PYRAMID SCHEME
A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. It has been known to come under many guises. Some famous examples including the massive Albanian Pyramid Schemes of 1966 were technically not Pyramid schemes but Ponzi schemes.
*Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.[1]
Pyramid schemes are illegal in many countries, including the United States, the United Kingdom, France, Canada, Malaysia, Norway, Australia, New Zealand, Nepal, Sri Lanka, and Iran. These types of schemes have existed for at least a century.MODELS
There are other commercial models using cross-selling such as multi-level marketing (MLM) or party planning which are legal and sustainable, although there is a significant grey area in many cases. Most pyramid schemes take advantage of confusion between genuine businesses and complicated but convincing moneymaking scams.
The essential idea behind each scam is that the individual makes only one payment, but is promised to somehow receive exponential benefits from other people as a reward. A common example might be an offer that, for a fee, allows the victim to sell the same offer to other people, or receive bonuses through other people they refer. Each sale includes a fee to the original seller.
Clearly, the flaw is that there is no end benefit; the money simply travels up the chain, and only the originator (or at best a very few) wins in swindling his followers. Of course, the people in the worst situation are the ones at the bottom of the pyramid: those who subscribed to the plan, but were not able to recruit any followers themselves. To embellish the act, most such scams will have fake referrals, testimonials, and information.
RECOGNIZE A SCAM
Not everything that looks like a pyramid is a pyramid scam. Typical pyramid scam offers:
- A highly excited sales pitch.
- A reassurance that it is not, in fact, a pyramid scheme, possibly with a false account of what a pyramid scheme is.
- Little to no information offered about the company unless an investor purchases the products and becomes a participant.
- Vaguely phrased promises of limitless income potential.
- No product, or a product being sold at a price ridiculously in excess of its real market value, or a product with minimal or unrealistic market potential. As with the company, the product is vaguely described.
- An income stream that chiefly depends on the commissions earned by enrolling new members or the purchase by members of products for their own use rather than sales to customers who are not participants in the scheme.
- A tendency for only the early investors/joiners to make any real income.
- Assurances that it is perfectly legal to participate.
- The insistence they are not here to pressure you but merely to guide you.
- The idea that there are no bosses, only coaches and mentors.
This is why Global Domains Inc (blog post) isn't a scam but an opportunity.
0 comments:
Post a Comment