no different.

In 2014, MLMLegal.com committed the highly-regarded article “BurnLounge Appeal Decision: Guidance on Pyramid v. Legitimate MLM and the Role of Personal Use in Pyramid Analysis” to the website.

In 2015, we plan to add 63 new videos to our website and Youtube Channel on the topic of MLM education. Below are some of the topics to be discussed by MLM Attorney Jeff Babener in this new video series:

What’s the Difference between MLM, Network Marketing, Party Plan and Direct Sales?
What Is a “Pay to Play?”
How Much Does It Cost to Start a MLM Company?
How Do I Raise Capital to Start My MLM Business?
What Is the Benefit of Recruiting Experienced Distributors?
What about Gifting Clubs?
Why Do I Need an Experienced Network Marketing Attorney?
What Do I Do with Distributors Who Go Passive (for MLM Executives)?
What Do I Do with Distributors Who Go Passive (for MLM Distributors)?
What Key Factors Determine the Growth of Network Marketing Companies?
Do You Have Some Tips for Generating Network Marketing Leads?
Do You Have Some Tips to Become a Successful Network Marketing Distributor?
Are There MLM Companies That Have Achieved Success on a Low Budget?
Since You Are a MLM Attorney, Why Would You Host the MLM Startup Conference for the Executives of Startup and Existing Companies?
If I’m a New Distributor Then Should I Focus My Selling In Areas Where Other Distributors Are Successful Or Should I Focus On Untouched Territory?
I Own a MLM Company. How Can I Determine Cost of Goods? In Other Words, How Do I Price My Products for Retail, Distributor and Direct-To-Consumer Sales?
Do I Need To Worry about Merchant Account Processing? Should I Have Just One Merchant Account?
If a Sales Kit or Startup Fee Is Several Hundred Dollars, Then Is This Considered “Frontloading”?
How Do I Create a Compensation Plan That Guarantees That I Am Legal?
I’m Starting a MLM Company. I Am Going to Have Distributors Earn Income by
Referring Others, Is This Legal?
What Should I Look for When Hiring a Vice President of Marketing?
What Is the Typical Price of an at-Cost Starter Kit in the Industry?
Can I (as a MLM Executive) Pass the Costs of Website Development, Marketing Materials, Etc. Down to Distributors?
How Do I Find Top Distributors?
In an Absolute Nutshell, What Are the Two Main Causes of a MLM Company Failing?
As a Distributor, Can I Use Display Booths to Sell My Company’s Products? Is There a Limit on the Time I Can Spend Selling at a Booth?
In Regards to Event Sales, Such as Fairs, Kiosks, Vending Machines, Etc., Am I Authorized to Sell My Company’s Products at Such Events?
Why Do MLM Companies Require Distributors to Use Replicated Websites Rather Than Distributor-Created Websites?
What about Raising Capital to Start Your Network Marketing Company?
How Many People Would I Need in My Organization to Make Over $10,000?
Are Network Marketing Companies Mostly Moving to All-Digital/All-Online Starter Kits? Can It be Done in a Way That Ensures a High Perceived Value?
What Regulatory Changes Are Affecting Network Marketing Companies?
What Should I Look for in a Company When Choosing Back Office Software?
How Important Are Celebrity Endorsements? Do They Help Marketing or Is It a Double-Edged Sword?
How Often Should Companies Renew Their Policies and Procedures to Make Them Relevant in Today’s Marketplace?
Do You Want to Attract MLM Professionals or MLM Junkies into Your Direct Selling Company?
How Have Raiding Rules Evolved in Direct Selling Contracts and Policies and Procedures?
What Happens if Consultants Raid Anyway?
What Are the Most Important Things to Remember When You Host a Distributor Recognition Event?
Do Incentives Increase Sales? How Worthwhile Are Consultant Incentives?
What Do Startup Companies Think about Long Term Professional Relationships?
What Is the U.S. and International Trend in Recognizing the Validity of Personal Use by Distributors in Pyramid Cases?

So, keep your eyes on MLMLegal.com this year. We will have a lot of new content added to our website and we want you to be a part of it! Run, learn and get lost at MLMLegal.com!

For more information on any topic on network marketing that comes to mind, please visit www.mlmlegal.com and www.mlmattorney.com.

MLMLegal.com is bustling with educational content for direct sellers and startup/existing MLM companies! Be sure to visit us often!

Our next Starting and Running the Successful MLM Company Conference takes place October 27 and 28, 2016 in Las Vegas. View our conference flyer and speaker list online. Participate in our Innovation Campaign for your chance to receive TWO FREE TICKETS to attend our next conference.

If you’re reading this blog post and the conference dates above have passed, check our website for the current conference dates.

Sign up for the MLM News Global newsletter for top headlines, news stories, scam alerts, videos, articles, and more information on the network marketing industry.

Visit us at www.mlmlegal.com to learn more.

Free “Direct Selling, Network Marketing, MLM” DVD

Charity — Tue, 02 Apr 2013 22:14:20 +0000

SourceNet Creative and MLMLegal.com present the “Direct Selling, Network Marketing, MLM” DVD. Visit www.mlmlegal.com for your FREE DVD full of MLM advice about starting and running the successful MLM company.

The FREE “Direct Selling, Network Marketing, MLM” DVD for qualifying executives of MLM companies.

The “Direct Selling, Network Marketing, MLM” DVD is FREE (for qualifying executives of direct selling, network marketing, MLM companies only. Click HERE to see if you qualify.)

Some of the Video Segments Include:

Introduction and Basics

Successful Companies

Legal MLM

Success Stories

History and Technology

Not Pyramid Schemes

Debunking Myths

Internet and the Future

This FREE MLM DVD full of excellent advice is courtesy of MLMLegal.com and the law firm of Babener & Associates.

Qualifying executives of Multi-Level Marketing and Direct Selling companies can request a free DVD that includes vital information for starting and running the successful MLM company. Please call our office at 503-226-6600 or 800-231-2162 to see if you qualify. Those who wish to purchase a DVD can do so for $4.95 (Call for bulk pricing). Legaline Publications also offers other valuable books, brochures and materials to aid in the transference of expert knowledge in the direct selling industry.

Click the image below to view the back of the DVD:

The back of the the FREE “Direct Selling, Network Marketing, MLM” DVD.

In order to receive your free DVD, complete the following form. This information is vital to executives of Network Marketing (MLM) companies, whether you are involved at a start-up level or are an emerging company, ready to launch and grow your company. We will confirm with you to verify that you will benefit from the information presented in the DVD and then send you the complete disk for FREE. Call us at 503-226-6600 or 800-231-2162 to see if you qualify.

Industry expert, Jeff Babener represents leading US and foreign companies in the direct selling industry. He has been advisor to such companies as Avon, Discovery Toys, Nikken, New Vision, NuSkin, Excel, Fuller Brush, Cell Tech, Kaire, Sunrider, Melaleuca, and more.

Check out Legaline Publications for books, brochures, DVDs, and more that are perfect for MLM company owners and distributors alike.

MLMLegal.com and MLMAttorney.com also offer over 60 FREE videos for both distributor and MLM executive education online:

Attorney Jeff Babener, Discusses Various Topics in a MLM Compliance Training Session NEW!

Earnings Claims and Consumer Protection Laws

Interviews with Expert MLM Attorney, Jeffrey Babener NEW!

Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes NEW!
The Difference Between MLM Earnings Calculators and Earnings Claims
From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM
Compliance Guidelines for Direct Selling Companies and Network Marketers
Factors that Make a MLM Company Successful
A View of the Direct Selling Industry: Past, Present and Future
Why Choose the MLM Model for Your Business? – A CEO Interview

MLM Startup Conference in Las Vegas Video Adverts NEW!

MLMlegal Releases New Film on MLM Startup Conference – Produced by Networkingstar.com
The MLM Startup Conference in Las Vegas

MLM Distributor Education Videos

Jeffrey Babener: Company and Distributor Training on the MLM Industry
U nderstanding the Basics in Order to Succeed In Direct Selling
Recruiting Advice from an Industry Expert
H ow to Tell if a Company is a Pyramid or a Legitimate MLM

Starting a MLM Company – A Video Primer

Profile of a Leading MLM Law Firm – Babener & Associates
In Order to Achieve Success in MLM, One Must Have Passion, Patience, Persistence
R aise Capital in Order to Recruit Key Distributors
Creating Clear Agreements Between Company Owners
Role of Compensation Plan in a Successful Direct Selling Company
MLM Startup Conference – A Must for Executives of Startup and Existing MLM Companies
Choosing the Right Product for Your MLM Company
You Must Possess or Buy MLM Experience
Choosing the Right MLM Software and Technology for your Direct Selling Business
T he Legal Issues of Starting and Running a MLM Company
MLM Startup T ips, Educational Resources, Answers to Network Marketing Questions
L earn What is Needed to Recruit Top-Selling Distributors
H ow Important is Your Company Name? Learn about Trademarking Your Company Name

All About MLM, Direct Selling and Network Marketing

An Introduction to Direct Selling and the Basics of MLM
The Major Players – Successful MLM Companies
The Legal Issues of Starting and Running a Direct Selling Company
Success Stories in the MLM, Direct Selling, Network Marketing Industry
T echnology’s Impact on the Direct Selling Industry: The History of Technology
Not all Direct Selling Companies are Pyramid Schemes
Debunking Direct Selling Industry Myths
The Internet ‘s Effect on Direct Selling and the Future of MLM

About the MLM, Direct Selling, Network Marketing, Party Plan Industry – Q&A

Is the Compensation Plan the Driving Force of Success?
What are the Top Two Reasons why MLM Companies Fail?
How Important Is Recruiting to MLM Company Success?
What is Importance of Merchant Account/Payment Solutions Processing?
Who are the first key Hires for a MLM Company?
Do We Start Local or Go National Immediately?
What is the Driving Force of Success for a MLM Company?
Why Do Distributors join MLM Companies?
Why Do Distributors stay with MLM Companies?
Has Corporate America Discovered the MLM?
What is MLM History with the Government?
Should a MLM Company go International immediately?
Is the MLM Industry “for real” in the Business World?
What is the role of an Experienced MLM Legal Counsel?
Is a MLM Lawyer a Typical Lawyer?
What is the Relationship between MLM and the FDA?
What is the Relationship between MLM and the FTC?
What is the Direction of State Regulation of MLM?
What are the Central Tax Issues for MLM?
Is it Proper to pay C ommissions on Sales Tools and Training?
Do Different Compensation Plans and Products Receive Different Legal Regulation?
How Does a Business Lawyer become a MLM Lawyer?

For more information, visit our websites at www.mlmlegal.com and www.mlmattorney.com. Or, visit our blogs at http://mlmlegal.com/MLMBlog/ and http://mlmattorney.com/blog/.

Find us on our social networks:

And, as always, visit MLMLegal.com, the best MLM resource on the web. The next Starting and Running the Successful MLM Company Conference will be here before you know it! On May 16^th and 17^th, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 64^th annual conference (held almost consistently three times per year over the last 24 years). All executives/owners of MLM, direct selling, network marking, and party plan companies are welcome to attend. This is the original MLM Startup Conference, hosted and perfected by direct selling industry expert, MLM Attorney Jeff Babener. Call 503-226-6600 or 800-231-2162 to register. (Can’t make this event? Keep an eye out for our October and February conferences as well.)

Visit us at www.mlmlegal.com to learn more.

MLM: Legitimacy through Statistics, Global Business Position, and Pyramid Schemes

Charity — Fri, 01 Feb 2013 18:00:33 +0000

This blog post is the companion post to the video Not all Direct Selling Companies are Pyramid Schemes.

There is clearly a middle ground between myth number one, which claims that there are no legitimate MLM companies, and myth number two, that claims that any pyramid scheme is free to do whatever it wants. The fact is that today the MLM industry is thriving. There are 16 million* people in the United States alone who are involved in network marketing. One in ten households has someone who is involved in a MLM opportunity.

We are a law firm that represents companies throughout the world. The companies that we represent are freely doing business throughout the United States – in every state – and around the world, while also respecting the particular rules in every place around the globe. For instance, China is currently and gradually allowing the phase-in of the direct selling business model. This will be magnificent to the direct selling industry and it will be a magnificent opportunity for millions of people around the planet.

Globally, today there are roughly 50 million people involved in direct selling part time. Some people work full time in network marketing. There are nearly 16 million people in the United States selling consumer products and services in the range of $30 billion and more than 90 billion people around the world are involved with MLM with sales exceeding $150 billion.

There is no question that the MLM industry is a thriving one. It is what the experts refer to as an “Ultraniche” industry. This is why network marketers and experts in the industry, such as myself, encourage people to be realistic about the MLM industry. We may impact the lives of millions of people. We may sell billions of dollars in products and services. However, many people don’t realize that direct selling represents less than 1% of retail sales in the marketplace. People that aren’t in the direct selling industry should keep that in mind. Network marketers play a vital role in the economy, but those who are involved in the industry should be realistic about the role that we play in broader world.

– Jeff Babener

*Note that the statistics in this post date from 2010-2012

For additional relevant information to this blog post, visit the following links:

Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes Video

From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM Video

Factors that Make a MLM Company Successful Video

Why Choose the MLM Model for Your Business? – A CEO Interview Video

H ow to Tell if a Company is a Pyramid or a Legitimate MLM Video

T he Legal Issues of Starting and Running a MLM Company Video

Not all Direct Selling Companies are Pyramid Schemes Video

Debunking Direct Selling Industry Myths Video

Has Corporate America Discovered the MLM? Video

Should a MLM Company go International immediately? Video

Is the MLM Industry “for real” in the Business World? Video

Is This A Pyramid or a Legitimate MLM? Article

Identifying Illegal Pyramid Schemes Article

Your Time Is Now Article

Starting Your MLM Company: why They Work- Why They Fail Article

MLM Consulting: International – MLM International Market Entry: Practical Issues Article

The Right Place, The Right Time: The Emergence of Direct Selling [PDF] Article

Free MLM Startup Manual Article

SEC: We Hate Pyramids Article

MLM Law in 50 States Article

How To Build A Successful Direct Selling Company Article

Pyramid: Yes or No? Article

What Differentiates a Legitimate Direct Selling/Network Marketing Company from an Illegal Pyramid Scheme? Article

The Hallmarks of Legitimate Direct Selling/Network Marketing Companies Article

And the Leaves that are Green Turn to Brown – MLM Penny Auctions Article

MLM/Direct Selling/Network Marketing: Billions of Participants Make for a Veritable Industry Article

Make sure to visit our blogs for the latest information on the direct selling industry: MLMLegal Blog Home and MLM Attorney Blog Home. HINT: Chose a category to narrow your search for discussion topics!

Find us on our social networks:

Google Plus: http://plus.google.com/u/0/115279960045099999909#115279960045099999909/posts

LinkedIn: http://www.linkedin.com/in/mlmlegal

Twitter: http://www.twitter.com/BabenerLawFirm

Myspace: http://www.myspace.com/mlmlegal

Facebook: http://www.facebook.com/profile.php?id=696968133

And, as always, visit MLMLegal.com, the best MLM resource on the web.The next Starting and Running the Successful MLM Company Conference is quickly approaching! On February 21^st and 22^nd, 2013 we are hosting the MLM Conference for the 25^th year! This is now our 63nd annual conference (held almost consistently three times per year over the last 24 years). All executives/owners of MLM, direct selling, network marking, and party plan companies are welcome to attend. This is the original MLM Startup Conference, hosted and perfected by direct selling industry expert, MLM Attorney Jeff Babener. Call 503-226-6600 or 800-231-2162 to register. (Can’t make this event? Keep an eye out for our May and October conferences as well.)

Visit us at www.mlmlegal.com to learn more.

An Introduction to Direct Selling and The Basics of MLM

Charity — Thu, 31 Jan 2013 19:58:00 +0000

This blog post is a companion post to the video: An Introduction to Direct Selling and The Basics of MLM

The Introduction of Expert MLM Attorney, Jeff Babener

Jeffrey Babener of Babener and Associates is a legal legend in network marketing for his representation of some of the biggest and best MLM companies in our industry, as well as for his contribution to the positive development of network marketing law.

His several books are viewed as cornerstones for understanding correct business practices in the direct selling industry. And, his quarterly seminars on how to launch and run an MLM company have served as the foundation for dozens of direct selling companies that have become network marketing success stories.

Mr. Jeffrey Babener, please introduce us to network marketing…

Mr. Jeff Babener: Unfortunately, we have many companies out there that are scams masquerading as legitimate multilevel marketing, direct selling companies. This has been a problem for the industry. There is often a fine line between legitimate and pyramid companies since the structure of all companies are in some pyramid format, but the courts and regulatory agencies have long established the difference between legitimate and illegitimate.

The bottom line is that we are looking for a product or a service that has a legitimate place in the consumer marketplace. When we look for a legitimate MLM company, we are looking for a variety of things. We’re looking for a product that is fairly priced and that gets used. We’re looking for a program that pays commissions only on products that are sold to the customer and are used. We are looking for a program that doesn’t involve inflated earnings claims or earnings exaggerations. We are particularly looking for a program that doesn’t involve high-cost investments or inventory loading.

We’re looking for programs that don’t involve overinflated pricing of products. We’re looking for programs that are intended for the long-run. And eventually, what is asked of the company by consumers, courts, regulatory agencies, etc. is if people are buying products or services from the company, what are they paying and why are they paying it?

If they are paying an exorbitant amount of money just to buy into the program and to qualify into what everyone refers to as “the deal,” it’s an illegitimate program. If they’re buying products and services because they want them, they intend to use them, and they have a market for them, then the business model probably will work. Always remember, there is always a fine line.

For more information on the difference between a legal and illegal direct selling, network marketing, MLM company, visit the following links:

Is This a Pyramid or a Legitimate MLM? Article

From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM Video

What Makes a Pyramid Scheme? Video

Not all Direct Selling Companies are Pyramid Schemes Video

Where can I find a legitimate direct selling company to join? Article

Identifying Illegal Pyramid Schemes Article

How to Tell if a Company is a Pyramid or a Legitimate MLM Video

Read our blog posts on relevant topics:

Interview with MLM Attorney On The Difference Between a Pyramid Scheme and Legitimate MLM

Are you Starting a MLM Company?

The Hallmarks of Legitimate Direct Selling/Network Marketing Companies

What Differentiates a Legitimate Direct Selling/Network Marketing Company from an Illegal Pyramid Scheme?

February 2013 MLM Startup Conference in Las Vegas

ZeekRewards.com Shut Down by SEC for Ponzi Activity

Are the Claims that Corporate America has Discovered MLM “Real” or “Off the Wall?”

Is Your Product Real? The Shoe Test…

There Must be Good Value in MLM

Personal Use by Distributors… Your Questions Answered

FTC v. BurnLounge: Lessons Learned for MLM/Direct Selling

Offshore MLM Pirates and Zealot Regulators

The Legitimate MLM Checklist

Steering Clear of Illegal Scams: “Red Flags” to Look Out for

21 Aspects of a Legal Direct Selling Company

How do I Check if an MLM Company is Legal?

Paying Commissions on Sales Tools, Sales Kits, and Training Materials……No!

MLM/Direct Selling/Network Marketing: A Validated Channel of Distribution

The Origin of State Regulation and the Current Direction of State Regulation

And the Leaves that are Green Turn to Brown – MLM Penny Auctions

The Inevitable Question: Is This a “Real” Business

D-Day: Direct Selling v. FTC

Stock Plunge on Internal Consumption: Whose Fault?

Make sure to visit our blogs for the latest information on the direct selling industry: MLMLegal Blog Home and MLM Attorney Blog Home

Find us on our social networks:

Google Plus: http://plus.google.com/u/0/115279960045099999909#115279960045099999909/posts

LinkedIn: http://www.linkedin.com/in/mlmlegal

Twitter: http://www.twitter.com/BabenerLawFirm

Myspace: http://www.myspace.com/mlmlegal

Facebook: http://www.facebook.com/profile.php?id=696968133

Visit us at www.mlmlegal.com to learn more.

Video – The Difference Between a Pyramid Scheme and Legitimate MLM

Charity — Thu, 04 Oct 2012 22:30:55 +0000

More new videos are posted at MLMLegal! Check out the new video From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM. This video and more can be found directly on our homepage.

There are many ways to determine the difference between a legitimate direct selling company, such as Avon, Mary Kay, Tupperware, or Amway and an illegal pyramid scheme.

Learn how to tell the difference yourself by watching expert MLM Attorney Jeff Babener’s new video From a Legal Perspective: The Difference Between a Pyramid Scheme and Legitimate MLM.

And, to learn more about how to spot the red flags that often occur in the MLM industry, read the articles “Is This a Pyramid or a Legitimate MLM?” and “Network Marketing Legal Issues.”

You can also Run, Learn and Get Lost at MLMLegal.com.

Find us on our social networks:

Google Plus: http://plus.google.com/u/0/115279960045099999909#115279960045099999909/posts

LinkedIn: http://www.linkedin.com/in/mlmlegal

Twitter: http://www.twitter.com/BabenerLawFirm

Myspace: http://www.myspace.com/mlmlegal

Facebook: http://www.facebook.com/profile.php?id=696968133

Visit us at www.mlmlegal.com to learn more.

New Video from Jeff Babener: Short Course on Network Marketing

Charity — Wed, 05 Sep 2012 16:21:48 +0000

MLM.com produced a new video featuring Q&A with expert MLM Attorney Jeff Babener. In the video Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes – What Makes a Pyramid Scheme?, Mr. Babener discusses how to tell the difference between a legal direct selling company and a pyramid scheme, how compensation plans can affect a company’s legality and how to keep distributors motivated to sell company products.

To view the video, Short Course on Network Marketing: Q&A with Jeffrey Babener on Pyramid Schemes – What Makes a Pyramid Scheme?, visit MLMAttorney.com.

Be sure to visit the blog at MLMLegal.com to read MLM Attorney Jeff Babener’s article, And the Leaves that are Green Turn to Brown – MLM Penny Auctions, in regards to ZeekRewards’ recent allegations and to learn more about illegitimate MLM companies.

You may also be interested in reading the following articles which help to identify pyramid schemes vs. legitimate MLM organizations:

Is it a Pyramid or Legitimate MLM?

Identifying Illegal Pyramid Schemes

Pyramid: Yes or No?

Visit us at www.mlmlegal.com to learn more.

Full Text of SEC Complaint Zeek Rewards

Charity — Tue, 21 Aug 2012 21:45:19 +0000

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

vs.

REX VENTURE GROUP, LLC d/b/a ZEEKREWARDS.COM, and PAUL R. BURKS,

Defendant,

) ) ) ) ) ) ) ) ) ) )

Civil Action No.

COMPLAINT

Plaintiff Securities and Exchange Commission (“Commission” or “SEC”) alleges as follows:

SUMMARY OF ALLEGATIONS

1. The Commission files this emergency action to halt the fraudulent

unregistered offer and sale of securities in an unregistered investment contracts constituting securities in a combined Ponzi and Pyramid scheme perpetrated by Defendants Rex Venture Group, LLC (“Rex Venture”) d/b/a

www.ZeekRewards.com (“ZeekRewards”) and its principal, Paul Burks (“Burks”) (collectively “Defendants”).

Defendants solicit investors through the internet and over interstate wires to participate in the ZeekRewards program, a self-described “affiliate advertising division” for the companion website, www.zeekler.com (“Zeekler”), through which Defendants operate penny auctions.
Since approximately January 2011 through the present, the Defendants have raised more than $600 million from approximately 1 million investors nationwide and overseas by making unregistered offers and sales of securities through the ZeekRewards website in the form of Premium Subscriptions and VIP Bids.
Unbeknownst to its investors, ZeekRewards is, in reality, a massive Ponzi and pyramid scheme.
Approximately 98% of ZeekRewards’ total revenues, and correspondingly the purported share of “net profits” paid to current investors, are comprised of funds received from new investors.
Defendants currently hold approximately $225 million in investor funds in approximately 15 foreign and domestic financial institutions, and those funds are at risk of imminent dissipation and depletion.
Defendants have violated, and unless enjoined will continue to violate, the antifraud and securities registration provisions of the federal securities laws. Unless restrained and enjoined, Defendants are likely to engage in future violations of the federal securities laws. Accordingly, the Commission (A) seeks to preserve investor funds through an asset freeze, (B) seeks orders (i) for an accounting, (ii) prohibiting the destruction of documents and (iii) appointing a temporary receiver over the Defendants’ assets; and (C) seeks preliminary and permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each of the Defendants.

JURISDICTION AND VENUE

This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(l) and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d)(l) & 77v(a)] and Sections 21(d)(l), 21(d)(3)(A), 21(e) and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d)(l), 78u(d)(3)(A), 78u(e) & 78aa]. Defendants have, directly or indirectly, made use of the means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, in connection with the transactions, acts, practices, and courses of business alleged in this complaint.
Venue is proper in this district pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act, 15 U.S.C.

§ 78aa, because certain of the transactions, acts, practices, and courses of conduct constituting violations of the federal securities laws occurred within this district. Both Defendant Burks and Defendant Rex Venture d/b/a/ ZeekRewards transacted business, and offered and sold the securities that are the subject of this action, to investors in this district.

DEFENDANTS

10. Paul R. Burks, age 65, is a resident of Lexington, North Carolina. Burks is the sole owner of Rex Venture Group, LLC, and exercises control over ZeekRewards, Zeekler, and other affiliated websites.
11. Rex Venture Group, LLC (“Rex Venture”) is a Nevada limited liability company with its principal place of business in Lexington, North Carolina. Rex Venture wholly owns and operates ZeekRewards, an internet website (www.zeekrewards.com) with physical operations in Lexington, North Carolina, and internet customers and contacts throughout the United States and internationally.

FACTUAL ALLEGATIONS

ORIGINS OF ZEEKREWARS

Since 1997, Burks has operated through Rex Venture (and its corporate predecessor) several online, multi-level marketing businesses.
In 2010, Burks created Zeekler.com, a penny auction website offering items ranging from personal electronics to cash. Penny auctions require participants to pay a non-refundable fee to purchase and place each incremental bid (typically one cent) on merchandise sold via auction. The penny auctions were not particularly successful until Burks launched ZeekRewards in January 2011.
ZeekRewards is the self-described “private, invitation-only, affiliate advertising division” of Zeekler. Bidders on Zeekler.com penny auctions can acquire bids by purchasing bids on Zeekler.com, but ZeekRewards and its affiliates also sell or give away free sample bids to be used in the penny auctions.

THE ZEEKREWARDS OFFERING

Through publicly available websites that Defendants own, operate, control, or sponsor, Defendants solicit persons to become investors or “affiliates” in ZeekRewards.
Through the ZeekRewards program, Defendants offer affiliates several ways to earn money, two of which involve the offer and sale of securities in the form of investment contracts: the “Retail Profit Pool” and the “Matrix.”
From at least January 2011 through the present, via the ZeekRewards website, Defendants have raised at least $600 million through the offer and sale of securities (via the Retail Profit Pool and the Matrix) to more than 1 million domestic and international investors.
Defendants have not made any effort to determine if investors in fact have the financial wherewithal to invest, nor have they ever made any effort to determine if investors have any experience investing before investors commit any capital to ZeekRewards.
No registration statement has been filed or has been in effect with the Commission in connection with the securities the Defendants are offering and selling, and have offered and sold.

1. THE RETAIL PROFIT POOL

Defendants attracted new investors to ZeekRewards with the promise of daily profit-share awards distributed through a Retail Profit Pool, which operates as a Ponzi scheme. According to the ZeekRewards website, through the Retail Profit Pool the company shares “up to 50% of the daily net profits” with affiliates who meet certain qualifications (“Qualified Affiliates”).
To become a Qualified Affiliate, investors must satisfy four criteria: (i) enroll in a monthly subscription plan requiring payments of $10, $50, or $99 per month; (ii) enroll new penny auction customers personally, through the

ZeekRewards co-op program, or through third-party businesses endorsed by ZeekRewards; (iii) sell at retail or purchase and give away as samples a minimum of ten Zeekler.com bids, earning Profit Points; and (iv) place one free ad daily for Zeekler.com and submit proof to ZeekRewards.

The requirements to become a Qualified Affiliate constitute an investment in a common enterprise and require little or no investor effort.
Qualified Affiliates have no role in ZeekRewards’ operations. The Defendants alone created, update and operate the websites, handle all payments, manage the bank accounts and payment service providers, manage affiliate and customer accounts, manage all affiliate and customer services, oversee and disburse all bids, operate the auctions, create all advertisements, sponsor recruiting videos and calls, create the advertisements, and decide the daily payout percentages for the Retail Profit Pool.
Investor funds paid are pooled and comingled in a handful of financial institutions. Investor funds also are commingled with ZeekRewards and the penny auction website’s overall revenues from all company operations.
Qualified Affiliates earn Profit Points by either (a) selling penny auction bid packages directly to retail customers (“Retail Bids”), or (b) purchasing “VIP Bids” and giving them away as samples to retail customers or to other personally-sponsored affiliates.
Most affiliates opt to simply purchase VIP Bids (up to a maximum $10,000 investment) and give them away as samples in order to earn Profit Points. Even then, affiliates need not exert any efforts in giving away the VIP Bids they purchase because Defendants have created automated programs, including the “Customer Co-Op” and the “5CC” programs, that generate or have generated purported customers to whom the bids can be given automatically without any further effort on the affiliates’ part.
Earning daily dividends also requires that affiliates place one free internet advertisement daily for the company, but that exercise requires little or no effort. Affiliates may merely copy and paste free ads – created by Defendants without input from affiliates – from a company-sponsored program, which the ZeekRewards website boasts should take no more than five minutes per day. Affiliates also may employ a third-party program to generate ads automatically for them; affiliates must simply verify that they’ve placed the ad by submitting an internet link to ZeekRewards. Placing more or better ads does not enhance an individual’s share of profits.
Qualified Affiliates are paid their share of net profits from the Retail Profit Pool in the form of daily “awards” or dividends on accumulated Profit Points, which function like shares of stock.
The size of the each Qualified Affiliate’s daily award is dependent solely on how many Profit Points that investor has accumulated, and is not based on rendering any significant service to ZeekRewards. Thus, buying and giving away more VIP Bids earns greater Profit Points, hence a larger daily profit share award, without any additional effort required.
Qualified Affiliates have the option to receive their daily “award” that typically has approximated 1.5% per day as: (i) a cash payment; (ii) additional Profit Points ; or (iii) a combination of both.
ZeekRewards encourages Qualified Affiliates to convert at least 80% of their daily award as additional Profit Points. Most Qualified Affiliates follow this suggested approach.
The daily award has a compounding effect for those Qualified Affiliates who elect to receive the daily award as new Profit Points rather than cash.
As a result of the compounding effect, Qualified Affiliates now have nearly 3 billion Profit Points outstanding. Based on the ZeekRewards current outstanding Profit Point balance, the company would be obligated to pay out approximately $45 million per day if all Qualified Affiliates elected to receive their daily award in cash.
Qualified Affiliates have no role in ZeekRewards’ operations. The Defendants alone created, update and operate the websites, handle all payments, manage the bank accounts and payment service providers, manage affiliate and customer accounts, oversee and disburse all bids, operate the auctions, manage the Customer Co-Op, manage the 5CC program, create all advertisements, sponsor recruiting videos and calls, create the advertisements, and decide the daily payout percentages for the Retail Profit Pool.
Investor funds paid in the form of subscription payments and purchases of VIP Bids are pooled and commingled in a handful of financial institutions. Investor funds also are commingled with ZeekRewards and the penny auction website’s overall revenues from all company operations.

2. THE MATRIX

ZeekRewards also employs a pyramid “Matrix” to reward its investors for recruiting others to join the scheme. The company places each newly recruited affiliate into a “2×5 forced-fill matrix,” which is a multi-level marketing pyramid with 63 positions that pools new investors’ money and pays a bonus to affiliates for every “downline” investor within each affiliate’s personal matrix.
Affiliates that have (i) enrolled in a monthly subscription plan requiring payments of $10, $50, or $99 per month; and (ii) recruited at least two

other “Preferred Customers” (i.e., investors who have likewise enrolled in a monthly subscription plan) qualify to earn bonuses through the Matrix.

Once qualified, an affiliate earns bonuses and commissions for every paid subscription within her downline 2×5 pyramid, whether or not she personally recruited everyone within the matrix. Furthermore, affiliates are rewarded merely for recruiting new investors without regard to any efforts by the affiliates to sell bids or otherwise support the retail businesses.
The Defendants, not the investors, created, update, and operate the websites, handle all payments, manage the bank accounts and payment service providers, manage affiliate and customer accounts, create all advertisements, sponsor recruiting videos and calls, sponsor training videos and calls, and track and determine all Matrix bonus payments.
Investor funds paid in the form of subscription payments are pooled and commingled in a handful of financial institutions along with all of Rex Venture’s other revenues.
Investors’ Matrix bonuses and the Defendants’ profits are both derived from the same source: the overall revenues generated from new investors to the ZeekRewards program and the penny auction website.

DEFENDANTS’ OPERATION OF A FRAUDULENT PONZI AND PYRAMID SCHEME

Defendants represent that through the Retail Profit Pool they will pay investors, or Qualified Affiliates, “up to 50%” of the company’s daily net profits in the form of daily profit share awards.
Burks is solely responsible for determining the amount of “net profits” to share in the Retail Profit Pool.
Defendants represent that daily awards are calculated by dividing “up to 50%” of daily net profits by the number of Profit Points outstanding among all Qualified Affiliates. This calculation results in a daily dividend paid to each Qualified Affiliate that consistently has averaged approximately 1.5% per day.
In fact, the dividend bears no relation to the company’s net profits. Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.
Despite encouraging affiliates to purchase and give away VIP Bids to promote and drive traffic to the Zeekler penny auction website, Defendants fail to disclose that almost none of the VIP Bids given away by Qualified investors are actually used on the Zeekler penny auction website. Of approximately 10 billion VIP Bids purchased by or awarded to investors, less than one-quarter of one percent have been actually used in auctions on the Zeekler penny auction website. Thus, the VIP Bids do little or nothing to actually promote the retail business.

Moreover, Defendants fail to disclose that more than 90% of all revenues (and hence net profits) are derived from new investor deposits (in the form of VIP Bid purchases and subscription fees) rather than actual retail revenues.
Defendants also fail to disclose that without new investor deposits (in the form of VIP Bid purchases and subscription fees), revenues would dwindle substantially as less than 10% of daily revenues come from actual retail sales, and the scheme would likely collapse immediately.
Based on the average 1.5% daily dividend on 3 billion Profit Points outstanding, ZeekRewards would owe nearly $45 million per day in profit share awards to investors – ZeekRewards Qualified Affiliates – if investors requested cash rewards instead of points. The company’s actual daily revenues, which in July 2012 averaged approximately $5 million per day, cannot support the daily awards that have been consistently been “paid” or awarded at an average of approximately 1.5% per day.
Defendants fail to disclose to investors that the company would quickly become insolvent if more Qualified Affiliates elected to take daily awards in cash from the Retail Profit Pool rather than converting their awards into ever-increasing accumulated Profit Points.
Defendants also fail to inform investors of the substantial risk that the Matrix is prone to collapse if the promoters are unable to recruit ever-increasing numbers of paid affiliates into the Matrix pyramid, because without new investors there will be no source of revenue to pay existing participants in the scheme.
Although to date ZeekRewards has paid out nearly $375 million to Qualified Affiliates through the Retail Profit Pool and the Matrix, the company has only approximately $225 million in deposits, which is insufficient to satisfy future awards based on outstanding Profit Points and Matrix commissions and bonuses.

RISK OF FURTHER DISSIPATION OF INVESTOR FUNDS

ZeekRewards’ current investor payouts are approaching, and may soon exceed, total incoming revenue. In July 2012, total revenue for ZeekRewards was approximately $162 million, while total investor cash pay-outs were approximately $160 million. If more Qualified Affiliates in the Retail Profit Pool elect to receive cash payouts for daily awards rather than reinvestment into more VIP Points, ZeekRewards’ cash outflows would eventually exceed total revenue.
Burks has withdrawn approximately $11 million while operating Rex Venture and ZeekRewards, of which approximately $4 million remains in his possession, custody or control.
Burks distributed approximately $1 million of the funds garnered from ZeekRewards to family members.
1. Defendant Rex Venture currently hold approximately $225 million in investor funds in approximately 15 financial institutions. These funds are in danger of rapid depletion.
2. Approximately $40 million of those investor funds are held in the accounts of online payment service providers, of which approximately $30 million are held outside the United States. The vast majority of these funds are being held by the payment processors as reserves against potential credit card “charge-backs” (i.e., claims for refunds for transactions involving fraud).
3. The Retail Profit Pool’s viability hinges on investors continuing to accept daily rewards in points instead of cash. With approximately 3 billion VIP Points outstanding in the Retail Profit Pool, if Defendants continue to pay daily awards at their historical average rate of approximately 1.5%, and investors seek cash awards instead of points, investor claims for cash withdrawals could increase to approximately $45 million per day. With only approximately $225 million on hand, the company would quickly be rendered insolvent.

FIRST CLAIM FOR RELIEF

UNREGISTERED OFFER AND SALE OF SECURITIES

Violations of Sections 5(a) and 5(c) of the Securities Act

The Commission realleges and incorporates by reference the foregoing paragraphs.
Defendants, by engaging in the conduct described above, directly or indirectly, made use of means or instruments of transportation or communication in interstate commerce or of the mails, to offer to sell or to sell securities, or to carry or cause such securities to be carried through the mails or in interstate commerce for the purpose of sale or for delivery after sale.
No registration statement has been filed with the Commission or has been in effect with respect to any of the offerings or sales alleged herein.
By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

SECOND CLAIM FOR RELIEF

FRAUD IN THE OFFER OR SALE OF SECURITIES

Violations of Section 17(a) of the Securities Act

The Commission realleges and incorporates by reference the foregoing paragraphs.
Defendants, and each of them, by engaging in the conduct described above, directly or indirectly, in the offer or sale of securities by the use of means or instruments of transportation or communication in interstate commerce or by use of the mails:
1. with scienter, employed devices, schemes, or artifices to defraud;
2. obtained money or property by means of untrue statements of a material fact or by omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

engaged in transactions, practices, or courses of business which operated or would operate as a fraud or deceit upon the purchaser.
By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined will continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].

THIRD CLAIM FOR RELIEF

FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder

The Commission realleges and incorporates by reference paragraphs 1 through 64 above.
Defendants, and each of them, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of a security, by the use of means or instrumentalities of interstate commerce, of the mails, or of the facilities of a national securities exchange, with scienter:

employed devices, schemes, or artifices to defraud;
made untrue statements of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
engaged in acts, practices, or courses of business which operated or would operate as a fraud or deceit upon other persons.

68. By engaging in the conduct described above, Defendants violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Securities and Exchange Commission respectfully requests that the Court:

Issue findings of fact and conclusions of law that Defendants committed the alleged violations described hereinabove.

II.

Issue judgments, in a form consistent with Fed. R. Civ. P. 65(d), permanently enjoining Defendants and their officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with any of them, who receive actual notice of the judgment by personal service or otherwise, and each of them, from violating, directly or indirectly, Sections 5(a), 5(c) and 17(a) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c), and 77q(a)], and Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].

III.

Issue, in a form consistent with Fed. R. Civ. P. 65, as to all Defendants, a permanent injunction freezing the assets of Rex Venture and any entity affiliated with it, directing that all financial or depository institutions comply with the Court’s Order, appointing a temporary receiver over the assets of Rex Venture, prohibiting each of the Defendants from destroying documents, requiring accountings from each of the Defendants, and ordering expedited discovery.

IV.

Order that Defendants, and any employees or agents of Rex Venture, be restrained and enjoined from destroying, removing, mutilating, altering, concealing, or disposing of, in any manner, any of their books, records and

documents relating to the matters set forth in the Complaint, or the books, records and documents of any entities under their control, until further order of the Court.

IV.

Order Rex Venture to disgorge all ill-gotten gains, including prejudgment interest, resulting from the illegal acts or courses of conduct alleged in this Complaint.

Order Burks to pay $4 million in civil penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)].

VI.

Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.

VII. Grant such other and further relief as this Court may determine to be just and necessary.

Dated: August __, 2012 Respectfully submitted,

John J. Bowers (NC Bar No. 23950) Stephen L. Cohen

J. Lee Buck, II

Brian M. Privor

Alfred C. Tierney

U.S. Securities and Exchange Commission 100 F Street, N.E.

Washington, DC 20549-xxxx

Telephone: (202) 551-4645 (Bowers) Facsimile: (202) xxx-xxxx

Email: BowersJ@sec.gov

Attorney for Plaintiff

Securities and Exchange Commission

The PDF is available by clicking HERE.

Visit us at www.mlmlegal.com to learn more.