International Law

Ad Surf Daily Ponzi Calculations

Image by Raymond Yee via Flickr

Interesting debunking of the Ad Surf Daily ponzi;

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."

Now against this clear reasoning, we have from the Ad Surf Daily attorney's a proposed Compliance Plan.pdf

Here is what Ad Surf Daily wants the Court to do. Give its money back, or unfreeze it and then. "(1) All but $2 million of those funds will be placed in restricted Company accounts at one or more banks reasonably acceptable to the Government. The Company funds currently held in Antigua will be repatriated to the US and will be held subject to this provision. Further, the Company funds currently being held with Solid Trust Pay in Canada will be held subject to this provision. (2) None of the funds in restricted Company accounts will be available for use by the Company, and all such restricted funds will only be used in the manner and subject to the approvals provided for in the Plan. The restricted funds will be held in interest-bearing accounts. (3) The up to $2 million available for use in the Company's operations will be expended pursuant to a budget established by the Company and approved by the Monitor. No funds will be expended outside the terms of the budget approved by the Monitor without the consent of the Monitor." I see, give us $2 million so we can come up a new "business plan" and then give us access to the $90 million we have already scammed. Don't think that it is going to be a winner. Do you?

Full post as published by Misleading Advertising Law on September 17, 2008 (boomark / email).