The Evolution of Fraud
01/17/2010 07:21 PM
As business has grown more complex, fraud has evolved and adapted accordingly. Multi-level marketing (MLM), the most common form of pyramid/ponzi fraud, is the product of years of evolutionary adaptation in the scam and swindle field, matching the adaptation of the legitimate marketplace. Public awareness and law enforcement always lag behind new forms of fraud. The success of MLMs and other financial Ponzis at duping millions of people, rich and poor, educated as well as illiterate, shows that public understanding has not caught up to this new mutation.
The Three Stages of Consumer Fraud:
(1) Product-based fraud in which consumers are tricked into buying defective or even non-existent products or to pay far more for a product than is worth
(2) Financial fraud in credit, banking, insurance, mortgages, stocks and bonds.
(3) Marketing fraud, in which consumers are induced to personally identify with the fraudulent company and to help it defraud others by becoming part of the marketing program themselves with their own purchases and personal promotions.
Pyramids and Ponzis – today’s most pervasive and insidious consumer fraud — achieve their fraudulent purposes with marketing. With marketing, they dupe people in the ways that the other stages of fraud do, i.e., to buy (usually overpriced) products or services or make investments that they would not have otherwise done and to lose money from finance fees, added costs, and hidden charges. But, with marketing, they go much further and deeper. They mislead the victims to believe that the schemes are their personal pathway to success and happiness and to recruit their closest friends and family into the fraud also. This is truly a new and more virulent form of fraud.
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The Three Stages of Consumer Fraud:
(1) Product-based fraud in which consumers are tricked into buying defective or even non-existent products or to pay far more for a product than is worth
(2) Financial fraud in credit, banking, insurance, mortgages, stocks and bonds.
(3) Marketing fraud, in which consumers are induced to personally identify with the fraudulent company and to help it defraud others by becoming part of the marketing program themselves with their own purchases and personal promotions.
Pyramids and Ponzis – today’s most pervasive and insidious consumer fraud — achieve their fraudulent purposes with marketing. With marketing, they dupe people in the ways that the other stages of fraud do, i.e., to buy (usually overpriced) products or services or make investments that they would not have otherwise done and to lose money from finance fees, added costs, and hidden charges. But, with marketing, they go much further and deeper. They mislead the victims to believe that the schemes are their personal pathway to success and happiness and to recruit their closest friends and family into the fraud also. This is truly a new and more virulent form of fraud.
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Donald Trump: MLM's Bankrupt Hero
11/30/2009 08:09 AM Filed in: Economics/Financial
Those who tell the truth about multi-level marketing (MLM) -- that it is a pseudo-business, a mere camouflage for a classic pyramid scheme -- face a wall of myths, deceptions and delusions. Charting the pyramid model and its flawed structure and characteristics, documenting the 99% failure rates, reporting the testimony of insiders in lawsuits and books who offer first hand accounts of the calculated lies about “income opportunity” – none of this breaks down that wall of deception. The media continues to buy MLM’s masquerade as a “fallback for consumers during the Recession.”
But then along comes a MLM spokesman, a hero of the business, who reveals the sham better than any analysis ever could. Enter Donald Trump. Bankrupt, scheming, abandoning those who loaned him money, ruining those who invested in his stock, while he smiles, postures for cameras, and pretends to be a financial expert and offers yet another bogus scheme for investors. This is the perfect caricature of the MLM industry.
The latest news on Trump is that his casino and resort empire – Trump Entertainment Resorts, which owns Atlantic City's Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino, and Trump Marina Hotel Casino – are completely bankrupt and Trump has left the scene, leaving investors to their fate. This is a pattern for Donald Trump. It foretells the doomed fortunes of thousands of consumers who will follow him in his new multi-level marketing venture, Trump Network, a recycled old MLM scheme selling yet another health concoction.
In the newest development, Trump withdrew from his plan to “buy” the very company he bankrupted. The largest creditor, a bank, is now in line to take over the business from Trump.
Just before bankruptcy Trump abandoned his official position by resigning from the board of the company, giving an appearance of distance from ensuing catastrophe. The stock had already plummeted to pennies, wiping out the investments of shareholders. He then pompously announced that he would buy the company that he had bankrupted. But, now he has “withdrawn” from that deal and is reportedly “unavailable for comment.”
Trump’s “success” is the mirror image of that championed by MLM. Those few at the top who “win” in MLM do so from the losses of thousands of others. They “failed” by believing the bogus story about “income opportunity.” After they lose their money and “quit,” the winners claim no responsibility and move on to make the same bogus offer to other hopeful investors. Often, after causing financial losses to tens of thousands of followers, the “winners” open a new MLM with exactly the same fraudulent income proposition, now under a new name.
But then along comes a MLM spokesman, a hero of the business, who reveals the sham better than any analysis ever could. Enter Donald Trump. Bankrupt, scheming, abandoning those who loaned him money, ruining those who invested in his stock, while he smiles, postures for cameras, and pretends to be a financial expert and offers yet another bogus scheme for investors. This is the perfect caricature of the MLM industry.
The latest news on Trump is that his casino and resort empire – Trump Entertainment Resorts, which owns Atlantic City's Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino, and Trump Marina Hotel Casino – are completely bankrupt and Trump has left the scene, leaving investors to their fate. This is a pattern for Donald Trump. It foretells the doomed fortunes of thousands of consumers who will follow him in his new multi-level marketing venture, Trump Network, a recycled old MLM scheme selling yet another health concoction.
In the newest development, Trump withdrew from his plan to “buy” the very company he bankrupted. The largest creditor, a bank, is now in line to take over the business from Trump.
Just before bankruptcy Trump abandoned his official position by resigning from the board of the company, giving an appearance of distance from ensuing catastrophe. The stock had already plummeted to pennies, wiping out the investments of shareholders. He then pompously announced that he would buy the company that he had bankrupted. But, now he has “withdrawn” from that deal and is reportedly “unavailable for comment.”
Trump’s “success” is the mirror image of that championed by MLM. Those few at the top who “win” in MLM do so from the losses of thousands of others. They “failed” by believing the bogus story about “income opportunity.” After they lose their money and “quit,” the winners claim no responsibility and move on to make the same bogus offer to other hopeful investors. Often, after causing financial losses to tens of thousands of followers, the “winners” open a new MLM with exactly the same fraudulent income proposition, now under a new name.
Yes, But What About this One?
10/26/2009 03:37 PM Filed in: Economics/Financial
Day after day after day, Pyramid Scheme Alert receives consumer inquiries about various multi-level marketing schemes, and the question is always the same: “What about this one?”
Sadly, few people get the big picture about multi-level marketing schemes. For the most part, MLMs are all the same scheme! From old established schemes like Amway to new startups like the Trump Network, these are the same flim flam in different clothing. One MLM may sell vitamins while another sells weight loss herbs. One sells legal services insurance and another fruit juice. But all of them, in reality, sell the exactly the same product: an endless chain income promise. MLMs are all in the “business opportunity” business, not “pills, potions and lotions.” And all of them sell the same “opportunity”, which is the chance to sell the “opportunity” to others who sell the same opportunity, forever and ever. Amen.
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Sadly, few people get the big picture about multi-level marketing schemes. For the most part, MLMs are all the same scheme! From old established schemes like Amway to new startups like the Trump Network, these are the same flim flam in different clothing. One MLM may sell vitamins while another sells weight loss herbs. One sells legal services insurance and another fruit juice. But all of them, in reality, sell the exactly the same product: an endless chain income promise. MLMs are all in the “business opportunity” business, not “pills, potions and lotions.” And all of them sell the same “opportunity”, which is the chance to sell the “opportunity” to others who sell the same opportunity, forever and ever. Amen.
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MLM's Version of Glengarry Glen Ross
09/04/2009 12:49 PM Filed in: Individual / Social Impact
In David Mamet’s classic film, Glengarry Glen Ross, an arrogant and abusive sales manager informs a struggling real estate sales team that there will be a one-week sales contest. The winner gets a Cadillac. The runner up gets a set of steak knives and the rest are fired. The desperate and brow-beaten salesmen are further told that the company has a set of new “golden” leads of sales prospects. However, they won’t get access to any of them during the contest. Those lucrative leads will be enjoyed only by the winners.
This scene in the movie is a close analogy to the situation MLM recruits are placed in. They are given a hopeless challenge, with each one pitted againt the others in a futule quest to build a pyramid “downline.” All are promised leads, tools and big incomes – after they build up their downline. Read More...
This scene in the movie is a close analogy to the situation MLM recruits are placed in. They are given a hopeless challenge, with each one pitted againt the others in a futule quest to build a pyramid “downline.” All are promised leads, tools and big incomes – after they build up their downline. Read More...