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MLM Company with Banking Issues

Posted: Sat Jun 21, 2014 4:17 am
by GlimDropper
I'm trying to suss something out about a MLM start up I'm forming a worse than typical impression about. Yesterday word came out that their existing bank accounts were being closed and not at their request. I guess this post is more or less a pressure test to see if their explanation holds water. I'm leaving the company name out of this in case my impressions might be ill considered.

Here is an [edited] email the company sent out yesterday:

Dear Valued [affiliates]:

First and foremost, we would like to apologize if you are experiencing an unexpected payment issue. We were notified by our bank that there was fraudulent activity happening to our account, and as a result we were forced to close the account immediately to control the situation. Unfortunately, that unforeseen closure will affect all un-cashed checks issued prior to June 6, 2014.

In brief, all future checks will be issued from a new account; further, we anticipate that our [company name] direct deposit Visa cards will be available to all [affiliates] within the next 30 days (once the API coding is completed for all systems).

We ask you to please only contact [company name] Support if you have checks from [company] that you have not yet cashed (issued prior to June 6) or if you have accrued any overdraft fees, which we will reimburse immediately when presented with relevant bank statements.

Again, we sincerely apologize and thank you for your understanding and patience. We are working to settle this unanticipated issue promptly, and will let you know immediately when it is resolved.

With our gratitude,

Your [company] Headquarters Team

In a video released today mention was made of "tens of thousands dollars worth of counterfeit checks" that had been drawn against their account as the reason for their bank booting them.

Some salients:

    *The company is only a few months old.
    *Their now former banking partner is a very large international bank. The MLM company has confirmed that they weren't given the option of closing the existing accounts and opening new accounts with the same bank.
    *This MLM company's primary product is arguably, ~somewhat~ legally ambiguous on a federal and many state levels (from a DEA perspective). There are lingering legal technicalities for national banking chains maintaining accounts for businesses who's products are legal under local state laws but illegal under federal law.

Anyone who has been following this company will know who I am talking about but I am taking the precaution of leaving their name out of this until a premise can be explored. That premise is, if "tens of thousands" of dollars in company checks were in fact counterfeited that would also mean that tens of thousands of dollars in (well known bank) checks were counterfeited. I would suppose the bank would be far more concerned with the second part of that previous sentence than the first part. Unless they had a specific reason to do otherwise.

I have been watching this company for months and am less than impressed with their ethics or honesty. Even given the standards of the industry as a whole, these people seem like moral midgets to me. But my question is, how likely is their story for getting booted from their bank to be factual. They are other than honest in several ways (MLM, duh) but where does a bank's liability for check fraud end and the company those fraudulent checks were written against begin?

Re: MLM Company with Banking Issues

Posted: Sat Jun 21, 2014 5:46 am
by notorial dissent
GD, my gut feeling, and based on years in the industry are that your suspicions are dead on the mark.

While it is possible that there could be counterfeit checks out there, a lot of them seems really unlikely, particularly since it is a new company and a new account, and if there are they have a whole other realm of problems that make them even less sound. Normally if there is an issue like that the bank will close the affected account and open a new one, the fact that they didn’t indicates to me that the reason given, by the company, was not the real reason for closure.

What I suspect happened is that either someone in compliance got to reviewing new accounts, which is a very common occurrence, particularly with high dollar ones, or else someone complained, and they looked in to the company further and risk management decided this was a bad idea and shut them down and told them to take their business elsewhere. Either way, something didn’t look right and they decided that the better choice was to part company with your MLM.

What you are beating around the bush at is basically what I suspect is a grow op or related business, all of which are federally bad news, and in pretty much the same boat for most states, and that alone would be enough for the bank to say buh bye.

I also seriously doubt that the company was ever going to get to set up debit cards, that takes a lot of money, and US banks are getting real leery of that due to money laundering laws these days. Basically, I think they were just shining their suckers affiliates on that one.

The magic eight ball says, "this is not a good bet".

Re: MLM Company with Banking Issues

Posted: Sat Jun 21, 2014 9:10 am
by Kestrel
Greedy scam artist company rep falls for Phishing emails and releases company banking information to Nigerian fraudsters. Or something like that. You think? What goes around comes around. And, as usual in an MLM, it's the affiliates who take it in the shorts. What the Nigerians didn't take the scam artist organizers will.

So after operating bank account gets wiped out, the company sent out this email on June 19th, saying checks issued to affiliates prior to June 6th would bounce. That gives a big suggestion that checks issued to affiliates on the 6th and later were OK. Assuming they issued ANY checks to affiliates on or after the 6th...

For some reason I have my doubts about that. And I have a sneaking suspicion that checks issued on or after the 6th were only to their inside players.

Well, it IS an MLM, after all. The affiliates were going to lose their money. It just happened a little faster than usual this time.

Re: MLM Company with Banking Issues

Posted: Sun Jun 22, 2014 1:02 pm
by rogfulton
I wonder if perhaps the company told the bank that checks to affiliates were counterfeited and the affliates showed documentation that they had requested the payment?

Re: MLM Company with Banking Issues

Posted: Sun Jun 22, 2014 7:53 pm
by Lambkin
GlimDropper wrote:I'm trying to suss something out about a MLM start up I'm forming a worse than typical impression about.

I would describe my impression of this MLM scheme as entirely typical (ie, it's a scam starting to come unglued).

Re: MLM Company with Banking Issues

Posted: Mon Jun 23, 2014 4:08 am
by GlimDropper
Since it would appear that my suspicions about their banking issues are not completely unfounded I feel safe in providing some background info. The company is the recently launched Kannaway [Video with more spin on the banking issues] and there is some room to be interested in their primary product line. When discussing Marijuana pretty much everyone knows what THC is, it's the cannabinoid substance which has inspired some of the best and worst music of the last hundred years. But far fewer people know about CBD (Cannabidiol). CBD is another cannabinoid and there is a growing body of evidence that some of the perceived medical benefits of marijuana are due to CBD and CBD does not get you high. One particular health claim is CBD's effectiveness in certain seizure disorders what don't respond favorably to more established anti-seizure medications. (One of the better sources of information on CBD)

I imagine CBD related products are a genuine growth sector but there is just one teensy little problem to be faced, The DEA considers CBD to be a schedule 1 drug (control code number 7372). Now it's fairly difficult to exaggerate how stupid I think this is, the definition of a schedule 1 drug is:

Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse. Schedule I drugs are the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.

CBD, does not get you high so it's hard to argue the abuse potential and it's even harder to pretend there is no medical use potential when PubMed lists more than 1,200 articles about it. Yet I guess what I'm asking for is our nations drug policy to make sense and about the best thing I can say about banging your head against a wall, hour after hour, day after day is that when you eventually do stop, it feels so damn good (at least by comparison). Let's hope it stops soon.

OK, that's the good thing I can say about Kannaway and it's products even if they may sorta be illegal. I will say more than one company are selling CBD products nation wide and so far no one has gotten busted for doing so. One technicality that HempMedsPx (Kannaway's product supplier) has been claiming is that all of their CBD is derived from industrial hemp and there is a appeals case which decided that the DEA could not prevent Dr. Bronners' soap company from selling hemp oil soap even if it did have more than zero (but less than useable) levels of THC. I posted the appeals ruling, I'm not a lawyer. It ~seems to me~ that it ruled that an otherwise valid product with ever so slightly higher than zero levels of a schedule one substance was not in the DEA's jurisdiction. The difference between that and this is, while the CBD Rich Hemp Oil™ is derived from legal hemp, it is not claiming to be so low in schedule 1 substance content so as to have no affect, it's claiming to have concentrated the schedule 1 substance content high enough to purportedly have an effect. As they say on Sesame Street "one of these things is not like the other."

Be that as it may.

The people behind Kannaway and HempMedsPx sure are an interesting sort. Two recent Forbes articles provide some of the flavor here. We have an interlinking group of pink sheet stock companies who's primary economic activity is passing shares in between themselves, a former CEO (and majority share holder of MJNA, Michael Llamas) facing fraud charges from his recent past and Cannavest CEO Michael Mona who's living proof that being too shady for the Nevada Gaming Commission to grant you a casino license is no bar to keep you from running a publicly traded (pink sheet) company.

There is dirt here and people are getting ripped off and that's even before we get to the MLM company.

As to Kannaway, they're providing me with a continuing education on modern MLM companies. It is just ever so very stupid to run a text book pyramid scheme when the law almost allows you to get the same results with just a few precautions. NEVER pay for recruiting, that's just so 15 years ago. What you do is make absolutely no distinction between retail sales and affiliate purchases and incentiveize the living hell hell out first month purchases. You really do not need to pay people for the act of recruiting when you couple daily "Opportunity Presentations" on YouTube (pep rallies) with mega fat commissions on the first months product sales to new affiliates. It goes without saying that you don't really need to waste time with pesky things like customers when the sweet spot in the pay plan calls for $1K+ affiliate buy ins.

The good thing here is that Kannaway is self destructive and counterproductive on more than one level and may possibly have already hit their sell by date. Look at the number of video views on their official YouTube Channel, look at their Google Trends stats for how frequently their company name is used as a search term. Their key flaw, besides the over greedy MLM comp plan is product value. They may have made more effort to publicize the commercial properties of CBD than anyone else to date but in doing so anyone who bothered to comparison shop would find they could get far more CBD for much less money if they bought from any of a growing number of competitors.

Kannaway fell into their own trap, the MLM trap. MLM's do not sell products, they sell dreams. Dreams of easy wealth, dreams of being able to live off the (residual) efforts of others. What they forgot (and keep forgetting) is that even if (hell, especially if) their products have value, someone or many someones can bring it to market far cheaper when all they are selling is that product without also having to pay for residual dreams.

Re: MLM Company with Banking Issues

Posted: Mon Jun 23, 2014 5:58 am
by notorial dissent
Kannaway's "may sorta be illegal" product/product line, as you put it, is not just a problem, it is THE PROBLEM here.

I'm not going to get in to the whole "weed" issue, since it has already been done to death in my opinion, and I do know about Cannabidiol and they do seem to think there is some very good medical use for it, and I am aware of several people using it to treat seizure and other types of disorders. Doesn't make it any less Federally illegal.

However,..... it is still just as illegal, technically or otherwise, as weed, and therein as they say lies the rub.

Somewhere buried in the mountains of banking law are provisions barring banks/financial institutions from having ANY commerce with a grow related op, if it touches marijuana it is an illicit business as far as the law is concerned. As far as the Feds and the banking laws are concerned it is STILL an illegal operation, subject to serious sanctions, specifically to the banks. It means they are legally prohibited from doing ANY kind of business with a grow op/etc. In other words, NO loans, accounts-checking or otherwise, debit cards, credit cards, or even free bank calendars. Get the picture??

Now I won't argue that the MLM may have or may not have tried to stiff their affiliates and enrich the insiders, like we all know that never happens, but more likely, in fact almost certainly, somehow or other the bank figured out who or what they were doing business with and risk management after having had a collective heart attack and several large bovinae in succession started closing accounts and telling them to go away and not darken their doors ever again. The point here, is that they are going to get the same reception at any US bank they go to right now, there are going to be NO accounts checking or otherwise, or debit cards despite what the company has been promising.

As gray areas go, this one is so gray as to be scary, or should be, right now with regard to the law.