What is a pyramid scheme?

Have you ever seen an “opportunity” posted online that seemed too good to be true? Many people have. In some cases, those types of opportunities are acutally illegal scams. The fact is that some of these pyramid schemes can be difficult to spot. You might have joined one of these and are so excited about the prospect of making money that you share the opportunity with others. If the opportunity is a pyramid scheme, your deisre to help others might land you in serious trouble.

What is a pyramid scheme?

A pyramid scheme is one that is based on a fraudulent or nonexistent business. The person who starts the business recruits people to join the business. Those people have to pay a fee to join. They then have to recruit other people to join for a fee. The key point here is that the need to find new recruits is the primary focus of the business. There are no products to sell or anything similar. Instead, the scheme is based solely on people giving money to join the opportunity. These schemes are illegal and can lead to criminal charges.

What about multi-level marketing?

Multi-level marketing isn’t a pyramid scheme because there is a legitimate product that is sold. The fee to join an MLM is used to provide the person with the chance to sell the legitimate product. Instead of focusing only on getting people to join the MLM, an MLM places a focus on finding customers who only want to purchase the products.

If you have been charged with a crime in relation to a pyramid scheme, you should work quickly to understand the laws that you are being accused of breaking. That will give you the foundation to determine what type of defense strategy you should utilize.

Source: FindLaw, “Pyramid Schemes,” accessed March 15, 2016