BBX Director Fraud Example

Magali Russo – Director of Employment 2014 Ltd, in Liquidation. Proved to be concealing assets from the NZ authorities.

In this post I give one simple provable example of fraud conducted by one of the Directors of BBX. The company Employment 2014 Limited was established for tax fraud, one of a string of such entities using property and BBX credit for tax evasion and cash conversion. The fraud is common in the commercial barter sector – founder of BBX Michael Touma showed his daughters how to do it and was banned as a company director in NZ as a result. Magali Russo took over the front-person and should also be banned, if not imprisoned. The real brains though and power behind the scenes is Carolin MacDonald, CEO, BBX International. [Read more…]

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Fraud within Commercial Barter

Barter is presented as members exchanging with members. Commercial barter however is actually members exchanging goods for currency issued and controlled by a central company designed to profit! Fraud is EASY & pretty much inevitable.

In traditional barter, people exchange goods without money – like apples for oranges or with pumpkins! The value of the goods is decided by the traders themselves, at the point of trade, not by a bank, nor by the government because no money changes hands. That’s why it is called barter and is not the usual business that uses money.

With Commercial Barter we create a business with its own brand and currency. We usually call this currency a trade dollar [or trade pound or whatever]. Members join the Commercial Barter system and then use that trade dollar to value their goods when they trade, so that one trade dollar may buy one orange or perhaps three apples and a pumpkin may be worth ten trade dollars.

The part that is rarely spoken about (for obvious reasons) is that members do not exchange their goods with others – they exchange their goods for credit in the commercial barter currency, issued, managed and fully controlled by a commercial organisation which is ALWAYS out to make money. That’s what makes it “commercial” barter!

Now the value of this trade dollar is established by the brand owners, usually pegged (by fiat [decree]) tightly to the local currency so that in the United States for example one Trade Dollar will usually equal one USD. In the United Kingdom one Trade Pound will usually equal one GB Pound in the cash economy.

When members trade among themselves they value their goods or service in Trade Dollars – building credits when they sell into the system and incurring debt when they buy from the system. In a normal trade exchange these figures will be perfectly balanced, and this is technically called Mutual Credit. The barter system owners simply manage their members’ credit.

As the members have no way of knowing the state of their currency, this is a HUGE opportunity to profit by way of fraud – by the currency owners. If politicians, big business and central bankers debase their “Legal Tender” currencies for personal gain all the time, it would be delusional to think that commercial barter organisations would not take advantage of this opportunity too.

But how would we know?

Most barter systems have a debt reserve fund where members contribute to protect the value of their currency in the case that a member defaults on any credit issued to them. This is a normal safety mechanism similar to cash reserves held by a bank. When there is a loss, they can cover for it.

Commercial Barter currencies are unregulated, so the system owners have the freedom to issue credit, control trading and thus manage their currencies independent from government influence. Remember though that all Commercial Barter systems create income for themselves for operating the system, thus there is a tension between the integrity required to maintain an honest currency and the commercial objective for deriving profit from that very system.

Fraud frequently occurs within the Commercial Barter industry when system managers (that’s the owners of the brands and currencies) hide the true value of their currency from their members. As there is usually no way of knowing who has been putting their hands in the cookiejar of members’ credit, we must trust the foxes to look after our hens.

Human nature being what it is, fraud does occur. In February 2017, I received inside information revealing the actual account balances of an Australian-based international Commercial Barter operation BBX, that revealed true valuation (backing) of less than two cents in the dollar. There were BBX members in my small country with accounts totalling $6.9m in credit more than those with accounts in debit. Their international fraud figures were substantially greater than this but a fraud of this size is simply the beginning . . . many Commercial Barter organisations have greater imbalances, including some of the biggest names in the industry.

Actual inside information of Commercial Barter accounts is a very closely guarded secret for obvious reasons so when trying to understand fraud in the Commercial Barter industry investigators like me usually have to use indirect evidence that points to the existence of fraud.

The easiest clue to see that things have gone wrong in a particular barter exchange is to see the patterns of membership. If they have been going down, certainly over a long period then you can be fairly sure that something is wrong, and fraud is probable.

If the members find it harder to spend their ‘funny-money’ as each year goes by, then again it is very likely that the currency has been devalued somehow. Someone will have had their hands in the cookiejar and it’s most likely to be the currencies owners, as they are the ones who hold the cookiejar!

If members are selling a particular item or service in the barter economy for more than they do in the cash economy then this is as a result of inflation – the perceived value of the currency has dropped. Inflation in a barter economy, like in a cash economy is due to a currencies reducing buying power – somebody has sucked value out of it somehow! Again, this is usually fraud by the currency owners.

Deception, the ability to conceal the missing value, is central to the fraudsters’ actions. Reality can be concealed by:

  1. Refusing members access to accurate accounting – you will not normally be able see, let alone to audit the members’ trade balances in Commercial Barter organisations who are operating fraudulently;
  2. The value of the currency will be first legislated, then enforced – so that despite market reality, the owners will insist that “one unit of their currency equals that of the local currency” when everybody knows that it doesn’t, in practice;
  3. Concealing losses, so that when a loss does occur, either through their own fraud or through adversity, rather than devaluing the currency, they hide their conduct (or at least try to);
  4. Controlling information so that only the elite within the system (owners, their staff, insiders and the privileged) can get the really valuable goods or services;
  5. Heavy marketing and sales activities, usually using more of their currency to draw in new members, thus perpetuating the scam, feeding old members with new blood. This has parallels to a Ponzi Scheme.

Dealing with fraud constructively in a Commercial Barter organisation once it has happened is virtually impossible because when value has been sucked out by criminal conduct, the criminals are very unlikely to return it; authorities are unlikely to act as barter is not mainstream criminal conduct and their time is spent more effectively away from white-collar crime.

Members with debits are unlikely to want to clear their debts to other members and resist any efforts to collect. In many cases they are in that position because they have used the system deliberately for their own benefit. Members in credit resist attempts at closure as it means that they are forced into accepting a loss – most will want to hold on as long as possible in the [unrealistic] hope that they will get something back.

In theory a currency should be devalued to its actually backing and then can be traded on from there, but the people who get their exchanges into this mess can never be the ones to get them out of it! In practice they continue to drag on and on an on with the exchange owners milking their members for cash fees for as long as they can.

Fraud within the Commercial Barter industry internationally is common, I know of only three exchanges in the Western world that I believe run truly balanced accounts and only a couple that have open books that by their very structure allow their members confidence to know the true state of their currency.

As I have blogged about extensively, those associated with IRTA are some of the first ones to suspect – their protection of their members in the face of evidence of fraud is legendary with conman Rob van Hilten who was principal of the now bankrupt Dutch fraud Qoin & Tradeqoin not only protected by the Chairwoman and President even while he was on the International Board but actively defended in public. Their protection of the fraudulent BBX International operation too is telling and their close long-term relationship with king crooks of the barter industry, Bartercard proof positive that within IRTA it is not what you know, nor what you are, but who you know and what you have over them that talks.

The Commercial Barter industry has serious credibility problems. Some of this is just human nature and common to all business environments, but the very nature of giving substantial value to people who can then dispose of it without accountability is an open invitation for business loss.

When seeking to join a Commercial Barter organisation if you cannot actually see the figures of members in debt and members in credit beware – you are trusting people in an unregulated ‘banking’ environment with your assets. If there is a reducing membership and/or difficulty in spending the currency, rest assured that it has been debased. Be concerned and doubly vigilant if the Commercial Barter organisation themselves wants your goods or services, as you can be sure that the existing members will be paying for their gain and that sooner or later this will turn around at your expense.

The Barter Series

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38. The BBX Investigation Final Comments

The BBX Investigation has closed. The book is being collated and the last words are written here for the puppetmeister (mistress really) Carolin McDonald, CEO (by hook or by crook) of BBX International, a conglomerate of companies that I’ve shown to have stolen from their members for decades and who lie through their teeth at every conceivable possibility. I have nothing but contempt for the conduct of Madam McDonald, as can be seen through my final words . . . to her. [Read more…]

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37. BBX Whistleblower: Cameron McKean

In this interview, I give opportunity for the BBX Whistleblower. Cameron McKean to speak. He has a lot at stake, first pulling out of BBX, then doing it the way he did, and then his questions getting out and The BBX Investigation following. His answers to my questions are very similar in style to those we had engaging during my investigation. I think it helps to see another perspective from a central character in the BBX saga. Enjoy! [Read more…]

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36. MEDIA RELEASE: Barter Tax Avoidance Warning

Media Release

FOR: IMMEDIATE RELEASE

DATE: 8 March 2017

FROM: DENNIS A. SMITH, INVESTIGATIVE BLOGGER

SUBJECT: BARTER COMPANY DATA BREACH CAUSES TAX AVOIDANCE WARNING

CONTACT: www.dennis.co.nz, dennis@dennis.nz; +64 272 046-112

URL: http://www.dennis.co.nz/2017/03/36-media-release-barter-tax-avoidance-warning/

BARTER MEMBERS – TAX AVOIDANCE WARNING
A data breach from barter company BBX reveals all to the Tax Man

Auckland, New Zealand: A data security breach from Australian operated barter company BBX International has gained the attention of the Tax Man. Investigative blogger Dennis A. Smith confirms that New Zealand’s Inland Revenue Department (IRD) has been in contact with him to discuss potential breaches of tax compliance.

“New Zealand has very strict privacy laws, and the IRD will not disclose any details to third parties like myself, but I am certain that BBX members throughout New Zealand will be the subject of their attention in due course,” Mr Smith says.

He wishes to forewarn all barter members that using barter (such as BBX) as a form of tax avoidance can be a costly experience if investigated. “The raw BBX data is out there,” Mr Smith says, “They’ve got it, I’m sure, and if they find anything untoward in there, I’m sure they will be talking to their colleagues around the world!”

Mr Smith says that goods and services received though any barter system still require accounting for GST and Income Tax purposes.  “Another area of confusion can be business and personal expenditure. Using a barter account for wining and dining Mum and the kids may not be a legitimate business expense, and the Tax Man often focusses on these sorts of slip-ups”.

BBX International suffered a serious data breach in February 2017, and members’ financial and personal data and has been available online for weeks. It is believed that the company has not reported the breach to the Australian authorities as required to do by law, but has instead downplayed the significance.

In an email to all affected 88,000 members, BBX International CEO, Carolin MacDonald explained, “BBXI discovered that a server containing member information was accessed without authorization . . . we have ensured all pins have been updated.”

“BBXI has no evidence to date that such data has been used inappropriately,” she explained to the barter members.

Mr Smith recommends that following the BBX data breach, all barter members should ensure that they comply with relevant taxation laws with urgency and rectify any errors or omissions as a matter of priority.

About the Author: Dennis A. Smith is an author and investigative blogger operating from New Zealand. He specialises in providing analysis and commentary in the alternative currency sector which includes commercial barter. His investigations include the international Ormita fraud, the report of which led to the fraud’s speedy closure; a three-year expose of a Dutch scam & his book The Qoin Con that led to Qoin’s bankruptcy for more than £500k; a damning analysis of the Australian barter company, Bartercard which he claims operates like a Ponzi Scheme, and more recently, The BBX Investigation, in which his blogging has revealed serious deception & management deficiencies across eight countries.

END

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35. BBX Rips Open the Barter Industry

The BBX Investigation has ripped open the Commercial Barter industry and this will have global ramifications. Michael Touma, founder of BBX, while he was alive had an aura of invincibility, but with his passing, the demise of his business has now shown all the scam it truly was. Despite the desperate efforts of IRTA to cover it all up, as the authorities investigate, first in New Zealand and then across the globe, the barter industries worst fears will inevitably come to pass – regulatory intervention. The sooner the better in my book! I conclude The BBX Investigation with my analysis of how the BBX saga will ripple out and affect the global barter industry. [Read more…]

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34. BBX Devaluation Helps With Tax Losses

The publication of actual BBX figures, showing massive currency debasement is a two-edged sword. First and most obviously when reality hits home that we’ve been defrauded, it hurts, but there is an upside to this. We can now legitimately claim huge tax losses with a devalued currency. Furthermore for those who have kept business transactions within the BBX system hidden out of their business accounts (or who may have ‘confused’ personal and business expenditure) this is now the opportunity to rectify any past ‘indiscretions’, come clean and escape serious consequences. [Read more…]

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33. Warning to BBX Staff & Associates

This is a formal warning to BBX staff, franchisees, sub-contractors, members and associated parties that their/your involvement in perpetuating a fraudulent barter operation (BBX) may place themselves at risk of aiding and abetting criminal activity, and if it is in New Zealand or associated with NZ following midnight 31st March 2017, will result in criminal charges. [Read more…]

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32. BBX and Issues of Morality

I address here, the issues of morality, using a communication received from an angry BBX Member not only showing him up for the hypocrite that he is, but how immorality takes over when we blame others for what is our failing. BBX International blames the whistleblower; then BBX members blame me, the messenger and everybody wants somebody else to pay for their mistakes and greed. According to simple logic, this is all wrong, immoral. [Read more…]

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31. BBX Members React – It’s War

BBX Members across the globe have and are continuing to rise up against Aussie Barter company BBX International. Reeling from The BBX Investigation, BBX staff and franchises are desperate to stem the leaks. The raw data is out and getting seen; court actions are commencing and the PR spin is that all is good and golden at BBX. It’s not! I share some of the things that have happened and that are being planned by BBX members across the globe. [Read more…]

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