Saturday, March 24, 2007

Ponzi and Pyramid Money Schemes - Part IV - A Supplement To "Unrealistic Expectations"

The below article was posted in the Conquer Your Niche forum by Josh Anderson and I think it deserves more attention. The article is very important and should be read and heeded by IMG.Ws Associates and all new marketers looking to start a business on the Internet or offline for that matter.

As in my previous blog articles, this very important point has been made over and over. There is no free ride, there is no miracle money, no easy money, all businesses require work and effort on your part to achieve success. Please read and heed Josh's post below.

I notice a lot of fairly new warriors posting questions about things like "randomizers," "investments," and other scams. These "newbies" are looking at these programs and their offerings with serious interest and feeling the temptation that comes when promised easy money. I am going to be strait forward and completely honest:

1. When you are getting started online it is hard to hear the legit opportunities because of the multitude of scams and Ponzi schemes.

2. Opportunities that offer you fast money by making an "investment" into a "matrix" or "randomizer" or other such Ponzi scheme are almost all illegal.

3. There are so many illegal schemes online that it may seem like very few are exposed and prosecuted by the authorities but this does not make them any more legit.

4. In the US 70% of your revenues must come from the direct sale of goods or services and only 30% can come from the recruitment of other distributors in order for the opportunity to be legal. This is known as the 70/30 rule and is used by the feds when taking on mlm and other opportunities. Otherwise the companies are getting into "Ponzi" and "chain" schemes which are federal offenses in the US.

5. "Referral sales" are illegal in all 50 states. A referral sale is where you offer a discount or other value in exchange for "leads" or the names of prospective purchasers (do a search for legal info regarding "referral sales" on Google and you will learn some very interesting facts). Here is a link to a page with some basic legal definitions for Ponzi or pyramid schemes and referral sales:

6. A program does not have to pay out in the form of a "pyramid" to qualify as Ponzi.

7. Just because their is a product or service offered as a front does not mean that a program is not Ponzi. Here is a good example:

8. There are many involved in Ponzi who will claim that their program "works" and has passed the scrutiny of the FTC... most of them have no clue what they are talking about and are simply subconsciously excusing a lie that they have convinced themselves to ignore.

9. Self deception is a destructive illness. I got on the Internet for the first time in 2001 and began researching Internet business. I was stuck by the amount of "investment" and "matrix" opportunities that were available. Many of them were "ground floor" start up opportunities that claimed they were going to sell a product or service once they got off the ground but that they needed a few "investors" to grab "top positions" before they "launched." I found that almost all of them never actually offered a legit product or service and operated as an unabashed and obvious pyramid scheme.

Most sites would disappear within a year and I would see the same founders starting different opportunities with varying "payout" plans all of them Ponzi. I also saw that some of these Ponzi creators spent time posing as "consumer advocates" for those who had lost money in other schemes. These Ponzi scammers would lure in victims of other failed Ponzi schemes by publishing submitted complaints on their websites in behalf of the victims. They would act as if they were trying to assist the victims in recovering their lost "investments." I would then see these very same "advocates," after building a list of victims sufficiently large enough who trusted them, launch their own Ponzi schemes with claims like "everyone gets paid" and "guaranteed not to fail." They would tout themselves as saviors claiming that no one would get hurt and that they were out to help everyone who lost money when other companies failed.

10. A majority... let me say that again a MAJORITY of opportunities I see advertised in safe lists are illegal investment schemes. The reason for this is because most people who are attracted to these type of opportunities cannot build a mailing list to market to (the reason is because the mainstream business world immediately sees you as illegit) and they congregate in safe lists in hopes of spreading their opportunity virally. Most members of safe list communities (the one's who spend every day reading and mailing safelists and investing in Ponzi) are inexperienced deceived and looking for easy money.

*I know I will get heat for saying that but I also know it is true. There are legit ways to use safe lists but the majority of the opportunities advertised in them are complete garbage.*

11. Light attracts light. Darkness attracts darkness. Scammers attract easy money seekers who have deceived them selves into believing their lies.

12. There are many members of this and other marketing forums making money in illegal investment and Ponzi schemes. There are many members of this and other marketing forums loosing money in illegal investment and Ponzi schemes.

13. If you align your self with such opportunities (even if you make money) your business will be seen as illegit and your own reputation will be tarnished by those whom you associate with.

14. It is illegal to offer an investment opportunity, collect funds, and then spend the money on other projects: Read the Matthew Bowin example on this page:

Not to long ago dozens of warriors were lured into investing in a software development opportunity run by a well known marketer that was never fully delivered. I settled out of court with that marketer to regain my own investment back after I threatened to bring in the FBI and SEC.

15. It pays to educate your self on the laws that govern your business. I have personally interviewed attorneys, legal experts, authors, and a federal expert witness on the subject of mlm, one up referral, and Ponzi style compensation programs during my own investigation into the online "money for nothing" phenomenon.

16. You should also read what the SEC has to say about "Internet investment" schemes. It may shock you to know that: "...the following companies must file reports with the SEC: All U.S. companies with more than 500 investors and $10 million in net assets;" Companies that fail to do that are in violation of federal laws and many cases send the owners of such companies to prison. The SEC governs most "investment" opportunities and when their hammer falls on a company it is not pretty.

Anyone interested in online business opportunities should read this page about "Internet investment fraud:"

Also it may surprise you how many Internet businesses violate these areas of the law:
Franchising -
Endorsements -
Earnings Claims -

17. Robert Fitzpatrick is one of the foremost experts and has served as an expert witness in many federal cases, been published on the subject of Ponzi, and has been featured on nationally syndicated television shows speaking on the subject. His website is one of the greatest resources for educating you self against Ponzi and other related illegal scams:

Mr. Fitzpatrick's site is not another anti scam site where people post their grievances it is one of the most educational sites on the subject of Ponzi and mlm legal battles on both side lines that you can read. I don't care if there are any detractors to this post. I am not going to debate what I have written. I have written it for the benefit of those who are truly interested in educating themselves on the subject and making educated decisions based on the laws that govern the businesses they are getting involved in.

There are many on the Internet and in this forum who will seek to excuse their illegal activities and continue to live in self deception. That is fine. Everyone is entitled to their own decisions and opinions. This post is to provide a powerful education to the multitudes who desperately need it including the newbies who keep posting questions about whether such scams "work" in various marketing forums around the Internet.

This post is the final installment in our series "Unrealistic Expectations" - the number 4 reason why so many fail in home businesses and was written by Josh Anderson