Last week, the US Attorney for the District of Columbia filed suit against an autosurf program running in Florida called ASD Cash Generator. The Florida attorney general followed suit soon after, effectively putting the business out of business. Immediately, so called “members” cried out that the evil government shut down a legitimate, paying program, that hadn’t hurt anyone and was indeed helping thousands achieve financial independence. Nothing could be farther from the truth, shutting this scam down saved many people from eventually losing their contributions and will minimize the losses of the current customers. Autosurfs are a very weak attempt to make a simple ponzi scheme look like there is some value created, so called “advertising” although the ads run are not legitimate as advertising, and the “rebates” are, from a legal point of view, unregistered securities.

Die hard members are being encouraged by others to write letters to the authorities, telling them how much they have increased their business by advertising on the site, when, in fact, and the Secret Service documented this before moving in to raid ASD, said advertising was mostly for members to get new members to join under them, (ASD offered generous referral commissions) and less than 5% of the ads were for legitimate businesses. Secret Service agents called several of those, and according to court documents, even those few “real businesses” admitted that they were not counting on any increased sales, but the rebates were the underlying reason for their ad buys. Members who attempt to get their testimonials entered into the official record should use caution, it’s possible that somewhere down the line, in either civil or criminal proceedings, that they may have to back up those statements, showing records to prove what they have said, which I would think would be unlikely. The simple fact that ASD offered to “rebate” more than the initial cost of the “ad credits” makes it an unsustainable business and the law will regard the rebate structure as a classic ponzi, which of course it is. One promoter engaged me in a very lengthy explanation of how “ASD only paid out 50% per day so how could it be a ponzi?” Well, let’s look at that.

The marketers of ASD used this sleight of hand to confuse the hapless members, at first glance, that does make some sense, right? “We take in $10,000, we keep $5000, and we profit share the other $5000 minus some administrative expense”. Now, let’s look at it from an accounting point of view, which is more accurate. When a program takes in $10,000 in a day, with the promise of paying out 125% eventually, it creates a liability of $12,500. It keeps the same $5000. So, from the $10,000 it took in, it OWES its members $12,500, its stockholders $5000. Even assuming it pays its expenses from the “profit” it kept, the $5,000, that’s still $17,500 it needs to come up with to pay the bills. No matter what percentage a day it uses to pay expenses and members, the cold hard fact is it needs $17,500 out of the $10,000 it took in. Unless it has some business plan that produces this kind of return (and as a hint, no business in history has ever produced this kind of return for an extended period) it goes more into insolvency with every dollar it takes in, because even with no profit for itself, every dollar it receives costs it $1.25, and that’s not a good business model in anyone’s book.

Just because the money goes out at a slower rate than it comes in at 1% per day, they of course have 100 days before they’re sending you money that wasn’t what you sent them to begin with, does not make it a sustainable business. During the growth of a ponzi scheme it always looks great and everyone is getting paid, but the list of what is owed just gets bigger every dollar they take. That’s how a ponzi works. In this case, the US Attorney seized $53 million, but a quick look at the accounts shows that the members, in total, if they were to each get their 25% payout, were owed over $300 million. So even if the government just gave back all the money, no one would be anywhere near even.

So, where did the money go? A good chunk went to early members, you know, the ones who bragged in online investment forums how much they were making on this can’t miss, no risk scheme, got most of it. That was the only real advertising involved in the whole scheme, the “I got paid” cheerleaders are, unlike the ads on the rotator, very effective advertising. These guys spent as much time recruiting as surfing and for them it paid off, or at least they think so. More on that later…..