“A friend of a friend is making millions and just closed a 1 Trillion Mask deal!”
Anyone with any modicum of a social network has heard this pitch a dozen times. “You could do that easily!” …you could, but should you?
A network of people from all walks of life are seeking to make money by acting as INTERMEDIARIES in the trade of PPE (Personal Protective Equipment). The products run the gamut from n95 NIOSH respiratory masks, nitrile and vinyl gloves, COVID test kits, isolation gowns, and anything else that can be bought and sold in large volumes and create generational wealth in one transaction.
But this isn’t a new game. Before COVID made the supply of PPE scarce and profitable, there was Bitcoin, with big banks and investors seeking a huge supply of tokens, often more than 10% of the entire global supply. As the #1 Woman in Blockchain influencer last year I was flown around the world speaking on due diligence and compliance for family offices and hedge funds looking to go big in bitcoin. What sounds simple involves a complex scheme of documents and hurdles and in the end rarely ever results in a closed transaction. And when it does, the likelihood that all the players get their expected payouts is close to zilch. I always advised them to look at blockchain-based companies with real business models that don’t rely on the price of their token going up.
Then came Hemp futures… I skipped that one altogether. Not surprisingly, it was these two groups that were the first to recognize the opportunity in PPE and had prebuilt communication pools ready to go – private WhatsApp chat groups, Facebook groups, telegram chats… all primed for the next big opportunity to start pitching deals.
BROKER CHAINS AND WHY TO AVOID THEM
The line of contacts from one intermediary to another is called a “broker chain” (and we are fairly certain the design of these chains constitutes an (illegal?) unregistered multi-level marketing scheme). How it works is that each person in the chain must sign a NON-CIRCUMVENTION NON-DISCLOSURE AGREEMENT (NCNDA). This document is “supposed” (I used air quotes because most chains use a template from the International Chamber of Commerce that makes better toilet paper than legal protection) to legally prevent any of the intermediaries from by-passing each other in an attempt to get closer to the originator of the transaction since those who are one-on-one with the originator make the highest commissions.
The intermediaries are never allowed direct contact with the originators of the transactions. Originators are known by many different titles, depending on the transaction. Buyer, Seller, Manufacturer, Importer, Title Holder, Mandate, Owner, Emir, Prince (ok but check the royal registry before you believe this one), Sultan, Agent, Minister, President (of a country), these are but a few of the titles bandied about. A relationship with a Middle Eastern Prince is the most popular contact and is frequently the title of the alleged initiator in 3M transactions. Now, with Nitrile gloves being the hot commodity, being BFFs with the nephew of a factory owner is the new hot connect.
People in the Underground Network put in extremely long hours, every day, seven days a week. They spend an enormous amount of money chasing commissions. Going broke and bankrupt is extremely common. I’ve seen it for years. In both Bitcoin and Hemp. The money is almost here. Almost…
Fast riches have their allure. And their risks. Like most financial transactions when dealing with trillions of dollars and multiple countries, and now especially while we are under the Defense Production Act, fiduciary duty becomes even more important. But most people in the Underground Network have little to no financial, legal, or medical supply background. They are networkers often clinging to the steep learning curve with their fingernails, having formerly worked making sandwiches at Subway or folding Tshirts at the Gap, both of which are totally fine jobs, just not the kind of transferable skillset you need to source, finance, import, and close a 100 million box glove deal.
REAL RISK TO LOSS
Having spent the last 6 months traversing the chats and secret rooms of the network, I’ve seen a multitude of felonies. The mere format of the Standard Operating Procedures in these transactions lend themselves to fraud. Requiring a Bank Confirmation/Comfort Letter or Bank Statement just to submit a Letter of Intent through a Broker Chain on an unverified lot means as a Buyer, you have no idea how many hands it will pass through before it is delivered to a Seller… if it ever is. I’ve seen my own clients Letter of Attestation from their attorney circle back to me in a template pack “direct from 3M!”
The fraud is getting harder to spot. In the old days, an intermediary would get hold of an old bank document, white-out pertinent information, and peddle it as proof of true information via fax machine. Sometimes the documents are stolen, often forged, or usually otherwise fraudulent. It’s called “The Art Department” and it’s how scammers make themselves look legitimate.
In fact, a person can actually post one of these bogus “deals” in a WhatsApp chat from the US which gets picked up by someone in Europe, and get the same deal back the next day as a great opportunity – from an unknown intermediary in Australia! And worse, when hospitals are in such great need, these long broker chains prevent needed PPE from getting into the hands of those that need them most – our fearless frontline workers.
A few months ago had one mask transaction circle back 3 weeks after we killed it for being a scam seller… this time “it’s REAL!” Our Buyer is still very desperate for masks so we play along… only to find out at the end that someone had altered our original Letter of Intent, changed the date (but not the AdobeSign encrypted stamp of the real signature date) and recirculated it. A new Broker Chain picked it up and was hot to close the deal, all the while thinking our Buyer Broker was the seller because someone had put them in the wrong box on the IMFPA (Irrevocable Master Fee Pay Agreement – what the broker chains use to divide up the commissions). There was no Seller, never was. Just 3 weeks of wasted time. For them. Not us. We knew it wasn’t real. Once you’ve heard the song a million times, you get familiar with the lyrics.
Most suspect deals start in the form of screenshots in WhatsApp chats with no way to verify titleholder, origination, or authenticity. While there are several real importers in these groups, you will often see the same lot, marked up, being sold by multiple brokers. Even when the real Seller is in the same group. It makes it more difficult to determine what is real, available, and ready to ship.
Keep in mind, scammers can easily alter documents in PDF. Even when you encrypt them. That attorney letter I mentioned that ended up in the 3M template pack? It was exported from a secure encrypted PDF into word. And who knows how many people received that template, ready to edit with a real attorney’s letterhead and wet signature? As a matter of fact, the transmission of these forged documents is called WIRE FRAUD and is so prevalent in the Underground Network that it is a normal course of business. Well-meaning but unqualified people in the chain pass along what they’ve been told is a legitimate transaction, real documents, literally anything they need to do to get the deal closed and collect their commission. And it’s this lack of diligence, fiduciary duty, and logic that we recommend avoiding broker chains altogether. If you do see a deal you really want, it’s essential that you have full due diligence and compliance check done of all parties involved in the transaction.
The PPE life never sleeps. Calls 24/7, flying to inspect an empty warehouse, staying weeks in hotels and motels to offices, ports, and back again. Usually, the people in the network are only speaking with other people trying to do the same thing, each stating they have the ultimate contact, the only lot on the ground, but you have to move fast or its gone. Docusigned NCNDA’s fly around the world at the speed of light. Rumors of someone closing a 1T (one trillion units) lot keep the feet to the fire to keep going.
Those who have the stamina will eventually hook up with the real contact for any of the unicorn lots being circulated. Unfortunately, this may the contact who will steal all your money and that of your clients and whomever else they can persuade you to suck into the trap.
Law enforcement is generally unaware of the Underground Network for the simple reason that the majority of the money lost is in the form of time, telephone bills, and travel expenses. The main victims are the members themselves, racking up thousands of dollars in expenses chasing deals that go nowhere. There is no law against poor judgment.
While this video deals with Platform Trading commodities futures, it’s the exact same process and a good laugh break.
WHAT TO DO INSTEAD
To avoid these issues, we have devised a standard vetting procedure that knocks 95% of deals to the curb before wasting the client’s time, and ours. If you are seriously looking for real supply or tied of buyers falling through at the last minute, we can help.
As a mentor to CEOs worldwide, Adryenn is directly responsible for adding significant revenue to her clients' bottom line. Her elite consulting clients cover a broad spectrum of industries, including Healthcare, Blockchain, Entertainment, Artificial Intelligence, and FinTech. Adryenn earned her “high tech priestess” stripes by crashing computers and breaking into banks. With a reach of 110 million globally, she starts conversations global that matter.