Multi-Level Marketing Scam

Scammers want you to think they are trustworthy because your friend or relative specifically recommended you. They make promises of huge returns on investments from the money you give them, dazzling you with thoughts of wealth and freedom. Why? So, you stop asking questions and end up making a decision based on emotions rather than one based on a rational decision. There’s a heavy emphasis on recruitment, a promise of high rewards in little time, and an insistence that the participant can quit their day job to “work from home.” More often than not, “investors” (who usually pay to participate) make money not from their product revenue, but from getting others to participate.

A pyramid scheme is an investment solely based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, given to the earlier investors/recruits above them. The scheme is initiated by an individual or company that starts recruiting investors with an offer of guaranteed high returns. In the beginning, the earliest investors do receive a high rate of return, but these gains are paid for by new recruits and are not a return of any real investment. If the scheme does not continue to bring in new recruits, the returns diminish and the business crumbles.

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. … Instead, they use it to pay those who invested earlier and may keep some for themselves.

Using social media, fraudsters can contact many different people at a relatively low cost – they can create fake accounts, and email addresses, and link their posts to a website, videos, or photos that make the investment look legitimate. The potential of anonymity on social media can also make it difficult to identify or find fraudsters using this medium to promote a scheme. If a scheme catches on in social media, people who think the investment is legitimate may encourage others in their network to invest. This can result in affinity fraud where friends, family members, and colleagues invest in and then promote an unsuitable or fraudulent investment. If the investment fails or is fraudulent, money is lost and personal relationships are affected.

Watch out for one or more of these characteristics of investment fraud via social media:

• Unsolicited offers to invest.
• Offers independent, unbiased recommendations.
• Claims of guaranteed high returns with no risk.

Gold scams are included as these are high-risk and always too good to be true. Pump-and-dump scams are those wherein scammers promote the purchase of a publicly traded stock in order to drive up its price, then sell it into the artificial market they have created, making a huge profit. Once the promotion ends, the scammers have lots of money from the sale of stock but leave the investors with stock that is worth nothing