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Have you ever come across or been tempted by an advertisement or offer through your friends to make “easy money” or “online income” out of your own home?
During the Pandemic, many companies and individuals have successfully utilised so-called “multi-level marketing” practices. It is important, therefore, to address the differences between a pyramid scheme and a legitimate multi-level marketing company. Initially, it should be noted that pyramid schemes always fail, while multi-level marketing companies sometimes survive.
A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of “investors.” The initial promoters recruit investors, who in turn recruit more investors, and so on. The scheme is called a “pyramid” because at each level, the number of investors increases. The small group of initial promotors at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.
In a pyramid scheme, money from new participants is used to pay recruiting commissions (that may take any form, including the form of securities) to earlier participants just like how, in classic Ponzi schemes, money from new investors is used to pay fake “profits” to earlier investors.
Multi-level marketing is a method of selling products directly to consumers without intermediary retail stores. Products are sold through a network of distributors or salespersons set up to resemble a pyramid: each distributor recruits and trains additional distributors and will earn commissions on their sales, as well as on the sales he or she makes.
A legitimate multi-level marketing company emphasises reliable products or services. A pyramid scheme uses products or services to disguise its quest for collecting money from the investors on the bottom levels to pay other investors further up the pyramid.
Pyramid schemes are doomed to fail because their success depends on the ability to recruit more and more investors. Pyramid scheme cannot be sustained and always collapse eventually. The only people who make money are those few who are on the top of the pyramid.The easiest way to avoid being defrauded is obviously not to participate in any promotion that appears to be a pyramid scheme.
Be Vigilant, Stay Safe
Kewepelo Mero,
Lower Naharbari Village