Transcript (PPTX, Unknown)



1. Ponzi
Schemes/Scams
2. Pyramiding
Schemes/Scams


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
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A Ponzi scheme is essentially an investment
fraud where the operator promises high
financial returns or dividends (6%-29% per
month).
The operator invests victims' funds and pays
"dividends" to initial investors using the
principal amounts "invested" by subsequent
investors.
Simple fraud whereby initial investors are paid
exceptional returns from the deposits of a
growing number of new investors

It is a fraudulent investment operation that pays
returns to separate investors, not from any actual
profit earned by the organization, but from the
money paid by subsequent investors.

“Profits” to investors are not created by the success
of the underlying business but instead are derived
from the capital contributions of others.

Schemes always offer an economic purpose so that
investors think they are investing in a viable venture
that generates income.

The scheme generally falls apart when the
operator flees with all of the proceeds, or when a
sufficient number of new investors cannot be
found to allow the continued payment of
"dividends.“

Guarantee payments by issuance of postdated
checks (generally 7 checks per investor)
Ponzi Company
Counselor/Agent (individual or
Corp)
investor
investor
investor
Company
returns part of
A’s investment
as “interest”
Company
A invests
A tells others of good
investment opportunity
Promise of
unusually high
interest rates
(4% to 20% A
MONTH
Company pays
A’s next interest
due from B’s
money
A invests
Company
Company
returns part of
B’s investment
as “interest”
B invests
A and B tell others of good
investment opportunity
Company
pays A from
B’s & C’s
money
A invests
Company
returns part of
C’s investment
as “interest”
Company
B invests
C invests
Company pays B
from
C’s
money
The Cycle continues
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
Stage
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6
Level 7
Level 8
Level 9
Level 10
Level 11
Participants
8
64
512
4,0962
32,768
262,144
2,097,152
16,777,216
134,217,728
Notes
Each participant
recruits 8 new
investors (Level 2
pays off Level
1 and so on)
- More than the
Philippine Population
1,073,741,824 – More than triple
the US population
8,589,934,592 – More than the
world’s population
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Pyramid scheme is an investment fraud which
rewards participants for inducing other people to
join the program.
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A distribution scheme in which a participant pays for
the chance to receive compensation for introducing
new persons to the scheme and these new persons
themselves introduce new participants
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Focus primarily on the exchange of money for
recruitment
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The selling point: each participant can recoup his
original investment and make more money by
introducing more participants.
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It hides scam by layering it with products, even if
these products:
o Have no real world value
o Are priced in an inflated manner
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They claim huge profits through continued growth of
“downlines” or bonuses based on your advancement
in the structure.
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The marketing of a product or service, if done at all,
is only of secondary importance in an attempt to
evade prosecution or to provide a corporate
structure.
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Pyramid schemes are inherently injurious to
consumers because as a mathematical certainty they
are doomed to collapse
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Only those on top make money, hence the stress on:
• Positioning
• Timing
• Getting downlines (you must be on top)
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Distort concept of entrepreneurship
In
ponzi scheme, the schemer
acts as a “hub” for the victims,
interacting with all of them
directly. In a pyramid scheme,
those who recruit additional
participants benefit directly. (In
fact, failure to recruit means no
investment return.)
A
ponzi scheme claims to rely on
some esoteric investment approach
(insider connections, etc.) and often
attracts well-to-do investors;
whereas, pyramid schemes
explicitly claim new money will be
the source of payout for the initial
investments.
A
pyramid scheme is bound to
collapse much faster because it
requires exponential increases in
participants to sustain it. By
contrast, ponzi schemes can survive
simply by persuading most existing
participants to “reinvest” their
money, with a relatively small
number of new participants.

Is Network Marketing a Pyramid Scheme?
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Pyramid Scheme (Illegal scam)
o A fraudulent money-making scheme that is based on a
non-sustainable business model that involves the
exchange of money primarily for enrolling other people
into the scheme without a legitimate product or service
delivered. Eventually the number of new recruits fails
to sustain the payment structure and the scheme
collapses with most people losing the money they paid
in.
o The easiest way to identify pyramid schemes:
• firstly there is no legitimate product or service
involved (i.e. you do not get a legitimate product in
return for your initial investment).
• The second way is that you do not get a financial
return unless you have successfully introduced a
number of new recruits into the pyramid. Pyramid
schemes concentrate on the money that you could
earn by recruiting new people into the pyramid and
generally ignore the marketing and selling of any
products or services

Network Marketing (Legitimate, legal business
model)
o The concept behind network marketing is a distribution
model that allows a company to sell products directly to
the consumer.
o Choosing to use a word of mouth approach
(networking) instead of advertising through traditional
streams (eg media).
o Instead of paying the media for advertising, network
marketing company are structured to reward
distributors through commission in return for selling
their products and finding new customers.
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The main focus of network company is product
distribution. In a legitimate network marketing
company, distributors are not required to recruit
new distributors in order to earn a commission,
they can earn money purely for selling the
company’s product.
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Those who do not want to be sales person,
choose to recruit more distributors into their
organization as a means to build their referral
base. Thus, creates a group of loyal customers
and allows one to leverage the efforts of others
and create a residual stream of income.
1. Is there a legitimate product involved?
What do you get in return for your start up investment other than the
potential to earn good money? If you’re not getting a product or service
or if the training tools appear to be overpriced, it could be a scam.
2. Do you get commissions based on product distribution or on
recruitment?
If they are paying commissions based purely on recruitment, it is a
scam.
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Be aware of hype and ground floor opportunities – Although
some people might claim you earn more money if you get in
first, this is never the case and these are companies that
normally fold up within the first couple of years.
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Does the company have proven track record? – If the
company has been around for a few years then there is a
fair chance that governing bodies that police pyramid
schemes have already pulled the business model apart and
given them clean bill of health.
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Will the company buy back any unsold product? Most
network marketing companies have a money back
guarantee which means that if you are unhappy with the
products, you can send them back for a refund. Naturally a
pyramid scheme is not going to refund your money.
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Is there a get rich scheme? – Although there is a lot of
potential to earn very good money in network marketing
very few have made it quick, most make their millions
though consistent effort, If it sounds too good to be true, it
probably is.
 Ponzi
and Pyramid Schemes have found
their way on the Internet making it hard for
the scammers to be prosecuted since there
is no contact with the clients and the
transactions are cross-border.
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HIGH INVESTMENT RETURNS
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OVERLY CONSISTENT RETURNS
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UNREGISTERED INVESTMENTS
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UNLICENSED SELLERS
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SECRETIVE/COMPLEX STRATEGIES