The Evolution of Fraud

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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