A matrix scheme (also known as a matrix sale or site, and as a hellevator, excavator or ladder scheme) is a business model involving the exchange of money for a certain product with a side bonus of being added to a waiting list for a product of greater value than the amount given.
[2] By 2003 more than 200 matrix schemes were in operation, including one which had the same owner as the payment processor StormPay (TymGlobal).
Subsequently, both TymGlobal and StormPay were accused of running an illegal Ponzi scheme.
[3] StormPay later claimed to be independent of TymGlobal, and they stopped accepting matrix schemes as customers.
This is accomplished through purchasing a token product of marginal value: usually e-books, cell phone boosters, screen savers, or other software CDs/DVDs.
The rewards for those at the top of the matrix list are usually high-demand consumer electronics, such as portable digital audio players, high-definition television sets, laptops, and cellphones.
In these cases, the operator could be charged with running a gambling game or failing to supply ordered products.
But if the product sold has no value or very little value, and consumers wouldn't buy it without the attached gift, the scheme probably runs afoul of federal and state laws.
After nine additional people purchased a spot, the first person would receive either a video game console (or cash value equivalent) and would be removed from the list.
Additionally, the amount of time needed before a given individual will receive the product in question is often mistaken.
After selling 10 $50 e-books, the organiser could make $500, and could purchase a PS2 for $299 to send to the first bidder while retaining a $201 of capital in return.
Finally, the buyer would have a profit of $101 (=201-10×10) This same process could be repeated every time the matrix cycles; if the matrix cycled 10 times, the organiser would have sold $5000 worth of e-books, of which $2990 would have been spent on 10 PS2s, leaving them with a revenue of $2010, and a profit of $1010.
Many of the original matrix sites, including EZExpo.com, are no longer in operation; some of them closed down while defending civil lawsuits.
One result of the lawsuit is that those payment processors and some others no longer accept matrix schemes as customers.
On 1 July 2005, two matrix sites, pulsematrix.com and phones4everyone (themobilematrix.com), were declared to be running a form of illegal lottery.
These two sites promptly closed down as part of a settlement agreement with the Office of Fair Trading (OFT).