Pyramid Schemes You Should Know About

The Most Famous Pyramid Schemes You Should Know About 

Pyramid schemes are a fraudulent business model that involve recruiting new members to make money by promising them a share of profits for recruiting others. The scheme involves an initial person or group of people who recruit a second wave of individuals, who in turn recruit a third wave, and so on. The scheme grows exponentially, with each layer having to recruit more members than the previous one to make a profit. The top layer of the pyramid, typically the organizers or founders of the scheme, reap the most significant financial rewards. The main issue with pyramid schemes is that they are unsustainable due to their reliance on an endless supply of new members to keep the scheme going. Eventually, the pool of potential recruits dries up, and the scheme collapses, leaving many participants with significant financial losses. 

Difference Between Pyramid Schemes & Multi-Level Marketing Companies 

Pyramid schemes and multi-level marketing (MLM) companies are often confused, but they are fundamentally different business models. While both involve recruiting people to sell products or services and receiving a commission, there are important distinctions between the two. The focus of a pyramid scheme is on recruiting new members with little or no emphasis on selling products or services. While pyramid schemes recruit waves of members in order to make money, MLM companies are legal and legitimate business models that involve selling products or services to consumers through a network of independent distributors. MLM companies typically offer a range of products or services, and the emphasis is on selling these products to customers, not just recruiting new members. 

Famous Pyramid Schemes 

1. Business in Motion: Business in Motion was a pyramid scheme that required investors in Canada to pay $3,200 to join in. Once investors joined, they were allowed to buy vacation packages and resell them for a higher price thus yielding a higher return. Canadian authorities investigated Business in Motion and ordered them to pay $6.5 million following a class action lawsuit. 

2. Herbalife: The health and wellness company was accused of running a pyramid scheme in 2016. The company denied the allegations, but it paid $200 million to settle with the Federal Trade Commission. 

3. OneCoin: OneCoin was a cryptocurrency scheme that promised investors high returns. The company had no public ledger or blockchain, and it collapsed in 2017 after investigations by several countries. 

4. Amway: Amway is a multi-level marketing company that has been accused of being a pyramid scheme. The company has faced numerous legal challenges and investigations over the years, but it has not been found to be a pyramid scheme. 

Keeping Investors Safe from Fraudulent Activity 

When publicly traded companies or sellers only care about making profits at the expense of their members and in violation of numerous state and federal laws, MLG is here to seek justice. Our Securities Litigation lawyers are familiar with the tactics used by such entities and will level the playing field by representing the interests of investors who have been wronged. If you believe that you have been manipulated, deceived, or scammed by unlawful or deceptive acts or statements from an entity, a Securities Litigation lawyer from MLG can review the situation with you to determine if you have a case.