I've Found a Ponzi Scheme-What do you think I should do?
A product developer politely reached out to me this week and gave me a review copy of their product. It's a $5000 product that is very popular in the make money online space.
I told them I'd go thru the product and give an honest review, but I would not consider the free copy of the product as a reason to slant my review one way or the other. They said they'd appreciate my honesty, so I was given a username and password to go thru the course. I've been going thru the product since yesterday, and I think I'm quite confident I've found a ponzi scheme!
It's probably 10 hours of content in total with access to a community.
From the beginning, I was very put off by the product because of the way it's marketed in typical "guru" fashion. He is constantly throwing money around, talking about how he makes $20,000+ per day, and showing his cars and houses. I tried being open-minded about it though because I understand some people market that way because they know it catches attention, and I get that.
I don't agree that's what's necessary to capture attention, but some people feel that's what THEY need to do, so I decided to be open-minded. Going into the product, I was surprised that the same behavior in the sales funnel isn't inside. There isn't the constant showing of money, cars, and houses although you do hear over and over that "I make more than $20,000 per day".
Despite the "bragging", I decided to continue to be open-minded and look for technical skills and whether or not the end user would have their goals achieved.
How I Evaluated the End User's goals
In the marketing material, the funnel is targeted at:
- People who want lifestyle freedom
- People who want to learn affiliate marketing
- Look-alike audiences of Toni Robbins, Dean Graziosi, Grant Cardone, and others
- People who want to learn to market their businesses online (regardless of niche)
- Paid advertising (no organic methods are taught or marketed)
- With special attention to people who want to learn a quick method for business growth
As a result, I was able to see that the target audience would likely be people who:
- Are looking for a first career or career change
- People who have heard of affiliate marketing, but who want to learn how to master it
- People who might be looking for investments or passive income
- Those who have existing businesses and want to learn how to use the internet to get more customers
With this in mind, I decided to evaluate the program based on the criteria of whether it would help the end user to get passive income, to successfully establish themselves as affiliate marketers, and whether they'd learn how to run the business as an investment or passive income.
My Findings
The course marketed that it would teach you:
- How to set up a website
- How to set up a sales funnel
- How to get traffic using solo ads, Google ads, Facebook ads, and Youtube ads
- and, How to sell to the traffic and make money
At first glance, I think newbies would not know how much money would be required to implement this strategy, but by looking at the curriculum, I can see this method would cost more than most peolpe have in liquid cash.
Ads cost. The funnel software he's recommending costs. Hosting costs (because he introduced a hosting alternative). I think the product developer should be more transparent about the prerequisite startup capital that would be needed because you'd probably need more than $400/mo for several months to master the methods.
Going further into the course, I watched the material on setting up a website and this is where things started getting phishy. You're taught to take a clone of his website and upload it to your website C-Panel. The alternative is you'd take a clone of his funnel and upload it into Clickfunnels. You don't learn how to make a website of your own, the psychology behind whhy he's placed elements where he does, copywriting or anything of the sort.
Everyone graduating the course will have the same identical website. That's ponzi scheme red flag #1.
Going further, I watched the content about setting up the ads, and he gives you the exact keywords, the exact ad copy, and you simply copy and paste the ads and drive the traffic to your website (which is a clone of his). You apply this same copy-paste technique to Google, Facebook, and Youtube. Ponzi scheme red flag #2.
Then, when I looked into the community to see how students are coming along, I see students saying "I set up solo ads using the email copy we're given but got no sales" and other students are replying the same way. Ponzi scheme red flag #3.
What I Suspect
At points, he would be very transparent. He said it took him 4 years to make his first affiliate commissions. He tries to inspire perseverence, and he shares personal stories of his failure, but that's after many lessons where you're given the impression that this can be quick and easy, and lots of anomaly testimonials where people make 7 figures/year and it's unclear how long they got there.
If you're not familiar with the growth phases in business online, you'd probably be very confused asking, "Should I expect to be the anomaly who makes 7 figures in my first year or the one who doesn't make a dollar in 4 years?". Being honest, who goes into a venture expecting to fail for years?
As a result, I think most people hearing his stories would walk away with the "get rich quick" expectation because he emphasizes that possiblity much more often.
People will Likely be Disappointed
I'm confident that a person who is looking to market their own business, sell their own product, or do anything other than sell this product would be sorely disappointed. As a WA alumni, I could pick up nuggets here and there because I have skills that could fill in the blanks like:
- Website development and design
- Copywriting
- SEO
- Traffic generation with paid ads
- Etc.
I'm confident that people without those skills would likely be lost, and I'm also quite sure a large percentage of those who buy the course would probably expect to walk away knowing how to build their own brands, sell their own products, and drive traffic in ways that's transferable to multiple business ventures.
What Would You Do?
I know the product developer is going to personally reach out to me at the beginning of the week. What do you think I should do?
- Tell him I think his product is a Ponzi scheme?
- Report him to the Federal Trade Commission without giving him the benefit of the doubt?
- Give him the benefit of the doubt, explain my findings, and hold him accountable to make changes, or else report him?
- Say it's not my job to correct his ethics and ignore the whole situation?
- Sound the alarm with a review and ignore the product developer?
What would you do? It's a privilege that he reached out to me, but people are definitely spending $5000+ and losing money and I can see this happening much more if I don't say or do anything.
I look forward to hearing back from you all. Your advice here is always golden.
Recent Comments
118
I must have missed something. Does the sales funnel include the ability to integrate an autoresponder in the mix? Also, are there any places in the funnel where a "student" could insert their product into the mix?
I would be reluctant to call it a scam or Ponzi scheme aka Bernie Madoff scheme of paying off the first ones in with subsequent member funds.
Also, the use of Done For You promotional material including replicated webpages and landing pages is common in many legit business opportunities and MLM. However, it is extremely difficult to succeed when members (affiliates) are all using the same landing pages, ads, emails, etc.
Overall, it sounds like a fixed system designed to replicate one standard marketing package. Consequently, that would not justify a high price.
Bottom line: To quote Supreme Court Justice Scalia, "it is awful, but lawful." (flag burning)
When you look at it like that, he's showing them how to set up a hosting account (with some host I've never heard of) or alternatively, you could use Clickfunnels. Once you set up the hosting account, you upload the website files and his website clone will show up on your URL. With Clickfunnels, he gives you the exact funnel you can use.
In theory, you could add in your own autoresponder and product, but you would have to learn how on your own. Isn't a ponzi scheme where you pay to learn to sell the "product"?
A Ponzi scheme is a scheme that uses investor money to pay off earlier investors. Typically, the payments to earlier investors are called "income" when in reality it is a return of capital.
It may be a "pay to play" scheme where members have to pay for an "upgrade" (training) before they authorized to earn commissions from the sale of the upgrade to others (Digital Altitude and MOBE).
I wrote a review of the Surf to Cash Formula program. It combines several existing make-money-online sales funnels (including Vira Lightning and Power Lead System) with a systematic approach to using free traffic sources to promote the one money-making system (STCF).
The STCF program provides ready-made promotional material for people to promote STCF. The system won't work for them unless they buy into the separate sales funnels (tools), particularly the Power Lead System, which is similar to ClickFunnels.
For a MMO system, I was surprised by the level of training STCF provided for free. I signed up because it was free, but did not buy into any of the tools that make up the "system." However, I did walk through the system and looked at most of the training.
The funny thing about STCF was that, at first, I thought it was a big-time scam based on the overly hyped sales material, "make up to $15,000 a month using 100% free traffic."
So, I think what you wrote about falls into the STCF type of sales funnel system set up to make money from the "tools" (hosting and sales funnel) aspect as well as the training.
That all sounds suspicious. I think those product developers are complicating things for sure!
Hi, Tiffany.
You have come a very long way in a very short period of time and you should feel honoured that someone out there would give you back office access to report on their program.
I'm in a similar situation when I was contacted by someone to have a look at his program that will be launching (I think prematurely) in the next few days.
Unfortunately, this person has a lot of negative press right now and has been accused of 'Ponzi' operations in the past. He and his new organization have a lot to prove.
Not sure why he would approach me specifically, but it probably has to do with the fact that back in 2004, I actually joined the program he brought forth to the Canadian market in the form of a 2X3 forced matrix time leverage system.
It was my first and last venture into MLM/Network Marketing. A lot of people were left holding an empty bag back then.
He has assured me that he has had time to figure out and provide newly developed solutions to the problems faced by his original offerings.
Long story short, Tiffany...
Be grateful in knowing that what you have been doing since you started here at WA is having a tremendous impact on what you will achieve moving forward.
Actual companies, (Whether legit or not) are coming to you for some support.
"What would you do? It's a privilege that he reached out to me, but people are definitely spending $5000+ and losing money and I can see this happening much more if I don't say or do anything...."
"I look forward to hearing back from you all. Your advice here is always golden."
Please understand, Tiffany that I am not giving you advice.
I would give this company the benefit of the doubt with their 'somewhat outlandish claims' and document your findings.
I would hold him/her accountable to explain your findings through dialogue and perhaps even an interview. There will be positive and negative found in your findings.
Reporting people and companies can get ugly and literally 'blow up' in your face. Remember MOBE VS. Wealthy Affiliate et al?
You, as becoming an authority figure in the new career path that you have chosen can have a much more 'outreach' effect on potential victims of online fraud as reported through your online presence.
I'm not sure that I am making complete sense to you, but I can honestly say that I can relate to your situation.
It's quite a feeling for someone like you (and me) just starting out, to already receive opportunities to look at and review other people's products and services.
Because of the value that you bring to your readers, you might be able to guide your readers into proper decisions.
Let me warn you of something though...
Most of the people that I have met and that I know who participate in the make money niche are for the most part compulsive gamblers. There is nothing I can do to change that.
Perhaps you can.
Thank you for sharing this very important post. More and more of us will be asked for our opinions and guidance as we grow.
Kindest regards to you, Tiffany.
Paul @PMindra.
Great points! I have seen some people who get into internet marketing with the same mentality as gamblers: they want to hit the jackpot and they're focused on the "chance" this could be it. Unfortunately, chance doesn't make most people successful, and I don't like to play into fooling those hopefuls. Some people do.
I have been leaning towards what you're saying: holding them accountable and telling them my findings. I know that path could be dangerous though.
Thanks for sharing your views. It's something to weigh out.
Pay attention to what Glen Palo has to say also.
Chance most usually results in yet another failed attempt. What intrigues me the most is the resilience of getting back after one failure to get involved in the next.
If people want to play with chance, they should within a budget that they can easily afford to lose. That is what is going to happen in most cases unless you are being studious here at WA.
Most people will not put in the effort required and hope that chance will one day pay off.
Have fun figuring this part of the human psyche out.
Whatever you decide to do, you will live with.
Try not to complicate or overlook the white around the black as most of these promoters want you to do.
Be safe.
Paul @PMindra.
Thanks! I definitely won't ignore any advice I'm given here. I'll use it to weigh out my decision about what I'll do.
As I said, Tiffany....be safe.
Sometimes, even our good intentions can lead to others' good intentions which may not necessarily be good.
Accountability is utmost when someone approaches you to do some heavy lifting for them.
What I think I am going to do with the enquiry that I have is to set up a siterubix website (instead of just a review) and let people chime in whenever they visit.
I.E. to say....provide all the information given to me in a manner that can be easily understood by the reader and then take back their input to move forward.
You will be all right. You are a very 'on the ball' person.
Best regards,
Paul @PMindra.
My two cents :-)
I'd discuss my findings with him, see how he responds. If he's willing to listen, adept and make changes to his program (and/or prizes), it could turn out fine.
If he goes in defensive mode and keeps things as is, you could tell him you feel obliged to report him. Then again, see how he responds. If he doesn't want to change a thing, it's up to you to report or not.
Personally I always do what I say/threaten I'll do, so I wouldn't talk about reporting him if I wasn't planning to go through with that.
From what I've read from you here in WA, I'm sure you'll handle this well. You know what you're talking about, you do your research and always state your case clearly. I'd say "I wish you wisdom" but you already have that, so I'll say "Use your wisdom" instead :-)
Awww! Thanks so much! I think that's where I was leaning. I definitely wouldn't threaten and not follow up--that would be a waste as you said.
The word 'Accountability' has crossed my mind a number of times over the last month. Mainly when I've been reading 'reviews' of sites that have been labelled as 'scams'. I ask myself how it is that these sites are able to exist, if they are so blatantly making claims that are not sustainable. Is there a body that 'polices' this type of thing ?
These types of sites quite often are expertly worded so that they have 'loopholes' should they become the object of investigation. Caveats in small print.
If you think it is a 'Ponzi' scheme, then the chances are, it probably is. If you have any doubts then maybe a conversation about your findings/opinion and see what they have to say.
It's a ponzi. I think they exist because there's no "global" police and many people take their failures in the programs personally so they don't report them to those who could do something about it. Thanks for sharing your views!
I think you've made a start by this post, Tiffany. Your question is not a simple one; where is the line drawn? Too much of online business promotion is questionable, but there are some very effective programs in both systems and teaching, and even the good ones often stray a little off the straight and narrow in how they present their offers.
I have my own thoughts and have blogged in the past to alert to the possibility of frustration, cost and disappointment. That said, I will not presume to advise on how you handle the issue. Each option comes with pros and cons.
Be honest. That's all you can do. You might want to let him know that he should market his templates as templates and not, do this exactly, as that's what creates the same site and same ads for everyone. They need to be customized so they differ from others.
I agree that costs should be disclosed to people before they shell out that kind of money for a program.
Have you reached out to them with your concerns? Maybe they have answers or a different point of view you haven't considered? Just a thought but worth a quick "hey" message.
It's like you're payng to learn how to be a salesperson of his. It's sad. I'll definitely take what you've said into consideration.
Follow your heart T! I have full confidence you will find a way to make a great impact and the world a better place
See more comments
Do you mean pyramid scheme?
A Ponzi is where money from new investors is used to pay existing ones.
Let me look that up. Hahaha. According to your definition, I guess it's a pyramid. It's not an MLM though. There's only one tier of commissions.
Ponzi schemes are where the owner accepts money and promises an ROI for investors - which is illegitimately achieved by 'robbing Peter to pay Paul'.
Pyramid schemes rely on recruitment and funds are rolled up - with cash often being 'gifted' between participants.
I just looked it up to make sure I'm using the right term. I see what you mean about the terms "investors", but essentially, that's what this is. It's not a "banking" product per se, but it is for "financial improvement". It's not a pyramid because it's only one tier of commissions.
In this case, he's sitting with money in nearly all of his videos and claiming he'll show you how to make money like this. He does the same thing with lifestyle.
He shows lambos, yachts, and things and says he can show you how to live that type of lifestyle. The course is supposed to be the "answer" and teach you to make the money, but instead, you wind up selling the course to make money.