We’ve told you how Bernie Madoff made billions off the Ponzi scheme concept. But scam artists also use another technique to take your money and land you in trouble. ABC2 News Joce Sterman breaks down pyramid schemes so you'll recognize the scam.
When it comes to Ponzi schemes, we told you it's all about big money investments, huge returns and recruiting others before the bottom drops out. But you could be pulled into a similar scam that'll take your money and could get you in trouble. They’re called pyramid schemes.
Those schemes are loosely based on a legitimate business concept, where sales people are recruited to sell products. The Better Business Bureau says that’s the way recognized and legitimate companies like Mary Kay, Tupperware and Pampered Chef do business. President Angie Barnett tells ABC2 that with those legitimate companies, “I may invite people to join in but the focus is really on the product."
But with pyramid schemes, there’s a twist on that reputable practice. That’s because the BBB says the focus isn't on what you're selling but on getting other people to sell it with you. Barnett says that can end up getting you in trouble, "You can find yourself being at the wrong end of the law by promoting and getting others to invest in a product that's actually not genuine or real. You have that responsibility."
That's why the BBB says you have to thoroughly research any product you're recruited to sell. You need to make sure that it's safe, it works, it's legitimate and has the backing of a reputable company you can actually reach. And be wary of big upfront fees and big promises. Experts say these pyramid schemes often exaggerate the claim about their products and use testimonials to make selling seem more attractive, roping you into a moneymaking scheme where the only people who make money are the ones at the top.
