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  • Landlords in Distress

    Before you invest - invest-igate!

    I have come across the two following "investments" being promoted on twitter and by various property people:

    Property Wikia

    Banner Brokers

    On doing some investigation, they both bear all the marks of a Ponzi scheme.

    The Anatomy of a Ponzi Scheme

    The basic definition of a Ponzi scheme is an operation that pays returns to it's investors from either the investors own money or money paid into the operation by subsequent investors. It's typically characterized by unusually high returns on an investment, or a very quick payout on the investment.

    Although he did not invent this type of scam, in 1920 Charles Ponzi became notorious in the United States for running a huge scheme that dealt with coupons and postage stamps.

    [Image: ponzi-600x583.jpg]

    Here's a hypothetical Ponzi Scheme for you to consider, step-by-step, with what they say, what they mean, what they do, what just happened, and what to look for each step of the way. Keep in mind that these steps don't have a set time between them. It can be days, weeks, or even months between each step.

    STEP ONE

    What They Say:
    Put your money to work for you! By investing $597 into our system, we can guarantee returns up to 300% in just two short months! That's right - up to One Thousand Seven Hundred and Ninety One Dollars in just THREE months!

    What They Mean:
    We need your money to keep this thing going. So, hurry up and pay us.

    What They Do:
    Part of your $597 is going to pay for their lifestyle. Their house, vehicle, phone, clothes, booze... whatever it might be. Another part of it is going to pay part of someone else’s investment. In some cases, a part of your money is actually being returned to you.

    What Just Happened?
    You have "invested" into a system, hoping for high returns on your money in a short amount of time.

    What to Look Out For:
    Anything that sounds too good to be true (it usually is).

    STEP TWO

    What They Say:
    Dear (YOUR NAME HERE), you've got profits! Here's your first commission check of $199! Watch your inbox for more! By the way, you can earn commissions faster by referring friends and family into this incredible opportunity!

    What They Mean:
    Dear (YOUR NAME HERE), here's 1/3'rd of your money back. That should buy us enough time to get some other people in this system. By the way, know anyone else who we can sucker into this thing?

    What They Do:
    They allocate 1/3rd of YOUR MONEY to go back to you on the first "commission check". This will give you a false sense of security. You think you're making money on the deal, when in reality you're not. They're also hoping you can provide them more leads for people who are desperate to make some money.

    What Just Happened?
    Your confidence just got a little boost. Ok, you got a commission check. You falsely believe you're now "making money". They just bought some time.

    What to Look Out For:
    Quick pay offs with the add-on of asking you to bring more people into the system.

    STEP THREE

    What They Say:
    Hey (YOUR NAME HERE), we're announcing a brand new, game changing technology that will change the world forever! For the low cost of just $99 a month, you can be part of this and explode your income! We're making it SO EASY for you to SKYROCKET your income - we'll simply take out the $99 from your monthly COMMISSIONS!

    What They Mean:
    Hey (YOUR NAME HERE), we paid some foreigners to program some crappy website for us so we can scam more people. We needed your money to pay for that programming, so we can't pay you back right now. But hey, it's not like it's going to COST you anything.

    What They Do:
    Outsourcing programming work is cheap. It's also ineffective, troublesome, and hard to manage. U.S. rules, regulations, and laws don't apply overseas, and paid foreign programmers aren't worried about repercussions in the scams that they're programming. It will take longer than they expected, especially if they haven't allocated the money to pay the programming company properly.

    What Just Happened?
    They just pulled some "slight of hand" on you. You think it's not costing you anything, when in reality they still have $398.00 of your hard earned cash.

    What to Look For:
    Any delays, changes, or new things being introduced. Anything that changes your original agreement with them. Do not accept anything new.

    STEP FOUR

    What They Say:
    (YOUR NAME HERE), we ran into some programming problems, which we can assure you we're working 24 hours, 7 days a WEEK to FIX. We're going to be late on getting you your commission check this month, but don't fear, we're keeping a record of your $100 commission (minus the $99 for the technology package!) BUT STICK WITH US, WE'RE GOING TO CHANGE THE WORLD!

    What They Mean:
    (YOUR NAME HERE), we can't afford to pay you this month, so here's an excuse as to why we can't. In reality, we spent your money on a lavish party, and we really needed to buy some candy for our kids. While we have your attention, we're going to do some weird math on you... we'll show you $100, then tell you we're subtracting $99, which leaves $1. We might be able to pay you that one day... who knows.

    What They Do:
    All they're doing here is buying time. They need to ramp up efforts and send more people over to step one. Without more people coming in, the system totally collapses.

    What Just Happened?
    They stalled. They need more people to invest into the system in order to pay you your "commissions". The system they have doesn't really work. It's nothing new. It's not game changing in any way. It's ugly, broken, and filled with hype.

    What to Look For:
    Excuses - or more changes to the system. You do not have to accept any changes.

    STEP FIVE

    What They Say
    YOU'LL NEVER BELIEVE THIS, (YOUR NAME HERE)!!! Hey, this is Mr. Big Wig, and I feel compelled to share this with you. When I was 18, I moved out of the house, looking for an escape from my alcoholic parents who used to beat me. I moved from job to job, never really fitting in. I couldn't pay my rent, and got kicked out of the apartment I was living in. I rented a locker at the bus station, and slept under the bleachers at the old high school football field. One night, when I was trying desperately to sleep in the cold, a voice spoke to me. It told me to sleep, to rest, and that when I awoke, all would be revealed to me. So I did. I slept. I slept like I was sleeping in a king sized bed at the Ritz. When I woke up the next morning, I was completely refreshed with the most positive outlook on life that I have ever had. Then "the plan" hit me! My writing could barely keep up with my mind, but there it was. There was "the plan" that was going to take back the financial gains from the Big People of the world and give it back to the hard working people of the world - the people like you and me. I don't know who or what had spoken to me the night before - I like to call it "The Universe". It spoke to me as I slept, and gave me the Financial Freedom Plan! I've been working with my programmers and graphic artists for the last two years, and I think we're finally getting close to a point where we can unveil the Financial Freedom Plan to a select few members. Because of the sensitive nature of this plan, we are only looking for qualified people who can afford to invest $4997 into the Financial Freedom Plan to make it a reality. We also have to limit this opportunity to only 36 people. If you want to secure your part of The Financial Freedom Plan, just click here.

    What They Mean:
    Here's a complete pile of trash, in which I'll interject things that might provoke an emotional response on your part. Then I'll talk about something that can't be verified, and lastly ask for more of your money without promising you anything.

    What They Do:
    Hope that by "limiting" the amount of people they'll get more people to quickly turn over their credit card information to them. Again, they need more people in the system for it to work.

    What Just Happened?
    Your heart strings got tugged on. You've been with these guys through the good times and bad, and you feel a connection to them. You want them to succeed, because that will mean you succeed. You've gone this far, you might as well go the whole way in hopes to recoup your original investment. They just got you for another five grand! And, by the way, there's no limit on how many people can get in on this - they NEED more people every day.

    What To Look For:
    Stories. Stories are nice, but stories don't put money into your bank account. All stories exist to try to get more money out of you, to get you to not complain, and to pacify you.

    STEP SIX

    What They Say:
    Dear (YOUR NAME HERE), we know there are a lot of nay-sayers out there, calling us scammers and what not. We just wanted to pass along some of our success stories from our members to you. (Insert 6 success stories here)

    What They Mean:
    Dear (YOUR NAME HERE), we had about fifty people sign up for our Financial Freedom Plan. With the $249,850.00 we made, we paid off about 25 investors. Most of them were so angry with us that they walked away. Some were so happy to finally get their money back that we asked them to write something nice about us. Here are 6 of the nicest ones we could fine.

    What They Do:
    Take the money that came in, pay off the "squeaky wheels" first, then their "cheerleaders" second, then they pay themselves with what's left over.

    What Just Happened?
    Ponzi scheme 101. Pay off the first people in with the last people's money. You've not made a dime in this yet, and can only hope for some good news soon.

    What To Look For:
    Testimonials that you can not personally verify, challange, or get the full story on.

    STEP SEVEN:

    Go back to STEP FOUR, make new excuses, write new stories, tell new lies...

    You have lost $5,395 of your hard earned cash.

    The bottom line is that people will go to great lengths to disguise a Ponzi scheme for what it really is. You need to learn to look for any signs that what is being presented to you might be a Ponzi scheme. If you are involved with one, the best thing to do is get out of it as quickly as possible, with as much of your original investment as possible. All Ponzi Schemes eventually collapse, with one of 4 possible outcomes:

    1. The "big wig" takes off with all they money.
    2. The system fails to pay investors because no new investors have come in. Investors ask for their money back, and the thing shuts down overnight, with no returns.
    3. The SEC, FTC, Attorney Generals Office, or some other legal entity steps in and shuts them down.
    4. The investors get uneasy, and demand their money back. With a high enough percentage doing this, the system fails.

    As always, if something sounds too good to be true, it usually is.

    I would be interested to hear from people who have made actual money from either of these schemes.
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    Quote:I would be interested to hear from people who have made actual money from either of these schemes.
    Technically, it is not possible to make money if we mean actually making a profit. All that is happening is the stolen money is transferred from one set of people to another. This is why the Madoff administrator has been able to claw back the 'profits' early investors received. He showed that there were never any profits so the money paid out was illegal gains.
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month since 2005. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Thank you for pointing that out John.

    People who are promoting Property Wikia and Banner Brokers on an affiliate basis should be aware that, if they are found to be a ponzi scheme, then they will be liable to pay all their "profits" back.
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    I thought this interesting to revive following the news that the two schemes mentioned above, Property Wikia and Banner Brokers, both turned out to be scams and people who got involved lost a lot of money - £126million in the case of Banner Brokers.  Both have been shut down and the people involved arrested.

    This took nearly 4 years, during which time the criminals continued pulling in money.  I believe this reiterates how important community self-regulation is and how it is worth taking note if early warning signs start to appear.

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    Is it along the same lines as what they used to call pyramid selling where you paid in to sell products but your income was really generated by recruiting more sellers to pay in to become sellers of the products. Plus you had to pay your recruiter a cut of this income. The only way to make any money was in the very top rows of the pyramid and a decreasing  customer base as you were approaching all your product customers to become sellers. Think it still goes on actually with some aloe vera type products.

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    Good to see the FCA taking strong action against property fraudsters - hopefully will send out a strong message to other unscrupulous operators in the sector who are undertaking regulated activities without being a member of the FCA.  Further details here:-


    https://www.propertytribes.com/fca-ban-pe...27040.html

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