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How Pyramid Schemes Work

        Money | Scams

How Pyramid Schemes Work: Author’s Note

"Work from home and earn $5,000 a month!" I see signs like this everywhere and have always wondered what kind of scam could be behind it. After researching this article on pyramid schemes, I have a good idea. Pyramid schemes are so successful because they prey on our desire for quick, easy money. In this scam, however, the odds are stacked so definitively against you that's it's almost mathematically impossible to make any cash at all. It's sad to think of all the people who bought a starter kit with dreams of lucrative sales and a bright future managing a team of salespeople, all from the comfort of home. In situations like this, it's best to heed some sage advice: If it seems too good to be true, it probably is.

Sources

  • Amway. "Business Opportunity or Pyramid Scheme?" http://www.amway.com/en/BusOpp/business-opportunity-or-pyramid-scheme- 10082.aspx
  • Federal Trade Commission. FTC Consumer Alert: The Bottom Line About MLM Plans http://www.ftc.gov/bcp/conline/pubs/alerts/pyrdalrt.shtm
  • Haekal, Reem. "What is a Pyramid Scheme?" Investopedia. http://www.investopedia.com/articles/04/042104.asp
  • New York State Office of the Attorney General. "Affinity Fraud." http://www.oag.state.ny.us/investors/affinity.html
  • The New York Times. "Made Millions by Trick in Exchange." July 27, 1920. http://query.nytimes.com/mem/archive-free/pdf?res=9802E6DB1E30E 633A25754C2A9619C946195D6CF
  • Pyramid Scheme Alert. "Missouri Attorney General Sues "Original Dinner Party" Scheme Perpetrators." http://www.pyramidschemealert.org/PSAMain/pyramids/dinner.html
  • Pyramid Scheme Alert. "New Wrapping for Old 'Gift'" http://www.pyramidschemealert.org/PSAMain/pyramids/newwrap.html
  • Pyramid Scheme Alert. "The Penny-Stock Pyramid Scheme (and Its Similarity to Multi-level Marketing Pyramids)." http://www.pyramidschemealert.org/PSAMain/pyramids/investscheme.html
  • Taylor, John M. Consumer Awareness Institute. "Which Does the Greater Harm?" http://www.mlm-thetruth.com/AveMLMvsNPSvsVegasvsDirSales6-6.pdf

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