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Why are Pyrimid schemes illegal and can anyone show me a law passed that forebids them?

As I understand it a pyramid scheme is when one person gets the idea that they are going to be fabulously rich and tries to go into a business by them self just to realize that they are going nowhere fast. So one day they come up with an idea that if they can get other people to do the work for them and maybe as incentive give them a fraction of the pot that they stand to earn they can make much more money, right? Well isn’t that every JOB you’ve ever had? You do all the work for the boss, and at the end of the pay period he gives you a fraction of what you made for him. He didn’t do anything, why does he get the bigger half? This sounds like a pyramid scheme to me. You have one guy at the top making a killing and doing nothing and everyone fall under him. Further down the ladder (or chain) you go the more people there are and the less you get paid. Isn’t this a pyramid scheme? So why do so many people claim pyramid schemes are illegal? Where is it written that they are?

Public Comments

1. You are your own worst enemy. And by the sounds of it, you are the enemy of a lot of naive job hunters. http://www.armydiller.com/financial-scam/avoidscam.htm http://www.ftc.gov/bcp/conline/pubs/invest/mlm.htm - advice from the ftc on mlms http://www.mlmwatch.org/ www.scambusters.org
2. Pyramid schemes are illegal A pyramid scheme is one that promises consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. There are several government agencies that prosecute pyramid schemes: the Federal Trade Commission (FTC) is just one among many agencies that have the authority to file suit to stop this type of fraud. The Securities and Exchange Commission (SEC) also pursues these schemes, obtaining injunctions against so-called "financial distribution networks" which in fact sell unregistered "securities." The U.S. Department of Justice (DOJ), in collaboration with investigative agencies like the FBI and the U.S. Postal Inspection Service, prosecutes pyramid schemes criminally for mail fraud, securities fraud, tax fraud, and money laundering. Under the FTC Act, which broadly prohibits "unfair or deceptive acts or practices in or affecting commerce."(12) That Act allows the FTC to file suit in federal court and seek a variety of equitable remedies, including injunctive relief, a freeze over the defendants' assets, a receivership over the defendants' business, and redress or restitution for consumers. The FTC has been prosecuting cases since the 1970's. Nowadays, these schemes are more elaborate than in the old days, but they all still promise the same return, fast money with little effort. I suggest you check out the attached websites for more information.
3. You are exactly right! Absolutely every job out there is a pyramid, the boss makes all the money and pays employees a minimal amount to do the work for him/her. Yet so many people call Network Marketing a "Pyramid Scheme" and have no clue as to why they are against it, they just are. These people go to work every day and line the pockets of their boss, and are happy to get paid less than the boss and think that is just fine. Yet if you introduce them to a marketing method where everyone is on the same playing field and they can work their way up and continue earning a lucrative income while helping others to do the same, it becomes a pyramid scheme in their minds, yet they are doing exactly that by working for someone else. It all boils down to a lack of education. Many people just don't understand the concept of elevating their net worth and never will. They don't understand marketing at all or how different methods of marketing work. They have this Pyramid stigma in their head and no idea how it got there, but not willing to sit down and really have a look at it. The only time a marketing plan becomes illegal is if you don't have a product to offer and are just getting people to put their money into something with no returns. What happens then is the person who instigated it does indeed make all the money, and the people they enroll into their scheme, ultimately get ripped off. There are very strict guidelines in place for this so if one does their homework, they can figure out which ones are a scam and which are legitimate. Any of the large companies out there, have to follow the guidelines or they would have been shut down a long time ago. A person just has to do their homework.
4. Call your Attorney Generals Office and they will answer that for you in less than a second!!!!!