'Members only': Lyoness explains its own pyramid scheme

The Complaint Centre has earlier reported that Lyoness seems to have resorted to the desperate technique of blaming their (rogue) distributors for everything that is wrong with the 'company'. Naturally, this is pure nonsense, for everything the distributors peddle are the systems developed by Freidl and his friends, as well as the propaganda material they have designed to peddle it to the masses. No matter who narrates the internal, 'members only' videos that feature (part of) official Lyoness presentations, the content of the slides remains the exclusive intellectual property of Lyoness - making the founders and owners fully responsible for the illegal swindle promoted in these videos. And let's not forget: it was Hubert Freidl himself who instructed his followers that Lyoness is all about 'positions, positions, positions, positions'.

Although the sophisticated, high-end marketing firms and video production companies hired by Lyoness to construct their propaganda material have managed to make the scam appear less obvious to casual observers and to take the sharp edges of the explanation of the fraud (contrary to the amateurish narration and production of the distributor-made propaganda videos featured on this Blog earlier) - the scam does remain obvious to anyone who has taken the time to read about how Lyoness has tried to dissimulate and disguise its 'closed-market swindle'.

This video is what reportedly gets shown to every new member of Lyoness, to explain them about 'the extended benefits' of the Lyoness system (which they falsely claim have been certified by TÜV Rheinland). This video does not contain any form of distributor narration, and the content of it can therefore only be attributed to Lyoness (that is, Freidl and his friends), and to no-one else.

The video below is the fourth and final part of the video, which we have embedded to show you how the 'position system' - i.e. 'the core business', the pyramid scheme - of Lyoness functions according to Lyoness, and how 'making money' with Lyoness is dependent on 'positions, positions, positions, positions', thus the recruitment of new members, who also want to become premium members by putting in down-payments of at least 1,800 GBP, 2000 euros, 3000 CHF/USD, etc.

For the people who are interested in seeing how Lyoness deceives and manipulates people into believing joining this pyramid scheme is actually a good idea, and a decision they made themselves, based on the available 'evidence', and as a truly and completely 'free choice' (an essential attribute of 'blame-the-victim' scams), we recommend watching the entire video. The video is split up into four parts, which are available on Youtube through the following links:

Part 1: http://www.youtube.com/watch?v=BQcBskVME94
Part 2: http://www.youtube.com/watch?v=axgM44KvYeQ
Part 3: http://www.youtube.com/watch?v=tKxDfQ7cG8U
Part 4: http://www.youtube.com/watch?v=R4uDhVMRQ-Q

Note the beautiful opening quote, which has of course nothing to do with a 'shopping community', let alone with all the scams Lyoness has been peddling to the world, but has deviously been designed (and combined with images of according events in people's lives) to program the minds of the people who view it:

"Happiness, it's so wonderful. Friendship, someone you can trust. Love, it's the ultimate."

Lyoness: you were scammed, but not by us

*For more information about whether Lyoness is a scam, also see our recent FAQ post: 'Is Lyoness a scam?'

Readers of this Blog will be well aware that Lyoness is collapsing as we speak. More and more parts of the pernicious scam are revealed to the general public and prosecutors and authorities in various countries have started investigating Lyoness, with the inevitable conclusion that Lyoness and its instigators (and possibly some of its core-adherents) have been operating a series of blatant scams, hidden behind an effectively valueless discount card.

Recent findings have shown that Lyoness members have been taught to lie and deceive, in order to peddle a pyramid scheme based on down-payments on redundant gift cards, apparently issued by Lyoness' major partner companies (who often have not got the faintest idea what Lyoness is and that they are listed as a Lyoness partner), as well as a series of related scams, such as investment schemes revolving around the advertising campaigns in certain countries in which Lyoness operates. It also became known that effectively no-one other than the Lyoness instigators and an extremely select group of core-adherents has made any money off of peddling this racket to new victims, and that Austrian courts have begun to demand that Lyoness reimburses disenchanted investors - particularly those who invested in the risk-free (yet also prospectus-free) advertising campaign investment schemes.

Traditional media - mainly in the countries where Lyoness originated - have increased their attention for the subject, featuring relatively thorough exposes of Lyoness on public television and in major print sources. Additionally, victims seem to be gathering. Recent notable examples are the 300 Australian victims that demand retribution from Lyoness (and a few related court cases over there) and the list of victims that have approached Plattform-Lyoness and/or attorney Eric Breiteneder (who is currently representing about 300 Lyoness victims, as well as the Austrian Consumer Union, which is also suing Lyoness) in Austria. As said, Breiteneder has won several cases against Lyoness, in which the fraudsters were forced to reimburse their investors. Additionally, an increasing amount of prosecutors and authorities are concerned with the fraud Lyoness has been spreading over the entire globe. Also, several former managing directors of Lyoness have turned against the 'company'.

Combined with the exponential growth of the amount of holes that are shot in Lyoness' fraudulent fairy tales, by an increasing amount of sources, including Wikipedia, Lyoness is running out of options to defend its 'company'. Where in earlier stages, Lyoness and its instigators immediately sought publicity to claim that their 'company' is a legitimate shopping community, which innocently offers discounts to shoppers and increases the sales for small and medium-sized enterprises, as soon as any allegation would pop up in the public domain, Lyoness now effectively has only three things left to do. Firstly, Lyoness uses every opportunity it gets to obstruct justice, both by complicating legal procedures and by sheltering the public from any form of criticism (i.e. the truth) publicly available about Lyoness. Secondly, by starting follow-up scams, seemingly unrelated to Lyoness, yet frighteningly similar to the fraud operated by Freidl and his friends and enrolling (former) Lyoness victims into these new scams.

The third one is the ultimate sign of a collapsing fraud. Lyoness is now publicly no longer refuting the idea that anyone involved in Lyoness has been scammed out of their money, but instead admits that this may have happened, followed by the immediate incriminating claim that rogue distributors are responsible for these damages - not Lyoness or its instigators.

Plattform-Lyoness has published (parts of) legal documents in which Freidl himself talks about Lyoness and issues the following, somewhat remarkable quotes:

Freidl: "Throughout the last year (2012) for example, there have been just 30 to 35 people who have demanded their money back and for which we have made ​​ex gratia solutions." Exp: "So you think that there are 30 to 35 people who wanted their deposit back?" Freidl: "Exactly. And for which we have found a  solution. And we fixed it." Exp: "Why did they get their deposit back?" Freidl: "Because they were wrongly advised. Or misunderstood it." 

Exp: "How does one misunderstand a deposit?" Freidl: "Someone must have told him nonsense. That is why we are sitting here. Simply because someone told nonsense. And just to the act against everything we have now standardized in the last few years, the entire communication." Exp: "What was this nonsense? Concretize the time." Freidl: "People may be mistakenly informed that they have invested in Lyoness. You cannot invest here. We are aimed at consumers. If a customer makes his down-payment because he thinks he makes an investment, it must have been due to wrong advice and for these cases we have always found a solution."

And:

"The vast number of Austrian Lyoness customers, namely around 95-96 percent, are shoppers, interested  only in price discounts on their own purchases. These customers use Lyoness often for many years to buy many products cheaper, and can, without paying and if they are interested, recommend our system to other customers. Concerning the possibility to make down-payments on vouchers, of which you say it is our true core business (selling payments on future purchases) - this is incorrect. The typical member of the Lyoness shopping community is not interested in building a sales team by recruiting new members, to gain a steady income. Our members are not obliged to recruit new members. 

Our business model has therefore - unlike is suggested - nothing to do with continuously acquiring new clients, who make these payments. We register all complaints and take due consideration of possible sources of error, as confirmed by our certification from TÜV Rheinland Cert GmbH and Quality Austria, who have independently tested our systems. These testing organizations noted, moreover, that we meet the requirements of certification according to ISO 9001:2008. ISO 9001 is an international standard that sets minimum standards to which the processes in a company need to live up. This is to ensure that customers receive the expected quality. At the same time, the management system should be subject to a process of continuous improvement. 

If the "Business Package" and our "campaigns" have been falsely presented by individual Lyoness members, that is not attributable to us. We have, as stated above, constantly tried to improve  the internal processes, presentation documents, seminar content, etc. Because of our size alone (the Lyoness shopping community counts now about 1.8 million members) we are limited in preventing at all times that individual members (without our knowledge and without our involvement ) are misinforming our new members, and abusing our information documents to do so. Contrary to the claims of the prosecutor, this has nothing to do with us deliberately designing our system in such a way that we could deceive our members."

This is of course nothing more than more of the same bullshit that was spread for years by the Lyoness racketeers. Although core-adherents may bear part of the (legal) responsibility for peddling the Lyoness fraud around the globe, the series of scams was thought out and executed according to a meticulous, devious plan by Lyoness and its instigators, just like they did before when operating GTS (Erin Trade) and Galvagin - and just like they will continue to do with their newest scams. Lyoness does not only make victims blame themselves for their losses, it also tries to make the adherents responsible for 'a brilliant idea gone bad' - which is of course a blatant lie. It was Mr Freidl himself who was caught on tape saying the Lyoness business model revolves around one thing only: 'positions, positions, positions, positions' - as well as instructing his followers that only down-paying members are relevant to sign up.

The Austrian Mafia 7: Lyoness' attempts to obstruct spreading of the truth

Earlier, this Blog has reported on several occasions that people should be aware that Lyoness, its instigators and/or core-adherents seek to obstruct justice by preventing Lyoness victims and/or critics from finding and spreading the truth about Lyoness. One prominent way of doing this has been to deny information-seekers access to critical websites about Lyoness, by actively infiltrating, possessing and controlling core search terms, such as 'Lyoness', 'Lyoness Scam', 'Lyoness Fraud' and 'Lyoness Pyramid Scheme'.

When unwitting or unaware information-seekers insert any of these terms into popular search engines such as Google and Bing, next to a series of variants of the Lyoness main and corporate websites, several obvious propaganda Blogs and websites surface. There is the mind-numbing nonsense of 'islyonessascam' and 'lyonessreviewscamfraud'. There is the clearly independent review of Mr Chris Pickard, who elsewhere claims to be a Lyoness member and to have made a meager amount of money off of this membership - like is common for Lyoness members. And of course, there is Jeanette Hayworth with her truly reprehensible lies developed to prevent anyone looking at Lyoness from forming a proper opinion and making a wise and informed decision.

That, we knew. However, today Plattform-Lyoness reported that Lyoness directors have registered and thus own a substantial amount of domain names that would likely be used to spread the truth about Lyoness (for instance by victims of the Lyoness racket) at some point. In this way, Lyoness makes it considerably harder for critics of their 'company' to reach information-seekers about Lyoness and inform them of the truth. These are the domains that were listed by Plattform-Lyoness:

Marko Sedovnik (Slovenia)

lyoness-betrug.at
lyoness-betrug.com
lyoness-betrug.net

lyoness-geschaedigte.com
lyoness-geschaedigte.net

lyoness-opfer.com
lyoness-opfer.net

lyoness-skandal.com
lyoness-skandal.net

lyoness-arbeiterkammer.com
lyoness-arbeiterkammer.net

lyoness-wirtschaftskammer.com
lyoness-wirtschaftskammer.net

Alexander Lerch (Graz, Austria)

lyoness-abzocke.at
lyoness-abzocke.com
lyoness-abzocke.net

lyoness-pyramidenspiel.at
lyoness-pyramidenspiel.com
lyoness-pyramidenspiel.net

lyoness-schneeballsystem.at
lyoness-schneeballsystem.com
lyoness-schneeballsystem.net

Monika Murarova (Malta)

lyoness-sammelklage.at
lyoness-sammelklage.com
lyoness-sammelklage.net

lyoness-klage.at
lyoness-klage.com
lyoness-klage.net

lyoness-kritik.com
lyoness-kritik.net

Rosenzopf Wolf Peter (Malta)

plattform-lyoness.net
plattform-lyoness.org
plattform-lyoness.ch
plattform-lyoness.biz
plattform-lyoness.de

Consequentially, we ask our readers once more, please help us spread our message!

Lyoleaks #2: Lyoness: 'the MLM redemption'?

Recently, the Complaint Centre has been publishing material made and/or spread by high-ranked (former) Lyoness representatives, such as 'Dr.' Rik Wahlrab, highest-ranked Lyoness member in the USA and Mr Craig Wotton, former professional golf player and former managing director of Lyoness Australia.

At first glance, all Lyoness propaganda we have found seems identical, yet when subjected to a closer examination, some differences surface. The most prominent one is that most Lyoness propagandists speak of 'Network Marketing' or 'MLM' when describing the 'business model' of Lyoness, yet the highest-ranked member in the USA, Wahlrab, of whom we think it's fair to expect that he's acquainted with the 'business model', refutes the idea that Lyoness has anything to do with 'MLM' and/or 'Network Marketing'.

In fact, Mr Wahlrab and his 'team' have been spreading propaganda videos and other documents amongst their downline in which they explicitly state that and why Lyoness is absolutely no 'MLM' or 'Network Marketing' company. Here are the arguments they provide for this statement:

The video in which Mr Simsby explains this in further detail, as well as more propaganda and instructions spread amongst American Lyoness members, can be found here:

http://vimeo.com/channels/iappreciateu/56255094 (look for the video 'MLM vs Lyoness')

The just of it all is that Lyoness has at least 13 major advantages over 'MLM' and 'Network Marketing' systems, which, according to Simsby, are 'broken' and 'are only surviving because they have enough workforce to continue adding new members to compensate for the drop out rates'.

While none of that surprises us (given the reputation of 'companies' operating 'MLM' systems) it is quite awkward - to say the least - that a 'company' that claims that its global expansion thrives on the mere concept of replicability, has to sell its 'excellent, unmatched shopping community' under different names and in different disguises in the different countries it operates in.

This is a video spread amongst Lyoness members in other countries than the USA:

Additionally, in all the propaganda material we found and published, as well as in our conversations with non-American Lyoness members, Lyoness is referred to as being 'MLM' or 'Network Marketing'. Some of the propagators have even spread videos detailing what 'Network Marketing' is, why it is the way to 'financial freedom' and why Lyoness is a perfect example of this system. Some of them have instead coined the term 'recommendation marketing' to refer to Lyoness, but according to them, that is 'a distinction without a difference' - used to move the attention of the audience away from the negativity circulation on the Internet about 'Network Marketing'. As regular readers of this Blog may remember, Lyoness members are generally recommended urged to avoid mentioning (next to the term 'Lyoness') 'Network Marketing' or 'MLM' in their contact with new prospects, until a member of the upline is present.

At this point, some of the readers of this Blog may be interested to learn whether we think Lyoness is 'MLM'/'Network Marketing' or not. Our answer is that it does absolutely not matter what we call Lyoness. Lyoness, its instigators and core-adherents have been - and are - operating a pyramid scheme, with related Ponzi schemes and other (advance fee) frauds.

We also know that Lyoness propagators have trained their followers to lie and deceive, and to tailor the lies and deception so that it fits your target audience. This process of tailoring can take place on the level of an individual prospect, but can also be expended to a wider audience, like for instance an entire country or continent.

Except for a some specifically-targeted subgroups, for instance comprising new citizens, everyone in the USA seems to be pretty familiar and fed up with the system sold as 'MLM' or 'Network Marketing', whereas the rest of the world is less experienced in this area. Thus, except for sheltering unprepared prospects from these terms, in the USA, Lyoness has made an extreme effort to avoid association with these terms, even within the organisation and the propaganda material intended for meticulously-brainwashed adherents.

It should be noted that no matter how a fraud is named, disguised or dissimulated - it remains a fraud at any point.

Crisis Management: Directors turn on Lyoness

After Bernhard Wagner, former managing director of Lyoness Bulgaria, and Günter Kreuzer, former managing director of Lyoness Italy and co-founder of Plattform Lyoness, a third former managing director of Lyoness has publicly turned against the company. This time, it's the former managing director of Lyoness Australia, former professional golf player Mr Craig Wotton.

On the Blog called 'BehindMLM', Mr Wotton contributes to the discussion about Lyoness that currently takes place there, by adding a quote from his own website about 'Network Marketing' (or 'MLM') and that - although the concept is 'tremendously successful' - companies operating in this line of business should be subject to tougher regulations, in particular concerning the enforcement of promised and deserved commission pay-outs (if there are any to begin with) and the fair treatment of big earners and skeptics within the organisation - instead of banning them from corporate events and meetings.

It is particularly interesting to see that like his former colleague Bernhard Wagner, Wotton does not seem to bother for a second about that the concept of what he has been enrolled in and has actively perpetuated and promoted around the globe, may be flawed and has caused numerous victims. No, instead, Mr Wotton is angry that he, apparently, has not received the commissions he was promised, which he thought to have earned fairly by enrolling new members into the scheme.

A fair question is whether Mr Wotton was aware of what he was getting people in to. Of course, one could argue that if he did not, he could have been a little more careful and reluctant in recruiting new members. The same goes, without a doubt for Mr Wagner, who has been a business partner of Hubert Freidl from the very start of his 'successful' career - when they found the company Freidl & Wagner together, and consequently could have known how Freidl operates. Also, he could have seen that Freidl has a tendency to get into a fight with his partners in the middle of another 'successful business venture'. During the GTS (Erin Trade) period, Freidl had a dispute with Roland Bernsteiner over a considerable amount of money; when operating Galvagin, Freidl and his main partner Helmut Rücker blamed each other for the demise of the company. Apparently, now it was Wagner's turn.

Like Wagner, Wotton has a history with being involved in scams - regardless of whether it was as a 'victim' or as an 'instigator'. In fact, Mr Wotton was - prior to his involvement with Lyoness - a key member of the company called 'MyShoppingGenie', which offered an 'amazing product', which would save the average consumer a considerable amount of money on everyday retail purchases by automatically comparing the prices for a product or service on numerous websites (sounds familiar, doesn't it?). 'Genius' it was, yet not for the thousands of people who had invested their money in (the 'distribution' of) the 'product'. Shortly after launching the product in Europe, the offices closed in May 2012. Just FYI, rumour has it that the company and its instigators have relaunched the racket under a new name: 'Shopping Sherlock'.

Anyway, like Mr Wagner, Mr Wotton was not unfamiliar with this type of scam and how it is played out before he joined Lyoness. On his website, he presents himself as a successful 'Network Marketing' coach, yet considering the 'business opportunities' he has been peddling, that may be a bit too much of self-commendation.

Unlike Mr Wagner, who has openly admitted that what he was peddling was a pyramid scheme (albeit to strengthen his case against Lyoness concerning hundreds of thousands of dollars in commissions), Mr Wotton keeps carrying out the message that this type of system is the way to achieve 'financial freedom'. Given his unfortunate history with 'picking the right opportunities', we would recommend people to think twice before doing business with this man. Also, we would like to advise Mr Wotton to make a more thought-out pick next time.

Nevertheless, it does tell us something that the former managing directors are publicly outing Lyoness for the scam it is on Austrian national television, the Internet and through founding a victims' organisation and the pyramid seems to crumble faster and faster. We at the Complaint Centre are very curious as to whether the revitalisation seminar currently held in Austria will have the desired effects and will suddenly make Lyoness a legitimate, ethical, honest business opportunity with solely happy and satisfied followers. We doubt it.

If you have been duped by this racket, please do not hesitate to contact us or Plattform Lyoness. Also, share this message!

Finally: a Wikipedia article on Lyoness

After years of comfortable hiding behind a self-constructed redirect to the Wikipedia page on 'Lyonesse', the fable land used as name giver for Freidl's racket, Lyoness now finally has its own Wikipedia article.

https://en.wikipedia.org/wiki/Lyoness

Lyoness

From Wikipedia, the free encyclopedia

Since 2003, 'Lyoness' has been the registered trademark name for an expanding^[1] group of globally distributed (mostly privately-owned, limited-liability) corporate structures, which originated in Austria^[2]. It comprises at least 7 corporations registered in Switzerland^[3], 9 corporations registered in Austria ^[4] and approximately 42 additional national and regional corporations all around the globe^[5]. The name ‘Lyoness’ was derived from the Celtic mythological kingdom ‘Lyonesse’^[6].

The main corporation, then called ‘Lyoness Holding Europe AG’, was registered in 2003 by Iwan J. Ackermann, Max Meienberg and Uwe Proch^[7]. In 2004, the publicly-known CEO of Lyoness, Hubert Freidl, was hired by this corporation as a director ^[8]. Lyoness, in its entity, has an estimated annual turnover of 1.2 billion euros (2012) ^[9], with a self-proclaimed member total of 2,800,000 (as of June 2013)^[10]. Lyoness is currently active in more than 40 countries spread over 6 continents^[11].

Business model

Lyoness operates an international, cross-sectoral shopping community^[12]. 

Participants receive discounts while shopping at companies affiliated to Lyoness through four different systems^[13].:

- Cashback card, a discount card
- Discount vouchers, issued by partner companies
- Mobile cashback, a discount-oriented smartphone application software
- Online shopping, through a shopping portal offered on the Lyoness website

The Lyoness shopping community has currently (as of May 2013) an estimated 2.8 million members around the globe^[14], receiving discounts while shopping at 29,000 Lyoness partners^[15], with over 150,000 points of acceptance^[16]. Through the discounts systems, Lyoness members receive direct discounts of 1-2% in the form of cash back on every purchase made at a Lyoness partner^[17]. The sum of the obtained discounts needs to be €10 or higher in order for it to be transferred to the account of the Lyoness member^[18].

Next to discounts over personal purchases, Lyoness members receive an 0.5% commission over the purchases made by the people they have introduced to Lyoness, as well as 0.5% over the purchases made by the people introduced by the people they have brought in^[19]. Lyoness refers to this system as the ‘Friendship Bonus’^[20].

Additional to the 1-2% cash back that Lyoness members receive, a percentage of the expenditures of members at Lyoness partner companies is transferred into the Lyoness position system – which is a system in which left-over discounts are saved up into positions^[21]. When enough new positions are entered into the position chain, the holder of the original position is rewarded with earnings through a concept called ‘system commission’ or ‘loyalty commission’ and when 35 positions have been entered above the original position, as well as under the position, the original position is multiplied in value by 9 (i.e. a 50 euro position gains a value of 450 euros)^[22].

In order to become a Lyoness ‘Premium Member’, one needs to put in a down-payment of at least 2000 euros on future discounts^[23]. Commonly, these 2000 euros are used to acquire 7 positions of 50 euros, 3 positions of 150 euros and 3 positions of 400 euros^[24]. The partner companies (entitled ‘Loyalty Merchants’) offering discounts to Lyoness members, need to become a ‘Premium Member’ as well, meaning they also have to put in a down-payment on future discounts of at least 2000 euros as well, if they want to enrol in the ‘loyalty merchant program’ for a flat fee of $570 per shopping location^[25]. If companies do not wish to become a ‘Premium Member’ of Lyoness, the sign-up fee is $1999 per location^[26]. Additionally, they may be required to pay $26 per month in ‘network charges’^[27].

Social involvement

According to Lyoness, every purchase made by its members at its partner companies benefits the Lyoness Child and Family Foundation (a Lyoness-owned charity organisation)^[28] and the Lyoness Greenfinity Foundation (a Lyoness-owned organisation promoting sustainability)^[29].

Lyoness, together with its Greenfinity Foundation, is the main sponsor of the annual Austrian Open golf tournament, now named Lyoness Open^[30]. This tournament is part of the 2013 European Tour^[31]. In 2012, a contract defining the sponsorship for three more years (until 2014) was signed^[32]. Lyoness also sponsors the ‘European Juniors League’, a European football competition for youth teams^[33].

Controversy

One year after Lyoness was founded, in 2004, the Austrian criminal police (Kriminalpolizei) published an article^[34] in the December issue of its organisation’s magazine, in which it warned for the resurfacing of Ponzi schemes and pyramid schemes in Austria. Lyoness was explicitly

mentioned in this article. Lyoness contested the allegations publicly^[35]. In 2005, Austrian Parliament member, Johann Maier (SPÖ) asked the then-incumbent Austrian Minister of Justice (Karin Miklautsch, BZÖ) parliamentary questions about the reports filed against alleged pyramid schemes in Austria in 2004^[36]. Lyoness was one of the organisations complaints were filed against^[37].

In 2008, the Austrian Chamber of Labour (‘Arbeiterkammer’) of Steiermark issued a warning against Lyoness, listing its alleged privacy violations, misleading advertising, deceptive information and unrealistic and negligible benefits as red flags for doing business with Lyoness^[38]. In 2010, the Vorarlberg branch of the Chamber of Labour issued a similar warning^[39]. The Chamber warned against the unreliability of the discount vouchers, the false and deceptive information spread by Lyoness, privacy violations, the redundancy of the ‘Cashback card’ and the unlikeliness of receiving any returns on investments if no-one is recruited into the system.

In March 2010, the Swiss medium Beobachter published an article^[40] by Pascale Hofmeier entitled ‘ Lyoness: Hands off’. In the article, Sara Stalder of the Swiss Consumer Union and Manuel Richard of the Swiss Gambling Commission warn consumers not to do business with Lyoness. In the beginning of 2012, Kleine Zeitung published an article^[41] suggesting that Lyoness has deceived the masses by operating an irrelevant shopping community, whereas actually, it is all about the systems behind this community. L’Hebdo, a Swiss medium, reproduced a story about how Lyoness members are told that an investment of 3,000 CHF will eventually lead to 25,000 CHF in return, if enough new, down-paying members are recruited^[42].

In February 2012, the Beobachter published an article^[43] stating that, based on consideration of internal Lyoness communication, members are offered ‘bounties’ up to 45,000 CHF to provide ‘relevant information’ on Lyoness’ critics. A critic from Zurich was reported to have been sued for over 1 million CHF for ‘defamation’ after he contacted Lyoness’ partner companies in Switzerland in an attempt to explain the business model of Lyoness to them. The article also reported that the Lyoness business model seems to revolve around recruiting activities instead of discounts and that Lyoness is internationally charged with forgery, fraud and hosting a pyramid scheme.

Der Standard reported in July 2012 that the Austrian Economic and Corruption Prosecutor (‘WKStA’) has been granted jurisdiction to investigate and prosecute Lyoness in Austria ^[44]. Additionally, criminal charges are pending in Switzerland. The Swiss Handelszeitung mentioned a court case Lyoness lost, which revolved around the question as to whether Lyoness should have issued a financial prospectus before asking investors to finance their foreign-markets advertising campaigns ^[45]. In September 2012, the same newspaper reported^[46] that major, alleged Lyoness partners in Switzerland (Microsoft and Kuoni Travel) were announcing not to continue the partnerships, if there were any to begin with.

The Wiener Zeitung reported^[47] about a pending lawsuit initiated by the Austrian Consumer Organisation ‘VKI’ in March 2013. The VKI contests 61 clauses of Lyoness’ ‘General Terms and Conditions’, which it called opaque, uncertain, and/or meaningless^[48][49][50]. Eric Breiteneder, hired as a legal representative by the organisation, also referred to the concepts used to distinguish various parts of – and benefits within the Lyoness business model as vague and/or undefined elsewhere^[51][52].

The Handelszeitung reported about suspicions that high-level Lyoness members were earlier involved in (other) pyramid schemes, like the ‘Spirit of Independence’^[53]. It also mentioned a system called ‘GTS’ (Global Trade System), operated by Erin Trade SA, as a former organisation tied to Hubert Freidl^[54]. Like Lyoness, this company has been called a pyramid scheme in the public debate ^[55]. The Kleine Zeitung reported that various experts were looking at the investment schemes for advertising campaigns organised by Lyoness, and whether a prospectus was required before attracting capital from investors ^[56]. Lyoness-hired^[57] professor Susanne Kalls concluded that no capital market regulations were violated by not issuing a prospectus; attorney Karl Hengstberger came to the opposite conclusion ^[58].

In the same article, Mathias Vorbach, spokesman of Lyoness, admits that Lyoness may have had some trouble before, but that those days are behind us – Lyoness has learned from its mistakes ^[59]. He asserts the message that legal problems have only appeared in Austria (a contested claim) and that 95% of the Lyoness members just shop and do not participate in the earning models offered by Lyoness^[60]. However, the Beobachter, after reportedly considering internal Lyoness documents, published an article^[61] suggesting that 99.7% of the Lyoness turnover derives from down-payments on future purchases, not from actual shopping or (saved up) discounts.

Lyoness contests that it operates a pyramid scheme, as well as that it violated the relevant capital markets regulations when offering investments without issuing a prospectus ^[62].

Television

On November 30, 2011, Dragons’ Den Canada aired an episode featuring the pitch of a Lyoness ‘Premium Member’ from Ontario, Canada, in which he asked the ‘Dragons’ to jointly invest 175,000 Canadian Dollars to acquire Lyoness ‘business packages’ through him^[63]. None of the Dragons were willing to invest. Instead, they ridiculed him and his business idea, claiming it to be a ‘distasteful pyramid scheme’. They also advised the Lyoness member, who borrowed against his house to acquire Lyoness positions, not to invest any more money in the Lyoness system^[64].

Another television showthat has reported on Lyoness is the Austrian public television program ORF Report. This programme aired episodes under the names ‘The money mule’ (December 19, 2012) and ‘The man behind Lyoness’ (April 23, 2013), interviewing experts and former participants, which both say that Lyoness operates a pyramid scheme behind the façade of a ‘shopping community’^[65][66]. The latter episode also features hidden camera footage of Hubert Freidl telling his followers that spreading ‘Cashback Cards’ is irrelevant – ‘it is all about the positions, positions, positions, positions’^[67].

Legality

In the meantime, both Austrian and Swiss authorities have started investigations of the Lyoness business model and the related allegations that the company is running an illegal pyramid scheme^[68]. Reportedly, similar investigations were started in Hungary^[69] and Australia. Also, it was reported that the Austrian Consumers Union has filed suit against Lyoness for providing participants with unclear and deceptive terms and conditions^[70]. According to the website of his law firm, VKI-attorney Breiteneder is currently the attorney of about 300 former Lyoness participants who are demanding their money back from Lyoness^[71]. Reportedly, he has managed to get his clients’ money back on several occasions^[72]. These clients had invested money in the advertising campaigns organised by Lyoness, and several option trading packages offered by Lyoness, but were not provided with a prospectus^[73]. The Viennese Commercial Court has on several occasions ruled that this violates the Austrian legislation on investments and has granted the plaintiffs the right to demand their money back^[74].

Income

From a leaked internal Lyoness income disclosure statement ^[75] can be derived that the average Lyoness member in the United States receives a gross annual commission of approximately $275, or $23 per month. The monthly median commission value of $0.38 indicates that the vast majority of the members receives a lower commission than the 23 dollar monthly average^[76].

Additionally, the document states that 46% of the Lyoness members makes $0 in commission and that the average annual expenditures, not taken into account when calculating the average commission, are $1,294^[77].

Internet

On the Internet, various websites and Blogs from all over the world have spent attention on Lyoness, accusing the company of illegal business practices (mainly of running pyramid and Ponzi schemes) and questioning the alleged partnerships between Lyoness and several multinational corporations, as well as the validity and relevance of the certificates granted to the Lyoness shopping community. English author David Brear’s copyrighted study of the subject concludes that: 'Lyoness is an unoriginal, blame-the-victim, cultic racket comprising a dissimulated closed-market swindle and various, related, advance fee frauds’^[78].

In April 2013, it was reported that former (Austrian) participants of Lyoness had organised themselves and founded an organisation and website called Plattform Lyoness^[79][80]. Not much later, an international equivalent was established under the name Lyoness Complaint Centre^[81].

In the beginning of June 2013, it was reported that Lyoness filed legal complaints against the founders of Plattform Lyoness^[82][83]. The founders were forced to remove legal documents concerning Lyoness from their website^[84].