Re: StockGeneration story in Wired

From: hal@finney.org
Date: Thu Aug 10 2000 - 12:24:56 MDT


Alex Heard of Wired magazine writes:
> I just wanted to let you know that the story will be out in the
> September issue, and it's a pretty amazing exposť of how a
> Net-powered pyramid scheme -- apparently run by a mysterious Russian
> fugitive through offshore servers in Dominica -- attracted nearly
> 275,000 players worldwide. The person whose message on this list
> originally caught my eye -- Rick Potvin -- is now convinced that SG
> is a scam, too.

I followed some of those Ponzi schemes for a few months early this year
after they were described here. StockGeneration did crash around March
or April, devaluing everyone's "stock" but then trying once again to
drum up business for people to get in and take advantage of the new low,
low prices. Other schemes with names like DigitalStocks and EMutualFun
have stepped in to offer alternatives.

The basic idea of all of these is you buy a "virtual stock" (for real
money) which is more or less guaranteed to go up in value. The way
they achieve this is by using the money from later investors to pay off
those who want to withdraw early. They hope that most people will be
satisfied with paper profits and stay in the game long enough to bring
in more suckers by telling tales of riches.

That's the really sad part of all of this; there is a multi-level
marketing angle by which you bring people into the game via referrals,
and get bonuses as a result. Plus, most investors realize that the only
hope they have of seeing real money is if they can get more people to
come in. So the players find themselves essentially forced to become
hucksters for the games. Even if they come to realize that the games
are essentially fraudulent, the only hope they have to get their money
out is to suck in more people.

There were a number of sad posts on the Delphi message boards where the
players congregate in which people turned against the games and admitted
that their previous postings, full of glowing hucksterism, were fraudulent
and only motivated to try to raise interest in the games. In some cases
players admitted to having misled potential investors with stories of
how much money they had made and successfully withdrawn from the game.
Once they realized that no amount of promotion was going to work, they
gave up and came clean.

I was especially disappointed by the posts here by Frederick Mann,
a well known "freedom entrepreneur". By promoting these Ponzi schemes
(especially on his bigbooster.com web site) he is essentially enriching
himself at the cost of those he suckers in to feed his downline. Even as
one game after another collapses, he continues to try to draw people in.
Presently he is promoting DigitalStocks, as StockGeneration has fallen
off his radar, conveniently forgotten. He has very little credibility
in my book.

Hal



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