Pyramid Schemes and Multi-Level Marketing (MLM) Scams
A pyramid scheme or a Ponzi scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme. Although an obvious scam, the pyramid ranks among the oldest in the list of business scams.
Multi Level Marketing (MLM) entails selling products and services by establishing a network of people and earning revenue not just from one’s own sales, but also from the sale of products and services by people in the network. While there are a few legitimate network-marketing businesses with agents selling products and services, almost all the MLM marketing opportunities on the Internet are MLM pyramid scams in disguise.
Signs of MLM pyramid scams manifest when the MLM company stresses building the pyramid rather than selling products or services. Such companies encourage new joiners to recruit more people to build a pyramid based on contacts to climb the ladder and do not pay much attention to selling the product or service.
Such MLM companies also deceive people through the fine print. One common way of deceit is the MLM Company advertising the product as free if the person recruits a specified number of people, and then mentioning in the fine print that the commissions and bonus earned would exceed of the cost of the product, making it free.
At times, Internet pyramid schemes shed any pretensions of MLM and promise rich returns by merely forwarding the email to others and sending some money to people on top of the list after adding one’s name at the bottom.
Pyramid schemes are illegal. Partaking in such schemes could lead not just to losing money, but can also lead to arrest for fraud.
On page 2 we'll look at two additional categories in the list of business scams: home based work opportunities scam and "how to make money" scams.