resolution – Paprium Fiasco

I present a translation of an original research by the user Ryaku, from french forums. This translation respects the original, but was edited for clarity and brevity. The original post in French can be read at:

https://www.gamopat-forum.com/t104109p90-topic-officiel-project-y-paprium#3014287

This post is intended to clarify the situation around the WM Company.

These investigations began following messages from people who contacted me a few weeks ago. They wanted to take legal action against WM in order to obtain their refund, but to do so, you need enough information to know what are the possible actions.

Fonzie was aware that if he did not make any official communication before May 16, I was going to post my findings, so he had the chance to keep it confidential.

What will be stated here will not make it clear whether or not the game will ever be released, but will provide some information and allow some people to go through a legal channel if they want a refund. I would not endorse any violent action (whether physical or moral), this information is only intended to give you some information in order to take legal action if you so wish.

Nor will it prevent the game from coming out as some have claimed (if it comes out one day) and I would like to make it clear that. From my point of view, it is better to wait for the game. although the information that follows may tell you the opposite and although Fonzie is a bad manager, he is certainly able to get the game out because while he has many defects, he is someone persistent and wants to go through with it.

I would like to thank Uipneu who gave me the first information allowing my contacts to go further in their research, still ongoing in China.

To begin with this presentation, I would distinguish 2 things:

1 – Facts

2 – Assumptions

FACT #1:

As a preamble, it should be noted that there are two WM companies.

1) The first company is based in Iowa, US (Watermelon Co.)

2) The Second is based in Hong Kong (Watermelon Games Limited –Registry No. 1669099) at 361-363 Lockhart St., Kiu Yin Building, Suite 22B, WANCHAI, HONG KONG

Source: http://www.watermelon-games.com/ (in Contacts)

Regarding payments made to these companies, it should be noted that until 2015 (months and days unclear), all payments made for Pier Solar or WM projects (Y and N) were made to the company Watermelon Co. in the United States via email enquiries@piersolar.com –source:

Between 2015 and 2016, the paypal payment address changed to watermelon@watermelon-games.com

Consequently, all payments made after 2015/2016 (including Paprium’s pre-orders) were made to Watermelon Games Limited, located in Hong Kong.

If you therefore wish to obtain a refund and have made a pre-order with watermelon@watermelon-games.com it is useless to file a complaint with Watermelon in the United States, since it is not the company collecting your money.

ASSUMPTION # 1

Was the change of headquarters due to Tulio leaving his partner? Was it because of Hong Kong’s tax advantages? Was it because of its proximity to Chinese suppliers?

We don’t know, but probably all three reasons influenced Fonzie’s decision.

FACT #2

It is therefore necessary to investigate Watermelon Games Limited to find out more about Paprium. After reaching some contacts in China, they went to Hong Kong to see where Watermelon was located –source:

Instead of “Watermelon Games Ltd”, we read JINETIC CONSULTANTS LIMITED (http://www.jinetic.com/Index/PageId/Jinetic_Home/en/)

This company business is off-shore company incorporation, and is also used as a post office box.

So it is actually via Jinetic that Watermelon Games Limited exists in Hong Kong, there is no physical office as such.

FACT #3

So I asked my contacts to investigate a little more.

According to my contacts in China (and if you can read Chinese)

This screenshot (dated 02/21/2019) indicates that the WM company known with the registry number 1669099 has not yet been authorized to operate in China.

Therefore, according to my sources, it cannot carry out any production in its own name in China.

ASSUMPTION #2

This does not indicate that Fonzie is unable to produce anything, it is possible to do many things “underwater” [sic] in China.

On the other hand, this may be the cause of “blocked funds”, because the payments were made to Paypal for Watermelon Games Limited, and in view of the amount accumulated by the last presale, Paypal had to request supporting documents, business or viability documents that Fonzie was unable to provide.

If Fonzie would have gone through Watermelon Co. in the U.S. as before, it is very likely that he did not have that fundamental problem because the company set up by Tulio was really working.

FACT #4

My contacts were also able to obtain the “Annual return” of Watermelon Games Limited for the years 2016 / 2017 and 2018 (of which I present an extract).

This document defines the status of the company, shares, and the owner of the company.

You will find attached an extract from NAR1 2018 (2016 and 2017 versions are identical)

I have deliberately hidden private information, but you can easily find it on some foreign sites that had already conducted some investigations on Paprium.

As you will see, the owner of Watermelon is Fonzie as the sole and only shareholder (it still had to be proven that the company could have been registered by another person in China). You will also be able to see that Fonzie’s residence is not in China but in France in the company’s declaration.

ASSUMPTION #4

This last point indicates that it is most certainly possible, for those who wish it, and who have been waiting for their refunds for almost a year (without having obtained it), to contact the DGCCRF to file a complaint against Fonzie [Godde, Gwenael], owner of Watermelon Games Limited based in Hong Kong, whose manager resides in France (since it has been registered as such with the registry in Hong Kong).

The above opinions are those of Ryaku, and do not necessarily represent Paprium Fiasco’s positions, strategies or opinions.

My two cents

To put it briefly, what Ryaku reported was that:

What we know as WaterMelon Games are actually two companies, one based in the USA (WM Co.) and one in Hong Kong (WM Games Ltd.). Both are active, and both are owned and managed by Fonzie. —This information was already known to the readers of this blog.
Hong Kong address is the address of the company that incorporated WM. The address listed in WM website is not Fonzie’s actual office.
Watermelon Ltd (HK) is not authorized to operate in China.
According to Chinese Annual Returns, Fonzie is resident in France.

Now, this information is interesting, but it doesn’t change at all the production limbo the game is in.

Watermelon explains on its website that it has offices in the US and Hong Kong. It does not clarify that they correspond to two separate companies. But the Hong Kong *unit* is called WaterMelon Games Ltd. Therefore it cannot be WaterMelon Co. the business incorporated by Tulio in 2009 in Iowa. That had already been disclosed by this blog.
The fact that the addresses Fonzie publishes are from LLCs formation companies shouldn’t surprise us. It is a common practice for small companies, especially those created through online services. Of course it is not optimal, but it is not illegal. It’s the case of WM USA, and that hasn’t stopped them from doing business.

In any case, I think Ryaku confirms that we won’t find Fonzie on that Hong Kong street. One less place to look.
I can’t read Chinese, so I take Ryaku’s word for it. WM HK cannot operate in China. Operate is a very broad term.Does it mean that WM cannot sell or buy in China? So what is the point?
How is the company active and yet unable to trade?
Is that difficulty the result of a WM fault?
Didn’t Fonzie complete the steps to have a functional company?

My bet is WM can’t sell to the public in mainland China. In other words, WMG Ltd. is an offshore company, useful for trading in most countries. But, selling in China probably implies special licenses. That doesn’t mean that Fonzie can’t manufacture in China. Now it is almost trivial to make things in Chinese factories from other countries. If Fonzie owns a company that can’t manufacture in China and sell elsewhere, well, that would be very stupid.
Also, we have proof that WM manufactured in China. Don’t their products say “Made in China” or “Assembled in China”? We know that WM USA made many of these products, but others were manufactured by a Hong Kong company. We know this from the barcodes on the packaging.
So the fact that WM can’t “operate” in China doesn’t seem that bad to me.

Looking for information on Hong Kong taxes (because some offshore jurisdictions prevent a company from trading in that jurisdiction and getting tax benefits – I wanted to know if that explained the “cannot operate” in the Chinese form), I found a very illuminating text:

The problem with business bank accounts for companies in Hong Kong

The biggest weakness of LLCs in Delaware and Limiteds in Hong Kong is nothing to do with the legal, tax, or even the financial side of things, it´s bank accounts.

But, what exactly is the problem?

The problem isn´t so serious in the case of the Hong Kong Ltd since these companies will still find it very easy to open business accounts throughout the world. But that is precisely the problem, all over the world, just not in Hong Kong.

And this is a problem, because generally one of the decisive reasons for choosing a location over another is the strength of the banks in that jurisdiction. But whats even more important is having payment services available, such as Paypal.

If you have a company in Hong Kong but you can´t use Paypal to receive payments from your customers (remember that, as we previously mentioned in our article about payment services, Paypal only allows you to withdraw funds to accounts in the country of residence, in this case in Hong Kong) you end up with a company that doesn´t pay taxes, but can´t receive payments from customers either.

Although its possible for a person to have several Paypal accounts, precisely in regards to money flows from tax havens alarm bells start to ring and your Paypal account can end up being frozen, especially when it comes to large amounts of money (another option would be to set up a payment subsidiary).

So, if you wanted to avoid problems with your company in Hong Kong you would have to get a business account. You could therefore process the payments directly, with more ease and less expenses, instead of doing it through third parties.

And, why is it almost impossible to obtain bank accounts in Hong Kong? There are several reasons for this.

Until not very long ago everything was relatively simple. Although you had to go in person, the norm was always going and talking to a banker and showing him your business plan. Major banks such as HSBC opened business accounts to companies without major difficulties, including for offshore companies outside of Hong Kong.

Since the beginning of 2016, HSBC and many other banks have greatly increased their requirements and conditions. Before, if you had a business with a turnover of around $50,000, you could try to obtain a business account. These days, don´t even bother trying if you have a turnover of less than 500,000 dollars (except for activities in China, for example).

If having a deposit of only $1000 in the bank was enough to open a private account before, today you´ll need around $100,000 to be taken seriously and to be allowed to open one. […]
The impossibility of deducting invoices in some countries (if you don’t have a real office in Hong Kong), the lack of double taxation agreements with certain important countries and the limited possibility of using payment gateways such as Paypal, Stripe, Braintree or Paymill (since you can´t open business accounts in the country) considerably increases expenses due to the need for additional corporate structures.

So, if we can´t open a bank account in Hong Kong, we’d better set up our offshore company somewhere else. Maybe an LLC in Delaware, as one might think of first …

Sorry about the text wall, but there are several *juicy* things here:

*It is very difficult to open a merchant account with a Hong Kong bank, unless you have a lot of money. While WM raised more than 100k dollars (probably closer to half a million), it was a one-time thing, and WM was not likely to generate those numbers on an yearly basis. That could have prevented the banks from accepting Fonzie as a corporate client.
*If you have a merchant account, you don’t need Paypal. You can accept credit card payments directly. The fact that WM relied on a Paypal account may mean that Fonzie did not have a corporate bank account in Hong Kong.
*For Paypal, if your bank account is in the same country as your company, it’s good. If not, there are problems. Extreme case would be freezing of funds due to suspicions of money laundering (offshore company withdrawing money into an account in another country, in large sums, in a short time). It seems exactly what (supposedly) happened with Paprium.
Now, I ruled out that possibility as one more lie by Fonzie, shot at the last minute to buy time, because the game was not complete.

If it really happened that PayPal froze WM funds:
+Fonzie himself assured us that the problem was solved. So I guess it’s solved.
+I suppose if the Paypal *embargo* had been permanent, all or part of the pre-sales would have gone back to customers, so people would have found out.
+Given the amount we are talking about, Fonzie could have faced official inquiries (if Paypal suspected money laundering). We don’t know if anything like that happened.
+Paypal took the money for itself. Very unlikely, because it would mean that Paypal is accesory in the scam ( knowingly).

So I restate that funding was not reached by Paypal. This does not mean that there were no inquiries by Paypal, demands or even the termination of the business relationship. But I think Fonzie finally had the money he collected from all the pre-sales.
If Paypal was *scared* of WM’s monetary flows, and decided not to serve it anymore, that would explain why Fonzie is reluctant to take orders again. Although having a half-finished game and not wanting to have more potential complainants also explains it.
In any case, the question remains as to why Fonzie chose to incorporate his company in Hong Kong, and whether he could foresee the headaches it would bring. Seriously, this guy never stops disappointing me.

The reasons why Fonzie has an offshore company in Hong Kong can be more sentimental than financial. Watermelon Games Ltd. Watermelon Games Ltd. would be a former company of Fonzie, opportunely renamed.
Again, I don’t read Chinese, but in the screenshot I see the date 2011-10-04If that is a date of incorporation, or change of name, then WM Hong Kong was not a consequence of Tulio’s departure from WM US. Fonzie’s bond with Hong Kong predates the formation of WM. Fonzie had professional ties with Tototek, a HK company. Together they made the (in)famous Mega Cart.I can’t help but think that Tototek, trusting a self-taught young man like Fonzie, must have made a very big impression on the moustached Frenchman. Did he decide to set up his company in Hong Kong to emulate his mentor? Did he hear the siren calls that Hong Kong would save him money on taxes, and improve access to factories in China?

What we do know is that something came out under the WM label from Hong Kong. Let’s look at the issue of barcodes.

You can look up a barcode online and find out which company owns the barcode.
The WM US codes yield the following info:

When we search for Hong Kong codes, we learn that “prefix was never allocated”.

Did WM use a fake barcode? Since that Hong Kong barcode was used in early products, is this a case of fake it ’til you make it? Was WM HK responsible for this move?
If since 2014 all WM products use US barcodes belonging to WM Co., why orders are paid to WM Games Ltd (Hong Kong)?
Why do people pay a company in HK for a product that is manufactured by a company in the USA? Why can WM US handle the entire operation?
If Fonzie is using WM HK to collect funds, run production, send shipments, why is he using the code of a company in Iowa, which has no part in that process? It’s not very serious, I think, but it’s not consistent with reality.

This is another example of Fonzie’s obfuscations, dark handling of Paprium. Guy is able to pay for dozens of domains so they don’t squat his “Magical Factory”, but he can’t license a proper GS1 code.
Finally, Fonzie’s in France. It’s good news, because he’ s more at hand, so to speak. Of course, he may have lied on the Annual Return form, I don’t know, maybe there is some taxation gain from pretending to live in France. But it seems to me he’s living in France. Hong Kong is very expensive.
PS: It would be nice to hear Tulio’s word regarding the issue of barcodes and the two Watermelon companies.