Has The Pyramid Selling Lesson Still To Be Learned?

In the same way that the newspapers are full of stories about new Ponzi frauds, new advance fee frauds and every other kind of fraud there is, we keep hearing about how people keep falling for Pyramid Selling programs. In 1996 and 1997 the foundations of a country's economy was rocked by one Pyramid scheme. When the scheme collapsed, two thirds of the population had lost money. There were riots and around 2000 were killed as a result.

Although Albania's problems were accentuated by a number of factors, including a financially unsophisticated population, deficiencies in the formal financial services industry and failures in the Albanian governance, the way in which hard working and careful people were taken in must be a cautionary tale for the rest of the world. This is especially true given the success that many Pyramid schemes have enjoyed in the years following the Albanian fiasco.

Pyramid selling schemes do work for the promoters because many people can not get their heads around the impossibility of the of their success for the contributor. The programs are disguised as good causes or money circulation clubs, such that the true pyramid nature is overlooked and it seems like a simple believable business opportunity. As an example, a typical program might be called something innocuous such as 'The Investment Assistance Community' and you are asked to donate £1,000 to be awarded silver membership.

All you have to do is to recruit two members yourself to become a gold member. That is all - then you can sit back and wait for your pay back of (say) £3,000. If you want you can buy any number of silver memberships, if you think you can recruit more people. If you receive your £3,000, you will probably decide to reinvest it in three memberships, such is your confidence in the scheme. It seems fairly plausible? But where is the £3,000 pay out coming from?

You rely on the two new recruits you have introduced and each of whom has provided £1,000 to join to also recruit a further two members each - thus elevating you to 'platinum level'. Now take note. Including yourself, seven members have joined the scheme and £7,000 in total has been paid into the system. The most recent four members now also have to recruit two new members each and then a total of £15,000 has been paid in by everybody. At this time you are raised to 'diamond' status and given your £3,000. The balance of £12,000, plus your £3,000 if you put your money back in, will be absorbed by the scheme's owners for themselves. It becomes harder and harder for the lower levels to each recruit new members and the scheme is not self sustaining. It reaches a saturation limit and collapses as all of these schemes inevitably do.

And yet there are those victims of such schemes that blame the authorities for intervening for their losses, such is the incomprehension of the fundamental concepts underpinning the fraudulent nature of pyramid selling schemes. The key identifier for such a scheme, regardless of how well it is disguised, is whether or not it is offering a tangible product for your investment. If the scheme is simply a money circulation club, an investment club, or anything else that purports to pay out astronomical returns for no work, then it must be a unsustainable pyramid scheme.

Now that pyramid schemes are better understood, they are outlawed in most countries. They are illegal in both the United States and the United Kingdom. Attempts to circumvent legislation have been made, by replacing any mention of 'investment' with 'gifting' for example. Schemes are still promoted, often as legitimate Multi Level Marketing programs. Many people still succumb, if they are unable to differentiate from schemes that offer genuine products and those that do not.

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<!DOCTYPE HTML PUBLIC '-//W3C//DTD HTML 4.01 Transitional//EN' 'http://www.w3.org/TR/html4/loose.dtd'><html><head><title>Look For Articles - Articles Directory | Has The Pyramid Selling Lesson Still To Be Learned?</title></head><body><h3>Has The Pyramid Selling Lesson Still To Be Learned?</h3><br><br> By: Mark Jenner<br><br><p><p>In the same way that the newspapers are full of stories about new Ponzi frauds, new advance fee frauds and every other kind of fraud there is, we keep hearing about how people keep falling for Pyramid Selling programs. In 1996 and 1997 the foundations of a country's economy was rocked by one Pyramid scheme. When the scheme collapsed, two thirds of the population had lost money. There were riots and around 2000 were killed as a result.</P><p>Although Albania's problems were accentuated by a number of factors, including a financially unsophisticated population, deficiencies in the formal financial services industry and failures in the Albanian governance, the way in which hard working and careful people were taken in must be a cautionary tale for the rest of the world. This is especially true given the success that many Pyramid schemes have enjoyed in the years following the Albanian fiasco.</P><p>Pyramid selling schemes do work for the promoters because many people can not get their heads around the impossibility of the of their success for the contributor. The programs are disguised as good causes or money circulation clubs, such that the true pyramid nature is overlooked and it seems like a simple believable business opportunity. As an example, a typical program might be called something innocuous such as 'The Investment Assistance Community' and you are asked to donate &pound1,000 to be awarded silver membership.</P><p>All you have to do is to recruit two members yourself to become a gold member. That is all - then you can sit back and wait for your pay back of (say) £3,000. If you want you can buy any number of silver memberships, if you think you can recruit more people. If you receive your £3,000, you will probably decide to reinvest it in three memberships, such is your confidence in the scheme. It seems fairly plausible? But where is the £3,000 pay out coming from?</P><p>You rely on the two new recruits you have introduced and each of whom has provided &pound1,000 to join to also recruit a further two members each - thus elevating you to 'platinum level'. Now take note. Including yourself, seven members have joined the scheme and £7,000 in total has been paid into the system. The most recent four members now also have to recruit two new members each and then a total of £15,000 has been paid in by everybody. At this time you are raised to 'diamond' status and given your £3,000. The balance of £12,000, plus your £3,000 if you put your money back in, will be absorbed by the scheme's owners for themselves. It becomes harder and harder for the lower levels to each recruit new members and the scheme is not self sustaining. It reaches a saturation limit and collapses as all of these schemes inevitably do.</P><p>And yet there are those victims of such schemes that blame the authorities for intervening for their losses, such is the incomprehension of the fundamental concepts underpinning the fraudulent nature of pyramid selling schemes. The key identifier for such a scheme, regardless of how well it is disguised, is whether or not it is offering a tangible product for your investment. If the scheme is simply a money circulation club, an investment club, or anything else that purports to pay out astronomical returns for no work, then it must be a unsustainable pyramid scheme.</P><p>Now that pyramid schemes are better understood, they are outlawed in most countries. They are illegal in both the United States and the United Kingdom. Attempts to circumvent legislation have been made, by replacing any mention of 'investment' with 'gifting' for example. Schemes are still promoted, often as legitimate Multi Level Marketing programs. Many people still succumb, if they are unable to differentiate from schemes that offer genuine products and those that do not.<br></P></p> <br><br> <b>Author Resource:-></b>  Mark Jenner is a Fellow of the Institute of Chartered Accountants in England and Wales, a Certified Fraud Examiner and has a Masters Degree in Fraud Management. He specialises in advising on internet <a target="_blank" href="http://www.businessopportunitymarket.com/internet-home-business/">home businesses</a>, network marketing leads and whether or not an opportunity is a <a target="_blank" href="http://www.mark-jenner.com">scam or fraud</a>.<br><br><b>Article From</b> <a href='http://www.look4articles.com/'>Look For Articles - Articles Directory</a><br></body></html>