Name
Pyramid Sales

Aka
Matrix Schemes, MLM, gifting circles, chain letters

Crew
One person, then six, then thirty six, then 216 , then 1296, then 7776....

Victims
Salespeople, poor people, greedy people.

The Scam
"First, let me assure you that this is not one of those shady pyramid schemes you’ve been hearing about. No sir. Our model is the trapezoid! " - The Simpsons

Long before The Simpsons, con artists were reinventing the pyramid scheme to make money from those at the pointy end whilst disappointing and bankrupting those at the bottom. This non-sustainable business model is both simple and genius...if you are at the top!

The basic concept is very simple. Each member of the pyramid enlists new members to the scheme. These new members pay participants further up the scheme. The only way to make money once in a pyramid scheme is enlist new members to be below you.

For example, the con artist enlists five victims to act as his sales people. These five victims pay the con artist a fee for lessons/products to sell/membership themselves. The victims make their money back by enlisting five new sales people each, taking a portion of their fee and passing on the rest to the con artist. This continues as long as the victims are enlisting new sales people.

As a business model, pyramid schemes are not sustainable and the further down the pyramid the scam goes, the more likely the victim is to lose their money. If each person who takes part enlists six people, within 13 levels, the pyramid scam will have enlisting the entire population of the world. It has been suggested that 88% of people lose in a pyramid scheme.
PyramidSchemeMS.jpg

Companies such as Amway use the pyramid system to gain new recruits but are usually not considered pyramid schemes because they make their money through the sales of homewares, cosmetics etc and not from charging fees to their new members. However, as the potential income from bringing in new recruits is so great, many similar companies have been accused of pyramid tactics. After all, with the Amway system, the members actually have to sell stuff!

Variations
Chain Letters: The con artist sends a letter to five people who must pass it on to five people. The letter usually involves send a small sum of money to a previous send of the letter in the hope that, later, they will receive a large amount of money.In many countries, chain letters are illegal.

Eight Ball: In the eight ball method, the con artist enlists two people, they enlist four people between them who enlist eight people. These eight people each pay $1000 each. The con artist leaves the scam with $8000 and the scheme continues with everyone moving up one level. There are now TWO con artists. It appears more stable because the con artist leaves the scam after only four levels. However, it still has the same flaws as the traditional model.

Multi-Level Marketing: MLM differs from traditional pyramid schemes in that each person involved is selling a product as well as enlisting new salespeople. When the people involve stop selling the product, it becomes a pyramid scheme.

Waiting List/Matrix: The con artist advertises a product such as an IPOD for $30. The victim pays the $30 fee and joins a waiting list of, perhaps 30 names, each week the con artist gives an IPOD to the person whose name is top of the list. The victim can get their name moved up the list by signing up other people to the scam.

Ponzi Schemes: The con artists gets people to invest in a business. He then pays off the old investors with money from new investors. When he runs out of new investors, everyone goes broke. This is not a pyramid scheme as the investors are unaware of the structure that the organisation takes and do not need to sign on new investors themselves. However, it fails for the same reason as the traditional model.

Case Study/
The Gold Quest pyramid scheme is wobbling following the arrest of the public face of the organization, Vijayeswaran Vijayaratnam, director Joseph Luis Tomacruz Bismark, and two senior executives, Donna Marie Glen Imson and Tagumpay Pablo Perez Kintanar in Indonesia. Gold Quest, which also goes by the name of Qatana.com, originally claimed to sell numismatics but their real products were medals and coins featuring the faces of the Pope, Mother Theresa and other religious figures.

Head of Pyramid Scheme Alert, Robert Fitzpatrick posted a message on the website False Profits saying "Gold Quest claims to be an ordinary multilevel marketing program of the types that are operating openly in the USA and other countries..Its business model is a classic MLM program in which each new investor recruits others in an 'endless chain.'..Little actual retail selling occurs. Each 'distributor' is also the 'customer',"

Take
People can lose thousands if they invest and reinvest in pyramid scams.

Keywords
Internet, money, sales, pyramid scheme

Created by Nicholas J. Johnson
Australia's Honest Con Man
www.conman.com.