Suspect web scheme complains of fraud

, posted: 2-Jan-2003 21:12

(Originally published in the NZ Herald Tuesday October 22, 2002)

Cashevolution, a scheme offering "financial freedom" via the internet, was hit last week by large-scale credit card fraud.

As reported in the Herald a week ago, Auckland-based Cashevolution is listed on the Ministry of Consumer Affairs' Scam Watch website and has been warned by the Commerce Commision that it may be an illegal pyramid selling scheme.

But in an ironic twist, Cashevolution systems administrator Barry Murphy posted a message on Thursday to the New Zealand Network Operators' Group (NZNOG) mailing list, asking for help in tracing a credit card fraudster. The NZNOG mailing list is normally frequented by internet service provider and telco staff, discussing operational issues concerning New Zealand and Asia-Pacific networks.

Murphy said the person "has used over 200 credit card numbers and many have been successful".

He says the fraudster connected from systems in Mexico and used a Yahoo email account with the credit card numbers on the Cashevolution website. But the request for help did not exactly fall on sympathetic ears. Some mailing list members were openly hostile to  Murphy.

One list subscriber wrote: "Let me put it in simple terms. Many of the people on this list have to do a significant amount of extra work to try and combat spamming rip-off artists. As such, you will find very little sympathy and certainly very little help from this group."

The New Zealand Bankers' Organisation advises merchants who suspect credit card fraud to immediately contact the issuing banks and the police. It says that going through the fraudster's internet provider would not be much help.

"Do you want financial freedom? Welcome to Cashevolution, where we give you the means to control your financial destiny."

Siren songs like this, aimed at the unsophisticated and unwary who flock to the internet in increasing numbers, are a common ploy for pyramid scheme operators overseas.

But this time it's Auckland-based that's playing the Pied Piper's tune.

The Cashevolution scheme run by directors Craige Mayo and David McQuoid started on the internet in May this year. Mayo says the scheme "was created to help ordinary and unsophisticated people to understand business".

Inspired and "deeply moved" by an episode of the Oprah Winfrey chat show about many people in the United States living below the poverty line, Mayo says he and McQuoid have a "philanthropic vision" for

They "wanted to create a programme that would not only provide the means to create extra income, but to retain it". But the Commerce Commission, which is investigating the scheme, has found little evidence of philanthropy.

In July, chief adviser Janet Whiteside said it breached three sections of the Fair Trading Act - those dealing with "referral selling, misrepresenting certain business activities such as those carried on from a person's home, and pyramid selling".

Whiteside's emailed opinion is now circulated on the internet.

Mayo says the message "has created controversy" but "it is not an accurate account". However, he acknowledges the commission has issued a notice that Cashevolution may be at risk of breaching the Fair Trading Act.

Mayo says the website was rewritten in response to the warning, but since August 8 the scheme has been listed by the Ministry of Consumer Affairs on the pyramid selling section of its scam watch website.

Mayo insists that is "a viable network marketing company, and not a pyramid scheme, that offers a valuable product to the market". The product it sells is a "subscription to education", says Mayo.

Asked if the Commerce Commission warning is damaging for the scheme's credibility, Mayo says no action has been taken since the warning was issued in July, and he believes that Cashevolution is "compliant with the Fair Trading Act".

Mayo says Cashevolution has 50,000 members worldwide, with 600 in New Zealand. Each member pays a US$25 (52.30) joining fee with a monthly subscription of US$25 on top. Asked what you will get for the money, Mayo says "education" and "investment modules" - as the previously promised Desktop Companion software has now been "put on hold".

Also, Cashevolution "will provide members with access to third parties who are licensed to sell investments" in the future. To make money from the scheme you have to start recruiting others into it. The "realistic US$1500 ($3138) a month" that the website says it is possible to earn from the Cashevolution scheme requires at least 155 other regular subscribers to be recruited.

Commission earned from recruiting new members is paid via a debit card issued by The Loyal Bank located in St Vincent and the Grenadines in the Caribbean. With 50,000 members paying regular monthly subscription fees, Cashevolution may have brought in around US$7.5 million ($15.75 million) - a staggering amount, considering the scheme has run for only about five months.

Mayo says Cashevolution pays "100 per cent commission". Asked to explain what this means, he says the scheme sees only 5 per cent of the membership fees. The rest is returned to members.

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