It’s so easy to become involved in network marketing programmes. Let’s face it, who doesn’t know a friend, family member or colleague that is keen to rope them into some new and exciting glossy ‘business opportunity’. Enticed by generating extra cash revenue, they are totally blinded by what they are actually getting themselves involved in, particularly with pyramid schemes.
To add to the problem, there is always that inherent trust that you have when it’s a friend or a family member. You trust that they would never get you involved in a scheme or a scam, that they would never let you down. The issue is that they might just be as fooled as you are and in the exact same state of wonder and awe at the riches that lie before them. I’m sure no loving relative or true friend would ever intentionally lure you into something that would be bad for you. However, this is how the propagation of a potential pyramid scheme gains traction and popularity with the masses.
So, how do you know if you are engaging in illegal behaviour yourself by being involved in a pyramid scheme? I will help you to understand this and give you the tools to make an informed decision as to what is and is not a pyramid scheme as I break down exactly what pyramid schemes are, how they operate, and the potential implications of being involved in one.
What Are Pyramid Scheme?
Therefore, should you find yourself engaging in something that appears in any way similar to the above then there is a high chance that you are involved in an illegal scheme. Unfortunately, such a high rate of pyramid schemes continue to operate under the radar of the FTC or even completely hidden, that you could potentially be involved in illegal activity without actually knowing it.
In this case, it would be advisable that if you are joining a programme, and your only purpose within that programme is to promote the very same programme, then it is extremely likely that you have not only been scammed by an illegal scheme, but there is a very good chance you could be being asked to do the same to others (unethical and immoral).
Here are some clear signs of a pyramid scheme, tread with care.
(1) High ticket/expensive products. Companies that are willing to charge you several $1,000’s simply to promote that very same product or service should be looked at in more detail. Very often these companies will disguise these high costs as education costs or ad package costs. It can also be quite common place to have masterminds, seminars, and retreats involved in pyramid schemes to mask what is really going on. DO NOT BE FOOLED!
(2) When Less than 3%(-) of people are making all the money. All multi-level marketing companies doing business in the first world and in particular the USA are required to have detailed compensation plan information as well as income disclosures. If you find that less than 3% of people earn all the money within the program (or most of it), it is most definitely a pyramid scheme.
(3) Cryptic wording as to how you will be making money. Many pyramid schemes will pull you into the program without being honest about the up front costs, or what you will be expected to do to earn money. You will be sold on their “scheme” or lifestyle, on your ability to EARN a fortune, and the opportunity to generate a massive amount of revenue with a turn key business. Then, once they sign you up, you will simply be another victim of their sales process and it is not uncommon for the sales coaches/reps to ask you to sell your car, take capital out of your retirement, remortgage your house or max out your credit cards in order to pay for their high fees of the platform.
(4) The training is solely focused on you promoting the exact same program. If you buy into a programme and find out your goal as a participant is to recruit others into the same program, it is highly likely that you are involved in a pyramid scheme. Very often these schemes are disguised with a variety of products (it is a con), the basic foundation of all the company revenue ticks along as a result of the scheme itself: You spend money on the programme, then getting others to do the same, that get others to do the same and the ball keeps rolling.
Pyramid schemes are inherently doomed to fail. As stated above, no scheme can recruit new members forever. It is as simple as that. Once this stops, the chain breaks and the pyramid can no longer survive. This is why many pyramids simply disappear, without intervention from the FTC. At some point they will all eventually collapse.
If you are involved in a multi-level program that feels as though this is what it is doing, tread very carefully. You may be involved in illegal activity yourself and could run the risk of fines and or jail time (which I will be getting into). Also, if you have been involved in something that you believe is a pyramid scheme and you feel as though you have been taken advantage of, you can report the scheme to the FTC and other country-specific regulatory entities.
- Report to FTC (United States)
- Report to Action Fraud (UK)
- Report to Competition Bureau (Canada)
- Report to Scam Watch (Australia)
In the event where the regulatory body follows through with the investigation, you could stand a chance of receiving compensation for your losses.
Typically, regulatory bodies like the FTC will seize assets and sue the associated companies, aiding the consumers involved highlight a part of the investment they have lost to these fraudulent programmes.
Recent Pyramid Schemes That Have Had Shakedowns?
There have been many pyramid scheme take downs in the past year and my suspicion and natural assumption is that there will be many more in the year ahead.
There are many pyramid schemes and ponzi schemes that have suffered at the hands of the FTC and SEC (as well as other regulatory bodies worldwide). There is an excellent resource called PyramidSchemeAlert.org where you can check at any time as they will give you oversight and insight into companies that are being investigated for being pyramid schemes.
The biggest issue with this is that those involved are intrinsically responsible for a scam, if they are promoting the same scam to others. For example, those involved in BitConnect lost an incredible amount of money and also worried about the idea that they are potentially liable for those that they had referred into the scam (and made money off of).
Am I Liable if I Refer Someone Into Pyramid Schemes?
Yes. The long and the short of it, if you are involved in an illegal scheme even as a distributor or as a participant, you carry liability and are deemed no different from the owner of such scheme. If you are knowingly promoting a scheme that is eventually deemed a pyramid by a regulatory authority, you could stand a substantial risk to massive fines as well as in some cases jail time.
If you meet the criteria that has been underlined and you feel as though you may be involved in something that is operating as a pyramid scheme, it is a good idea to stop. It is also a good idea to report it to the appropriate entities to avoid any potential legal issues down the road.
Contact the appropriate legislative authority based on your country rules (a simple Google search will help you with this). They will give you sound advice and point you to the appropriate channels to start an investigation on the given company.
Could I be Part of a Pyramid Scheme Without Knowing it?
It is very possible that you could be involved in and actively promoting a pyramid scheme without even knowing it. At one time, all pyramid schemes were actually defined as legitimate, however, they have since been investigated and deemed to be masquerading as legitimate entrepreneurial opportunities.
Since there is an underlying responsibility to those involved in the sell of anything (even as a distributor). It is imperative that you understand exactly what you are signing up to. If something sounds too good to be true then it probably is!
If you are required to spend a large sum of money to get involved in an MLM program, then you should do more research. You could be involved in a pyramid scheme. If you have to upgrade to a certain level within the programme in order to sell that level, that is something that should be taken very seriously as those are traits of many of the most prolific pyramid schemes that an example has been made of by the FTC, SEC, and other regulatory bodies worldwide.
Be cautious when making decision about choosing programmes and platforms to join. There is protection against these fraudulent of programmes, however, it is still very much ‘out of control ‘and these regulatory bodies only have so much in the way of resources to combat the fight.
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Please leave your thoughts and feedback relating to pyramid schemes below and feel free to get in touch with any queries.