MLM News

Tag: pyramid scheme

  • Co-founder of $4B OneCoin fraud scheme pleads guilty and faces up to 60 years in jail

    Co-founder of $4B OneCoin fraud scheme pleads guilty and faces up to 60 years in jail

    The co-founder of OneCoin, a fraudulent cryptocurrency scheme, has admitted guilt to several charges brought by the US Department of Justice (DOJ) and now faces up to 60 years in prison. Karl Sebastian Greenwood pleaded guilty to counts of wire fraud, conspiracy to commit wire fraud, and conspiracy to launder money, each of which carries a maximum potential sentence of 20 years in prison.

    OneCoin was promoted as a “Bitcoin killer” by Greenwood and his business partner, Ruja Ignatova, but the tokens were actually “totally worthless” and part of “one of the greatest international fraud schemes ever committed”, according to U.S. Attorney Damian Williams. The company, based in Bulgaria, was actually a pyramid and Ponzi scheme, in which participants could bring others into the plan without a tangible product and later participants were compensated with funds from earlier participants. It presented itself as a multi-level marketing company, with members earning commissions for the sale of cryptocurrency packages that purportedly included OneCoin and the opportunity to mine additional coins. However, OneCoin could only be converted into fiat money on the exclusive Xcoinx exchange.

    As the “global master distributor” of the fake company, Greenwood reportedly made about $21.2 million per month. Three million customers who bought the packages and invested over $4 billion are thought to have been duped by OneCoin. Ignatova, who is still at large and was last seen leaving for Athens, Greece in October 2017, was added to the FBI’s top ten most wanted list in June due to her involvement in the conspiracy.

    Williams stated that Greenwood’s plea “sends a strong message” that the DOJ is “going after all those who want to exploit the Bitcoin environment through fraud.” Three associates are accused of fraud and money laundering in Germany, and other authorities have filed charges against people connected to OneCoin and Ignatova.

  • MLM Scams in India: How to Spot and Avoid Them

    MLM Scams in India: How to Spot and Avoid Them

    Multi-level marketing (MLM) is a business model in which a company sells its products through a network of independent distributors, who earn commissions based on their sales and the sales of the distributors they recruit. While MLM can be a legitimate and profitable business opportunity for some, it has also been the subject of controversy and criticism in many countries, including India.

    One of the main criticisms of MLM is that it can be used to operate fraudulent schemes. These schemes often involve distributors making exaggerated or false claims about the potential profits and benefits of joining the company’s network, and using high-pressure sales tactics to convince others to sign up. In some cases, the products being sold may be of low quality or overpriced, and the main focus of the company may be on recruiting new distributors rather than selling products.

    There have been numerous cases of MLM fraud in India, with many people losing their hard-earned money after being lured into such schemes. In some cases, the companies operating these schemes have been shut down by the authorities, but they often re-emerge under different names, making it difficult to track and prosecute them.

    One of the most well-known MLM frauds in India was the QNet scam, which was exposed in 2013. The company, which was operating under the name QuestNet at the time, was accused of running a pyramid scheme and defrauding thousands of people across the country. The company’s distributors were accused of using false promises of high returns and luxurious lifestyles to lure people into joining the network, and many people lost their savings after investing in the company.

    Another infamous MLM fraud in India was the SpeakAsia Online scam, which was exposed in 2011. The company, which claimed to be a market research firm, was actually operating an illegal pyramid scheme, and its distributors were accused of using false claims and deceptive marketing tactics to recruit new members. The company was eventually shut down by the authorities, and many of its top executives were arrested and charged with fraud.

    In recent years, the Indian government has taken steps to crack down on MLM frauds, and there are now several laws in place to protect consumers and prevent such schemes from operating in the country. However, it is still important for people to be cautious when considering joining an MLM company, and to thoroughly research the company and its products before making any commitments.

    If you are approached by an MLM company or are considering joining one, here are some things to watch out for:

    • Exaggerated or false claims about the potential profits and benefits of joining the company.
    • High-pressure sales tactics or a strong emphasis on recruiting new members.
    • Poor-quality or overpriced products.
    • A lack of transparency about the company’s business model or financials.
    • A requirement to make a large upfront investment or purchase a large quantity of products.

    If you suspect that an MLM company may be a fraud, it is important to report it to the authorities and seek legal advice. In India, you can report such schemes to the Ministry of Corporate Affairs, the Serious Fraud Investigation Office, or the local police. It is also a good idea to inform others about your experience, so that they can be aware of the potential risks and avoid being scammed.

    In conclusion, while MLM can be a legitimate business opportunity for some, it is important to be aware of the potential risks and to be cautious when considering joining an MLM company. By doing your research and being aware of the warning signs of fraud, you can protect yourself and your hard-earned money from being scammed.

  • OneCoin Scheme Sued by Former Investor After Losing $130,000

    OneCoin Scheme Sued by Former Investor After Losing $130,000

    • OneCoin scam alleged to be of 3.4 billion euro ponzi scheme
    • Ignatov and her brother Konstantin charged with conspiracy to commit money laundering, wire fraud and securities fraud
    • OneCoin recruted 3 million members worldwide

    OneCoin, a cryptocurrency investment scheme, has been sued by its former investor, Christine Grablis, over her losses of $130,000.

    On behalf of Grablis, Silver Miller has filed the lawsuit in New York Tuesday. It has been alleged that OneCoin were involved in fraudulently promoting cryptocurrency investment thereby violating the federal securities laws of New York.

    As per Grablis claim, she has lost around $130,000 in the scheme and has demanded the return of those funds along with the payments for damages. It is also reported that she is seeking a class action on behalf of other investors who lost money through same investment scheme.

    OneCoin has been on limelight since 2016 , when Belgium ‘s financial regulator issued a warning against the scheme. Founded by Ruja Ignatova, OneCoin works as a multi-level marketing organization. Due to its unpopular reputation owing to the huge loses to the scheme , various government authorities across the world including the U.K, Germany, India, Italy, Africa and China have issued strict warning to its people to be careful while investing in the scheme.

    More than 100 individuals were charged in China last year regarding the scheme, while in India the authorities arrested the alleged promoters in 2017.

    Recently , the U.S. Attorney for the Southern District of New York (SDNY) have charged the OneCoin leaders, Ruja Ignatova and Konstantin Ignatov, for wire fraud , securities fraud and money laundering. While Konstantin was arrested, Ruja, who also faces charges in India for her role in the project is still absconding.

  • HOW FRAUDSTERS ARE ABUSING THE MLM INDUSTRY

    HOW FRAUDSTERS ARE ABUSING THE MLM INDUSTRY

    There a big difference between multi-level marketing companies which promote products and which build a network through a pyramid scheme. In fact, the latter makes money only when people sign up to use the products for themselves.

    According to many industry experts, the overall success of everyone depends on the ways in which the individuals receive commissions. While the company’s plan works in a different way altogether, everything boils down through the compensation plan. Some people may be tempted to use the IRs for their own benefits. But, rather than helping them grow with the business and be recognized for their accomplishments, such individuals tend to exploit the people under the network or the downline.

    A well-known writer of a magazine stated that illegitimate MLM companies promise to offer incentives for those who bring in recruits. But, instead of focusing on the sales to end consumers, the prime difference lies only on commissions that are fetched from retail sales or inventory sales to other distributors.

    Lawmakers and the industry have been put their efforts vigorously to face the worst problems. It’s also possible that people keeping an eye on the internet where doubtful charges may be highlighted in personal blogs. The person may claim to have earned from the business but that’s not the actual case. Abuses also occur in some situations, but independent representatives may collaborate with unscrupulous operators to act smart in the following ways.

    Compensation plans with a promise

    Sales representatives who are at the top of the pyramid might earn a good amount of money than the ones in the network. This surely indicates that everyone is involved with a pyramid scheme. The entire commission is earned only through appointing new individuals. On the other hand, the rest are at a big loss because the earning is not shared in any case.

    Stockpiling

    As someone comes up with the idea of network marketing, fraudsters assign the task the people for making purchases. As they join the network, they are qualified to earn commissions. But, this is a smarter way of running a network marketing business. The scheme is deemed to be Ponzi because the network grows simply because individuals have the only option to persuade others for buying the products.

    Channel-stuffing

    Coming up with a revised product is something that fraudsters think about. This would seem great and create an impression that the company is enhancing product development. But, eventually, the earlier products have to be disposed off because they are out dated. In fact, the independent representatives have to shell out more money to buy them. They have no other option if they wish to continue managing the business for a long term.

    Insufficient controls

    In the network marketing realm, the representatives are always trained not to make false claims. This might be often misleading when people come to know that it’s worthless to purchase the items. So, if this is not the case, then main motive would just be recruiting new people to the network. On the other hand, nobody would benefit as per the compensation plan the company has presented.

    Pay to join

    Requesting representatives to pay fees could sound fishy. Even if the prime motive of growing the network is fulfilled, the upstream individuals would only be earning. After all, a legitimate MLM business grows only when everyone seeks the potential of earning something extra. It should be far beyond what they earn from the nine to five jobs.

    Doubtful sales tools

    A new joinee may be persuaded to buy DVDs that are packed with a set of training sessions. This is often the best way to gather money especially when someone is a poor performer. The upline mates are bound to get something from them when they understand the situation they are going through. This could be considered as robbing money when the individuals are planning to move out from the network.

    Indirect motivation

    Motivation is something that organizations boost for their employees. Some MLMs just like to enhance it with messianic language. They may also put forth an impression of delivering the purpose and being involved in improving community living. Well, this is tactic to lead the representatives to be loyal. They still follow what’s been stated even when they are losing money. Nobody can ever figure out what might be happening behind the scenes.

    According to a reputed Direct Sales Association, code of ethics has been presented to prevent abuse. But, on the contrary, the laws can be enforced in other regions of Asia. In many cases, everything is dependent on the management style, the skills with which the business is managed, and the long-term benefits that can be enjoyed. It could either be through ethical means or responsibilities in accomplishing the sales. In case someone needs assistance, then he can approach an MLM coach. This would lead him in the right direction and help him grow the network like never before.

    Read MOre:

  • John Oliver calls MLM industry a ‘pyramid scheme’

    John Oliver calls MLM industry a ‘pyramid scheme’

    The Last Week Tonight with John Oliver on the HBO channel aired an episode on November 06,2016 demonstrating how direct selling or MLM companies use unethical practices to make money.

    John Oliver mocking the  MLM industry  said that they generally have two things in common- “first, you don’t see them on store shelves, you buy them from distributors like friends , family , co-workers and secondly they are always looking for more distributors to join them. And they have pretty attractive message” of how it helps you become your own boss, pay your own bills and flexi working hours.

    Oliver said that though the MLM companies may present their business as a great opportunity to make a lot of money, however, the chances of success are very remote. He called it a pyramid scheme where only a few people at the top make a huge amount of money.

    The main focus of the episode revolved around the point that people who join the MLMs make money from recruiting more distributors rather than from the actual sale of products to the customers outside their distributors.

    He however also acknowledged the fact that the industry has done around $36.12 Billion business collectively in the US in the year 2015.

    Multilevel Marketing: Last Week Tonight with John Oliver (HBO)

    The episode focused on a dozen of MLM companies like Vemma, Youngevity, Kyani and mostly Herbalife. Almost half the episode talked about Herbalife and the claims made by its distributors for which the company had got into trouble recently with the FTC. Herbalife competes with Amway in the vitamin and supplement line of products. Earlier this year, Federal Trade Commission had ordered Herbalife to pay $200 million to compensate distributors who lost money. The FTC also required them to some make major changes in its sales and distribution practices.

    Amway expressed its disappointment at the misrepresentation of the direct selling industry which has given an opportunity to many people across the world.

    In 1979 Amway was the first Direct Selling / MLM company to be investigated. The federal agency ruled out the allegation of illegal pyramid scheme but said that it was certainly guilty of price fixing and overstating earn potential.

    However, it was also interesting to see that Oliver did not mention Amway and the examples given were mostly that from Herbalife. Amway a giant of the Direct Selling or MLM industry, headquartered  at Ada, collects more than a quarter of the industry’s $36 billion in annual revenue.  It was indeed very interesting to note that not one example of misrepresentation by Amway was mentioned in the episode. One might wonder if the episode was indeed an attempt to show the real picture of the MLM industry or to showcase the unethical conducts and misrepresentation by one MLM company.

    The Direct Sales Association published a statement criticizing the show on its Facebook page. They said  “As the voice of direct selling in the U.S., we are proud to represent a vibrant industry of the more than 20 million Americans who are involved in direct sales to do things like supplement their income or balance work with family. We are disappointed by Mr. Oliver’s mischaracterization of our industry and its value to many, including veterans, stay-at-home moms, caregivers and early retirees, among others.”

    The DSA also mentioned that “most direct sellers offer protections and guarantees to their customers and salespeople, many of which exceed Federal Trade Commission (FTC) regulations, as well as federal and state law. In addition, members of DSA adhere to a set of standards as part of our Code of Ethics, which includes requirements that member companies buy back unused inventory at no less than 90% of the original purchase price.” DSA urged the public to take the time to learn the facts on their  website at www.dsa.org/facts.”

    The MLM episode on the YouTube video has been watched more than 5 million times so far.

  • Are you part of a Legitimate Network Marketing / MLM Company or Pyramid Scheme?

    Are you part of a Legitimate Network Marketing / MLM Company or Pyramid Scheme?

    Key Highlights:

    • General notion about the network marketing /multi-level marketing/direct selling industry
    • Understand how to differentiate legitimate and fraudulent network marketing company

    As the world is progressing in technology and automation, there are also other developments and business models that are coming up which promise to help individual build their own system for residual income. Yes, we are talking about network marketing, famously infamous as multi-level marketing (MLM). Fortunately or unfortunately many network marketing companies have been under the spotlight lately for all the wrong reasons, wrong situations or false allegations.

    Network marketing or multi-level marketing (MLM), is a system of retailing, in which the products and services of a company are sold by independent representatives. Generally, network marketing or a multi-level marketing company will encourage its individual representatives to build and manage their own sales force by adding distributors/business partners, keeping them motivated and training them to sell the products or services

    Although the biggest advantage of network marketing is the opportunity to earn and make a good amount of residual income, it is important to understand that it is not a get rich quick scheme or get rich easily scheme. It is complete hard work and can become a full-time job if done with dedication and honesty.

    There is also a general notion that anything resembling a pyramid is a scam or not completely a legitimate business. But what we forget is that every profitable and sustainable business model in the world works on a pyramid structure. A company is headed by one CEO under whom there are 3-4  VP’s , under the VP’s there are 9-10 DGM and so on. Even our Government is structured in a pyramid – One President, under him his Ministers and so forth. Every strong structure is a pyramid structure. People should be more worried about how a network marketing company is sustained rather than with the shape of the pyramid.

    So how does one decide if the network marking company they are looking g at is indeed legitimate and not fraudulent money-making schemes? Here’s how to differentiate a legitimate business from a pyramid scheme:

    Legitimate direct selling companies add value to the existing economy by selling competitive, high-quality products and services and provide a sustainable source of income for those who choose to sell those products. In particular :

    • Legitimate network marketing companies provide accurate information about the company, its products, and usually have a website to research, understand and study their products.
    • Business in simple terms means goods or services being exchanged for an equal value of money. Hence, a legitimate network marketing company has products or services that are competitive in the marketplace and is purchased by the end user.
    • It is very vital to understand that no legitimate network marketing company makes any payment or has a compensation plan based on recruitment of people into the business. The payout or commission is and should always be based on the turnover made by the individual or his team. This means that each time a product or service is sold, the company pays commission to the individual representative on the total sales made. Having said this, anyone who purchases the product from a network marketing company can become the distributor or individual representative of their products and start earning a commission. However, each company has certain qualifying criteria for becoming an individual representative or a distributor, one of them includes the amount of purchase made by the individual as a customer.
    • Based on the fact, that, a legitimate business, means an exchange of goods and services for an equal value of money, the compensation plan of a network marketing company should primarily be on the sale of products and services .The sale can be the personal sale of the individual representative or the sales generated by the team under the individual representative.
    • A legitimate network marketing company will have a clear policy of return and refund of money in case the individual is not satisfied with the product .The website of the company should very clearly mention procedure for return and refund with contact details like email Id and phone numbers, in case an individual wants to retune and claim a refund. The time frame for claiming a refund should also be very clearly mentioned in their policy and strictly adhered to.

    Indeed, network marketing companies face a lot of challenges since there is a lack of awareness, misconception and most importantly, because there is no legislation to administer the industry, especially in many developing economies including India. This gives way to doubts and apprehension when it comes to starting the business with network marketing or multi-level marketing companies. Another notion of people, in general, is that network marketing is an easy and fast money making way, but the fact is that the individual representative or the network marketers who are involved in a legitimate network marketing company have to put in a lot of hard work and efforts to achieve their goals. In this light, it is important to understand and become more aware of the new trends in the economy. Only awareness combined with correct information about the industry will help to differentiate between a legitimate and a fraudulent network marketing company.