This is not a pyramid scheme, but multi-level marketing. Multi-level marketing is legal.

Not everyone who engages in multi-level marketing is a bad guy. Engaging in multi-level marketing can benefit yourself and others.

The objective of this investment plan is to collect big data by recruiting more people. Many social media companies start out this way.

Knowing how to sell to people can help you make big money. It’s only fair that you pay to learn the skills.

Recruiting friends from your own social media network is called digital marketing. It’s a major marketing trend.

The above are some of the typical lines from swindlers to brainwash potential victims. It is a common tactic to create a smoke screen by presenting scams as legitimate multi-level marketing or investment schemes, so as to lure people into participating. If you can’t see through their lies and deceit, you may assume that you are doing legitimate business – while in fact you have fallen victim to a fraud.

Pyramid schemes and multi-level marketing

Swindlers often describe their product sales plans as multi-level marketing, and will name-drop some actual multi-level marketing companies to “prove” their legitimacy. The swindlers often appear to be credible, and hence succeed in tricking people into their scams.

There is often a fine line between what is legal and illegal; whether specific multi-level marketing or other selling activities are legal, or belong to a part of a pyramid scheme, would depend on the income source of the activities. If the entire or main income source comes from participation fees rather than selling activities, that programme is part of an illegal pyramid scheme. Some pyramid schemes do sell products, but they often lack commercial value and fail to generate revenue.

The line between multi-level marketing and a pyramid scheme is not as vague as they appear to be; it is only the swindlers who deliberately confuse people.

Pyramid schemes and investment

Conmen will also infuse elements of a pyramid scheme into different investment scams. In recent years, we have seen pyramid schemes related to virtual currency investments, social media and pre-IPO shares of private companies.

What is common among these scams is the “promise” of high returns over a short period of time. In order to quickly involve more people in the plan, conmen will use pyramid scheme tactics when promoting the plan: participants will be rewarded with higher returns on investment or a bonus if they persuade others to join the plan. Under such an “incentive scheme”, participants will not only make investments themselves, but also solicit others to invest. More than often, the swindlers’ investment plans are unsustainable as they depend entirely on the money participants put towards the investment, or simply, the investment product in question does not exist at all. The plan will fail when it runs out of new recruits, resulting in monetary losses for the participants.



22 April 2020