Anti-saturation, Anti-pyramid Anti-Security, Anti-Scheme to Defraud
The Appeal Panel failed to acknowledge and misunderstood Hosseinipour’s anti-saturation plan, representing the affirmative defense she was twice denied. Instead, the panel focused solely on the legitimacy of the 5,000-person cap, which Judge Nalbandian pointed out was contraindicative of a pyramid scheme.
However, Hosseinipour’s key argument was that the “customer reliance” incorporated into the plan reduced or eliminated the need for recruitment. The government’s evidence irrefutably supports the anti-saturation plan.
(Exh101a,101b documenting product and usage purchases resulting in commission, (101c) casino transactions demonstrating commissions earned from casino chip purchases, (exh 145) conference call definite the 25% of casino usage paid as commissions, Doc 487 #3857- 3874 Dr. Keep documentation of 1.2 million in casino chip usage resulting in commissions, ie R.497,#4028,29, 48-49; R.505,#4551-52; see App’x047-48,59,84, See, e.g. R.504, #4309-11; R.497, #4063-68; testimony affirming customer reliance in i2G plan, Exh 158 6 ways to get paid,)
Reynolds, the plan provider, best equipped to explain the I2G plan he programmed, described an anti-saturation plan with “built-in” consumer reliance to earn commissions and advance within the plan based on product sales and “usage,” without the requirement to recruit. (Doc 497 4021-23, pp. 4028, 29, 4035, 36, 4043-49) He described that distributors could advance to the emperor level based solely on product usage (Exh 497 4036).
Reynolds identified a retail “casino customer” that generated “distributor rewards” from “outside retail customers” without recruitment. (Exhibit 102, Document 497 4043-49). He emphasized that the commissions” generated from casino chip usage were the “whole point” of the plan. The connection between product usage and distributor rewards, unrelated to recruitment, disproves the existence of a pyramid scheme, per Koskot. For the same reason, this disproves a securities offering or scheme to defraud based on a pyramid scheme.
Moreover, as product usage increased, the need for recruitment to earn commissions diminished or would be eliminated. The plan was working, as evidenced by $1.5 million in casino chips and fantasy sports product usage, which generated commissions independent of recruiting.
The anti-saturation plan was explained in Hosseinipour’s videos and the i2G materials. It documents that 25% of the usage of the I2G product generates commission without the need to recruit others. Hence, the slogan “earn from every bet placed.”
The panel mistakenly equated the concept of “no recruiting required” with the idea that no work was required, despite evidence that contradicts this. Regardless of any misunderstanding, the requirement for product usage is outlined in the I2g program rules (see doc 497, #4021,22) and identified as a means to advance within the plan without recruitment. Given her limited role as a distributor, Hosseinipour’s belief in this plan was crucial to her affirmative defense.
The company’s materials support the anti-saturation plan, as highlighted in the company’s PowerPoint tagline: “Get paid to play,” which relates to the commissions earned from “customer play” at the casino and fantasy sports, without the need to recruit. (101a, b, c)
The Emperor cap of 5000 further supports the plan to shift focus from recruiting to driving customers to use the i2g products that generated the same commissions under the plan. This approach would enable the company to grow indefinitely without recruiting, avoiding saturation.
Hosseinipour presented substantial evidence to support her argument, surpassing the minimum requirements outlined by Judge Nalbandian. However, she was denied this affirmative defense twice.
The first denial occurred when defense expert Warren was prohibited from raising the anti-saturation argument. The government argued that the anti-saturation argument was irrelevant as I2G faced no risk of saturation and would not raise the issue. Despite this promise, Dr. Keep strongly argued the risks of saturation, which Warren could not rebut. Therefore, Hosseinipour was twice denied the opportunity to present a well-substantiated affirmative defense.
Judge Nalbandian noted the inconsistency of a pyramid scheme with no saturation risk. Despite acknowledging the odd concession, he failed to consider that this was related to the anti-saturation plan Hosseinipour presented, which was fought from being introduced. Nor did the government address this contradiction or rebut Hosseinipour’s argument, which was critical to explain her consistent belief in the company’s legitimacy.
Dr. Keep, Anzalone, and company materials (101a, 101b, 101c, 503b) affirmed that 25% of product usage generated commissions unrelated to recruiting within the i2G plan. This disqualified I2G from being a pyramid scheme, per the Koskot standard, a security per Howey, and a scheme to defraud based on a pyramid scheme. No law or guidance defines a pyramid scheme beyond what Koskot vaguely describes.
Simply, to establish a pyramid scheme, distributor rewards must be unrelated to product sales. This can not apply when “product usage” results in distributor rewards independent of recruiting.