Dear Investor Juan,
I wanted to post this on your blog but I keep getting blocked by the internet here in China.
My sisters got invited to join Global Fusion. They want to join and emailed me the following:
"We met our friend JANE* by chance. I know it might sound pretty shady, but she's part of a networking company known as Global Fusion. She introduced us to her mentors who turned out to be multi millionaires (legitimately, we saw photocopies of the documents and everything). She told us that she joined because she wanted to give her dad a car because he's old na, and she wanted to spoil him in his last years. She pawned her earrings pa for it and borrowed money from friends to join. But in the end, she was able to get them back within a week. She now uses the money for currency trading or stock trading. I don't remember. The millionnaires actually explained how it works, and theoretically, it works. The thing is, it also pays off in reality, every week. We honestly think this would be a good investment. No risk, high return. They're hoping to get us because of our UP Diliman connections, which they were planning to expand into. Jane also got to go to an Asian cruise for free, with pocket money pa. Also, she's going to be part of the European cruise in 4 months. So, please think of this as an investment. We even visited their office across the street in Maddison square. We were hoping you'd allow us to join. We were hoping we could borrow some money. We're not stupid enough to do it if we weren't sure about it's credibility/legitimacy. Around 4 friends have joined na. it would cost around 26k for 3 heads, or 8,900 for one, but that's all we have to pay because the rest will be through networking. The mentors said they'd train and help us, so our money is pretty much secured."
(*Not the name stated in the letter.)
From what I gather they get paid for networking (perhaps they get a portion of the sign up funds from other people who sign up?) although I can't tell for sure. I tried researching BFAD/DOH for their products but couldn't find anything. I checked SEC and PSE but could not find it in any of the listed companies. I can't find their articles of incorporation or any of their financial statements for that matter. I've been trying very hard to discourage my sisters but they refuse to believe me. This is why I must ask, am I doing something wrong? Perhaps I am looking in the wrong direction? If so, what should I be searching for? I'm sorry to have to disturb you with this but my internet access is extremely limited here and Google is suspended every now and then. This just strikes me as something very similar to a pyramid scam and I don't want my sisters involved (and to report it if it is).
I'd very much appreciate your help in this matter if only to point me in the right direction.
Thank you!
Bert
Dear Bert,
As I've mentioned several times in this blog before, my initial reaction whenever the words "networking" and "multilevel marketing" or "MLM" get mentioned is skepticism, rooted in the possibility that what's being discussed may just be another Ponzi scam right off the mill. Typical apprehensions about these kinds of schemes has been well articulated by one of our readers:
"I think MLM is a valid business model; it can work well as long as what is being sold is the product and not the 'recruitment'. A lot of people are joining this primarily because of big referral incentives, which give it a very bad image. A lot of MLM-based companies also just 'front' with bad products to pass off the business as legitimate. I've been part of an MLM-based organization once, and I've earned pretty well, as I strongly believed in the product and did direct selling (of the product)."
The reader describes one way to earn big in MLM: to be a good, hardworking, and effective salesperson. A legit MLM organization would have a product or service that meets the needs or wants of its market, whereas a pure Ponzi or pyramiding scam would only offer the promise of high returns for new recruits. Since all MLM organizations fall anywhere between these two extremes, it is important for any potential "partner" to figure out what he or she is expected to sell in return for the promised riches.
Regardless of whether one is hardworking or not, regardless of whether the organization is legit or not, a sure way to earn big in MLM is to join early enough. This is why we should all believe the testimonials of the nouveau riche that these MLM organizations parade in front of potential recruits: these are the people who were able to board before the train left the station, be it by luck or connection or divine intervention. And that is where the trouble lies: eventually, this thing gets big enough that people who got in last will be left holding their ____ in their hands as the supply of greater fools eventually runs out. It's impossible to figure out exactly when this will happen; the only thing we can be sure of is that it will.
I don't think we have sufficient information to be able to come up with an unassailable conclusion about the legitimacy of Global Fusion. So we would have to make do with what we have:
- Googling "global fusion scam" will lead you to this video. In case you can't watch it from where you are, here's the gist of it. The video is from the ABS-CBN's XXX program from February of last year. It discusses allegations that Global Fusion's glutathione product has not been approved by BFAD and contains an insufficient amount of glutathione; both allegations have been verified as true by the program.
- Tell your sisters that the venture can't be a "no risk, high return" proposition because no such thing exists. If it truly were no risk-high return, why would the owners of Global Fusion share their gold mine with the public? Out of the goodness of their heart? If there is really no risk, if making money really were as easy as that, then Global Fusion will have already solved the world's problems.
- On the contrary, MLM involves the transfer of risk from the founders of the venture and early participants to latecomers; not only do the people at the bottom of the pyramid bear a bulk of the total risk, but their risk also increases proportionately as the network becomes bigger. And if they do decide to join, it's more likely that you sisters would be coming in at the bottom rather than at the top.
Based on the red flags, it's my opinion that Global Fusion leans towards the Ponzi end of the extreme too much for comfort. But that's just me.