Zer01 Loses $43 Million Lawsuit To MLM Partner For Never Delivering Phones

from the vaporware-scams dept

Wed, May 26th 2010 2:49pm — Mike Masnick

Remember Zer01? The company that made really quite stunning claims about being able to offer a VoIP-based mobile phone that would offer unlimited voice and data on smart phones for a low price? After some investigations by reporters like Nancy Gohring and our own Derek Kerton it became pretty clear that the whole thing was pure vaporware, tied to a multi-level marketing (MLM) scheme that had a questionable past. It certainly sucked in lots of folks, a bunch of whom showed up in our comments insisting that the phones were real and we'd be proven wrong soon enough. Of course, multiple promised launch dates came and went with nothing to show for it. Laptop Magazine, whose credibility took a big hit, rescinded its "best of show" award for the product, and eventually the company tried to blame everyone else for its problems, suggesting that it was its MLM partner, Global Verge, who was the real problem. Oh yeah, and all those journalists who asked tough questions and weren't satisfied with the non-answers they received. As part of that Zer01 "dissolved" its relationship with Global Verge (the "parent" operation of Buzzirk Mobile, which was set up to sell Zer01 -- or, more accurately, to sell the "dream" of being a Zer01 sales rep, in typical MLM fashion).

Of course, if it was really everyone else's fault, you would imagine that somewhere along the line, Zer01 would show up with an actual product. One that people could see and actually use -- just as Derek had asked to use the "demo" phone at CTIA, a request that was denied. But, of course, none of that happened. Earlier this year, Zer01's website just disappeared. It also turns out that Global Verge sued Zer01, and has now been awarded $43 million. Of course, considering that Zer01 seems to have disappeared entirely, you can consider that $43 million to be worth about the same as $43 million in Monopoly money. Apparently, Zer01's boastful CEO, Ben Piilani lost his lawyers after "he stopped replying to contact from his counsel." In other words, Piilani has disappeared.

Assuming that Piilani doesn't re-emerge and appeal, then Global Verge may try to take any assets it can, which may include some apparent patent applications that Zer01 claimed it had -- though, the details were never explained, so I wouldn't hold my breath on the actual existence of such patent applications, or the likelihood that they get approved. Of course, as Gohring's latest piece on the saga points out, many people are still upset with Global Verge for convincing them to sign up to sell these non-existent phones. Global Verge tap dances around all this:

"One of the misnomers out there is that with Zer01 that we were charging people to come into the company to sell the Zer01 service. We never charged any of our distributors one dime for any service or any phones or any of the ability to sell the phones or the service," he said.

Yet, Robbins himself spoke repeatedly on conference calls for associates last year that were almost exclusively about the Zer01 service and the potential benefits of becoming an associate in order to sell the service.

Robbins maintains that associates who signed up to become part of the marketing program last year did so in order to get other benefits of being part of Global Verge, such as national ID recovery, back-end management systems to manage their businesses, a video conferencing program and travel sites to save money on travel.

Of course, it seems that many of those who signed up don't agree. Gohring notes that two dozen complaints have been filed against Global Verge to the Missouri state attorney general's office. Yet another reminder that if something seems to be too good to be true... it probably is.

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Filed Under: mlm, multi-level marketing
Companies: buzzirk, global verge, zer01

11 Comments

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bob, 26 May 2010 @ 3:12pm

MLM=Ponzi
I don't care if DeVos and Van Andel convinced a court of law that it is not, MLM is a scam.
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Ted Robbins, 26 May 2010 @ 5:24pm

Global Verge
Thank you for posting this article and we would like to futher comment. It is true that Global Verge did not charge for 1 Zer01 phone or activation, meanwhile giving money to Zer01 as deposits for the service. The courts found no fault in Global Verge or it's promoting of the Zer01 product. Global verge was only promoting according to the signed contracts and this is why they were awarded the 44 million vs the $172k out of pocket. Just to make sure they went back to the 65,000 people that had ever signed up in the company offing refunds to anyone that did feel that they came into the company for just this product. In addition to the refunds, Global Verge had to eat the cost of goods for the products they actually purchased. Global Verge would to tell you the full story if you want to contact the President Ted Robbins at ted@globalverge.com
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dorp, 26 May 2010 @ 5:46pm

Global Verge had to eat the cost of goods for the products they actually purchased.

What products?
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_Arthur (profile), 26 May 2010 @ 8:24pm

Hop-On Inc.
In one of the many twists of the ZER01 tale, another truly putrid company, Hop-On Inc, has announced its partnership with Global Verge to sell nicotine delivery devices, "Electric Cigarettes". So far, Global Verge has not acknowledged this "partnership".

Another former ZER01 partner, Pervasip Inc, has launched its own $69 VOIP service for the Nokia N900 Maemo. So far, no known sales.

Global Verge also sells the "Golden Eggs™", a pair of brass balls that purify tap water or bottled water...
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Trerro, 26 May 2010 @ 8:36pm

MLM = pyramid scheme with good lawyers behind it
That's all it is. Even when there actually is a real product attached to it, most of those involved in its sale will be royally screwed over.
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Derek Kerton (profile), 26 May 2010 @ 9:08pm

The Story Fits A Script Someone Wrote
I haven't continued digging into this story much, since a) it's unpaid work, and b) it's just a frustrating maze of lies, exaggeration, blame games, false addresses, and he said-she said.

But I do have the time to notice a quote Nancy Gohring published recently from Ted Robbins, Global Verge CEO, "Zer01 didn't charge anyone for phones and service, which I think saved our bacon," Robbins said. If Global Verge had presold the mobile services and failed to deliver them, the court may not have looked so kindly on the company, he said."

Might that not have been planned all along?

His quote sounds just like the story I suggested we would hear from Global Verge in my Techdirt post of July 2009: http://epsilon.techdirt.com/articles/20090721/1746225615.shtml

I wrote, "In the US, a pyramid scheme is illegal, and is defined by an utter lack of product, and a focus on the recruitment of additional distributors instead of product sales. But since Zer01 is a separate legal entity from the MLM distribution companies [Global Verge], they can't be accused of a pyramid scheme -- they simply sell their phones to 'entirely separate companies'... with similar office locations. Meanwhile, Buzzirk and Global Verge, despite recruiting their e-affiliates with a focus on the mobile phone offering, also are clear that they offer other products that their e-affiliates can sell, such as a 'water saver,' a 'power saver,' and 'identity theft protection.' Thus, it is possible that the phones will never arrive, Zer01 will say 'Sorry, just couldn't pull it off,' and blame it on Ma Bell. Buzzirk and Global Verge can say, 'Sorry, e-affiliates, no phones. Thanks for the fees, but stick around to sell the water saver,' thus, engaging in legal MLM, not a pyramid. This paragraph is certainly just speculation, but cautious investors might want to investigate further whether the mobile phone service is just an oasis to lure them into an expensive 'water saver' MLM franchise."

Did I nail it? Either way, Global Verge can now claim that they actually have real products (ex: water savers, etc.) thus they are a legal MLM. They are not JUST a pyramid scheme recruiting paying distributors with a non-existent product (i.e. the non-existent Zer01 phone with which they recruited paying distributors.)

I still want to know whether the whole fiasco had been planned by both companies from the start. There is reason to doubt their claims, having made so many specious ones in the past.
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Derek Kerton (profile), 26 May 2010 @ 9:11pm

Re: Hop-On Inc.
Really? The same scammy Hop-On that Techdirt examined here in 2003?

http://www.techdirt.com/blog/wireless/articles/20030418/1422211.shtml

The same Hop-On where the CEO was indicted for fraud and tax evasion?

How is it these guys keep on operating with impunity?
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_Arthur, 27 May 2010 @ 4:27am

Re: Re: Hop-On Inc.
Yes, it is the very same Hop-On (HPNN.pk).
During the mid-2000s, Hop-On had a very marginal operation, selling disposable phones in the Middle-East. Just imagine.

Hop-On is 3+ years delinquent in its SEC filings, which means the SEC can pull the plug on them anytime, just like what happened to Phantom Entertainment, née Infinium Labs.

Hop-On unaudited 2009 financials show no sales, no inventory, no revenues of any kind, $173K in expenses, heaps of payables and debts, including a bank overdraft. Any normanl company woulf have long declared bankruptcy and moved on.

Hop-On only know economic activity is emitting press releases. Every single press release raises the price of its sub-sub-sub penny stock. That's how the game is played in that "market". Being delinquent in their filings, HPNN is not allowed to emit billions of new shares anymore, small mercies.

In its latest paid-for press releases, Hop-On was considering the acquisition of a VOIP company...

And then, there is their partnership with USAcig to peddle propylene-glycol+nicotine jelly cartridges based "Electric Cigarettes" ...
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Jon, 31 Oct 2010 @ 3:30pm

Global Verge Dive Bomb
I got enticed to enroll, paid several hundred dollars... Thankfully a refund was processed, the sting went away... Still looking for that 49.99 Unlimited high tech month to month phone.... With a family plan of course(more discount!)
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Gitami, 6 Nov 2010 @ 11:35am

Re: Global Verge Dive Bomb
Same here, but I was only two months in when they began offering refund back in August-September 2009. Didn't bother with the refund, I am just glad I got out then. At most $200 loss.

What I am worried about is they have my social insurance/security number. So far it doesn't seem to have been misused...
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steve, 4 Oct 2012 @ 3:35pm

solavei scam
next mlm mvno scam is called solavei . waiting for the lawsuits already
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