Pyramid schemes are illegal systems of making money. The distinguishing aspect of pyramid schemes from other forms of consumer fraud is the importance of finding new recruits to participate in the scheme. For instance, a recruiter asks a recruit to give $200 for admission into some business. The new recruit then must enlist more individuals to pay $200 to become part of the business. Participants who recruit others receive a percentage of each of the new members’ earnings, which again increases when those members recruit, and so on. The more individuals that are added onto the pyramid scheme, the more profit.
Pyramid schemes only benefit those at the top of the pyramid, and as a result, most people who participate suffer a financial loss. Some companies that hold themselves out as legitimate “multi-level marketing companies” (“MLMs”) are actually fraudulent pyramid schemes.
If you have been involved in such a business enterprise and have lost money, you may be entitled to monetary compensation. Glancy Prongay & Murray’s consumer protection attorneys have successfully sued pyramid scheme companies and can determine whether or not the MLM you are interested in may actually be a pyramid scheme.