It’s called a Pyramid for a reason. Ask 10 different people to describe a pyramid, most will offer up a description of a structure in the shape of a triangle converging at a point. I have yet to see one of these amazing structures up close and personal but it’s on my list of to-do’s. Just recently I was reminded that a very different kind of pyramid also exists.
These pyramids have a much less awe inspiring effect. In fact they are illegal; the FBI considers pyramid schemes as fraud. Quite simply they are designed to steal people’s money.
So how does it work? In a pyramid scheme the founder sits on top at the highest point collecting almost all of the real revenue. All the hard work is done by those below in the base of the pyramid, unfortunately they receive very little payoff for their efforts. Promises of financial independence keep many victims within the loop for quite some time.
Where and when did these pyramids type scams first start? Nobody is entirely sure. The United States Federal Trade Commission (FTC) first disclosed what it called an internet-based “pyramid scam” in 2003. Its complaint states that customers would pay a registration fee to join a program that called itself an “internet mall” and purchase a package of goods and services such as internet mail, and that the company offered “significant commissions” to consumers who purchased and resold the package.
Some would argue that the “pyramid” structure already exists in many facets of our society. They are quick to mention our government and corporate
Over the past 7 years countless thousands have been duped by these schemes. As time goes by more and more people have been warned to stay clear. As a result designers behind these schemes have had to become more and more creative in an attempt to disguise the pyramid.
The pyramids of 2010 are much harder to spot but make no mistake they are still there. Recently increased skepticism is being directed at Multi-Level Marketing or MLM. This newer and more sophisticated scheme may purport to sell a product, but they often simply use the product to hide their pyramid structure. The FTC warns “Not all multilevel marketing plans are legitimate. Some are pyramid schemes. It’s best not to get involved in plans where the money you make is based primarily on the number of distributors you recruit and your sales to them, rather than on your sales to people outside the plan who intend to use the products.” Many believe that MLM’s are just legalized pyramids schemes wrapped in a shiny new package.
Investing some real time and effort into researching any new endeavor is your best defense against falling victim.
The FTC suggests following the following 8 steps.
· Find and study the company’s track record.
· Learn about the product
· Ask questions
· Understand any restrictions
· Talk to other distributors (beware shills)
· Consider using a friend or adviser as a neutral sounding board
· Take your time.
· Think about whether this plan suits your talents and goals
We have found 1 simple rule to be fool proof, stay away from pyramids unless they are surrounded by sand.