Unemployed are Targetted by Ponzi & Pyramid Schemes

Why Unemployed, Housewives, and youth are being targeted what are these schemes?

What is a Ponzi Scheme?

A standard?Ponzi scheme?is a fraudulent investment scheme in which an operator pays returns on investments from capital derived from new investors, rather than from legitimate investment profits. Ponzi scheme operators entice new investors with abnormally high short-term rates of return.

The fraudster profits by either charging fees on the “investments,” or simply fleeing with investors’ funds. Ponzi schemes generally fall apart when there is not enough new capital to pay the ever-growing pool of existing investors.

The scheme is named for Charles Ponzi of Boston, Massachusetts. In the 1920s, Ponzi launched a scheme that guaranteed investors a 50% return on investments in postal coupons. Although Ponzi was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.

Examples of Ponzi Schemes

• Bernie Madoff:?a Wall Street broker whose wealth management business was a nearly twenty-year Ponzi scheme that defrauded investors of billions. Madoff’s scheme was revealed by whistleblower Harry Markopolos.
• JSG Capital Investments:?two California men who promised high returns via investments in “hot” pre-IPO stocks. No actual investments were ever made.

What is a Pyramid Scheme?

A?pyramid scheme, also called a chain referral scheme, is a fraudulent business model in which new members are recruited with promises of payment tied to their ability to enroll future members in the scheme. As the membership pool expands exponentially, further recruiting becomes impossible and the “business” becomes unsustainable.

A pyramid scheme often appears as a legitimate multi-level marketing (MLM) practice. A legitimate MLM uses the profits from downstream sales to pay bonuses to recruiters. However, pyramid schemes involve almost no legitimate sales. Instead, earlier investors are paid from the incoming funds of subsequent investments instead of true profits.

Examples of Pyramid Schemes:

• Burn Lounge:?An online music store that lured persons who paid for the right to sell music, while earning awards for recruiting other individuals into the business. The bonuses were not in any way tied to sales of merchandise. The FTC won a $17 million judgment.
• Give and Take:?An English scheme in which a group of operators requested ï¿¡3,000 as an entry fee and promised a ï¿¡20,000 bonus for recruiting a certain amount of new members. Six individuals were convicted of running the scheme and served jail time.

Differences Between Ponzi and Pyramid Schemes

Ponzi and pyramid schemes are similar but not identical.

The essential difference between the two frauds is that a?Ponzi scheme?generally only requires investment in something from its victims, with promised returns at a later payment date.

Pyramid schemes, unlike Ponzi schemes, usually offer a victim the opportunity to “make” money by recruiting more people into the scam.

The SEC and CFTC bring actions against perpetrators of both Ponzi and pyramid schemes, and whistleblowers are essential in catching this kind of fraud.

Contact an Experienced Whistleblower Lawyer

Do you have information concerning Ponzi or Pyramid scheme fraud??Submit our secure form?or call us at?(866) 497-7162?today to request a confidential consultation with an experienced whistleblower attorney.

How to identify an MLM?

• If recruiting more people is incentivized and empowered.
• If there is a hierarchy of distributors that is multi-level and is achieved by recruitment.
• If commissions are given only if you buy a certain amount. (Pay to Play)
• If big dreams and unrealistic promises are done to you telling you can earn money quickly.

Vulnerable people or Target groups are Unemployed Youth and Housewives.

They claim to make you become an entrepreneur after joining their company showing you a path to a luxury lifestyle. But the reality is mentioned on the left-hand side.

Is MLM always a Scam?

Almost all MLMs are scams. I feel the odds of winning in a casino are greater than in MLM schemes. There are still some companies that use MLMs to sell their products and their products are actually good. Every consumer is not a distributor in this case and these legit MLMs won't force you to invest to get the commission. Eg: Tupperware, Amway, Qnet

Increased economic instability makes MLMs seem attractive

MLM participation typically rises with unemployment, according to Stacie Bosley, an economist who studies MLMs.

"The Great Recession was another situation where there was an uptick in participation," Bosley said. "People are seeking alternatives in a time of uncertainty, especially when traditional labor market actions might be less available."

Resources:

• https://constantinecannon.com/practice/whistleblower/whistleblower-types/financial-investment-fraud/ponzi-schemes/
• https://www.dhirubhai.net/pulse/multi-level-marketing-traps-vaibhav-joshi/
• https://www.insider.com/unemployed-people-turn-to-risky-multi-level-marketing-companies-2020-7