Chances are, you've gotten a direct message from someone on social media or seen postings where young people (usually college students) are selling products and tell glory stories of working from home, on their phone, and being paid for seemingly easy tasks. You can have all the perks they do when you sign up- as long as you pay a fee. The old adage "if it's too good to be true, then it probably is" applies. You've also probably heard the phrase "pyramid scheme" thrown around, but what does that really mean?
What a pyramid scheme really is
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For starters, a genuine pyramid scheme is illegal in the United States. But just what is a true pyramid scheme? According to Merriam-Webster, a pyramid scheme is: "a usually illegal operation in which participants pay to join and profit mainly from payments made by subsequent participants". So, in order for a person to make money, they have to pay to join. Can you think of any legitimate job that requires its employees to pay to work for them? Does any fast food or retail establishment require you to pay money to work for them? Sounds pretty backwards. Merriam-Webster says in other words, a pyramid scheme is a form (albeit illegal) of multi-level marketing. Now in multi-level marketing, the way the person makes money is by selling the company's products to consumers and recruiting others into the scheme. The only problem is, it is difficult to recruit enough people and sell enough products to make a sufficient profit, as you still have to pay money to work. In a pyramid scheme, you also usually have to buy the products you are selling to people. You'd be lucky to break even. The majority of your profits would come from other recruits signing up and from collecting a portion of their commissions once you form a team. Your paycheck comes from other people paying for products and signing up to be a part of the company. The recruits are the base of the pyramid. For a brief time, you will probably make a lot of money, but that will quickly come to an end. Eventually, it will crumble. It is unsustainable. And by then, it is on to the next recruits. And you have sadly, just wasted your money, as well as your time and energy.
Red flags of a pyramid scheme
Techzim
- You have to pay money to sign-up
- Sign-up fee is reduced or discounted for a limited amount of time
- You have all these fees added on after you sign up
- You must recruit people to earn money
- Promises that you can make lots of money, very fast
- Pays you to do very little work, such as just by posting on social media or direct messaging people to join
Resources:
https://www.fbi.gov/scams-and-safety/common-fraud-schemes/pyramid-schemes
https://www.sec.gov/oiea/investor-alerts-bulletins/investor-alerts-ia_pyramidhtm.html
If you think you have fallen for a pyramid scheme
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You are not alone. Countless people have been in the same situation as you. There is nothing to be ashamed of; you have not done anything illegal or wrong. You are a victim. If you suspect you are a victim of a pyramid scheme, call your local police department's economic crimes unit, or the FBI to report a tip. You can also file a complaint with the Better Business Bureau (BBB). I am sorry this has happened to you, but again, you are in good company! The people running these schemes prey upon young college students who are usually very busy and looking for a quick and easy way to make some extra cash. The company is marketed towards recruiting people who are in a similar situation as you.
Before you begin any employment process, please be sure to thoroughly research it and read every single review. Literally, Google the name of the company and search: "is _ a scam?" or "is _ legitimate?" This should yield some basic information. You really should delve further. The Better Business Bureau is an excellent resource to search companies and see the ratings provided by the BBB, as well as reviews. Ask your friends and parents for their opinion. If you have any sort of doubt or there are red flags, do not waste your time, energy, and money. It is better to be safe than sorry. There are other reliable ways to earn money.
