WELCOME TO THE CON WORLD

Are you unemployed and looking for some opportunity?

Are you a house wife, want to earn some money sitting at home?

Are you tired with 10 to 5 work job and want to have freedom of work and earn more money?

Are you looking for little extra money?

Do you want to become a Multi millionaire in no time?

So here is a life time opportunity!!!

You just required to enroll in a Scheme by buying their products (for selling?) and recruit three more to do the same. You need not know anything about the marketing or knowledge of any products. That is all. The persons you recruited will recruit three persons each and they will recruit another three each and so on. You will get percentages on the products sold by you and also on the persons you recruited and the people recruited by your recruitees (downline). The most important thing is that you will receive commission for recruiting people.

Is it not a wonderful life time opportunity? Are you not still convinced? So just look at this example.

Here is the company ‘X’ which markets few health products. You can join this scheme by buying their products; once you are a member you will get the right to recruit other people. You will receive commissions for recruiting people. You also receive percentage on the sales made by you and your recruitees.
You need to buy their products by paying Rs.500/- to the company to become the part of their scheme. Then build a “down line” by recruiting three new members, who then each will recruit three more members. The company will pay Rs.150/- for each of three members recruited at first level. The company will also pay Rs.30/- commission for each recruit at the next levels. Imagine the situation at the fourth level, you can earn Rs.3,960/- on an investment of just Rs.500/-, a whopping 792% return. This is to calculate – Rs.150/- from the first level of three recruits is Rs.450/-, Rs.30/- from next three levels of recruits is Rs.270/- (Rs.30/- X 9) + Rs.810 (Rs.30/- X 27) + Rs.2,430/- ( Rs.30/- X 81) not a bad deal. Of course you also get percentages on the actual sales made.

This is the promise of the con world. Pyramid schemes, Multilevel Marketing, Network Marketing or whatever be the name. Promises quick money.

Is all this true? Any scheme with this kind of structure is bound to collapse at some point of time and 99.9% of people will loose money. Are you not able to belief just look at the above example. Imagine that this scheme collapses at level four.

The promoter of the scheme at this stage will have made Rs.500/- from the first investor in the pyramid (Rs.500/- with no commissions paid out), Rs.350/- from the 3 at the next level (Rs.500/- minus commission of Rs.150/-), Rs.320/- from the 9 at the next level (Rs.500/- Minus commissions of Rs.150/- + Rs.30/-), Rs.290/- from the 27 at the next level (Rs.500/- Minus Rs.150/- + Rs.30/- + Rs.30/-), and Rs.260/- from the 81 newest investors (Rs.500/- Minus commissions of Rs.150/- + Rs.30/- + Rs.30/- + Rs.30/-). The simple math – Rs.33,320/- flowered down to the con artist – and all he did was attract one investor.

Did the investor made any money?

Level	No. of investors	Amount invested	Money gained as commission	Net loss/profit
I	3	1500/-	Rs.4590 (Rs. 150/-X9 + Rs.30/-X108)	Profit - Rs.3090/-
II	9	4500/-	Rs.6480/- (Rs.150/-X 27 + Rs.30/-X81)	Profit - Rs.1,980/-
III	27	13,500/-	Rs. 12,150/- (81 X Rs.150/- Rs.150/- as commission from recruit multiplied by 3)	Loss - Rs.1,350/-
IV	81	40,500/-	0	Loss - Rs.40,500/-

On the total investment of the investors of Rs.60,000/-, All 81 investors at level-IV lost all their money of Rs.40,500/- (Rs.500/- each), All 27 investors at level-III lost their money of Rs.1,350/- (Rs.50/- each), thus a total 108 investors out of 121 investors lost their money. So if you are in level IV (most of the people will be at the bottom level when the pyramid eventually collapses) you would have lost all your investment.

If this chain continues for just 20 levels the whole population of India will get exhausted and within another 3 layers whole of earth population will get exhausted. Imagine that even if every body on the earth are recruited into this scheme it should collapse after 23 layers, what will be the loss at this stage to the investors … astronomical figures… will be shocking to quote.

This scheme is a product based pyramid scheme. A pyramid scheme is a scheme which rewards the participants for inducing other people to join the program. These schemes are internationally growing problem. Pyramid schemes are of two types – the naked pyramid schemes in which there will be no selling of products – product based pyramid schemes are the schemes which appear to sell products but the main emphasis will be on recruiting people.

As observed by Debra A Valentine general Council for the US Federal Trade Commission in the presentation made in international monitory funds seminar on current legal issues effecting Central banks that “What is striking about these schemes is that while they are very old forms of fraud, modern technology has vastly multiplied their potential for harming our citizens”.

Pyramid schemes as currently defined by the Federal Trade Commission of U.S.A. and in many state laws as plans which concentrate on the commissions you could earn just for recruiting new distributors and which generally ignored the marketing and selling of products and services.

Pyramid schemes were banned in many countries including India. Even though pyramid schemes are banned they are reappearing with different names. One of such is the Multilevel Marketing or the Net Work Marketing. It is being argued that pyramid scheme is illegal but Multilevel Marketing or Network Marketing is legal. So far as company is “Multilevel … it is pyramedic and thus illegitimate. It could not work by legitimate means and is a con. In so far as an MLM company is Multilevel “Pyramedic” then it is fraudulent and illegitimate. In so far as a company markets products and services “rather than they dream” then it can be just like any company. Some MLM emphasize product selling rather than MLM “math magic” and thus they can avoid many, if not most of the “Wrongs”. On the other hand, there are many MLM companies for whom the product is merely the cover for building a collapsible pyramid (“what is wrong with Multilevel Marketing”, Dean Van Druff).

SOURCE: (IMF working paper, “the rise and fall of the pyramid schemes in Albania”, July 1999).

Singapore banned Multilevel Marketing schemes and Pyramid schemes. China banned these schemes in 1998. America and Canada prohibited Pyramid schemes. Very recently Sri Lanka passed a legislation banning Multi Level Marketing Schemes.

In India, The Prize Chits and Money Circulation (banning) Act, 1978, banes such a kind of schemes but not enforced effectively. Further it is most unfortunate that the central governed opined that this Act is not applicable to Direct Selling, Network Marketing and Multilevel Marketing. On one hand the legislation banning these kinds of frauds is not effectively implemented and doubts expressed about its applicability, on the other hand Direct Selling industry is trying to legitimize these kinds of frauds in the name of Direct Selling and lobbying for legislation.

Pyramid schemes or Multilevel Marketing schemes whatever the name may be which emphasize on recruiting people rather than selling products will doomed to be collapsed and will do a great harm to many people. In the next following pages the attempt is to explain the harm and how the very design of the scheme is bound to collapse and thus argue for a ban on these Pyramid Schemes reappearing with different names to get legitimacy.

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