Just as ancient Egypt’s pyramids were the final resting places of the Pharaohs, today’s Internet pyramid schemes are where some folks’ investments go to die. These scams have been around forever and have crossed over into the Internet with gusto. The Better Business Bureau advises consumers to avoid pyramid schemes no matter how attractive they may look.
Last week the Securities and Exchange Commission charged a North Carolina businessman with fraud, accusing him of running a $600 million online pyramid scheme through ZeekRewards.com. The commission slapped an emergency asset freeze on the company, which may help victims recoup some of their investments. The SEC said the scheme was “on the verge of collapse” at the time they shut it down.
Nationally, the BBB received nearly 30,000 inquiries about ZeekRewards, Rex Venture Group and other names of the company associated with Paul Burks of Lexington, N.C. Some investors had put as much as $10,000 into the pyramid scheme.
Here are some suggestions to help investors decide whether a company is ethical or should be avoided:
• Ethical companies are about products first. In a pyramid scheme, people make money for selling the business opportunity. They make money when people join, not when they sell a product. In a legitimate company, if your recruit doesn’t sell something, you don’t profit.
• Network marketing doesn’t work on autopilot. Network marketing and direct sales are about making connections with people. That doesn’t happen on autopilot. A legitimate company will provide you with real information about the type of work you’ll be doing. You’ll have to talk to people.
• Is the company a member of the Direct Selling Association? Members go through a lengthy process involving a thorough legal review of their marketing materials and policies and agree to comply with the association’s code of ethics. Look for the DSA logo on a company’s website.
• As always, if it sounds too good to be true, it probably is. Building a business requires time and hard work. A network of people is involved, and it does not happen overnight. If a company tries to entice you by telling you it’s easy and that you’ll make a bundle quickly, that’s a big red flag. Legitimate companies tell you what you actually have to do and give realistic estimates as to how long it will take to make money.
Here are three simple questions to help you assess a moneymaking opportunity:
• Do I have to make an “investment” or give money to obtain the right to recruit others into the program?
• When I recruit another, will I receive what the law calls “consideration” – that usually means money – as a result?
• Will the person I recruit have to make an “investment” or give money to obtain the right to recruit and receive “consideration” for getting other people to join?
If you answered yes to these questions, avoid the scheme. Don’t let your hard-earned money get buried away forever in a pyramid scheme.