News from Goldnuggetinvest - GNI

Dear Friends & Associates of GNI

As we welcomed Year 2010, we (Principals, Staff and Associates) felt the need to reflect on the challenges GNI faced and were able to overcome; and what if anything, we could learn from having faced these challenges.

These challenges were broad in scope - which included catastrophic script failure(s) to potentially catastrophic hackers; from being flush with cash when we shouldn't have been and devoid of funds when we should have (had ample amounts). Despite these hardships, and in contravention to those who wish nothing but our demise, never did we consider abandoning our friends and associates without whom we never would have experienced, learned and grew with the project uniquely known as GNI.

The last quarter of 2009, however, placed significant obstacles in our pursuit of success, each having the capability of wiping out any well-managed program, anywhere!

During the Christmas / New Year Holiday, needing a crystal clear vision of our financial vortex, I met with Jurgen and others to obtain their trading reports and declare our Profit / Loss position to the Principals of GNI. With Arthur leading the way, we were able to evaluate with no uncertainty, our financial, technical and situational oversight in preparation for year 2010.

Specifically, we looked at:

1. Yesilada Bank. That entity having the most significant impact is / was the freezing of assets by the German Authorities, of Yesilada's Correspondent Bank. This particular frozen account contains all of Yesilada's client's foreign exchange funds. There are dozens of legitimate clients, along with GNI, whose lives have been put on hold pending the resolution of an investigation which has NOTHING to do with GNI. It's a matter of being at the wrong place at the wrong. time.

Twenty-three weeks without the availability of OUR (and some of our best clients) funds, while continuing to honor our obligation of paying interest on those funds becomes a loss ranging from 10% - 12.5% a week. We arrive at those numbers simply by adding the percentage we could have received (which fluctuates based on the traders success) had they not been frozen, with that percentage we would have otherwise not had to pay out; over a twenty-three (23) week period. If we released the actual dollar amount that is involved, the numbers become staggering if not overwhelming.

As significant as this amount became, it was a manageable scenario using reserves and our favorable Forex positions. In defiance of all economic logic, the dollar began and continues to this day to gather strength against the Euro; weakening our positions considerably.

2. New Competition. About the same time (late September, early October) several well-managed, aggressive and unique Sports Arbitrage programs came on-line decreasing our market share, not in terms of investment dollars, more so for viable arbs.

Arbs which were earning consistent 4% - 8% returns during 2008 - 2009, our traders were now earning between 1.75% - 5.50%.

Our competition has taken advantage of technology and formed marketing partnerships which allow for clients to engage in arbitration activities without having to obtain accounts and relationships with bookies that has taken us years to develop. We were caught unprepared, but weren't discouraged.

What this meant:

For GNI to earn returns at the level of last year, demanded twice the amount (proportionate) of capital funds. Whether this is a one-time phenomenon or a new state of affairs in the world of Sports Arbitrage, we cannot say. We hope its the former!!!

2(a) Untimely Customer Requests for Payout of Principal. This, the first full year availing GNI to the world at-large, the percentage of client- requests for principals quadrupled (in proportional comparison to our last 3 years. I have my suspicions why, but cannot back this with any empirical data. It hurt us by forcing us out of arbs (becomes a complete loss on both ends) and missed many good ones during Christmas and the New Year celebration, largely in the US.

3. Fraud / Hacking Activities. Further compounding matters are the uninvited guests who pleasure themselves by hacking into client computers, then invade the GNI script. They have had some limited success redirecting Liberty Reserve deposits and to a much lesser extent, Strict Pay deposits causing untold amounts of additional work and further depletion of assets. Has this intruder caused us harm? Yes. Have we eliminated the threat? We hope so, but we're not entirely sure. What we do know, our customers are NOT taking the requisite steps to keep their computers free from hackers. How many of you use a US Social Security number for your password; or some other parenthetically easy conflagration any experienced hacker can guess. All told, this has cost us, in real dollars, well into the six figures and has contributed SIGNIFICANTLY towards our "situation."

4. Referral Program Abuse. When developing the business model to run and grow this project, included was a percentage to reward those who introduced GNI to prospective members (The Referral Plan). The abuse and fraud perpetrated by members who have become wealthy resulting from their participation in this program, at the expense of non-abusing members, the Principals and staff. who played by the rules, is disturbing!! The outlay of funds for payment of ill-gotten commissions is sufficient to end any well-meaning program!!

A very typical scenario relates to some customers we have who reside in the Eastern part of Europe. These clients held deposits of $100,000 (there were three participants). They staggered their deposits in a way that was clandestine avoiding detection by us. Every 7-10 days an amount between 21k and 35k was being deposited by one of the participants while a similar amount was being withdrawn. After absorbing fees and paying the undeserved commission, this amounted to well over $5000 per month.

Todd has gone through many GNI accounts. He estimates that somewhere between 45% and 60% of all active GNI accounts have received unearned commission (money that should not have been paid). There is no possible way to reverse these at this point. Unfortunately, the entire GNI membership will have to pay this in the form of a restructured program.

There is no justifiable excuse we can make other than we failed to implement adequate oversight.
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We have determined we have but two options: Restructure the organization or liquidate and close up shop!

Option I - Restructuring of the project (GNI) - The following depicts the highlite's of the "New GNI" as we currently envision. The changes are drastic, but still provide for customer's to make profits that dwarf any conventional investment program. Further, it is subject to change as new facts, information and level of capital is made available. It's nothing that any of us take pleasure in implementing, but it is what is necessary to regain our viability and operational capacity in the next decade. With that being said, I give to you the "New GNI" program.

Highlights of the "New GNI" Payment Plans

Much thought was put into the type of plan(s) we could offer. If our membership subscribes to the notion this new "monthly" plan was created having both the customer as well as the program in mind, remaining as revenue neutral as possible while recognizing the returns fall well short of what were able to offer previously. Nevertheless - we want to first introduce the new and now replaced Weekly Fixed Plan with the GNI Monthly plan as follows:

1 (A) The GNI Monthly Plan, has a target subscriber base of those wishing to invest $50 - $20,000. The rate of return will be 16% per month for 14 months. Those of you GNI clients who were in the Weekly Plan will have been rolled over into the Monthly plan.

1(B) The new rate of return will be 20% per month for the Premium Plan which will become effective immediately and will be paid at the above specified rate for 14 months. There will no longer be a cap on level of deposits unless specifically mentioned to you by Todd or myself.

2. Each deposit with have a life-span of 14 months. THE MONTHLY INTEREST PAYMENT INCLUDES THE RETURN OF YOUR PRINCIPAL.

Comment: A common question that has arisen - If the funds are in trade and earning GNI reasonable returns why would GNI need to keep the Investment Principal? The answer to this question is a complex one. Having an established end to the life-cycle of the the investment term, we will have established strong, internal management controls over the flow of currency, something we do NOT have at this point.

(Please Keep in mind, this is a "RECOVERY PLAN," not an operational plan. It can be modified one way or another to ensure the health and longevity of the plan as a whole. Despite the drastic steps we are taking, we are still paying interest at the 150% level (interest). We cannot find any mainstream investment paying anywhere close to this.

3. Consistent with the above, there is no longer a "lock-in" period as all investment cycles are 14 months. No early withdrawals (of principal) are permitted, no exceptions.

4. Outstanding withdrawal requests:

Currently, there is a large number of outstanding withdrawal requests that have not been processed. We know all of you, despite our incessant admonitions that GNI was to be a SECOND INCOME, NEVER wanting or asking to be anyone's primary source of income and encouraging EVERYONE to withdrawal from their accounts on a regular basis, have dire needs for those funds NOW.

There are / were two viable options and two only. The first option (A) is / was as follows:

(A) Those members having outstanding withdrawals may elect to keep them outstanding; and will be the first to receive interest payments when they resume in March. There will not be earnings or interest paid on those pending withdrawals;

On the other hand, those of you who elect to re-deposit those currently pending withdrawal requests,will earn interest starting at the time of re-deposit.

The second option allows for the least disruption and reduced impact on the customer base.

(B) Specifically, it permits the redressing of the withdrawal function starting on Feb. 01, instead of the inflated down time which would not have seen the first withdrawal until the following month, March 01, 2010.
* All pending withdrawals will be cancelled effective January 15th; reverted back to Customer's wallet then deposited (automatically) into either the Monthly or the Premium plan.

* No amount of funds exceeding $49.99 in any one currency will be permitted to remain in either client's wallet or cash balance up to and until this first "cycle" of payments has been completed.

* All requests for withdrawals must be made between the 1st and 7th of each month.

* GNI will fund customer's PP acc't with the agreed to amount between the 8th and 28th of that same month.

Note:

We have been able to change (escalate) the unlocking of the withdrawal feature a full thirty days earlier than originally scheduled . This resulted as a consequence of those members who, either voluntarily or out of necessity, had their withdrawals delayed allowing us to place those funds into trade and essentially reducing the withdrawal "time-out" by a full month. I only wish all of you can appreciate those who were not able to withdrawal during the holidays and the tremendous step forward this enabled our recovery to make.

6(a). New withdrawal requests will be received between the first (1st) and the seventh (7th) of each successive month beginning Feb. 01, 2010. The withdrawal requests received AFTER 11:59pm (server time) on the seventh of each will not be received and payment will not be made for that month.

If the seventh of the month falls on a Saturday or Sunday and your request was timely, it will be honored.

6. Payments will be made between the eighth (8th) and last business day of each month.

7. One withdrawal request per Payment Processor (PP), per month. Minimum withdrawal amount for any one processor = $10.00. If you have deposits in four different processors, you would be entitled to request one withdrawal for each PP accordingly.

8. Fees charged by the PP to transfer funds to GNI can no longer be absorbed by GNI. As an example: Customer sends 100.00 via Strictpay to GNI; GNI receives 98.00 (100.00 less 2.00 charged by SP for transfer, client will be credited 98.00)

9. Referral Program. The referral program and the abuse thereof, will stop. Conversely, we cannot abandon our marketing partners nor those who legitimately introduced the program to OUTSIDERS. Those of you who referred to yourself or to those who already were familiar with the program, along with those of you who withdrew your funds only to re-deposit immediately after you received your payout, you may take credit for contributing to the need for us to restructure. There are times when we needed for our customers to act in a way that showed gratitude, not greed!

Regretfully, the populace being what it is, couldn't resist giving themselves an extra bonus. They did so at the expense of our most honest customers and to those, on behalf of the ones who engaged in Referral Program abuse, we sincerely apologize.

That being said, the "New Referral Program" will work as follows:

Up-lines will, in lieu of the five (5) % punch at the onset of an invested deposit, receive 5% of their downline's interest payment for the life of the investment.

For example. Customer makes a $1000.00 purchase into the Monthly plan. Referrer would NOT receive 50.00 as they otherwise would (at the onset). What they would receive is $8 per month for 14 months or 112.00. This is calculated as follows: ($1000 = customers invested principal)($160 = the monthly interest received by customer for one month)(.05 or 5% = the declared rate of return for referral commission)=8(14 = the number of months invested) // $112.00.

The rate of commission would be slightly higher if your downline invests in the Premium Plan.

Option II - Liquidation of the GNI Project.

It is a fact, nobody wants to modify their program if it has shown the potential for success. Likewise, until a program is up and functional, there is no way to anticipate ALL of the needs, ALL of the problems or the true level of success or failure the program may potentially yield until you take that plunge or go forward. GNI was no exception. Never did we anticipate, nor could we have, the actions taken by the German Banking Administration to freeze Yesilada Bank's assets and those of our best clients, all merely caught up in unrelated investigation of some fraudster on a different continent. Unfortunately life, being what it is, has twists and turns - some of which you can plan, others you cannot.

For us to deny responsibility, as many, many others would, proclaiming "it's not our fault" is failing to accept the responsibility for that which is yours.

We chose Yesilada Bank to be our partners as they offered favorable rates, convenience, accessibility, wire transfer capabilities and other features we felt were important to the successful operations of GNI as well as to those customers who were compelled to utilize their services. We had secured personal assurances for the appropriate managers and service level administrators; with the end result being nothing more than what we are forced to face head-on.

There is never a convenient time to implement the kind and scope of changes we are insisting you, our customers, we the administrators and certainly our employees, to have to take. (Employees of GNI will be taking a 25% REDUCTION in payments and salaries as their contribution towards the successful recovery of the program).

Before going over the less attractive Option, please keep in mind the Terms of Service all of you who are participating in GNI, agreed to accept.

Terms of Agreement

Below are the terms of agreement and use for this site:

...We reserve the right to change the commissions and rates of the program at any time and at our sole discretion without notice, especially in order to respect the integrity and security of our members' interests. You agree that it is your sole responsibility to review the current terms...

There's a couple ways of liquidating GNI. If it goes through governmental regulators, the assets would be placed in receivership. A Court of Competent Jurisdiction would assign a Trustee, who would hire a team of lawyers, paralegals, accountants and bookkeepers, making anywhere between 100.00 - 700.00 per hour, all of which would come out of.....your (GNI Customer's) funds. It would take between 2-5 years to complete and assuming you have not recv'd ANY funds in the form of a payment; could get between 5 & 10 cents for every dollar invested.

The second option is to have Counsel retained by GNI to take the remaining assets and divide it amongst those of you who HAVE NOT received 100% of your invested dollars. It would be paid out on a pro-rata basis.

Conclusion:

While these are some trying times for everyone, we have devised and orchestrated a comprehensive plan we feel is workable. If circumstances change, we will modify the program accordingly.

How many of our loyal customers will we lose to attrition? We shouldn't loose any, but we will. We'll also loose some "fear weather friends."

Because we don't have a Crystal Ball, we can't predict the future. What we do know is we're honest, our team is honest and we want to succeed where others haven't. With that, along with mentioning we are lifting all caps on investments. We have, per deposit, a total 14 month commitment with each of you (Hopefully much, much longer). We not only have the additional capacity, we need to rebuild our position as the leader in Global Sports Arbitrage World.

We wish at this time to thank you for your support. We are confident this will be nothing more than a hiccup in the life of our program..

Thank you,

Robert, Jurgen and Team