The “WirtschaftsWoche” from Germany is probably one of the most traditional economics journals far and wide. It is characterized by a very high professional competence and great influence on the formation of opinion. The following article was published on June 14, 2019:
My Insta profile, my yacht, my debts! Ironically in social networks the oldest trick works especially well: the “snowball system”. How criminals are abusing digital biotopes of vanity and self-staging.
meeting the man who promises the deal of my life to me on Instagram. He is in
his mid-thirties, has got a little chin beard and a slight double chin. With
his help I could become rich without working. That’s what he says. 30,000 per
month can easily be made.
years, at the age of forty, he would be wealthy enough to retire. For now, the
man, who shall be called Hannes Krause here, is working as a truck driver. It
all started with a comment below one of my pictures on Instagram: “Hey, nice
picture. Let’s connect!” Via a link in his Instagram bio I can start a chat on
WhatsApp with Krause. He has already prepared my message. All I have to do is
to send it. The next morning, Krause sends a message: “Hey, we are offering a
program for customer loyalty and are making money with daily worldwide
purchases.” Large enterprises were taking part: Walmart, Red Bull, the soccer
club AS Roma, the Moto GP motorcycle
Championship. And many, many more.
This is the
story of a large-scale rip-off. The deal, Krause proposes to me while I am scrolling
through my Instagram feed quite bored waiting for the train, is a deal that
only brings money to a few. First, it is about paying money – and about
recruiting further people who pay further money. Whoever is at the foot of the
hierarchy is paying in. Whoever is at the top, collects the money. The company
Kraus is working for has reloaded the very old snowball system for Instagram.
The youngest and hippest of all social networks. With 15 million members only
in Germany. The most of them: young people.
Target group: young and naïve
Krause and his colleagues are currently addressing unexperienced and gullible seeming people. The promise a deal to them through which they could quickly become rich and could be able to fulfil all their wishes. They are referring to desires that have been nourished by all the shiny pictures in social networks. In truth, this is about taking money out of their pockets. An illusory business for the illusory wold of Instagram.
I, too, am
fitting perfectly into their scheme: On Instagram I am acting successful. My
trademarks: white shirt, Rolex and gluey hair. I decide to accept Krause’s
offer. We arrange a phone conversation. “Hello? Hello? Wait a second…” Krause
is sitting in his truck and has problems with the hands-free kit. As soon as
the connection is established he comes to the point quickly: The “super
business” is his side job. Krause is an independent distributor of Lyconet. The
company, that is present with various names, had built the biggest purchasing
community in the world, Krause wants to make me believe. With eleven million
registered customers, 130,000 partner companies in 47 countries.
Lyconet, Krause distributes bonus cards through which one shall save money on
purchases. So-called Cashback cards. The difference to the payback card known
in Germany which one can use at every large chain: You get your money back,
immediately when purchasing. One to two percent of the sum, Krause tells me. Only
by saving, nobody becomes rich overnight, I say. This is, when Krause places
his lure: I should become his new colleague. An independent distributor of the
company Lyconet, just like him. Or “marketer”, as they call it internally. Only
marketers are the ones who are making some real profit.
make money with passing my card on to other people who are using it for their
purchases. With recruiting new companies. And with new distribution partners
that I am recruiting. How much money I am making is measured in “Shopping
Points” that are emerging every time somebody uses my card at a shop. Just like
playing a video game: The more points I collect, the faster I will reach a new
level of career.
tells me that he would be on level 3. Earnings: 200 EUR per month. At level 8,
one would earn up to 150,000 EUR per month. Simply by other people that go
To make money, I first have to invest money. 299 EUR for the software with
which I can register customers, companies and new marketers. And 2000 EUR for
the Starter Package. On a reference day, I will get the money back and will
additionally get a monthly participation in sales.
takes great care to dispel my concerns. One had to put the start fee in a
context: As a marketer of Lyconet, one is more or less a franchisee. “Normally,
a franchise costs one million Euro. The license of McDonald’s for instance.”
Actually, the costs are at 844,000 Euro. If collecting points may take too long
for me, I could also buy shares in an account recording all revenues from all
cashback partner shops for 1,000 EUR each. Obi, Douglas, MediaMarkt, Fressnapf,
McDonald’s, even Formula 1. In this way, I will earn up to 2,500 EUR per month.
Krause says. After the phone call, he sends me a personal link for the
registration so that the system knows that he was the one who recruited me. And
he further sends me a video. I should send it to my friends.
Blinded by stylish clothes. In the video, the discount card is advertised as a groundbreaking idea: Its inventors, Hubert Freidl, is said to be smarter than Mark Zuckerberg. The founder of Facebook is only networking people. But Freidl had concluded: Not all people want to communicate, but all of them have to consume. “If you don’t eat and drink for two weeks”, the video says, “you are in trouble. Because you are dead.” That’s why Freidl’s source of revenue is quasi inexhaustible.
looks somewhat different: In Germany, hardly any retailers are taking part.
Certainly, no large chains. But: barbershops, nail spas, pubs. “Everyone who is
in a bad economical position and considers the possibility for acquiring new
customers via the discount card the last chance”, says a person who opted out
of the Lyconet management and wants to remain anonymous.
card on the other hand, was only a camouflage, he says, just like the mafia
clan Corleone’s trade of olive oil in the gangster movie “The Godfather”. The
company was making money with high starting fees, the independent distributors
are paying – or are rather putting into an alleged investment opportunity.
Just like Anna, who does not want to give her
real name. She too, was recruited on Instagram. The 24-year-old looked online
for a bank that would give her a credit of 11,000 EUR and bought shares with this
money. Before this, she had not even searched for Lyconet on Google. Currently
she is going through an education with the German army.
beginning of February, she met her marketer for the first time, in a café in
her hometown Bayreuth. He was only 19. But with his stylish clothes, she got
the impression that he already had achieved a lot in his life. Anna joined
immediately. That something was wrong, she suspected only after a dropout had
She confronted her recruiter. His answer: Only members,
who are one hundred percent behind their work were to get anywhere. “Every
weekend, I drove 400 kilometres from Hannover to Bayreuth, just to attending
the business trainings of our groups”, she says. “The seminars and videos have
been making me feel inwardly strengthened to this day.” Despite the high debts.
Anna asked the Viennese lawyer Josef Fromhold
for help. For more than 1000 injured parties, he had claimed back money. Most
of them were young people under 25. Some of them had invested up to 25,000 EUR.
“I even had clients who had stolen from their
parents. Just for being able to pay into the system of Lyconet,” the lawyer
Almost everyone joins Lyconet without reading
the terms and conditions. A fatal mistake. Because there, they say, that
everything that was promised in collateral agreements, is invalid. So as well
the promises in chats with marketers. “If the company itself contacted people,
it would be inadmissible advertising. But a private person who recommends
something is not forbidden”, Fromhold says. Social networks are making things a
lot easier. “Back in the days, they held gatherings in conference rooms of
hotels”, the lawyer recalls, “and people were told to bring their friends.”
The number of people who fell for Lyconet in Germany can only be estimated. For example, by considering the number of requests Ben Ecker has received so far: 4,000 since he started his website for Lyconet victims four years ago. For many of them, he is the first point of contact.
Krause calls me back. He wants to know whether
I am in. I am hesitating. He tries to build trust: He tells me, that is married
and has two young daughters. He was unhappy. Wanted to leave his old life
behind. Become rich. “I sold my car”, he tells me. He had spent the money for
further shares in Lyconet immediately. Worth 12,000 EUR. Krause quit his job as
head of a vehicle fleet. Complete focus on Lyconet. Now he is a truck driver. A
Job, that should help him make ends meet until he has not become rich.
Obscure network of companies
How much money did he already make with
Lyconet? “Well, not that much.” Krause has signed a contract that says he will
only see any money after 4 years after signing the contract. And he had only
joined 20 months ago.
In 2003, the company was founded as Lyoness
International AG with its headquarters in Graz, Austria. After the first
lawsuits, it outsourced its distribution channel in 2014 – and called it
Lyconet. Last year, the parent company renamed itself to my-World. The
headquarters moved to London. But the business model remained. Meanwhile, the
company has grown to an obscure network of subsidiary companies. All Lyconet
marketers from EU countries are not concluding their contract with the Viennese
Lyconet International AG, but with Lyoness Europe AG located in Switzerland.
The terms and conditions state that the swiss Lyoness Europe AG is only
operating a marketing program under the name “Lyconet”. This makes it harder
for European courts to take actions against Lyconet.
Nevertheless, in May 2017 the Austrian High
Court judged, that the terms and conditions are obscure and deliberately misleading.
Lyconet was classified as an illegal snowball system. This also happened in
Norway and Switzerland. And in Italy, the competition authority gave the
company a sentence of 3.2 million euros.
Upon request, Lyconet rejects any dishonest
intent: The marketers, a written comment says, are “self-employed
entrepreneurs” who are free to choose “the channels for bringing forward the
development of their network.” A “Code of Ethics, set up by Lyconet” obligated
them to not make unrealistic profit predictions. Lyconet did not have “any
knowledge” about marketers making false promises in social networks.
The company also rejects the accusation of
advertising with fake partners. Nevertheless, they are advertising with the
McDonald’s logo on their website. A speaker of the fast food chain comments:
“McDonald’s Germany is not a cooperation partner of Lyconet.” Similar comments
are made by the perfumery chain Douglas or the pet food chain Fressnapf, with
whose logos also had advertised in the past.
A private jet in reward
A Saturday, beginning of May in Brose Arena,
Bamberg. Where normally the basketball team sinks baskets, this afternoon, an
event of Lyconet is going to take place. Also founder Hubert Freidl is said to
be there. I don’t want to miss this opportunity. A ticket costs 70 EUR.
2000 young people are streaming into the arena.
Monitors are hanging from the ceiling and finally Freidl’s face appears in
close-up while he strides through the audience rows. As he stands on the stage
in his dark suit, his bald head and the pointed patent-leather shoes are
reflecting the spotlights. Freidl is not sparing on superlatives: Lyconet would
become the new Amazon. He roars into the crowd: “Over are the times in which
the revenue for our purchases went to the USA or to China!” Soon there would be
a common online shop for all Lyconet partner companies.
“And then the marketers are making the money!”
People next to me can’t stay on their seats
anymore. They are cheering. To my right: Hannes Krause. He murmurs to me: All
over Europe, huge warehouses are already being built for the new online shop.
But Freidl has brought even more with him: He
announces an “Elite-Club” – as a reward for the marketers. From now on there
would be private clubs “in every big town”. Luxury cars would be available
there. Also, the marketer would be able to use the company’s helicopters,
private jets and yachts. Krause is cheering.
Initially, I thought that Krause selects his
victims specifically. But he is a victim himself. Back from Bamberg, I decide to
tell him the truth. He was faster: There is no use for people like me in his
team, he writes me via Facebook. I would not be a doer. “You did not even
manage to get registered for the free Cashback card.” It is his last message.