Warnings About Cyberfraud ~ Multilevel marketing plans and pyramid schemes
Three elements characterize pyramid schemes:
A reliance on funds from new investors (recruits) to pay returns, com missions, or bonuses to old investors
The need for an inexhaustible supply of new recruits.
The promise of earning profits without providing goods or services.
A good example of a pyramid scheme is located in the United Kingdom and online. The enterprise is called a "gifting scheme" and was still available online as of February 2005. Unfortunately, because it doesn't' appear to breach any current U.K. legislation on pyramid schemes or multilevel marketing and doesn't involve any trading of products for services, it has wriggled through a legal loophole and (at this time) can't be shut down by U.K. authorities.
Here's how the scam specifically works: If eight individuals invest £3,000 and then progress through the levels of the network, they can each expect to receive £24,000 when they reach the top level However, to reach that top level, 64 people have to each invest £3,000. Each of those 64 investors also expects to collect her £24,000. However, that means that another 512 investors need to participate.
The next level requires 4,096 participants, then 32,768 par ticipants, and then 262,144 participants. To sum it up, each investor needs eight investors in the scheme in order to get her money back and to make a return. In most cases, the supply of poten tial investors dries up, leaving the majority of investors with nothing to show for their investment.
No comments:
Post a Comment