You may have heard about the DubLi Network, the e-commerce platform that offers shoppers cash back on their purchases and, at least from the outside, looks like other familiar cashback platforms such as Swagbucks or Ebates. Here is what you see when you first glimpse DubLi’s cashback mall:
The site looks fairly innocuous and even resembles eBay, to some extent. One can sign up to DubLi for free and earn cashback on purchases made at the site’s mall. Alternately, one can pay $4.95/month or $99/year for a Premium or V.I.P. membership, respectively, and make an additional cashback percentage on purchases.
DubLi also offers its members the opportunity to earn cashback via its entertainment (video, audio, radio) and travel portals.
The DubLi affiliate network is where the real money is made, however. The company encourages its members to become affiliates, Business Associates, by recruiting other members to DubLi. The affiliate ranking system is listed as follows and operates by the top affiliates feeding off the commissions and customer referrals of the bottom affiliates. These bottom affiliates form an ever-widening pyramid that supports the few affiliates at the top.
- Senior Vice President (top)
- Vice President
- Sales Director
- Team Coordinator
- Team Leader
- Team Member (bottom)
However, if you don’t do well with recruitment, you can also pay as much as $12K to instantly become a Team Leader.
Looking around DubLi’s website, you see that the company has several international offices and a USA-based one in Ft. Lauderdale. DubLi even provides some enticing photos of its Florida office, with Michael Hansen, the company’s President and CEO, portrayed in the top right photo:
However, that’s where the legitimacy ends.
DubLi’s SEC filings tell a different story
DubLi trades as the ticker DUBL on the over-the-counter or OTC market. While this might make the company appear more legit, the OTC market is not the NASDAQ or NYSE. There is significantly less transparency and SEC regulation of the OTC market, and stock trades are frequently made between dealers without the actual price ever being reported.
At most, the OTC market is a quotation service and requires just one market maker to quote the stock price. Oftentimes, this market maker is also the broker who hypes up the stock only to dump his shares immediately afterwards. More notoriously, so-called “boiler room,” penny stocks and pump-and-dump scam stocks are frequently found on the OTC market.
Within DubLi’s SEC filings, such as the most recent 10-K dated December 2014, the true nature of the company emerges. To begin with, the company’s Ft. Lauderdale office is not even listed as one of its main offices. And the reason becomes clear once the address and suite number are input into Google:
The “office” that DubLi maintains in Ft. Lauderdale is actually a virtual office. It also goes for just $106/month, an incredible cost savings compared with the company’s original Boca Raton office (and perhaps the real reason why the lease was broken). The “change of address” is described in the company’s 10-K as follows:
So, where is DubLi really located? The company’s main headquarters are in Cyprus. Additional corporate offices are located in the BVI, the Cayman Islands and the United Arab Emirates.
While these locations alone don’t prove that the business is a scam, they do hint that DubLi has situated itself in tax havens or foreign countries where it will be exceedingly difficult to reach out to execs and ask for compensation and/or refunds if something goes awry.
Show us the money
Let’s dig a bit further into DubLi via its SEC filings and answer the really critical question: How does DubLi make its money?
In the very first paragraph of DubLi’s 10-K, the company states that it is a “global network marketing company that operates an online shopping portal through which our customers search and purchase products offered by various online stores…We have a large network of independent Business Associates that sells our various E-commerce products, including memberships and advertising and marketing programs.”
So, a significant portion of DubLi’s business is based on its Business Associates (i.e., affiliates). And these Business Associates engage in MLM networking, not just the sale of e-commerce goods. Just how much does the MLM business bring in yearly?
Of the $26 million in reported revenues, $16 million was generated by member license fees, subscriptions and advertising. This entailed DubLi V.I.P. members signing up other members to the DubLi network and having them pay for subscriptions. As a result, a sizable portion of DubLi’s revenues are derived from new member sign-ups, not the sale of actual goods.
Then, there is the auctions business. Until the end of 2013, DubLi operated a penny auctions area (i.e., reverse auctions) that required members to purchase bidding credits from the company. These credits were supposed to be resold to other members and general consumers at a higher than purchased price, enabling the original member-buyers to make a profit.
That was the plan, anyway. And it’s not that DubLi members didn’t purchase the bidding credits- the statement above shows that over $25 million was spent by members on credit purchases. Unfortunately, the penny auctions were just not as profitable as the company had hoped. Indeed, it looks like most consumers preferred bidding on the more expensive gift cards and not the actual goods. This resulted in a $15 million loss for the company.
By the end of 2013, DubLi announced that it would discontinue its penny auction program. As for the members who had purchased all those reverse auction credits and were now looking to unload them on future consumers, they were stuck (i.e., SOOL). DubLi did exchange the auction credits for free or reduced price memberships going forward, but that’s not the same as providing actual cash refunds. Furthermore, what about those members who did not wish to renew their yearly memberships?
Thus, of DubLi’s $26 million in total “revenues,” $15 million are derived from signing up new members and another $25 million from members purchasing penny auction credits (that would later become non-refundable). Meanwhile, only $1.6 million in revenues is generated from actual product sales. On top of all this is a whopping $15 million loss on gift card sales.
Or, as the company itself stated in its 10-K:
The Company has incurred operating losses since its inception through September 30, 2012. As a result, the Company had stockholders’ and working capital deficits of approximately $12.0 million and $15.8 million, respectively, as of September 30, 2013. The Company also recorded negative net cash flows from operating activities of $11.7 million for the year ended September 30, 2013.
If this kind of revenue “generation” doesn’t steer you away from this company, I’m not sure what will. Oh, wait…
So, where’s the money going?
With DubLi damming up various revenue streams and not refunding its members their original cash investments, you have to wonder where all its actual generated revenues are really headed. Luckily, the 10-K again answers this question in full:
Apparently, DubLi doesn’t just operate e-commerce and MLM businesses- the company likes to buy land! While DubLi has explained its considerable land purchases to be part of members’ incentives program, there is no mention of how such a program might function. So far, the only function that these land purchases have served is as highly publicized DubLi marketing (i.e., party) centers.
The final proof is in the “accounting”
Buried deep within DubLi’s 10-K is the following blurb about its old and newly hired accounting firm:
OK, it’s never the best PR move to publicly announce that you had a shouting match with your accountants and they quit. However, the curious item here is the firm that DubLi chose to replace Cherry Bekaert with- Mayer Hoffman McCann (MHM). This newer accounting firm has made quite a name for itself- though not exactly in the best way. Back in 2010, MHM was pulled into court over its alleged involvement in a mortgage loan Ponzi scheme, with investors clamoring for $900 million in monetary damages.
More recently, MHM has had to answer to charges brought in by the SEC itself over the firm’s auditing of clients that it would have obvious conflict-of-interest issues with. Or in SEC parlance, MHM committed independence violations.
Wow, this firm just can’t catch a break.
Exactly why DubLi would hire an accounting firm with such a colorful legal history is certainly interesting, albeit in a puzzling kind of way. Regardless of this accounting firm being guilty or innocent of the above stated charges, the central issue is that, if it keeps getting itself into such legal SNAFUs, the same issue is bound to resurface at DubLi.
The Bottom of DubLi’s Bottom Line
Should you sign up with the DubLi Network and start making money with this “e-commerce” and MLM network? Only if you wish to personally fund Michael Hansen’s expanding Cayman Islands and Dubai empires with your own cash.