Best World

[Boon]

 
Very interesting document indeed – class action against Nu Skin (illegal MLM practices in China)
 
Much to learn from it………………….
_______________________________________________________________________________________
 
http://securities.stanford.edu/filings-d...V00033.pdf
 
 
I. NATURE OF THE ACTION
This is a federal securities class action on behalf of a class consisting of all persons other than Defendants and certain affiliated persons who purchased or otherwise acquired Nu Skin securities including options between May 4, 2011 and January 17, 2014, inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.
 
2. Nu Skin is a global multi-level marketing company that distributes personal skin care products and nutritional supplements in the Americas, Europe, and the Asia Pacific region. Multi-level marketing (“MLM”) is a marketing strategy often used by companies making sales directly to consumers where the salespersons are compensated not only for products they sell, but also for the sales of other salespersons whom they recruit.
 
3. Prior to the start of the Class Period, growth in Nu Skin’s business in some of its larger, more developed markets including Japan and the United States was on the decline.
 
4. To offset the slowdown in growth in Nu Skin’s major, more developed markets, Defendants orchestrated a plan to substantially expand Nu Skin’s presence in the People’s Republic of China (“PRC” or “Mainland China”). The decision to focus the Company’s resources on growing business in the PRC was made despite stringent regulations in China prohibiting the very type of multi-level marketing and multi-level compensation employed by Nu Skin in all of its other markets and despite the limited success Nu Skin had achieved in penetrating the Chinese market as a result of those stringent regulations.
 
5. In early 2011, Defendants took what was already a modest, but illegal multi-level marketing business model and multi-level compensation plan in Mainland China, and essentially put it on steroids, easing some of the restrictions they had put in place, rapidly recruiting new distributors who received inadequate, if any training, authorizing the rapid expansion of downlines, and permitting the direct sale of products outside Nu Skin’s brick and mortar stores that were not licensed for direct selling.
 
6. Defendants also encouraged Nu Skin’s existing sales distributors around the world, including its Chinese-speaking distributors in Hong Kong, Taiwan, and Southeast Asia, to recruit sales promoters and distributors in Mainland China in much the same way they recruited distributors around the rest of the world. This included signing up sales distributors in Mainland China, paying them strictly on commission, and requiring the new recruits to sell specified minimum monthly sales levels of Nu Skin products while promising to reward them handsomely not only for selling Nu Skin products but also for recruiting additional new sales distributors from whom they could share their sales commissions. Defendants masterminded this massive expansion in China knowing that Nu Skin’s form of multi-level compensation violated many of China’s regulations on direct selling and prohibitions on pyramid schemes.
7. During the Class Period, Defendants repeatedly and misleadingly misrepresented how Nu Skin was operating its business in the PRC in order to create the appearance that the Company’s growth in Mainland China was achieved in compliance with China’s laws and regulations. Defendants told investors that Nu Skin developed a “hybrid” system of marketing the Company’s products in the PRC, creating “teams” that marketed Nu Skin products and shared in commissions.
 
8. In reality, Nu Skin was operating the very same MLM system in Mainland China that it was operating everywhere else. Confidential witnesses, and internal documents used to train new employees confirm that Nu Skin was not complying with China’s direct selling and anti-pyramid selling regulations. In fact, quite the opposite - Defendants were permitting the establishment of downlines in China in direct violation of China’s rules prohibiting multi-level marketing. Moreover, Defendants knowingly failed to put in place a system of internal controls that would have ensured that new sales representatives and direct sellers were trained in a way that complied with Chinese law. The training that did exist was lax and inconsistent and not at all enforced – another violation of China’s regulations on direct selling.
 
9. Quarter after quarter, Defendants continuously touted astounding growth in Mainland China attributing it to enthusiasm for Nu Skin’s anti-aging products and general business momentum all the while failing to acknowledge how that growth was really achieved in China – through multi-level marketing, vast networks of downlines, and poorly trained sales representatives who sold products not authorized for direct sales in Mainland China.
 
10. Nu Skin sales materials shared with potential recruits in China in early 2013 detail Nu Skin’s strategy to encourage its direct sellers and sales representatives in China to create at least six “generations” or layers of recruits underneath them to maximize their compensation. In these documents, Nu Skin calls the downlines of its sales representatives - sales “teams” - and calls its multi-level compensation “team rewards” or “team awards” – in an attempt to skirt the Chinese regulations prohibiting multi-level compensation and MLM. However, there is a flat- out prohibition against multi-level compensation in China and Defendants knew their “team rewards” system and “payment by team” was in direct contravention of that prohibition.
 
11. Nu Skin became increasingly dependent on Mainland China for a disproportionate share of its gross revenues and all of its growth. In 2010, revenue from sales in Mainland China was $91.4 million or 6% of Nu Skin’s overall revenue. By the end of 2013, those numbers skyrocketed – to over $1 billion in revenue and 32% of the Company’s revenue – a growth rate for Mainland China of 292% (year-over-year).
 
12. As they were touting the Company’s performance and prospects in Mainland China, the Individual Defendants unloaded huge amounts of Nu Skin stock for proceeds of more than $40 million, at a time when they knew that the Company’s stock price was inflated by the
false statements they were making about the reasons for the Company’s extraordinary growth in China .
 
13. Defendants’ scheme began to unravel in August, 2012, when Citron Research, a short seller, published the results of its private investigation showing that Nu Skin’s operations in Mainland China were being conducted no differently than they were in the rest of the world, through a multi-level marketing, pyramid scheme. Nu Skin’s stock dropped on the day this report was issued. Defendants responded to the report almost immediately, denying Citron’s claims and continuing to misrepresent the nature of Nu Skin’s business in the PRC. Defendants successfully convinced analysts and investors following the Company that Citron’s report was not credible, and Nu Skin’s stock rebounded in response while investors remained deceived. For the next year and a half, Defendants continued to tout the Company’s growth in the PRC, which, they claimed, was achieved while operating in compliance with Chinese law.
 
14. Defendants’ scheme completely fell apart on January 15, 2014 when a leading Chinese newspaper reported that Nu Skin was operating an illegal pyramid scheme in China, and employing unlawful business practices in violation of PRC law. The next day, Nu Skin reported that its business practices were under investigation by Chinese authorities.
 
15. The full truth was finally revealed on Tuesday, January 21, 2014 when Nu Skin filed a Report on Form 8-K releasing a letter to its customers in China (in English and Chinese / Mandarin) admitting to violations of Mainland China’s regulations on direct selling.
 
16. Between January 15, 2014 and January 21, 2014, Nu Skin’s stock price plummeted over 43% - falling from a market close on January 14, 2014 of $136.47 per share to a market close on January 21, 2014 of $77.39 on unusually high volume during those four trading days.
 
17. Ultimately, Nu Skin was fined by one branch of the Chinese government, forced to retrain its sales representatives in China and required to shutter certain “working studios” improperly used by the Company’s sales representatives in China to recruit new distributors and direct sellers. Further, based upon information and belief, at least one investigation by
Chinese authorities regarding Nu Skin’s business is ongoing as of June 2014 .
 
18. Defendants’ actions have negatively affected and continue to negatively affect Nu Skin’s revenues and growth rate in Mainland China. During the Class Period, growth in Mainland China reached almost 300% year-over-year. Now the Company cannot even predict if and when its business in Mainland China, previously one of its largest markets, will recover.
 
19. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiffs and other Class members have suffered significant losses.

[Boon]

“your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death."
 _____________________________________________________________________________________________________
"In network marketing, you can earn money upon the effort of people you may or may not know – you earn money off other people’s effort as well as your own. If you are successful in building leaders in your team, there will be a point where your team will grow with or without you. You can’t stop it, and you can’t stop your earnings going up. Amazing, isn’t it?"

"When you are able to build a big team, you will start to earn a consistent and good amount of residual passive income."

http://passiveincomesingapore.net/networ...-business/
______________________________________________________________________________________________________________________

Passive income schemes in both the above cases is based on multi-level-commission earned from a strong network team of downline.

Without the multi-level-commission structure, it wouldn't work.

Same thing...............Downlines = future income stream.

Hard to imagine if there were no distributor agreement between DMJ/CGL and BWL.

In my experience, I have learned that almost all distributors join a MLM company under what I call the “MLM Promise.” This promise essentially comprises of a representation (generally from the company’s marketing materials) that the distributor’s downline constitutes a “business” that he or she “owns.” The MLM Promise also includes a representation that if the distributor works hard to build his or her downline, he or she can eventually sit back and continue earning residual income for the rest of his or her life.
 
http://w-wlaw.com/use-provisions-limit-m...m-damages/

[vingaard]

 
Very interesting document indeed – class action against Nu Skin (illegal MLM practices in China)
 
Much to learn from it………………….
_______________________________________________________________________________________
 
http://securities.stanford.edu/filings-d...V00033.pdf
 
 
I. NATURE OF THE ACTION
This is a federal securities class action on behalf of a class consisting of all persons other than Defendants and certain affiliated persons who purchased or otherwise acquired Nu Skin securities including options between May 4, 2011 and January 17, 2014, inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.
 
2. Nu Skin is a global multi-level marketing company that distributes personal skin care products and nutritional supplements in the Americas, Europe, and the Asia Pacific region. Multi-level marketing (“MLM”) is a marketing strategy often used by companies making sales directly to consumers where the salespersons are compensated not only for products they sell, but also for the sales of other salespersons whom they recruit.
 
3. Prior to the start of the Class Period, growth in Nu Skin’s business in some of its larger, more developed markets including Japan and the United States was on the decline.
 
4. To offset the slowdown in growth in Nu Skin’s major, more developed markets, Defendants orchestrated a plan to substantially expand Nu Skin’s presence in the People’s Republic of China (“PRC” or “Mainland China”). The decision to focus the Company’s resources on growing business in the PRC was made despite stringent regulations in China prohibiting the very type of multi-level marketing and multi-level compensation employed by Nu Skin in all of its other markets and despite the limited success Nu Skin had achieved in penetrating the Chinese market as a result of those stringent regulations.
 
5. In early 2011, Defendants took what was already a modest, but illegal multi-level marketing business model and multi-level compensation plan in Mainland China, and essentially put it on steroids, easing some of the restrictions they had put in place, rapidly recruiting new distributors who received inadequate, if any training, authorizing the rapid expansion of downlines, and permitting the direct sale of products outside Nu Skin’s brick and mortar stores that were not licensed for direct selling.
 
6. Defendants also encouraged Nu Skin’s existing sales distributors around the world, including its Chinese-speaking distributors in Hong Kong, Taiwan, and Southeast Asia, to recruit sales promoters and distributors in Mainland China in much the same way they recruited distributors around the rest of the world. This included signing up sales distributors in Mainland China, paying them strictly on commission, and requiring the new recruits to sell specified minimum monthly sales levels of Nu Skin products while promising to reward them handsomely not only for selling Nu Skin products but also for recruiting additional new sales distributors from whom they could share their sales commissions. Defendants masterminded this massive expansion in China knowing that Nu Skin’s form of multi-level compensation violated many of China’s regulations on direct selling and prohibitions on pyramid schemes.
7. During the Class Period, Defendants repeatedly and misleadingly misrepresented how Nu Skin was operating its business in the PRC in order to create the appearance that the Company’s growth in Mainland China was achieved in compliance with China’s laws and regulations. Defendants told investors that Nu Skin developed a “hybrid” system of marketing the Company’s products in the PRC, creating “teams” that marketed Nu Skin products and shared in commissions.
 
8. In reality, Nu Skin was operating the very same MLM system in Mainland China that it was operating everywhere else. Confidential witnesses, and internal documents used to train new employees confirm that Nu Skin was not complying with China’s direct selling and anti-pyramid selling regulations. In fact, quite the opposite - Defendants were permitting the establishment of downlines in China in direct violation of China’s rules prohibiting multi-level marketing. Moreover, Defendants knowingly failed to put in place a system of internal controls that would have ensured that new sales representatives and direct sellers were trained in a way that complied with Chinese law. The training that did exist was lax and inconsistent and not at all enforced – another violation of China’s regulations on direct selling.
 
9. Quarter after quarter, Defendants continuously touted astounding growth in Mainland China attributing it to enthusiasm for Nu Skin’s anti-aging products and general business momentum all the while failing to acknowledge how that growth was really achieved in China – through multi-level marketing, vast networks of downlines, and poorly trained sales representatives who sold products not authorized for direct sales in Mainland China.
 
10. Nu Skin sales materials shared with potential recruits in China in early 2013 detail Nu Skin’s strategy to encourage its direct sellers and sales representatives in China to create at least six “generations” or layers of recruits underneath them to maximize their compensation. In these documents, Nu Skin calls the downlines of its sales representatives - sales “teams” - and calls its multi-level compensation “team rewards” or “team awards” – in an attempt to skirt the Chinese regulations prohibiting multi-level compensation and MLM. However, there is a flat- out prohibition against multi-level compensation in China and Defendants knew their “team rewards” system and “payment by team” was in direct contravention of that prohibition.
 
11. Nu Skin became increasingly dependent on Mainland China for a disproportionate share of its gross revenues and all of its growth. In 2010, revenue from sales in Mainland China was $91.4 million or 6% of Nu Skin’s overall revenue. By the end of 2013, those numbers skyrocketed – to over $1 billion in revenue and 32% of the Company’s revenue – a growth rate for Mainland China of 292% (year-over-year).
 
12. As they were touting the Company’s performance and prospects in Mainland China, the Individual Defendants unloaded huge amounts of Nu Skin stock for proceeds of more than $40 million, at a time when they knew that the Company’s stock price was inflated by the
false statements they were making about the reasons for the Company’s extraordinary growth in China .
 
13. Defendants’ scheme began to unravel in August, 2012, when Citron Research, a short seller, published the results of its private investigation showing that Nu Skin’s operations in Mainland China were being conducted no differently than they were in the rest of the world, through a multi-level marketing, pyramid scheme. Nu Skin’s stock dropped on the day this report was issued. Defendants responded to the report almost immediately, denying Citron’s claims and continuing to misrepresent the nature of Nu Skin’s business in the PRC. Defendants successfully convinced analysts and investors following the Company that Citron’s report was not credible, and Nu Skin’s stock rebounded in response while investors remained deceived. For the next year and a half, Defendants continued to tout the Company’s growth in the PRC, which, they claimed, was achieved while operating in compliance with Chinese law.
 
14. Defendants’ scheme completely fell apart on January 15, 2014 when a leading Chinese newspaper reported that Nu Skin was operating an illegal pyramid scheme in China, and employing unlawful business practices in violation of PRC law. The next day, Nu Skin reported that its business practices were under investigation by Chinese authorities.
 
15. The full truth was finally revealed on Tuesday, January 21, 2014 when Nu Skin filed a Report on Form 8-K releasing a letter to its customers in China (in English and Chinese / Mandarin) admitting to violations of Mainland China’s regulations on direct selling.
 
16. Between January 15, 2014 and January 21, 2014, Nu Skin’s stock price plummeted over 43% - falling from a market close on January 14, 2014 of $136.47 per share to a market close on January 21, 2014 of $77.39 on unusually high volume during those four trading days.
 
17. Ultimately, Nu Skin was fined by one branch of the Chinese government, forced to retrain its sales representatives in China and required to shutter certain “working studios” improperly used by the Company’s sales representatives in China to recruit new distributors and direct sellers. Further, based upon information and belief, at least one investigation by
Chinese authorities regarding Nu Skin’s business is ongoing as of June 2014 .
 
18. Defendants’ actions have negatively affected and continue to negatively affect Nu Skin’s revenues and growth rate in Mainland China. During the Class Period, growth in Mainland China reached almost 300% year-over-year. Now the Company cannot even predict if and when its business in Mainland China, previously one of its largest markets, will recover.
 
19. As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiffs and other Class members have suffered significant losses.

Thanks for this. It looks like a potential huge risk for Best World.


Sent from my iPad using Tapatalk

[Unicorn2]

“your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death."
 _____________________________________________________________________________________________________
"In network marketing, you can earn money upon the effort of people you may or may not know – you earn money off other people’s effort as well as your own. If you are successful in building leaders in your team, there will be a point where your team will grow with or without you. You can’t stop it, and you can’t stop your earnings going up. Amazing, isn’t it?"

"When you are able to build a big team, you will start to earn a consistent and good amount of residual passive income."

http://passiveincomesingapore.net/networ...-business/
______________________________________________________________________________________________________________________

Passive income schemes in both the above cases is based on multi-level-commission earned from a strong network team of downline.

Without the multi-level-commission structure, it wouldn't work.

Same thing...............Downlines = future income stream.

Hard to imagine if there were no distributor agreement between DMJ/CGL and BWL.

In my experience, I have learned that almost all distributors join a MLM company under what I call the “MLM Promise.” This promise essentially comprises of a representation (generally from the company’s marketing materials) that the distributor’s downline constitutes a “business” that he or she “owns.” The MLM Promise also includes a representation that if the distributor works hard to build his or her downline, he or she can eventually sit back and continue earning residual income for the rest of his or her life.
 
http://w-wlaw.com/use-provisions-limit-m...m-damages/

This is a potential risk, however, it is only possible during the mature stages of expansion in China - only during so, corruption can happen, but not before it has even expanded into China (early stages)

> Have taken a look at Boon's projected calculations in past trends
> Have taken a look at direct selling books, Amway
> Have previous work experience in MLM 
> Vested

[Boon]

“your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death."
 _____________________________________________________________________________________________________
"In network marketing, you can earn money upon the effort of people you may or may not know – you earn money off other people’s effort as well as your own. If you are successful in building leaders in your team, there will be a point where your team will grow with or without you. You can’t stop it, and you can’t stop your earnings going up. Amazing, isn’t it?"

"When you are able to build a big team, you will start to earn a consistent and good amount of residual passive income."

http://passiveincomesingapore.net/networ...-business/
______________________________________________________________________________________________________________________

Passive income schemes in both the above cases is based on multi-level-commission earned from a strong network team of downline.

Without the multi-level-commission structure, it wouldn't work.

Same thing...............Downlines = future income stream.

Hard to imagine if there were no distributor agreement between DMJ/CGL and BWL.

In my experience, I have learned that almost all distributors join a MLM company under what I call the “MLM Promise.” This promise essentially comprises of a representation (generally from the company’s marketing materials) that the distributor’s downline constitutes a “business” that he or she “owns.” The MLM Promise also includes a representation that if the distributor works hard to build his or her downline, he or she can eventually sit back and continue earning residual income for the rest of his or her life.
 
http://w-wlaw.com/use-provisions-limit-m...m-damages/

This is a potential risk, however, it is only possible during the mature stages of expansion in China - only during so, corruption can happen, but not before it has even expanded into China (early stages)

> Have taken a look at Boon's projected calculations in past trends
> Have taken a look at direct selling books, Amway
> Have previous work experience in MLM 
> Vested

China Export Revenue (SGD million)
FY2013 ~  2.600
FY2014 =  5.912  (~ 127% growth)
FY2015 = 13.077 (~ 121% growth)
FY2016 = 53.198 (~ 311% growth)
FY2017 = ?
 
Is the growth at infancy stage now?
Is the growth at mature stage now?
Who knows?
 
If the high growth from FY2013 to FY2016 were attributable to “illegal activities” in China – and if BWI were to get caught now for these illegal acts
=> revenue would drop
=> share price would drop
=> investors could lose money=>
=> investors could sue BWI for misleading them…..

[Boon]

Another very interesting case of class action against NHT.
 
http://securities.stanford.edu/filings-d...V00255.pdf
 
1.    This is a federal securities class action brought on behalf of a class consisting of all persons and entities, other than Defendants and their affiliates, who purchased or otherwise acquired the securities of Natural Health Trends Corp (“NHT” or the “Company”), including persons who purchased call options or sold put options, from March 6, 2015 to March 15, 2016, inclusive (the “Class Period”), and who were damaged thereby. Plaintiffs pursue remedies against Defendant NHT and certain of its officers and directors for violations of the federal securities laws.
2.    NHT is a Delaware company whose principal executive offices are located in California.
3.    NHT’s business is multilevel marketing (“MLM”). MLM is a marketing strategy in which the sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation. A prominent example of an MLM company is Amway.
4. NHT pays commissions in two different ways. First, NHT’s salespersons, which it calls Members, receive commissions on sales by their downlines at least three generations down.1 Second, Members are paid fixed dollar rewards when their sales organizations – including infinite generations – reach certain pre-specified sales targets. All commissions other than those earned by the Member’s own sales are called downline commissions.
5. NHT generates more than 90% of its sales through its Hong Kong subsidiary. NHT admits that most of its Hong Kong orders are in fact shipped to Mainland China. During the Class Period, Defendants repeatedly claimed that Mainland China was NHT’s most important market.
6. But Chinese law prohibits many aspects of MLM, including all downline commissions. In fact, it is a criminal violation of Chinese law to pay third-generation commissions.
7. Defendants claimed that NHT did not violate Chinese law. Indeed, Defendant Sharng told investors that “[w]e have taken great care to make sure that we’re not in violation of any Chinese law.” Specifically, Defendants repeatedly told investors that NHT “[u]nder the NHT Global compensation plan, distributors are paid weekly commissions for product purchases by their down-line distributor network across all geographic markets, except China, where we maintain an e- commerce retail platform and do not pay any commissions.”2 Indeed, Defendant Sharng added that in Mainland China “[w]e sell products for personal consumption from Hong Kong.” Thus, Defendants told investors, NHT complied with the law because it did not pay downline commissions in Mainland China.
8. Defendants’ statements were not true. Plaintiffs obtained promotional materials provided by NHT to Members located in Mainland China. One of the documents, marketing slides for a presentation for Mainland China Members, touted NHT’s “globally uniform” compensation practices. And both the marketing slides and a separate marketing brochure included a pyramid (the “Pyramid Drawing”) demonstrating that NHT paid downline commissions in China:
9. Plaintiffs’ investigator similarly spoke with nine NHT Members who reside in Mainland China, are current NHT Members, and were NHT Members during the Class Period. These Members confirmed that Chinese Members were eligible to earn downline commissions. Indeed, most Members who spoke with Plaintiffs’ investigator reported that they themselves earned downline commissions. The Members reported that their compensation structure was the same as NHT’s compensation structure in other countries.
10. Making downline payments and advertising them were not the work of rogue Members. NHT claims in its SEC filings that it is its corporate policy to specifically approve all marketing material, including the marketing brochure and the marketing slides. NHT itself paid the Members’ commissions, using proprietary software which recorded the Members’ residential address. And certain NHT Members who resided in China received annual downline commissions of more than $1 million, an amount so high it could not possibly result from the
Member’s own sales. Accordingly, NHT knew that it was paying downline commissions in Mainland China, and advertising the fact to current and prospective Members. Such downline payments were NHT’s China strategy.
11. By falsely assuring investors that NHT complied with China’s MLM laws, Defendants concealed the substantial risk that NHT would face severe legal and regulatory penalties in China, including that NHT’s China operations representing over half its global revenue would be shut down and that NHT could face substantial monetary penalties.
12. In December 2015, Chinese authorities began to take notice of NHT’s violations of MLM law. On December 28, 2015, NHT published a notice on its Chinese-language website, admitting that “[r]ecently, there have been some member rule violations in the market.” The announcement spooked the markets, causing NHT’s stock price to fall from $45.89/share to $39.78/share, or $6.04/share (13.1%).3
13. On December 31, 2015, an analyst who had pretended to be interested in becoming an NHT Member reported a statement from a senior NHT official that the “vast majority” of Asian NHT Members purchased the most expensive package NHT offers, the platinum package. The platinum package’s principal benefit is that it pays Members higher commissions for sales from their downlines. On December 31 and the next trading day, NHT’s stock price fell from $37.05/share to $29.59/share, or $5.46 (20.1%).
14. Then, on January 7, 2016, Chinese press reported that the Chinese State Administration for Industry and Commerce (the “SAIC”) had begun an investigation into NHT’s MLM practices. That day, NHT’s stock price fell from $28.98/share to $25.88/share, or $3.11/share (10.7%).
15. On January 8, 2016, a screen shot of a Chinese NHT Member’s internal NHT page was publicly posted. The internal page showed that the Member had a downline of 1,222 Members. That day, NHT’s stock price fell from $25.88/share to $23.31/share, or $2.57/share (9.9%).
16. On January 11, 2016, an analyst published a report documenting a site visit to NHT’s Beijing offices. NHT’s office was closed, but an employee in the neighboring office told the analyst’s investigator that uniformed government employees had recently seized several computers from NHT’s Beijing office. That day, NHT’s stock price fell from $23.31/share to $20.67/share, or $2.65/share (11.3%).
17. On January 12, 2016, NHT responded by denying certain of the analyst and media reports of an SAIC investigation, but admitting that it was in direct contact with Beijing City government officials, giving added weight to the allegations raised by the analyst. That day, NHT’s stock price fell from $20.67/share to $19.15/share, or $1.51/share (7.3%).
18. On February 3, 2016, a Chinese newspaper published an article presenting evidence that the SAIC investigation of NHT was a large, serious MLM investigation. That day, NHT’s stock price fell from $22.57/share to $21.01/share, or $1.56/share (6.9%), damaging investors.
19. On March 15, 2016, an analyst reported that NHT’s Beijing office had
been shut down since March 11, 2016, showing that the shutdown resulted from
the SAIC investigation. That day, NHT’s stock price fell from $31.08/share to
$28.45/share, or $2.63 (8.4%), damaging investors.

[Millionfaith]

This is one of the question I asked BW IR:

Question: I am concerned Best World under attack by short seller/s. It was reported in Reuters that Nuskin and other direct selling companies have come under increased scrutiny because short sellers and other critics have accused them of running illegal schemes. How can Best World navigate such accusations? As a result of increased publicity, the risk of short seller attack has also risen.

Answer: Thank you for giving us your feedback. Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws.

Above is the response from BW IR.

Additionally, just to share since I have some exposure in the MLM industry. Most direct selling companies (whether single level or multi level) often have claims against them on over exaggerated promises and/or illegal practices. Besides Nuskin, Amway was sued before too. This is common in this industry. Despite it was normally the conduct the of the IBOs, the company, to a certain degree has to take responsibility. Hence if one invest in a direct selling company, one should be prepared to such attacks.

I have no doubt, since day 1 of my posting in BW thread that there could be some unofficial practices. Whether BW is aware or not, I do not know (you may refer to my earlier postings). I have given my 2 cents worth about how some independent business owner (IBO)...the black sheep tried to outsell others by not following company practices. It is difficult for the company to exercise control especially when the membership explodes. Hence I would rather spend quality time to figure out what is the true value of BW..with China DS license and without. What should be the fair value if China DS is out of the equation...not sure if Mr Boon can use his knowledge and skill to advise on that, which is in my opinion, more meaningful. 

Also, how much will the export revenue in China be affected if there is no DS license. According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights .

Please do your own diligence.

(Vested)

[DCF]

This is one of the question I asked BW IR:

Question: I am concerned Best World under attack by short seller/s. It was reported in Reuters that Nuskin and other direct selling companies have come under increased scrutiny because short sellers and other critics have accused them of running illegal schemes. How can Best World navigate such accusations? As a result of increased publicity, the risk of short seller attack has also risen.

Answer: Thank you for giving us your feedback. Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws.

Above is the response from BW IR.

Additionally, just to share since I have some exposure in the MLM industry. Most direct selling companies (whether single level or multi level) often have claims against them on over exaggerated promises and/or illegal practices. Besides Nuskin, Amway was sued before too. This is common in this industry. Despite it was normally the conduct the of the IBOs, the company, to a certain degree has to take responsibility. Hence if one invest in a direct selling company, one should be prepared to such attacks.

I have no doubt, since day 1 of my posting in BW thread that there could be some unofficial practices. Whether BW is aware or not, I do not know (you may refer to my earlier postings). I have given my 2 cents worth about how some independent business owner (IBO)...the black sheep tried to outsell others by not following company practices. It is difficult for the company to exercise  control especially when the membership explodes. Hence I would rather spend quality time to figure out what is the true value of BW..with China DS license and without. What should be the fair value if China DS is out of the equation...not sure if Mr Boon can use his knowledge and skill to advise on that, which is in my opinion, more meaningful. 

Also, how much will the export revenue in China be affected if there is no DS license. According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights .

Please do your own diligence.

(Vested)

[DCF]

I like the approach that many here take the Positive and direct approach of discussing with the company, compared to speculating what could have happened. I think over the long term. This approach help our invested companies to growth and avoid risk. The approach bw took in taking feedback open and positively also ensure sure improvement over time.

Just want to shared my similar experience. I have some business network so I explore with BE on distributing their business there, as well as in singapore. They explained that because of the regulatory constrains, the compensation models are completely different for china and it really looks more like export than DS. Hope this gives those vested some peace

[Boon]

This is one of the question I asked BW IR:

Question: I am concerned Best World under attack by short seller/s. It was reported in Reuters that Nuskin and other direct selling companies have come under increased scrutiny because short sellers and other critics have accused them of running illegal schemes. How can Best World navigate such accusations? As a result of increased publicity, the risk of short seller attack has also risen.

Answer: Thank you for giving us your feedback. Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws.

Above is the response from BW IR.

Additionally, just to share since I have some exposure in the MLM industry. Most direct selling companies (whether single level or multi level) often have claims against them on over exaggerated promises and/or illegal practices. Besides Nuskin, Amway was sued before too. This is common in this industry. Despite it was normally the conduct the of the IBOs, the company, to a certain degree has to take responsibility. Hence if one invest in a direct selling company, one should be prepared to such attacks.

I have no doubt, since day 1 of my posting in BW thread that there could be some unofficial practices. Whether BW is aware or not, I do not know (you may refer to my earlier postings). I have given my 2 cents worth about how some independent business owner (IBO)...the black sheep tried to outsell others by not following company practices. It is difficult for the company to exercise  control especially when the membership explodes. Hence I would rather spend quality time to figure out what is the true value of BW..with China DS license and without. What should be the fair value if China DS is out of the equation...not sure if Mr Boon can use his knowledge and skill to advise on that, which is in my opinion, more meaningful. 

Also, how much will the export revenue in China be affected if there is no DS license. According to BW IR, currently all DRs Secret product is sold freely in ALL of China by Drs Secret outlets/workshops, and is not through DS model, so how much will the business be affected, would be good if someone can offer their insights .

Please do your own diligence.

(Vested)

Nu Skin:
 
7. the Company’s growth in Mainland China was achieved in compliance with China’s laws and regulations. 
 
In the end, what happened ? what is the truth?
 
NHT:
 
7. Defendants claimed that NHT did not violate Chinese law. 
 
In the end, what happened ? What is the truth?  
 
BWI:
 
Best World adheres to strong principles of legal business, transparency and corporate governance and is fully compliant with the rules and regulations of business operations under China’s laws. 
 
In the end, what will happen ? What will be the truth?

“your hard work in building up a strong network team entitle you to earn a passive income and this passive income can even extend to become a lifelong income with sustainable earnings for your family even after death." is in complaint with 禁止传销条例?
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