Pyramid schemes
I’ve grouped these two together because they both rely on the same scam. That is, the idea that the only way you can ever get rich is by getting as many others as possible to work under you. Sure, it’s true that many companies have a pyramid-like structure. However, the important difference is that legitimate companies produce some sort of product that they sell to the public.
The money the company makes is based primarily on their sales to the public. In a pyramid scheme, the main focus is on how the business can profit by having you recruit others to work under you. In order to join, you typically have to make some sort of an initial payment. From that point on, the only way you can hope to recoup your investment is by getting others to become involved.
This is because there usually won’t be any product for you to sell to the public. Your only customers will be others involved in the scheme. Even if there is a product, it is often of little value and overpriced in an attempt to legitimize the scam.
An example of this can be seen in the recent case where a multilevel marketing company claimed to have a miracle pill that would cure cancer and other diseases. This product, however, was never marketed to the public and was only available to those already involved in the scheme.
These product-peddling pyramid schemes are destined to fail for anyone not at the top of the pyramid. This is because it becomes increasingly unlikely that you will be able to find anyone else to become involved, especially given that the product is usually not in demand by the public. When the scheme collapses, those near the bottom are left with nothing. They will have likely spent a good deal of time and money in the process.
– Multi-Level Marketing Scams
Also known as “Pyramid Schemes”, multi-level marketing scams promise huge profits in return for a small investment. The central idea is to invest in becoming a distributor of a company, then recruiting others to join, and claiming huge profits will come from the new recruits’ sales.
Money actually comes from the investments of new recruits, thus little or no profits are made from the sales of a legitimate product. When the recruitment slows, it becomes almost impossible to make the promised amounts. Often, the promoters at the top of the pyramid take the money and run, leaving most participants with nothing to show for their investment.
In order to get rid of these scams, it is important to recognize whether you are being offered a job or a business opportunity, and take a good look at any product’s actual worth and the amount of profit from sales. These scams are widespread and have cost consumers as much as 10 billion dollars in a given year (FTC). Compensation plans for MLM programs can be confusing and difficult to understand. This is a good tip-off that something may be a scam (FTC).
– Chain Letter Frauds
Chain letters are a form of gambling, and sending them through the mail (or delivering them in person or by computer, but this article is about the mail) violates Title 18, United States Code, Section 1302, the Postal Lottery Statute. (Chain letters that ask for items of minor value, like picture postcards or recipes, may be mailed, since such items are not things of value within the meaning of the law.)
If you receive a chain letter, especially one that involves money or valuable items and promises a substantial return, you can do everyone a favor by reporting it to your local postmaster. See [Link] for information about chain letters. If the letter is addressed to someone in another city and/or state, you would file your report with the Postal Inspector at that office.
The Postal Service does not have a central reporting service for chain letters. Chain letters have been around for many decades. Most of the older chain letters have died out, but new ones keep appearing. Usually, a person becomes involved with a chain letter through an invitation to send a small amount of money (or sometimes an item) to several people on a list, in the hopes of receiving lots of money later when their turn comes to be at the top of the list. This is a bad and a foolish gamble to be involved in.
Would you expect to make much, if any, profit by starting a chain letter of your own, especially if you were late in the chain?
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