Tell me about pyramid schemes and multilevel marketing

[OS]

A classmate has been aggressively recruiting other classmates to participate in an investing thing. I'm not clear on the details yet, but a different classmate has already become involved. What are classical signs of a pyramid scheme? And tell me about whatever experience with them you have seen or know, be it first hand or watching others.

 

[Jarwa]

Sounds like some sorta Ponzi scheme. Is that how you spell Ponzi????

 

[Bryan]

p-a-n-s-y

 

[Pepsi90919]

Yes, it's Ponzi.

 

[OS]

Well, his story is that you foot 1k, 2k, 10k, whatever and you buy into foreclosed property, repair it, and sell it. If the person cannot foot the initial price, they pool with other people to buy one lot. He claims to have connections that give him access to properties worth ~100k for around 40-50k. I think he gets a comission of 3% of the end amount. That's as much detail as I have. I personally have never encountered a pyramid scheme, but by asking people here, I can access the collective knowledge of potentially thousands of people to fill me in.

 

[Yo Ma Ma]

This isn't a 'real' definition, but for me I'm always suspicious if the person is more intersted in getting ME to sell the product than in selling me the product itself...

 

[Jarwa]

If it sounds too good to be true, then it usually is.

 

[Windogg]

The products are different but the idea is the same. You basically pimp out your friends to make money. You get a percentage of whatever they sell and so on. You sell to 10 friends and they sell to 10 friends and those people sell to 10 friends. This is multi-level marketing in the spirit of companies like Avon.

Then there are the illegal pyramid or "Ponzi" schemes where you rip of Jack to pay Jill. It begins usually with someone promising outrageous returns. "Invest $10,000 with me and I'll pay you $20,000 next month" Then other suckers are found. You take the money from the new suckers to pay off the old suckers and so on. The whole idea is to then get the original person to "reinvest" his gains back into the pyramid. Eventually you can't get enough people to invest enough to cover the promised returns and the pyramid collapes. Those that get in early usually make money. On average, 95% lose their shirts.

Windogg

 

[Dameon]

1) Unrealistic promises of fabulous wealth with little or no effort on your part.
2) Heavy push by uppers to get others involved.
3) Vagueness, unwillingness to provide details of any sort... which they usually respond with more of #1

 

[tkim]

dont pay any attention to it. go to humor him and that's it. man ive been asked to and went to tons of them. it's major hard work. it's possible to put in countless hours and not make a penny. dont get me wrong...if your the type of person to work your ass of and then some, go 4 it! as for me, i'd rather work a 9 to 5.

 

[OS]

Holy sht!t Windogg, I think you just nailed it in your second reply. It's like using a polarized lens to cut through the glare.

Dameon, for this situation, lots of #1, a bit of #2, and I haven't heard enough to say much of #3.

 

[bolomite]

If you send me $5, I will mail you an exclusive report on these types of schemes.

 

[Missus]

Don't get involved... They are nothing more than a scam...

Unless it is Amway... Then it is a scam with make-up...

 

[veryape]

Yes,send me five dollars and I will send you some information on Pyramid schemes. But fear not for if you tell your friends and get them to invest in my Pyramid Scheme Information Packets you could make your money back and much,much more. There is opportunity to make as much money as you care to and all you have to do is sit at home and mail out *cough*useless flyers *cough* *cough* I mean my Information Packets with the valuable information.

So if your tired of working 9-5 and want to get rich overnight send your
five dollars or better yet,i'll make you a special offer;instead of one Information Packet for five dollars i'm going to practically give these things to you for twenty dollars for three of them. Act now before I regain my sanity,and don't forget to tell your friends.

 

[veryape]

Umm,in case any of you happen to be from the cia,fbi,kgb or McBlt agencies,that was a joke. Sorry guys,i'm not really selling that valuable information I promised.

 

[Dan]

I don't want to start a war or anything here but I don't think Amway is a scam. It is multi-level marketing and it does hold out the promise of riches, etc. But it also stresses that those riches don't come easily or overnight and it does promote the selling of it's products.

Don't get me wrong. There are plenty of pyramid schemes and Ponzi scams out there. As I recall though, the Supreme Court ruled years ago that Amway is not a pyramid. Instead, the Court ruled that Amway's business model is a benchmark one can use to judge whether or not other business "opportunities" are legitimate or not.

 

[Double Trouble]

OuterSquare, first off, it's a complete scam. Don't even think about wasting 1 single penny or minute on this crap. Make sure your friends don't get involved either, because it's a sure-fire way to loose your money.

When you hear this kind of stuff, stop at each step and pause for a second to think about it. "has access to 100K properties for 40-50K". If someone really had the ability to do this, why would anyone else have to be involved? If I knew something to be worth 100K and it could be purchased for 50K, I certainly would not sell that opportunity off to someone else for a 3% comission.... do you smell the scam yet??

What you're seeing in action is a classic pyramid scheme...

 

[guyver01]

here ya go...

Pyramid Schemes, Ponzi Schemes, and Related Frauds

Pyramid Scheme: A scheme in which a hierarchy is created by people joining under others who joined previously, and in which those who join make payments to those above them in the hierarchy, with the expectation of being able to collect payments from those who join below. Pyramid schemes are prohibited by the laws of the United States of America, by the laws of each of the fifty individual states, and by the laws of most other nations. Pyramid schemes are variously defined under these laws either as a form of gambling, or (more accurately, in my opinion) as outright.

Ponzi Scheme: Named after Charles Ponzi, who ran such a scheme in 1919-1920. A Ponzi scheme is an investment scheme in which returns are paid to earlier investors, entirely out of money paid into the scheme by newer investors. Ponzi schemes are similar to pyramid schemes, but differ in that Ponzi schemes are operated by a central company or person, who may or may not be making other false claims about how the money is being invested, and where the returns are coming from. Ponzi schemes don't necessarily involve a hierarchal structure, as in a pyramid scheme; there is merely one person or company that is collecting money from new participants and using this money to pay off promised returns to earlier participants.

 

[kami]

My uncle was once stupid and got involved in a pyramid scheme. He invested $2k (and got in early) and made about $50k in less than a month. Bought a new car, big screen TV, and everyhing. Then he was caught...spent a night in jail, paid a large fine, and did several hundred hours of community service.

I don't think it's worth it...

 

[MrBond]

This sounds more like one of those package deals they're always advertising on the local FOX affilate at 9am on Sunday. You send out for this "kit" that shows you how to do exactly what he's doing (buy property low, sell high). Of course, the show is filled with people saying how well it works, all the while fine print is running across the bottom saying "results not typical". Doesn't seem like much of a deal to me...more like a scam.

 

[Azraele]

Don't fall for it.