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Arbitrage Scam Websites Targetted in Australian Crackdown

Posted by Aegist on September 23rd, 2008

The Sydney Morning Herald ran a story today (below) about the investigation being conducted by the Australian Competition and Consumer Commission (ACCC) into Australian websites making ‘too good to be true’ claims. Arbitrage Betting investment schemes, and the over-promising over-priced Arbitrage software companies were mentioned in the investigation, alongside other regular scams like anti-ageing rip offs, other get rich quick schemes, expensive ‘free’ mobile phone services, and genealogy rip offs.

No companies being investigated will be named until after the ACCC finds the company is in breach of trade practices - I look forward to seeing numerous companies which we have discovered and posted about here on SAG being named by the ACCC.

The full SMH article can be read here:

http://www.smh.com.au/news/biztech/watchdog-eyes-140-scam-websites/2008/09/23/1221935618431.html

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CSI Arbitrage’s CarbonA and Finding Arbs

Posted by Aegist on September 16th, 2007

Update to this article:

Since posting this article CSI have spoken to me again, and assure me that they do in fact have their own arbs feed. How CarbonA works, I am told, is that it can be interfaced with any other alert service, so that those arbs are displayed in CarbonA. As such, their clients are all provided with their own default feed, plus the option to supplement their feed with any other service they want. CSI then subscribes to that service as a user on behalf of the client and that clients CarbonA will now have arbs supplied from those alerts. So the fact that SportsPunter arbs was being used in CarbonA does not mean that it doesn’t have its own feed, but simply that it was only getting SportsPunter arbs at that time.

Original article follows:

Incredibly disappointed I am.

After a couple of weeks of quite thoroughly investing my time into this matter it seems like nothing is ever as it seems in the world of arbitrage. Shortly after writing an article about Cohen Strachan Investment’s CarbonA, where I basically say that having spoken to numerous people that work there for several hours that I think everyone seems completely sincere, I find out that there was one ’small fact’ which was never revealed to me, which I think would be quite obviously worth mentioning.

CarbonA doesn’t find it’s own arbs, it takes data from other arb services and uses them.

So when you buy CarbonA from CSI for $16,000, you are actually getting a software add-on to one of the other more commonly available alert services. It was taking arbs from SportsPunter, but when SportsPunter found out about this, they closed down all of the CSI associated accounts and stopped taking new membership for a brief period of time. Last I have heard, CSI are now looking at using a commercial licensing available from Tip-Ex. That is, they will pay Tip-Ex a larger than normal fee to gain the right to re-sell Tip-Ex’s arbs. SportsPunter costs $75 USD a month or $510 USD a year, while Tip-Ex costs €120 a month or €1000 a year.

In light of another article I recently wrote warning about the risks of paying for non-subscription based services, I think this perfectly highlights risk #3 in that article. That is, the risk that the arb feed suddenly and mysteriously stops. If CSI stop paying Tip Ex’s commercial license fee (or whatever arbs data feed they end up settling on), then what happens to the expensive CarbonA? It becomes a useless husk of a program.

Boy I hope that never happens, for the sake of all of their clients.

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Sports Arbitrage Alert *Service* Subscriptions - Why single upfront payments are risky.

Posted by Aegist on September 15th, 2007

We have recently added a new category to our complete list of Arbitrage Alert Services titled “Non-Subscription Based Software“. This was added because a couple of companies have recently started selling software in this manner and it seemed appropriate that they be distinguished on this fact. The three entries currently in this section charge no ongoing fee, but instead require one single upfront payment. In some sense it may seem like a sound investment; it is easy to rationalise that the profits made from arbing will eventually pay them off and you will be able to continue arbing for free for the rest of your life if you wanted… but there are quite a few concerns which need to be pointed out when considering taking a non-subscription based offer.

For instance, what happens if:

1. Arbing is not what you thought and after a month or two you want to quit?

   This is the most obvious risk for all newbies to sports arbitrage trading, and probably the most common problem. Arbitrage can easily be made to sound very enticing. It is easy to make it look like arbitrage is free money for anyone who wants it, and many companies use that methodology when trying to sell their software. Reality of course is very rarely ideal, and the hands on experience of arbitrage could take all of the excitement out of the idea. Within a month or two the average person just isn’t interested anymore. If you are using a subscription based service then you simply stop paying the monthly fee and move on, no loss incurred (even your trading balances are usually intact, which is one of the best aspects of arbitrage!) However if you are using a non-subscription based service, and you have just paid a huge upfront fee for the software; you’re stuck with it. Refund policies rarely cover “I don’t want it anymore” and you are now out of pocket for the entire fee paid.

2. You gain experience and start to realise that the software isn’t as good as you first thought?

   This is a general risk which most people new to arbitrage will never think of. If you don’t know what arbitrage really is, how it really works, and don’t have years of experience doing it, how could you possibly know what is good quality? Making something look all shiny and fancy is much easier than making something work well. If you are considering paying a huge upfront fee for some software, you better know it is high quality, otherwise you could be basically giving away good money for nothing. If there is no decent trial period where you can have a chance to see how well it really works for yourself, then that is definitely a good reason to be concerned. Similar to the first concern, there is very rarely a refund policy for “It’s not as good as I expected.” If you were in a subscription based service, you could simply stop paying your subscriptions and move to a better service. When it comes to one off payments though, you are trapped and have to accept the product you have paid for. You could complain to the company providing the software, but what real incentive do they have to improve their service? They already have your money and there is no financial incentive for them to invest in improving things when they know that their product can still bring in new clients who know as little as you did when you started.

3. The arbs stop being delivered, or The quality of arbs decline over time?

   The fact which most people don’t realise with alert services, is that it isn’t the software package you are really buying. What you are really paying for, is the ongoing ’service’ provided by the owner of the arbitrage alert feed to continue providing high quality arbs. With most alert software, the software you have or the website you log into is just a the ‘client side’ of the whole package. The real work is done on the ’server side’. That means that the real work being done on a server somewhere else, and the results are simply being displayed in your software or on the web page you view. So it is very important that the service side aspect of your alert software is maintained because without the server working, your software is completely useless. This is very important because the software which runs on the server side of an arbitrage alert service is still just stupid software blindly doing what it has been programmed to do, and in every case this will requires constant human attention to ensure it is finding the right odds for the right sport at the right bookmaker for it to work. It can’t do this itself because the work that it is doing (finding odds from many different bookmakers, standardising them into a comparable format, calculating arbitrages and presenting the data to clients) is based on information which is constantly changed. So when Bookmaker A decides that they want to do a complete redesign of their website, the alert software pulling odds from their website will need to be recalibrated to find the odds in their new design. And when Bookmaker B decides that they are going to move their XML feed (where odds are provided to most odds comparison websites etc) to a new server, the alert software will have to be pointed to that new feed. Or if Bookmaker C changes the naming protocol for all of the sports, will the alert service still be able to match up odds for that bookmaker with all of the other bookmakers for each particular sport and market?

   Bookmakers are very dynamic. They change regularly, and there are a LOT of them out there so there is continuous ongoing work in ensuring that your alert service works well. That is why most alert services require ongoing monthly fees. You aren’t paying for the software alone, you are paying for the continued performence of the software. You are paying to make sure the server which provides the alert software with its arbs keeps working! Which brings us to the bigger concern raised in this point: What happens if the alerts simply stop coming? The company which sells you alert service software for thousands of dollars goes bankrupt for unforseeable reason (or disappears for any reason for that matter) and they have to remove their server which does all of the real work for alert service software? The software which was worth so much is now worth nothing. Without the stream of arbs being fed through to your client side software, all of its fancy features, calculators, clever displays and functions are completely worthless.

   As with the previous two points, having already paid for the product, what incentive does the company providing the software have to maintain the quality of their arbs? With a subscription based service, if their quality drops you can quickly and easily move to a better service. If the company goes out of business and their arb feeds stops, you have no recompense and worthless software. If you are paying on a monthly basis though, then you have not lost anything other than maybe a months fee (at most). There is no real way of knowing for sure than any of these scenarios won’t happen, either accidentally, purposefully, or through complete apathy. Regardless of the cause though, the risk to the consumer is real and must be taken into account.

When it comes down to it, you may be certain that concern #1 is not a problem for you: you are certain that you want to arb for the rest of your life. Maybe even point #2 doesn’t apply: you are already experienced and the demonstration/trial you had of the product proved that it was the best software on the market. Point 3 though is inescapable. You have no control over it and the risk will always be there.

When you are looking at a non-subscription based service, you are basically betting that you will get its value out before one of the above risks are realised. As most arbers are risk adverse (the very idea of arbitrage is to reduce risk to a negligible level) I expect that most would prefer to take the ’surebet’ option and avoid the risk altogether. Of course in the end it does depend on the cost. For example, JuiceTrading is one of the programs in the “Non-Subscription Based Software” field, but its cost of only $99 means that it only needs to work for less than a month before it pays for itself in comparison to the monthly subscriptions which usually cost around the same per month anyway. It is when the cost is significantly higher that the extra concern is warranted.

To just conclude the point of this article, I think it is worth contrasting the above risks, with the benefits that come with paying an ongoing monthly subscriptions.

When you need to pay for each month as it comes:

1. You have influence

   To ensure ongoing profit the provider has to keep his customers happy. If the service declines in performance, then many customers will leave and it will have a very real tangible impact on the profit of the provider. Thus there is a lot of incentive for the provider to maintain a high quality feed and to ensure their customers are happy.

2. The business model is much more stable

   Most people know that it is easier to keep a customer than it is to find a new one, so services which make ongoing profits from each individual customer they already have are much more likely to stick around longer than business which are constantly fighting to get new customers in order to make a profit. Non-subscription based services have no other product to sell to their current customers, so the customer they have already worked so hard to get, are now worthless to them.

3. You have freedom to choose

   As long as you have only paid for a month at a time, at the end of every month, you can pick a different service. You are never locked in, and even if things go wrong, you can only lose a small amount of money. Freedom, drastically reduced risk, and no concerns.

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Cohen Strachan Investment (CSI Arbitrage) and International Arbitrage Strategies

Posted by Aegist on September 6th, 2007

Cohen Strachan Investment, known as CSI Arbitrage, is the marketing arm of International Arbitrage Strategies, a software company which programmed the arbitrage alert software CarbonA. I have received a number of queries about whether I think this company is reliable or not, so I started to look into it, reading through their website and booking myself in for a live demonstration of their software. I had known that CSI Arbitrage existed for a while, because they actually link to SAG from their links page. Inbound links arise like that every now and then, so I didn’t pay much attention to it, but other than that I had heard nothing about the company. No negative reports, nor any positive ones. I didn’t even realise that they sold arbitrage software, I thought they were looking for investments into a trading fund they were running and so pretty much lumped them into the growing group of dodgy HYIP’s available which promise huge returns on investment. The reason for that assumption is because most companies selling software make it very clear from the outset that they are offering software, they tell you the price, and they provide you with the option to buy straight away. CSI doesn’t focus on its software product so much as it focuses on the strength of their business, the strength of the company behind them (IAS), their trading fund which they are operating (hence my initial assumption that they were just another HYIP), and their goal to be listed on the Australian Stock exchange. Now that I am approaching the end of my initial research on this company, I have realised that CSI isn’t just trying to sell arbitrage alert software, they are trying to sell themselves, and the idea of a new level of sports arbitrage trading.

So when you make first contact with their sales representative over the phone and the $16,000 (+GST = $17,600 for Australians) price tag is one of the first things you are told, it becomes a little more obvious why they are going about this a little different to usual. In fact, my first thoughts when I heard that they were selling software for that much was that they had just put AusSoft to shame (with a cheap price tag of only $7,800!). But there is something more going on here. Why would a company which is selling their software for so much more than the average market price link to SAG? SAG clearly informs every visitor that software is as cheap as $50 a month in most circumstances and clearly informs every visitor that Arbitrage isn’t all easy sailing, it involves work and even a few risks. What could they gain from that? It seems like they weren’t relying on the ignorance of their prospective clients to make sales… but how could they sell their software for $17,600?

I spoke to Simon (a CSI Sales rep) over the phone in the morning. Basically the first thing he said to me was “This software costs $17,600, do you think you would be able to afford that?”. I answered honestly and said “No, probably not, but I’m already in arbitrage and I’d like to see your software” so he booked me in to see the live demonstration. The software looked much the same as most other arbitrage software on the market. It had a page full of arbs, showing the odds, the sport, the duration of the arb so far, the arb percentage etc. It does the usual calculations, and enables the user to hedge one way or the other on a sliding scale. The only two differences which really separated it from most of the other alert services on the market was that it has the ability to update currency exchange rates and auto convert currencies for you, and it also stores all of your bookmaker username/passwords so that you can have the software log in to all of the bookmakers for you, and for some of the bookmakers it can even do everything for you up to the bet confirmation page. Now this is the only software I have ever encountered which can do that, so that is impressive. Strangely though, I didn’t realise it only took you to the confirmation page until I spoke to Glen during my third conversation with CSI staff. Until that point everyone else had simply said that the software placed the bets for you, which I thought was quite problematic. For instance, that doesn’t take into account max bets, which contrary to the reassurance Simon gave to me at the time about the training directing you to large limit bookmakers, most betting limits encountered by arbers have nothing to do with the bookmaker wide betting limits, and everything to do with personal limits, sports specific limits, and bet specific limits. For instance I know that WillHill often has very high bet limits, but I can’t count on all of my fingers and toes the number of times I have had a great arb with Pinnacle and WillHill where the arb still existed but the WillHill side of the arb was limited to $1.50. However after all that, it only takes you to the confirmation screen, and only does it for a few of the top bookmakers (though they are working on adding the function to more). I think stopping at the confirmation screen is much more reasonable then letting the software commit your money, and this seems like quite a good function.

So all that said, is CarbonA, the software, worth $17,600? My honest opinion, is no; but remember, they aren’t really trying to sell the software, they are trying to sell themselves.

Shortly after I had my live demonstration of CarbonA, Alan Newton (a senior staff member who basically acts as a liaison officer) called me back and we spoke for almost an hour over the phone. He is determined to prove that there is nothing questionable about their business, and that the activities of other questionable organisations do them no end of harm (because everyone assumes the worst in an industry full of scams) while they are trying to basically start a new age of respectable sports arbitrage big business. So in short Alan basically promised to do whatever needs to be done to remove their company from being associated with any other questionable companies which have operated in the past. We spoke about what they could do to achieve that and we are working on some ideas, but personally my opinion on the matter is that the fact that they are willing to engage this problem so openly is quite impressive in itself.

So why do they charge so much? What does one of their clients get for that upfront payment? Basically, as I said, CSI are trying to usher in the age of Big Business Sports Arbitrage. They are trying to make sports arbitrage trading something which is worthy of the attention of the stock market, something that is worthy of financial reviews. They are not lone programmers working out of their basement selling their software for simple cash flow. So they have a big price tag to cover their staff which provide extensive training and support. They have a large price tag to cover their staff which trade their own investment fund. They have a large price tag to cover their costs, which are all designed to form a tight nit community of professional arbitrageurs who will work together to get the greatest profit they can manage: both individually, and for the IAS trading fund they run. So to reiterate the point: the software is not worth $17,600, but the company is trying to sell a dream, a big picture package of arbitrage which extends beyond the solo trader. The consumer is paying for the running costs of the CSI dream, not the software itself. I don’t know whether that is worth $17,600 or not, and I am not going to even offer an opinion on it because it is something which has never been done before. Who knows what it is worth? It could flop, or it could be the start of a real revolution. I offer no speculation.

In the end, the only question is whether you can trust them to uphold their end of the bargain. As I have said, I am impressed with their openness and their cooperation. The people I spoke to seem sincere and honest, and there is certainly a lot more going on than just some guys operating out of a house. But aside from their words, how can anyone be sure that they will still be around in 5 years? How can you be sure they will provide the extensive training their price seems to encompass? What motivation do they have to keep you happy once you have paid them? Well, it comes down to trust.

What should you do? My recommendation remains the same as always: If you are brand new to Arbitrage, take out the free trials, register at the bookmakers and have a go yourself before you part with any money. Once you have seen the reality of arbitrage, then re-evaluate whether you want to arb at all, and whether you would prefer to pay $50-$300 a month, or jump right in the deep end and lock yourself in with a one off payment. With that last step, I even recommend subscribing to one of the other services for a month or two first, just to be sure you are dedicated, because once you pay the big money, there is no going back.

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