March 28, 2021 – It happens routinely. You are browsing YouTube and an ad or flashy video pops up telling us they can help make your dreams come true. They have a way for you to work from home and make a six-figure income and all you have to do is click on the link for more information.
Everyone wants to be the best they can be and succeed at life, resulting in being financially independent. The desire and motivation for self-improvement is a healthy pursuit, but others can use it to lead you down the wrong path if you are follow the wrong people.
Many have lost thousands of dollars to “super affiliate marketing” or “multi-level marketing” (MLM) schemes or just the “accelerator” business classes sold by fake gurus. Let’s look at some recent articles that expose these scams and fake internet gurus.
The MLM Trap
Mindy Lilyquist has written an article called “Signs and Red Flags a Business is an MLM Scam“ explaining what an MLM is, and what are the signs you need to look for when trying to discern if a business is legit or not.
What Is MLM?
Multi-level marketing, sometimes referred to as pyramid selling or a pyramid scheme in some cases, is a marketing strategy aimed at selling products or services where a non-salaried workforce provides the revenue. Rather than selling products to consumers, the products are presented as a business opportunity that the purchasers would then sell to another group of people on the same premise, and so on. Relationship referrals and word-of-mouth marketing are a big part of MLM.
Before signing on the dotted line to start a home business with a direct sales company, make sure you can spot these 10 warning signs of an MLM scheme.
1. No or Low-Quality Product or Service
There are many red flags that should warn you away from a business or financial opportunity, but the biggest is a lack of a product. Programs that push recruiting over the sales of a product or service might be a pyramid scheme. If a company isn’t focused on acquiring more customers to buy its products, but rather it’s interested entirely in “building a team” or membership of sales reps, consider it a red flag.
The foundation of any good MLM business is about getting products and service to end consumers. While building a team can be a part of that, income is based on goods sold by the team, not in the recruiting itself.
2. Outrageous and Unfounded Product Claims
Wild claims is seen most in health and wellness companies in which reps boast that their products cure ailments or work miracles. Outlandish hype is a red flag in any industry, including direct sales.
A successful business is founded on quality products. If the company you’re considering joining has bizarre products or products that seem too good to be true, use caution. The last thing you want your name tied to is a faulty product or a product which is the focus of litigation.
3. High-Pressure Sales Tactics
The most common high-pressure tactic is the lure of getting in on the ground floor. But in direct sales, a good opportunity is a good opportunity no matter when you get in. In fact, you’re safer to go with a company that has been around for more than five years (the longer the better) than a start-up.
Any effort a representative makes to prevent you from studying the company, talking to others, or ‘sleeping on it’ isn’t someone you want to work with. – Mindy Linguist
Mindy claims that not all MLM businesses are bad. However, you must make certain you are doing your due diligence before getting involved or making any kind of personal investment. Other red flags are things like pressure to buy stock in the company, poor communication from the company, expensive training and “self improvement” courses you are required to pay for, deceptive advertising, a bad rating with the BBB and lack of a real employee vetting process or educational requirements for employment.
There are MLMs that have people who “recruit” others into the company. That recruiter then gets a “cut” of the commission that the people they bring in make when selling the products. They will then take you to a “seminar” where there will be motivational speakers telling you that all you need to do is work really hard and you can be as successful as they are. Typically you are sent home with some “training materials,” i.e. self-help books. These books will tell you that you just need to put the time in and work hard. They will give you positive affirmations like “if you put your mind to it, you can accomplish anything.”
You are then encouraged to buy a “starter pack” of the companies products and told to try to recruit others into the company. You might be asked to make a list of your friends and family and then be told to try to sell them the products or “bring them to a seminar.” At this point, you may start reaching out to your contacts and getting rejected. Your friends may begin to ignore you. You reach out to your “recruiter” and ask for advice. They tell you to start posting more pictures of the products on social media, and they might send you examples of their own posts.
At this point, you may become discouraged. You might start to notice that this friend that “recruited” you, doesn’t seem to really be living the lifestyle they portray on social media, nor do they seem to be making all the money that they claim they are on social media. You start to get discouraged and wonder, when do I actually earn some money from this?
See, these companies are able to get away without really having to pay wages to employees, nor do they pay for regular advertising. They use their “recruits” as distributors to advertise the products so they can try to sell them to earn a “commission” on the sales. These people might be working their tails off, and if they do sell a product they only get a commission on that sale, and not even the full price. Once people have already invested something like $500 on a product starter kit, and spent so much time reading the training materials, they want to recoup some of that cost and initial investment. If they see other people claim to be making $5,000 a week through doing this, they think “maybe just grind a little harder I can get to a point where I am at that level.”
Many times these companies have cult mentalities, encouraging distributors to “cut out negative people” from their lives. Those just happen to be the people telling them that they should be weary of the company and its claims. The company encourages distributors to be friends with each other, creating an isolating and echo chamber effect. This can make it hard for people to get out of the process, once they have joined. That is why these companies can be so damaging and dangerous.
Casey Bond of the Huffington Post published an article detailing people’s personal experiences of being exploited by these MLM scams.
Multi-level marketing companies, or MLMs as they’re commonly known, have been around since the days of Avon and Tupperware. Today, there are hundreds of companies that recruit consultants to sell everything from health products to cosmetics to clothing. But despite how the industry has evolved, one thing’s remained the same: They’re a nightmare for almost everyone involved.
MLMs all follow a pyramid structure in which the people at the top (known as uplines) make tons of money off the sales commissions of the people they’ve recruited to work underneath them (their downlines). In fact, these businesses rely heavily on recruiting new members, who are mostly women, targeting stay-at-home moms, military wives and others under the guise of financial empowerment.
Success rates are minuscule. It’s estimated between 73% and 99% of participants either don’t make any money or lose money. Some wise up and quit while they’re ahead. But thanks to the cult-like nature of MLMs, many remain convinced that they’ll be successful someday and relentlessly pursue friends, family and acquaintances with pitches for their products. Ultimately, these ‘huns,’ as they’re known, lose money, relationships and their dignity thanks to MLM companies.
‘Touting Female Empowerment’
‘I used to own a gym. I am also a full-time teacher and have two children, so I had a lot going on, to say the least. I was constantly stressed and overwhelmed. At that particular time, I had just moved from one building to another and my rent nearly doubled.’
‘A Beachbody coach, who was constantly posting about female empowerment, was a member of my gym for a couple of months. She eventually quit, which was fine, but she proceeded to use all of my correspondence to reach out to all of my female clients relentlessly via email and Facebook ― you name it ― to try and tell them they didn’t need me as a coach and they could just do Beachbody with her (I coach weightlifting ― NOT the same thing).
‘Fortunately, none of my clients actually left. But here I was, a woman with a full time job, kids, and the owner of an actual business, and this lady was touting female empowerment while trying to steal all my hard-earned clients.’ ―Laura
‘I joined Revital U ― which sells ‘smart coffee’ and CBD oil to help you sleep ― in June 2019 and have not yet made any money. Not a dime. I was hoping I would at least get back the amount I spent to join, which was $99, but that has not happened.
‘Everyone I sent a sample to since I started has not been interested. I know I’m supposed to keep in contact and send out emails, but that feels like borderline harassment to me. I did it a few times, but I know when someone just isn’t interested!
‘I have no idea how people are convinced they can get rich with this company. You would have to have thousands of repeat customers or a ton of ambassadors under you, which seems so sleazy to me.’ ―Bea
‘It Nearly Caused Me To Get Divorced’
‘LuLaRoe markets their products to customers like a garage sale ― you had better buy it when you see it, because it will be gone before you know! It’s addictive and creates a culture of ‘friends’ that you buy from. I’m not well off, but spent in excess of $5,000 to $8,000 over the last three to four years buying this shoddy clothing. I bought right into their BS story that I was helping a small business succeed.
‘My first purchase was a pair of leggings. They were really soft, and I was hooked. I bought items, won items, traded, sold and searched for my ‘unicorn’ skirt for weeks. I’ve spent so much time and money on LuLaRoe, it nearly caused me to get divorced.
‘I finally quit buying as of earlier this year, as the quality and sizing variability was just too much. Not to mention the wasted money, and the fact that you can’t return but only can exchange items, is overwhelming.’ ―Rachel
MLMs have torn through my small, rural and very poor community. I’ve seen friends, schoolmates, even my mother-in-law get sucked into these predatory companies because there are simply no opportunities for people in my community. – Casey Bond, Huffington Post
As Casey notes, these schemes target women primarily, taking advantage of people who are the most vulnerable, like mothers or stay-at-home moms who are desperately struggling for income. Even worse, they siphon money from people who often are broke, getting them to buy starter packs and training materials that will never generate any revenue for them. It’s kicking someone when they are down, and taking their last dollar all the while telling them that you love them and are empowering them.
Mashable reports that technically what they are doing isn’t illegal, but only because they are gaming the system and using loopholes:
Pyramid schemes are illegal, but multi-level marketing technically isn’t. Also called pyramid selling, network marketing, and referral marketing, participants typically buy product in bulk and then sell it individually to customers. Think companies like LuLaRoe, which sells clothing; Herbalife, which sells supplements; or Rodan + Fields, which sells skincare. Instead of a traditional retail store or site, customers can only buy products by going through ‘certified’ or ‘registered’ sales reps. In other words, you can only get your heinously patterned legging fix by buying directly from someone who had to buy them wholesale in hopes of shilling them to friends and family.
As the Federal Trade Commission reports, less than one percent of MLM participants make a profit. That’s right: More than 99 percent of participants lose money instead of making it. Most of these companies target vulnerable women like stay-at-home moms and military wives who don’t tend to be financially independent anyway. The 2011 report states that out of 350 MLMs analyzed, every single one was recruitment driven and top-weighted. Those at the top made the most profit ‘at the expense of a revolving door of recruits.’
‘This is after subtracting purchases they must make to qualify for commission and advancement of the scheme,’ the report continues. ‘To say nothing of minimal operating expenses for conducting and aggressive recruitment campaign — which (based on the compensation plans) is essential to get into the profit column.’
Spend money to make money? That sounds sketchy.
MLMs have been around for decades, but the universal adoption of social media has only fueled them. At the same time, they’re so widely hated that MLMs even have a subreddit dedicated to complaining about them. On r/antiMLM, Reddit users warn others of the toxic MLM ‘hustle’ and mock the ‘huns’ who get sucked into it.
When old acquaintances hit you up again after years of silence, it can mean one of two things: They genuinely want to rekindle your friendship, or they’re trying to sell you essential oils.
MLM huns often use a pre-written format to reach out to potential customers. Sometimes they flub it, like in this post from r/antiMLM. If the message you get seems a tad robotic, it’s probably only a matter of time before they launch into their pitch about working your own hours and being a small business owner. – Mashable
I’m from South Florida, where some people my age are at some point drug addled, desperate and don’t think twice about conning someone who was once a dear friend. I have gotten the “hey girl” and “hey hun” messages before, from girls I knew were drunks or druggies claiming that they have a great business opportunity for me. Thankfully I was always gainfully employed at real jobs, like law firms and these ‘offers’ never appealed to me. I did have friends who were suckered into these things though, so it can happen to anyone.
The Fake Guru Trap
Another trap that some millennials have fallen for is the online, internet guru. I can’t tell you how many of my friends fell for Tai Lopez and his business and financial “advice.” There are others, too. They purchase YouTube ads, and they will be dressed very flashy, or have a fancy car or boat in the foreground of the video. Then, with the camera held in the hands or on a gimble, they will look directly into the camera (so it feels like they are looking directly into your eyes) and give their pitch. They will often say something like “I just made $10k this month. Do you want to know how I did it? Would you believe it if I told you that you can become an entrepreneur, work from home and become your own boss!”
They make direct appeals to your desire to want to become more successful. They will then say “I can teach you exactly how I did it, step by step. Just sign up for my FREE course in X” (whatever they are selling, real estate investment, financial consulting, affiliate marketing, etc).
Before you know it, you are signed up for some course or “workshop” where you are given a spiel about how you can be making several thousand dollars a month if you purchase the rest of their “business accelerator” or “super affiliate marketing” course. You look at the prices, it might say “WAS $6000 but TODAY for a LIMITED TIME you can take this course for as LITTLE as $2,000” and they will then perhaps add in some comments about the “total overall value” of the course as being worth much more. You are made to feel as if you are getting a really good deal on the course. You are told you need to invest in yourself if you want to become the best you that you can become and so on.
One of these “gurus” is a man called Dan Lok. He always is dressed in fine pressed suits and flashy watches. Vancouver Sun recently reported on his failure to pay his rent on his home:
A wealthy entrepreneur is being sued in B.C. Supreme Court for allegedly failing to pay rent on a West Vancouver home.
Gary Richard Murray, the landlord of the house at 2929 Mathers Ave., claims in a petition that he is owed unpaid rent by Dan Lok, a financial guru who signed a one-year ‘fixed term’ lease to live in the home in 2019.
Lok agreed to pay $35,000 a month rent for the eight-bedroom home, which has an assessed value of more than $13 million.
Murray claims that in August 2019, Lok signed a one-year extension of the lease for 2020 at the same monthly rent, but that he terminated the lease in December 2019.
He says that in September 2019 he got notice of Lok’s intention to terminate the tenancy in December of that year and that his lawyer issued a written warning that failure to pay rent to the end of the extension agreement would result in him losing in excess of $420,000.
In October 2019, Lok and two other tenants, Desmond Soon and Jennie Li, alleged that the rental property had deficiencies which if unaddressed would result in the tenants terminating their tenancy agreement for cause.
On Jan. 1, 2020, the tenants failed to pay rent to the landlord pursuant to the fixed-term lease, says the petition.
Contacted on Monday, Lok, who claims on his company’s website to be a best-selling author and ‘the world’s #1 closing and influencer business strategist,’ said he was aware of the petition and had a lawyer handling the matter for him.
He said that it was ‘false’ of Murray to claim that he is owed rent, noting that he had ended the lease in December.
‘He’s just desperate, wants to get more money from me.’
He said he had ‘nothing to hide,’ welcomed the opportunity to take the case to court, and claimed that right after he left the home, Murray already had a lease signed for someone else. – Vancouver Sun
While this article is not conclusive evidence that Lok is a fake guru, it certainly doesn’t look good for a man who claims to be so successful.
One man claims to have lost $26,000 to Dan Lok’s programs, while another claimed to have lost over $50,000.
Coffeezilla has done a series documenting the problems with these fake gurus. He claims that Dan Lok pretty much runs a cult, at the very least a cult of personality.
Next we have Brian Rose of London Real. An entire website has been created, devoted to documenting Rose’s grifts called LondonRealScams.org. Brian had promised people he was going to sue Google, and that he was going to build a “Blockchain Digital Freedom Platform” and he raised hundreds of thousands of dollars. To this day, that platform has never been created. Brian is now running for mayor of London, and he continues to suppress negative comments on his videos and website.
Here you can see negative comments before Rose took them down. Rose has “London Real Academy” and also sells his “Business Accelerator” classes.
This video details the story of a student who lost $15,000 to London Real Academy and feels that they were scammed.
These are just two out of a plethora of complaints from the LondonRealScams.org website.
This Reddit user accuses Brian of being a scammer.
Brian Rose is getting so mauled by us on twitter that his Senior Digital Media Strategist CATHERINE CRAWLEY has been forced to step in and PRETEND TO BE A BRIAN VOLUNTEER to fend off the trolls. 😂😂🤣 #london mayor 2021 from gammasecretkings
People have been so upset with Brian and his grifts that there are posts like this all over reddit and Twitter.
I find this type of behavior despicable.
To be fair, there are some folks who claim to have benefited from these programs. However it appears that the negative reviews outweigh the good ones.
Then there is Tai Lopez.
Selling $5k packages is insane. Once again I must reiterate that it’s typically the most desperate and vulnerable who are taken in by these grifters.
Here is Tai in a 2008 matchmaking series.
Finally we look at John Crestani and his “Super Affiliate Marketing” program.
This graphic comes from his website.
Niall Doherty has written extensively about Crestani and his programs:
According to my research, John’s backstory includes a stint as a medical test student, getting kicked out of university due to a cheating scandal, and making lots of money online by selling pseudoscientific health products.
According to a video posted to his YouTube channel in 2017, he earns ‘roughly $5 million per year’ and would very much like to be your mentor…
(That video links to the promo webinar for his course, but I don’t think it’s worth your time)
More than 300,000 people have subscribed to John’s YouTube channel.
Selling other people’s products and collecting a commission is called affiliate marketing.
Affiliate marketing can be done with free or paid traffic, and you can use it to promote many different products.
Based on my research, it seems that one of the primary teachings inside SAS is how to promote the course itself with paid traffic from Facebook ads.
As detailed below, I’ve seen so many red flags with this program that it seems foolish to invest any significant time or money in it.
Strictly speaking, I don’t consider Super Affiliate System to be a pyramid scheme, since students are free to promote whatever products they like.
However, it seems to me that many of the ‘success stories’ John Crestani shows from his Super Affiliate System are students recruiting other students to buy the same training. – Niall Doherty
Niall has documented some pretty sketchy things about Crestani and has questioned if the SAS program is a pyramid scheme.
This is a “coupon code” for the six-week SAS program. Remember what I told you earlier about how this makes it appear like you are getting an incredible deal?
Crestani also has a lot of outdated testimonials on his website and it appears most of his students are only earning profits from selling his courses, etc.
Hopefully people will do their research before getting involved in a multilevel marketing business or being persuaded by any internet gurus. Often they are hiding things from their audiences and customers and engaging in shady business practices. If it sounds too good to be true, like these exaggerated income claims, then it probably is. Most likely you are the product or mark. I want to stress that internet gurus may have some value — they offer something — just not what they are claiming. While some people may have gotten something positive from it, that is certainly not the case with the majority of the participants. Use your discernment and make sure you do your due diligence before committing any of these courses. I have done the Masterclass courses, and they are not scams so I highly recommend those for people who are interested in online courses.
Do not ever let anyone take advantage of you. There are honest opportunities available and real ways to improve your life without inviting a scammer or grifter to take the last of your money.