March 28, 2020
How to spot a pyramid scheme – Stacie Bosley

How to spot a pyramid scheme – Stacie Bosley

In 2004, a new company called Vemma Nutrition started offering a life-changing
opportunity to earn full time income
for part time work. Vemma’s offer was open to everybody, regardless of prior experience
or education. There were only two steps to start
get started earning: purchase a $500-600 kit
of their liquid nutrition products, and recruit two more members
to do the same. Vemma Nutrition Company grew quickly, becoming a global operation that brought in 30,000 new members
per month at its peak. There was just one problem— while the company generated $200 million
of annual revenue by 2013, the vast majority of participants
earned less than they paid in. Vemma was eventually charged with
operating a pyramid scheme: a common type of fraud where members make money by recruiting more people to buy in. Typically, the founder solicits an initial
group of people to buy in and promote the scheme. They are then encouraged to recruit others and promised part of the money
those people invest, while the founder also takes a share. The pattern repeats for each group
of new participants, with money from recent arrivals funneled
to those who recruited them. This differs from a Ponzi scheme, where the founders recruit new members and secretly use their fees to
pay existing members, who think the payments come
from a legitimate investment. As a pyramid scheme grows, it becomes increasingly difficult for new
recruits to make money. That’s because the number of participants
expands exponentially. Take a structure where each person has
to recruit six more to earn a profit. The founder recruits six people to start, and each of them recruits six more. There are 36 people in that second
round of recruits, who then each recruit 6 people— a total of 216 new recruits. By the twelfth round of recruiting, the 2.1 billion newest members
would have to recruit over 13 billion more people total
to make money– more than the entire world population. In this scenario, the most recent recruits, over 80% of the scheme’s participants, lose all the money they paid in. And in real life, many earlier joiners lose out too. Pyramid schemes are illegal
in most countries, but they can be difficult to detect. They are presented as many
different things, including gifting groups, investment clubs, and multi-level
marketing businesses. The distinction between pyramid schemes
and legitimate multi-level marketing can be particularly hazy. In theory, the difference is that the members of the multi-level
marketing companies primarily earn compensation from selling
a particular product or a service to retail customers, while pyramid schemes primarily compensate
members for recruitment of new sellers. In practice, though, many multi-level marketing companies make
it all but impossible for members to profit purely
through sales. And many pyramid schemes,
like Vemma Nutrition, disguise themselves as legal multi-level
marketing businesses, using a product or service to hide the
pay-and-recruit structure. Many pyramid schemes also capitalize
on already existing trust within churches, immigrant communities,
or other tightly knit groups. The first few members are encouraged
to report a good experience before they actually start
making a profit. Others in their network follow
their example, and the schemes balloon in size before it comes clear that most members
aren’t actually profiting. Often, the victims are
embarrassed into silence. Pyramid schemes entice people with the
promise of opportunity and empowerment. So when members don’t end up making money, they can blame themselves
rather than the scheme, thinking they weren’t tenacious enough
to earn the returns promised. Some victims keep trying, investing in multiple schemes, and losing money each time. In spite of all these factors, there are ways to spot a pyramid scheme. Time pressure is one red flag— be wary of directives to “act now or
miss a once-in-a-lifetime opportunity.” Promises of large, life-altering
amounts of income are also suspect. And finally, a legitimate multi-level
marketing business shouldn’t require members to pay for the
opportunity to sell a product or service. Pyramid schemes can be incredibly
destructive to individuals, communities, and even entire countries. But you can fight fire with fire by sending this video to three
people you know, and encouraging them to do the same.

100 thoughts on “How to spot a pyramid scheme – Stacie Bosley

  1. Is Amway a pyramid scheme? My friend from work is apart of that company and he has to recruit people to make money, and he has to buy products from them as well in order to make money…. only thing is he doesn’t sell what he buys

  2. Red flags:

    • Old high school bully that now is a single parent
    • Calls you hun
    • Asks to ask them how to make a $1000 per week without doing anything (they get offended when you ask them if they make the money)
    • Are about to be bankrupt but use their kid’s college fund to buy more products to sell that don’t sell at all

  3. When you go to their office for the first time and you can hear loud music from down the hall, GET OUT OF THERE. Pyramid scheme.

  4. Just got a YouTube add " Pyramid Scheme " type. Al those ads that promise you to make 100.000 $ /month with absolute no experience in anything. Those ads are everywhere on YouTube

  5. I can just save you 5 minutes by saying it’s when people you kinda knew in high school message you trying to sell you something.

  6. I was contacted to join the pyramid scheme. They promised lots of stuffs and it will never fail. And i knew if i say no they will be behind you untill you join. So i said i dont have the money soo you borrow me the money and you can keep the money when i find people worth the money. Well it worked. I used hes promises against him. It was a checkmate.

  7. Thered a pyramid scheme at the end because by sharing the video and making other people share it you will earn money

  8. One of the worst things to happen to me is seeing my entire group of best friends and their families buy into a pyramid scheme. It's like losing everyone you know. The company is Kuvera Global if anyone was wondering.

  9. I sent this to three other people and asked them for $10 each to get the opportunity to get money back in ad revenue even though I don't own this video. Does that count as the "fight fire with fire" you were talking about?

  10. OMG! I had a similar experience (2016).
    One day, my friend said that he met a guy who could help me and him to make millions in months. As a middle-class boy, I was so excited about it and met him with my friends asap.
    He showed us a product to purchase in order to join the scheme. This time it was a c++ learning kit which contains only 3 CDs and cost 12000Inr (169USD). After hearing about the money part my logical mind triggered and it said that "this is a trap and you have no money to waste". That time I was so unaware of such frauds. Still, my mind said that something was not correct and I just left it. He nearly convinced me to spend my college fees on it. Only by my luck and poor financial condition saved me that day.

  11. If you are in a large hall room at some hotel with bunch of if people you don’t know, and suddenly loud music breaks out while some speaks to cheerfully about they work, it’s a pyramid scheme.

  12. Hey, wanna join my octagon scheme it's you, me and some of your fReAkiNg friends but it's not free to start your money comes to use

  13. I'll let them talk about bringing others into the business in order for me to make money and that's when I tell them I'm not interested….. after they spoke so highly about the business for a full hour or more.

  14. This doesn't take into consideration that when you register with any (legal) Network Marketing company it costs money for the company to buy a license for the individual representative to sell products (legally) in the US and many other countries. Just a heads up 👍🏻 great video though!

  15. So what happens if it's a charity pyramid scheme, would it be difficult to see if they are illegal? Like they recruit people to help them get charity money and as the it goes higher to the higher ups they get more and the boss is living the high life. I think this is happening in Singapore.

  16. The people who buy the snake oil deserve it and the people who get tricked into selling also deserve it.

  17. Some known pyramid schemes: LulaRoe, Young Living, doTerra, Mary Kay, Avon, Herbalife, it Works, Rodan and Fields.. did I miss any??

  18. Recently I was approached by a good friend about what I think is a pyramid scheme. When a member of that organisation gave me a presentation on it, tbh I was mesmerised but I was put off by his constant repetition of how the organisation is legal. After I returned home I thought about it calmly and looked up stuff about it on the internet but could not find much info about it which I found alarming. I made an excuse to my friend but she managed to convince atleast 5 of our classmates and others are seriously considering joining and I just think its sad that I cant do anything about it without possibly jeopardising our friendship. The organisation targets college students and its sad that so many are going to lose money on this.

  19. Another red flag: they post pictures of $100 dollar bills spread out on a table on Facebook. I had at least three friends who got sucked into one. One of them unfriended me after I pointed it out. I think he works at a Footlocker now.

  20. This pyramid reminds me of something, hmmmmm🤔. Uh yeah!! A job is like a pyramid. The people on top make $$$$$$$$ and people in bottom make $.

  21. So most organized religions that ask for a set amount of income are pyramid schemes? 🤔🤔 it's almost like people have been saying this for years, but because they're buying a product that doesn't actually exist, it means they're either brainwashed, gullible, or afraid of the threats being held against them, so it's much more difficult to help them out of the cycle.

  22. who do you work for.?
    who is on top of you, on top of that person, and who is on top of that person, who is the owner. ? what are your changes of being the owner..? it looks like you work for a pyramid scheme, getting pay the same money for the rest of your life, while the owner keeps making the difference..!!!

  23. Umm…. If it isnt basic enough then why do you even care? You must not be smart enough to even be good at any type of professional business.

  24. The biggest red flags that it’s a pyramid scheme:

    1. You were “hired”

    2. You have a “boss”

    3. The boss’s boss is called “CEO”

    4. You start at the bottom

    5. The only way to get to the top is if someone dies, leaves or is promoted

    6. Someone determined your income for you

    7. Someone (probably the same person) controls your time by giving you a “work schedule”.

  25. Friend: Come join Market America with me, save money, and make money by getting 3 people!

    Me: it's a scam.

    Friend: it's not a scam! You just need motivation and the right people to make it work! You know what? We're aren't friends no more cause you won't join me, or believe in this!

    I had trust issues ever since my friends joined these six-figure schemes. 💀💀

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