Product-Based Pyramid Scheme Definition
Product-Based Pyramid Scheme Definition:
A product-based pyramid scheme is an income opportunity, in which persons are recruited into a pyramid of participants making ongoing personal purchases or retail sales of products and services. These persons recruit others to do the same in an endless chain of recruitment and personal consumption or retail sales. This is done in order to qualify for commissions and bonuses and to advance upward in the hierarchy of levels in the pyramid. Personal purchases or retail sales become the means of disguising or laundering investments in the product-based pyramid scheme.
Additional note:
Typically, prospects are lured into the scheme with exaggerated product and income claims. And because the pay plan is heavily stacked in favor of those at the highest levels in the pyramid, the vast majority of participants spend more than they receive and eventually drop out, only to be replaced by a stream of similarly misled recruits, approximately 99% of whom are likewise destined to experience loss and disappointment. – Source Research-based web site Mlm-thetruth.com
Modern pyramid schemes generally do not blatantly base commissions on the outright payment of fees, but instead try to disguise these payments to appear as if they are based on the sale of goods or services. The most common means employed to achieve this goal is to require a certain level of monthly purchases to qualify for commissions. While the sale of goods and services nominally generates all commissions in a system primarily funded by such purchases, in fact, those commissions are funded by purchases made to obtain the right to participate in the scheme. Each individual who profits, therefore, does so primarily from the payments of others who are themselves making payments in order to obtain their own profit. – Source FTC Division of Marketing Practices James Kohm
Pyramid schemes—also referred to as franchise fraud or chain referral schemes—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product. The real profit is earned, not by the sale of the product, but by the sale of new distributorships. Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses. At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment. Promoters fail to tell prospective participants that this is mathematically impossible for everyone to do, since some participants drop out, while others recoup their original investments and then drop out. – Source FBI.gov
Here is an informational video on identifying and protecting yourself against pyramid schemes.
Are there any Direct Sales/MLM companies that you deem NOT to be a Pyramid Scheme?
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I personally do not make recommendations for business opportunities because it is a conflict of interest for me as a Scam Buster. I can direct you to some free places to get the information you need to select the type of business you would like to run. Avoid MLM and you will have a much better chance at selecting a decent money making opportunity. https://ethanvanderbuilt.com/small-business-beginnings/
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Dear Ethan, Hope you could publish your views on ExFuze, from their product up to their system and history as well. I’ve been researching bout it because a friend of mine is currently involve with it. I wanna be able to help this friend of mine. Hope you could help me with it.
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Thank you for your request. I will add them to my list to review.
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hai. how about umatrin and phytoscience ?
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Thank you for your request. I will add them to my list to review.
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How about SWA (Supreme Wealth Alliance), AIM Global and UNO?
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Thank you for your request. I will add them to my list to review.
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how about royale business club in the philippines?
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I have not had a chance to review them. I will add them to my list.
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What about ACN?
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Here are my thoughts on ACN: https://ethanvanderbuilt.com/2014/04/29/acn-scam-yes-opinion/
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I consider that the best way to spot an illegal pyramid scheme is if product or service offered is of quality and with a reasonable price. It is the same with the regular business setting.
That leads to the question: Are people not getting money from the comp. plan willing to buy the product or service, without pressure from friends, family members, coworkers, or neighbors?
For example: I participate in a few MLM companies and I sell a products to people that don’t participate in the business part of them, don’t want to participate. Melaleuca, Multi-Pure, Pain Relieve are some of them.
I once participated in a MLM company that had the only product that could alleviate some diabetes symptoms, lamentally, that company got out of business. Many diabetes suffering people wanted me to find that product elsewhere. Haven’t found a similar product elsewhere.
The important question is not if it is a mlm or network based marketing company, the question is if the product or service offered has value for a customer base, not distributor base?
Your friend,
Sincerely,
Luis Antonios
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hi, i work for an airline. my boss earns more than me. his boss earns more than my boss. the ceo of my company earns more than anyone else. is that a pyramid scheme? our organisation chart looks like a pyramid.
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Just like the pyramids in Egypt are not a pyramid scheme nether is a company that has a pyramid shaped org chart. Each person in a company gets paid. In a pyramid scheme almost everyone loses money.
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What about Le-vel Thrive?
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I have not had a chance to review Le-vel. It is on my list to review.
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I second the call for a review of Le-vel Thrive!! It is blowing up in my corner of the Midwest. And those nicotine-style skin energy (?) patches they put out – wtf?! Glad to hear it is on your list!
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hi, what bout organo gold, SWI and syntek global?
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Thank you for your question. Organo Gold is on my list to review. I will add the others as well.
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hi ! what all about Emgoldex! it is like a scheme ?
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Here is my information on Emgoldex. https://ethanvanderbuilt.com/2014/10/23/emgoldex-scam-charged-with-fraud/
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Hi aim global is scam
isn’t it?
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I have not had a chance to review them. They are on my list to review.
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Thanks for the insight. Have you reviewed: Apex Revenue LLC (Forex Training and Trade Copier Service), Zhunrise, Lyoness or other cash back rewards programs?
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I have reviewed Zhunrise and Lyoness, and I will add Apex to my list to review.
https://ethanvanderbuilt.com/2014/08/29/lyoness-taken-court-operating-pyramid-scheme/
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What about Motor Club of America? (MCA)
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Here are my thoughts on MCA https://ethanvanderbuilt.com/2013/06/21/mca-motor-club-of-america-is-a-scam-yes-it-is-in-my-opinion/
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My cousin joined in and he’s 18 and already bought a new car! I asked him if it’s true he said “if it wasn’t [I] wouldn’t have joined” should I warn him?
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You should go up to him and tell him to stop scamming people out of their money to make money.
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But how does it scam people?
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Feel free to read the post I provided you above. I go into great detail on how it is a scam and I even provide a detailed definition for you.
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Have you heard of Royale business club?
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I have not heard of the Royale Business Club. I will add them to my list to review.
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I’m thinking of starting a biz with dropshipper what do u think of this company
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I have not had a chance to review them. I will add them to my list to review.
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Market America?
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Thank you for your question. They are on my list to review.
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Ethan- Was in that deal for a brief period of time over 10 plus years ago. They market themselves as an “Unfranchise” attempting to portray themselves as business that has the benefits of one, but without having to pay royalties. They employ a binary model. You can reach me via Twitter at @del_vol and I will be happy to answer any questions you may have. None of their products are science based and in no way would survive in a real economy. Plus, JR Ridinger is not the kind of person I would want to help me secure my financial future. In short, it is a scam.
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Hi Ethan,
Have you ever heard of a company called Sisel International? If so, what are thoughts?
Thanks
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I have not had a chance to review them. I will add them to my list to review.
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Have you reviewed Ingreso Cybernetico yet?
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I have not had a chance to review them yet, but they are right at the top of my list to review.
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Who does this all fall down on if it gets investigated?!?!?
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I don’t understand your question.
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Hi my name is dennis is there any online marketing site you would recommend to people like us looking to make a extra income.
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I personally do not make recommendations for business opportunities because it is a conflict of interest for me as a Scam Buster. I can direct you to some free places to get the information you need to select the type of business you would like to run. Avoid MLM and you will have a much better chance at selecting a decent money making opportunity. https://ethanvanderbuilt.com/small-business-beginnings/
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Okay, i’m working a full time job this summer, and should have one every following summer throughout my time in college. I am considering joining this company (not for a decent annual salary), but for an extra bit of money each month. I can respect the points that you’re making in comparison to annual salaries of minimum wage jobs. But as a college student looking for extra money to save for future endeavors, this doesn’t entirely sound like a bad idea. I’d like to know how this could be detrimental to me (just for extra cash), and if i can trust putting my personal information into this company, such as ssn, etc.
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Which company?
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I’m assuming he probably means either WakeUpNow or 5linx.
Answer: No you cannot trust these places to make extra money, at all
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