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Crimes

This ‘Cashback Membership’ Was a Ponzi Fraud

October 22, 2019

by Howard Haykin

 

 

GREAT DEAL.    In exchange for a monthly fee of $125, “Saivian” Cashback Members (Investors) were entitled to a 20% cash rebate on their shopping purchases. All they had to do was submit point-of-sale (“POS”) receipts to Saivian, which sold those receipts to 3rd parties - to generate the needed revenue to cover its cashback payments to members.
 
Unfortunately, Saivian was a multimillion-dollar Ponzi and pyramid scheme.

 

 

According to the Securities and Exchange Commission (“SEC”), Saivian did not generate any revenue from the sale of POS receipts. Nor did it make any serious efforts to sell or otherwise monetize the data in its Cashback Members’ POS receipts. Instead, Saivian generated revenue almost exclusively from membership sales to Cashback Members themselves.

 

  • Like a classic Ponzi scheme, …, Saivian satisfied promised returns to some investors - in the form of 20% cashback on shopping purchases - through the investments of other investors rather than any underlying, legitimate, commercial activity.

 

  • Saivian was also a pyramid scheme that … required the constant influx of new investors to remain solvent. In order to keep the scheme afloat, the company urged Cashback Members to become “Affiliates” and sell Saivian Cashback Memberships to others – in exchange for additional substantial financial benefits.

 

PONZI SCHEME:  a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
 
PYRAMID SCHEME:  a form of investment (illegal in the US and elsewhere) in which each paying participant recruits 2 further participants, with returns being given to early participants using money contributed by later ones. Pyramid schemes are illegal when they " purport to sell a product, but they simply use the product to hide their pyramid structure."

 

Eventually, the fraud collapsed when Saivian could no longer afford the lavish lifestyle of its executives nor pay out cash rebates to all its members.

 

 

INVESTOR TAKE AWAYS.     As a rule, STEER CLEAR OF deals that promise to pay out 20¢ on the dollar - they're suspect. But if you're keen on investing, seek our a trusted individual for a 2nd, unbiased opinion - even if the deal seems relatively small. If and when the deal goes bad, you're likely headed for a huge headache.