Ponzi/Pyramid Scheme Warning Signs
By: Bill E. Branscum
Copyright 2002

As with any investment, advise your Clients to carefully evaluate any prospect promising unusually high returns and/or a multilevel marketing opportunity and:

  1. Avoid any program they must pay to join where they are promised a commission based upon their success in recruiting investors or a “downline.”

  2. Avoid plans requiring the purchase of expensive products and marketing materials (often called tools).

  3. Be highly skeptical of plans involving miracle products or promising enormous earnings at no, or low, risk.

  4. Beware of shills - "decoy" references paid by a plan's promoter to lie about their earnings through the plan.

  5. Decline to pay for anything, or sign any contracts, in pressure-filled situations. If they have already committed, have them send the promoter a written notice of their intent to cancel as soon as possible.

  6. Be diligent in checking claims, backgrounds, references and use the governmental resources available to potential investors like the State Office of the Attorney General, the State Division of Securities, the NASD and the Better Business Bureau wherever they are based.

  7. Always get information about the investment in writing before investing. Any legitimate investment opportunity should have an offering circular with specific, detailed information about the company and the investment.

  8. If the promoter claims that the information is too complicated to understand, or that time is of the essence, pick another investment opportunity.

  9. Do not believe in “secret” strategies, proprietary programs, or any other mysterious offering – nobody should ever invest in anything they do not understand.

  10. Never, ever, attempt to get clever with the IRS – by all means, they should protect their assets, but it is insane to entrust their future to some Internet huckster promising tax relief. The mere appearance of criminality may result in a federal prosecution that will ruin them, whether they are ultimately convicted or not.

  11. Remember that no matter how good a product, and how solid a multilevel marketing plan may appear to be, there is no, “free lunch.”

I welcome your comments, questions and suggestions.

© Copyright 2002 - Bill E. Branscum. All Rights Reserved.