Investors are often warned about new investment scams by state and federal regulators but two tried and true scams aren't often mentioned even though they continue to trap investors. Pyramid and multilevel marketing schemes are in full swing now that people are desperately looking for better returns in a declining market.
Most all pyramid promotions are illegal because members earn money from getting people to pay to participate in the operation. When new members can't be recruited, the pyramid collapses.
With a legitimate multilevel marketer, participants make money selling products or services and by getting commissions on sales made by their own recruits, not just by paying a fee and getting others to pay a fee to join the organization.
According to the Federal Trade Commission, investors need to be very cautious before joining because it is difficult to tell the difference between a legitimate multilevel marketing scheme from a pyramid scheme. If you are approached with a money-making proposition promising easy earnings or inflated investment returns, you need to be skeptical. Be sure to obtain a lot of information and be sure a proven record is shown.
-- L. Morse
Labels: Investor fraud, Pyramid, Schemes
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