Spotting an illegal pyramid scheme 101

Your social media feed is abuzz with stories of people making serious money selling an energy drink. Not one to miss out an opportunity, you do a quick search and come across a viral video. The guy making the pitch insists you can make thousands of dollars a month. “Forget working 9 to 5. Join the Young People Revolution!” he says. You think to yourself, “I’m young people! And I can totally get on board with a revolution.”

Slow your roll, my friend. Before you shell out a wad of cash and start making pitches to your friends, you should know that the FTC just filed a complaint against the company behind the pitch. The FTC alleges Vemma is running an illegal pyramid scheme and is targeting college students.

Here are some telltale signs of a pyramid scheme — think of these as “Spotting an Illegal Pyramid Scheme 101”.

1: Recruit, recruit, recruit. If your income is based predominantly on how many people you recruit into the program, not how much product you sell, it’s a pyramid scheme. According to the FTC’s complaint, Vemma’s marketing and training materials emphasize recruiting other Affiliates. In fact, one of the masterminds behind the alleged scheme says Affiliates should focus on recruiting other Affiliates because customers are simply a “byproduct of the business.”

2: Buy our product, lots of it. Many pyramid scheme operations require participants to buy the product or other things to stay in good standing with the company. Vemma Affiliates are told to spend 150 bucks a month on products to stay in the monthly “bonus” pool, according to the complaint. That’s $1,800 a year!

3: Live the lavish lifestyle. The recruitment pitch says you’ll be living in the lap of luxury. It fails to tell you most people in a pyramid scheme lose money. Vemma made promises of luxury cars and travel to exotic destinations, but the company’s own income disclosures tell a different story: 9 out of 10 Affiliates made less than $6,200. And the FTC alleges even those figures are overblown because they don’t take into account expenses like the initial purchase and the monthly purchases.

If you’re tempted by a sales pitch that says you can make money selling products, find out what questions to ask before you buy in.

Blog Topics: 
Jobs & Making Money

Comments

Goes back to the same old saying "if is it too good to be true.......you know what happens. You suffer in your wallet/hard earned cash.

I totally agree with you.

Dear FTC and commenters,

Churn is an omitted word from all the HLF recruiting materials (including the company Marketing Plan Training). For example, If you start the new year with 1,000 and recruit like crazy 1,000 for a doubling of the base, but then on the first day of year two you are back to 1,000 distributors ...

You could look at this in two ways: a) Our base grew 100% b) We lost half our base or more realistically c) we recruited 1,000 which doubled our base and we are back where we started. All these choices are correct in their own way. However, answer C) clearly illustrates that the failure of the blistering recruiting was 100% (or maybe even worse). ?

Do you get it ? The Failure was 100%. This can go on for years, decades, and it has with HLF. This begs the question, what would happen if recruiting were to stop? Hlf has around 4M distributors and loses about half a year (2MM). So under NO recruiting: Yr 1: the 4MM (where 2MM are really the churn) is really just 2MM Yr 2: 1MM Yr 3: 500K Yr 4: 250K Yr 5: 125K HLF could function under these start decreases in memberships.

Thus, recruiting is Everything for hlf. Also, the collapsing membership where 5 get 5 who get five who get five ... forever in hopes of achieving the Passive Income would result in 5 who get 5 less who get 5 less ... So the above progression actually exaggerates membership levels. In a business model that Defenders and Foes both agree can be molded to 'whatever you want it to be' there is great risk to the consumer, the populous, the investors, and even the employees. A clear definition of what is and is not legal is paramount to all parties and blurred lines only allow scammers and the unscrupulous to take advantage. For example, how can Michael Johnson the HLF CEO take home as much or more than the CEO of Disney (where Disney is many many many times fold the size of HLF).

These are business opportunities. To start a business it takes money. If you think running a business is easy then try it,most fail within 3 yrs. If you work it you make money. If u want a job go Federal but don't look down on small business people just because they have a dream to be better than average. National sayers are dream sealers and lazy complainers who slave their lives away for another person's dream of success then they bash them for being successful.

I am trying not to be judgemental, but I can't help noting that your grammar is poor, at best. Perhaps it's just a mobile device that is screwing things up. However, the context of what you are attempting so say is rubbish. Pyramid schemes are NOT worthwile "business opportunities" for anyone except the low down dirty dogs that start them, sit at the top and collect the creame. That is how dreams are crushed. Typically, these types of "get rich" schemes prey on the dreamers, fools, and the un/undereducated. This is why such practices have been deemed illegal in the United States.
It certainly seems as though you are promoting such scams. Shame on you! Either you are a fool or a schemer. Neither is good.

What if it involves a good quality product with a high demand and I am not asked to pay or spend any money whatsoever. I simply place a free ad and then answer calls about it. Is that a pyramid scheme?

This clearly defines the vast majority of Network Marketing and MLM companies running today as scams. I hope people will wake up to what is happening in the business opportunity world.

HA! Whatever you say Ethan....

Agreed. Having tried to sell Mary Kay for about half a year in college, it certainly fits the bill. Mary Kay is clearly a pyramid scheme, though it's somehow managed to squeeze its definition of itself through legal loopholes for ages. The sad part is that so many women struggling to make ends meet - divorcees, single mothers, women without college degrees - turn to Mary Kay as a safe haven where they can connect with other women in the same boat and earn money to support their families from home, only to find out that they're all losing money together and any successes their team does have only benefit their recruiters' recruiters. Not to mention that the Mary Kay company itself does precious little to help its "independent beauty consultants" with sales or marketing, instead treating them as the end customer. It's like "I sold my overpriced products to you, so my work here is done." Except for the annual Pink-washing rallies to convince the women that they're beautiful, strong, and successful or something. Ok, rant over.

You should look into Bonvera

What about the federal reserve and its banking cartel what about Goldman Sachs JP Morgan Banking per pyramid schemes

Good catch. Keep up the good work.

What happens that a person who uses your credentials saying that they are from the claim dept. and that the trade was done in London and in order to received any payment we will have to pay a fee. Is that true in any winning case that then victim will have to pay a fee in order for them to release the funds.

If someone asks you to pay before you get a prize, that is a sign of a scam. The FTC has an article about Prize Scams.

To make a complaint about something that happened outside the US, go to ecommerce.gov.  Agencies in 30 countries gather and review those complaints.

If someone is misusing your personal information, Social Security number, or bank or credit card number, go to identitytheft.gov. The site has information about what to do.

If the trade was done outside of the United States is there any way to get it back. Even when all the evidence are all there. That person who scam me for more than $5,000 say that he know longer there. I would like to pursue this and take action so they can close down before more victims fall for their scheme. Example: After the purchase I found out that they are in Gibralta owned by chelestra Limited. I don't know what to do . The commissioner at your dept, say that it is slim to non. With knowledge and the know hows to get around this in getting my money I'll be so greatly appreciated.

Just like Cookie Lee did what a farce

Please investigate itworks! I've had health reactions to their products and it is run the same way.

You can report a problem with a product to the FTC. Go to ftc.gov/complaint and enter the information. It will go into the database that law enforcement uses for investigations.

Blog comments don't go into the database.

Thank you for sharing this important information with us, really helpful. Scams are now part of our routine life. Fraudsters are become more technical and professional now and they know where your soft link is and from where they can easily convince you and took advantage. Their main motto is to make money easily and this is only possible when they plan something fishy. The problem is, we also want to make money and because of that we fall for big and small scams on internet or any other place.We need to be aware of these scams and from the scammers too. Don't Fall!

I just got one of those emails.

So while not explicitly stated we are talking about WALL STREET.IT SURVIVES ONLY WHEN NEW LOSERS ARE BROUGHT INTO THE FOLD TO BE KAPITALIZED ON.

After many years of seeing and being pitched this sort of junk, (I work in the Entertainment/Carny business) I'm sorry to see it still happening. THIS DOES HAPPEN folks, it has just gotten more sophisticated and slick!

A fool and his/her money are soon parted.

They should also look into that scam of a company Altaria International with their NEON energy drink pyramid scheme.

You should check into LIMU. I see it plastered all over Facebook.

I just got into Vemma, I wanted to cancel my account because it's still within the 30days. How can you help me cancel it and get my money back? Please help me!?

Because of a federal court order, Vemma is temporarily shut down, so you can’t contact them. The FTC asked the Court to permanently shut down the operation. After the court makes a decision about the FTC’s request, the FTC will update information here.

Please file a complaint at ftc.gov/complaint so we know you did business with Vemma.

Call the Attorney General in your state. I got scammed by Polaris which had a few other names before it. I called the AZ Attorney General's office and they gave me some helpful information and I was able to recover all of my money. Be careful of anyone who suggests that you call your cc to request they increase your credit line. Bad for your credit in the long run.

I was so fortunate I asked a broker about a stock someone was trying to sell me. She said it has no history and seemed too good to be true. I passed on it and it seemed to disappear into the air.

Alvaro, this barely describes what a pyramid scheme is. It just seems like another allegation against Vemma Nutrition being an illegal pyramid scheme(which has yet to be proven in court). If your goal is to educate the consumer about pyramid schemes please do everyone a favor and educate yourself on the Network Marketing industry as a whole and not use an example based off of complaints by a blog (TINA. targeted at a company that hasn't even been tried in court yet.

You'll find more information about the basis for the FTC's Complaint against Vemma in the press release.

At the FTC's request, a federal court temporarily halted an alleged pyramid scheme, Vemma Nutrition Company, that lures college students and other young adults with the prospect of getting rich without having a traditional 9-to-5 job.

The FTC seeks to stop the operation, which earned more than $200 million annually in 2013 and 2014 and has affected consumers throughout the United States and in more than 50 other countries, from continuing as an unlawful pyramid.

I think Isagenix fits this illegal profile. has anyone reported?

i know a company that the consumer should pay every month for products to get commission from his organization . Its legal or not ?

This FTC article has information about multilevel marketing plans.

The article explains what to think about before you get involved in a multilevel marketing plan.

You mean Avon don't u? That's almost a pyramid scheme. It's very similar though

Shut them down for good! Stick it to um!!!

They have already started a new one, since Vemma zyndio Please investigate this one before my parents fall victim again!

If you have a complaint about a company, please report it to the FTC at ftc.gov/complaint. The information you give will go into a database that law enforcement uses for investigations. Complaints from consumers help us detect patterns of fraud.

I was pitched by a close friend about joining Amway some 30 years ago and remember that he had to buy so much product each month to stay of top of the people he recruited to get bonuses. His entire basement was full of stuff. It was ridiculous! His presentation was like someone witnessing for a religion almost. It was rather odd. To his astonishment, I declined the opportunity. When I moved to Houston 20 years ago a vitamin company tried to sign me up, but had no suggestions on actually selling their product, so I figured the people at the top were making money off signing other people up who would buy product. These are two clear cut cases of pyramid schemes - in my humble opinion.

Isagenix requires you to purchase 100 "points" (approx US$140) worth of products each month (via an autoship program) in order to stay eligible for financial bonuses. And all the 'consultants' I ever met were more focused on recruiting and building teams than selling products because that's where the REAL money was. Are we in Egypt? Because I think I see a pyramid.

Tell us more please. File a complaint so FTC can at least investigate. A loved one is Isahypnotized.

many good research people are not be use why,many cheating people many opportunity are miss to the world,why,because of cheat real research people are from low -money people.Because many spend many money for pass years,now he is empty hand,

Duterra, Young living oils. All mlm schemes that even got written letters of warning from the FDA about making false claims. These people go around recruiti g others by making claims of health and wealth thru unproven claims, and mis-information. They seriously need a deep investigation.

scam website are jobrize. / weelyfixpay. are both scam website giving you a link to generate for them on your social media sites and etc and when you get in cash they claim you can cash out $300 its not true when you go to cash out they tell you do a survey after that another to just get to the point you never get the money and the one contact information they have is they email which are suuport-center@jobncash and Admin@jobrize when you send them a letter you receivd this MAILERDAEMON@YAHOO.COM FAILURE NOTICE PLEASE PEOPLE DONT GET SCAM!!!

Thanks for bringing this case against Vemma! They are a predatory company. This is really good work by the FTC. Let's all hope Herbalife is next. Consumers need protection from these kinds of companies. Thanks FTC!

I'm with all of you....but the ones that need to be at the top of the list and tracked like ISIS are the health companies that come out and say, "with your doctors note" use us and you can be healthy AND make a lot of money. Can't you just see whats wrong with that phrase? Advocare, Beachbody, Young Living Essential Oils, DoTerra, Herbalife, Isagenix, are just a few to name that do this crap and the government needs to step in and regulate it or shut it down.

I am ever so happy to see that the FTC has finally caught up to Vemma and shut them down, hopefully for good! I have no qualm with the product, just the way they feed upon young, naïve, college students. BK should have just sold his product in stores like every other company. Instead he chose to take advantage of our children.

Just like with any business there's a right way and a wrong way to do things. Mlm is great if it's done with high levels of ethics and is fair and is about promoting products rather than recruit recruit recruit. Being balanced is good too. 

But just like what the ftc points out there are red flags to look for. It doesn't mean all mlm is this way but it is very good to consider the questions they want you to ask. 

My hope is that this makes people more aware of all these companies that give the industry a bad name, because it puts companies with extremely good tract records in the same boat as others who take advantage of people. 

And that's not fair, but hopefully people will become more educated about this, mlm shouldn't be about making money quick, if you see that being touted RED FLAG. Legit mlm takes months and years to build clientel and a team and is a balanced business focusing on product sales. 

If someone says it's super easy and all you have to do is sign up a few people and sit back, RED FLAG. Legit mlm requires you yourself to promote your business and products and being able to get in front of new people. Depending on the business and company it can be a simple business but not necessarily easy. But what is easy? Work is work and you have to treat it like work. 

Also watch people, what's their tract record with these kinds of businesses. Have they been with a company for 20+ years or have they bounced around from one company to the next touting how much money they are making? Red flag! 

Also people give the industry a bad name if they had been with a company and built up a large network, then they quit and join another company. Watch these people on their social media platforms when they say "ask me how I made 20,000$" this month. Again RED FLAG. That's totally unrealistic and doesn't last. Watch these people they will be in another company a few years later doing the same thing. 

All I ask is people to do their research, there is good mlm companies out there, it's just unfortunate that there's many that give the industry a bad name and don't abide by a high level of business ethics. ‎

First and foremost, do your own research. Any good company out there is focused on getting their products to the end consumer. Products that are a good value and not overpriced.

You should only be buying what you need and use each month, not building an inventory in your garage. I've been with a wellness company for 24 years and love their products. For me it's about helping people and not getting "recruits"

A good business model will always be product focused with commissions payed based on product sales, not sign up fees or recruiting bonuses. There are companies out there that do business the right way, unfortunately, there are more that don't. Be cautious, skeptical, and most importantly, do your own research - don't just believe what someone told you.

What attracted me to my company was the management team comes from Fortune 500 companies, not MLM companies. They are doing business the correct way and slowly building a solid business model that will last multiple generations, not 5 years like most get-rich-quick schemes. It should ALWAYS be about getting quality products to the end consumer - that's the only business model that will work long-term.

Good companies are out there that really do work.

Is Neirman a pyrimiad scam?

Jeunesse Global is definitely a pyramid scheme, and a very big one at that. My mother got suckered into Jeunesse. She lost most of her friends because soon as they rejected her recruitment effort and mentioned the dirty word (i.e. pyramid) she cut all ties. It's sad to me. Not making any money and she must spend about $150 per month (they call it AUTOSHIP) to stay eligible for earnings. They have a fancy video with cool animations that tells people you can make $25,000 per WEEK lol. What a scam in my opinion.

We have a Herbalife's nutrition club around our house. I was attracted to the free fitness camp, then I signed up to be a herbalif distributor two month ago. Since then the lady who works there keep pressure me to buy 2500 volume points products to qualify as a supervisor. Is this legal?

My wife got into the herbalife business, she paid thousands of dollars to get a bunch of junk that she never sold a penny. She refuse to take it back because she doesn't want to damage the relationship between Her sister in law.

Please shut down the company!

What is the logic? Your wife buys a product that you call junk, then she is not able to resell it, so the company has to be shut down?

Has anyone seen complaints on Empower Network

What's the difference between Vemma and Herbalife?

What about Morinda ? Is this an authentic company?

There are many legitimate MLM companies. I belong to one. I was TOTALLY SCREWED by a different one. i won't even bother to complain to FTC, because non of the government agencies have done a thing.

Your complaints can help law enforcement with investigations. If you encountered a scam, please report it.

Tell the FTC at ftc.gov/complaint, or inform your state and local consumer protection agencies.

As many people have stated. Legitimate mlm companies do exist. So remove that thought process that EVERY mlm company is a scam. I love the network marketing industry, and I love more so that something like the FTC actually exist as well. What the FTC is doing is helping cleaning up the industry. Actual legitimate companies are around. But for every legitimate company there are probably 10 others ruining the industry, or maybe the company was suppose to be legit but bad people joined the company and recruited using bad tactics which were used by the new recruits. Downward spiral.

Wealth Masters International is a pyramid scheme! They robbed me for more than $34,000 dollars

You can report a scam to the FTC at ftc.gov/complaint. The information you give goes into a database that law enforcement uses for investigations. You can also report to your state Attorney General’s office.

Blog comments don't go into the database.

So the question I have is do we as consumer who have wasted so much money on Vemma and this damn scam get any of our money back? I have report and have not received anything back. Victoria H

The FTC filed a case against Vemma in August, 2015. The FTC seeks to stop the operation, which earned more than $200 million annually in 2013 and 2014 and has affected consumers throughout the United States and in more than 50 other countries, from continuing as an unlawful pyramid.

As of 2/22/16, the case has not concluded. When there is new information about the case, the FTC will post it on the Vemma Nutrition Company case page.

I was "offered" a life changing opportunity about 30 years ago: AMWAY..!!! and of course stupid me fell under the spell...bought the key to success: "The Almighty Kit", that would take us to the lavish, over achieved life that for the wrong reasons I dreamed of. With the kit I got some of the wonder/products that stayed in my kitchen sink for years to come. But of course, it the "system" didn't work for me it was all my fault because I was lacking of enthusiasm and recruiting skills, but I found out really quick, well, after $400.00 that the only real way they made money was by selling motivational books, tapes (yes tapes, 30 years ago), the rallies, conventions etc etc etc... the price I paid for my greed was little compared with people that lost all the savings, loans, jobs etc etc. I've seen the same trend thru the years, new people, new companies, better media approach with the same results, shattered dreams, lost money, broken relationships, stubborn people that realized sometimes after years that they were victims of another scam, unfortunately many of them after losing a lot of time, money, family, jobs, friends. I've read some comments ftom people that still give full support to the mlm, whatever the reason may be, they refuse to share those names and don't mention a single "good" mlm company name, that in my case will be just as an ilustration. In all these years I have come across companies, friends or acquaintances that wanted to share the "good news and wealth" with me but I have refused every single one, however I must say that 1 or 2 times I've bought a product that seemed good just to find out that the same old thing was behind it all. Recruit, recruit recruit... so now I just go and get whatever I need with no strings attached or promises of wealth, then if I like it I just get another one, end of story. I don't even try the so called "free trial offers, just pay $4.95 in shipping cost" deals, cause #1 you can only pay the miser $4.95 with a CC and once you give that info, it may be sometimes difficult to say the least to stop the charges in an amicable way. So, why the trouble?? and #2 just go back to #1... My advise to the friends that have approached me in the past is simple, JUST GET OUT,QUICK!!
NEVER MIND ABOUT YOUR LOSSES, GET UP AND LEARN...Some chose to stay, others to leave. Like the old saying: "There is a fool born every second" (it used to be every minute) but sadly, we've improved even that statistic... have a nice day!!!!

What it taking so long, Herbalife is a scam, just it down!!

Has anyone heard of Bonvera?

Bonvera forces you to spend a certain amount of money every month to be eligible to make money. Furthermore, their pricing is equal and/or more than if you go directly to the store itself. Do not recommend, as you are just making money for the founders.

Bonvera is another MLM scam that has you way overpay for products, and then pays you some of the overpayment back. You can easily buy their products for a lot less at other name brand locations on the internet.

Was part of Bonvera for a little bit, total scam. Way over priced, shipping was insane, their drinks are dollar store quality, they're affiliated (Not PARTNERED with) big names like Target and Best Buy. I've been in business a long time, affiliation is easy. All Bonvera does is take all your commissions from their affiliate account with these chains (which anybody can sign up for ) then gives you back pennies on the dollar. Total scam.

You were with Bonvera for a total of 3 months and ur quick to point out some of the wrinkles a new business goes thru. U have failed to mention if any FTC charges have been filed against Bonvera. There has not. So your comments are of your opinion and nothing else.

YES! Bonvera is s huge scam. Gets you sucked in thinking that you get paid for shopping. Signed up and started reading the fine print you aren't reimbursed for everything you buy from an affiliate store - groceries are excluded. You only make money buying the Bonvera products. It's basically an energy drink company disguised as an affiliate program. DO NOT FALL FOR THIS SCAM!!!!

Good Day All. Yes, I was approached so many times and I finally have a few rules of thumb: 1) If you cannot make money without you need to buy the product first, then it is NOT good. Example here is insurance salesmen. They don't have to buy the policies themselves to make money. 2)The moment it is more viable for you to recruit rather than to sell personally, it is NOT good. 3)If you have to be recruited first under someone else before you can make money, it is NOT good. Thus to conclude, I ask myself: "Why must I pay before I can work? Why cannot I just keep selling and get commission rather than to recruit other salesmen? And Why must I fall under someone elses level to start working for the company?"

What does any of this have to do with whether any activity is within or outside regulations. That is what I would like to know. I know if something sounds too good, it probably isn't. That doesn't make anything or statement illegal. At least, I hope not. Let's refer to regulations and acivity. THIS IS WHERE THE FTC, IRS, AND GOVT AUTHORITY IS CONCERNED AND I AM INTERESTED. Is anyone at home at the FTC???

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