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Are pyramid schemes and MLM’s the same?

On Behalf of | Jan 23, 2023 | Blog, Criminal Defense |

Pyramid schemes include elements where the victim gets defrauded of money, property and other assets. Colorado residents use caution before entering these ventures that gain victims’ trust with the promise of huge and unusual investment returns. These schemes are illegal. They are fraudulent schemes that result in harm or loss to the victims. The recruitment process is how the money rises to the top like a pyramid. The more people that get recruited the more money is made for the pyramid.

Victims of white-collar crimes may receive incentive payments to remain in the scheme, but eventually, many lose everything.

MLMs are not illegal but many people lose their assets by continually pouring into the MLM with little return hoping to build a successful business. Because of this, many feel that MLM is a poor business model.

Pyramid schemes

Pyramid schemes promise high, short-term returns from investments. The pinnacle might supply victims with fraudulent documents that make the scheme appear legitimate. When victims realize the ruse, they will have lost all or most of their assets. White-collar crimes are face stiff penalties including prison sentences.

MLM schemes

Crimes like these are challenging because the victims generally sign agreements willingly and often receive payments or bonuses. MLM or network marketing appear legitimate because they provide a physical product to sell or distribute.

Members recruit additional marketers while also selling products. MLMs have a commission-based payment structure with few salaried employees. Most marketers are not employees and have few protections against loss. The product is generally something people will typically purchase, and the idea is to get people to buy from the MLM.

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