Pyramid scheme
For the directors, the scheme is potentially lucrative—whether or not they do any work, the organization's membership has a strong incentive to continue recruiting and funneling money to the top of the pyramid.
In this model each person must recruit two others, but the ease of achieving this is offset because the depth required to recoup any money also increases.
Prior instances of this scheme have been called the "Airplane Game" and the four tiers labelled as "captain", "co-pilot", "crew", and "passenger" to denote a person's level.
Another instance was called the "Original Dinner Party" which labeled the tiers as "dessert", "main course", "side salad", and "appetizer".
One version called the Abundance Fractal uses the four elements as the names of tiers: "Fire", "Air", "Earth", and "Water".
A more recent variation known as the Living Workshop takes the names of plants, calling the tiers "seed", "sapling", "blossom", and "lotus".
Whichever euphemism is used, there are 15 total people in four tiers (1 + 2 + 4 + 8) in the scheme—with the Airplane Game as the example, the person at the top of this tree is the "captain", the two below are "co-pilots", the four below are "crew", and the bottom eight joiners are the "passengers".
They would continue to buy in underneath the real investors, and promote and prolong the scheme for as long as possible to allow them to skim even more from it before it collapses.
This scheme has a circular structure, as increases in new recruits pushes individuals closer to the center of the circle, hence the "Loom" in the name.
Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses.
[9]Matrix schemes use the same fraudulent, unsustainable system as a pyramid; here, the participants pay to join a waiting list for a desirable product, which only a fraction of them can ever receive.
In a Ponzi scheme, however, participants are promised returns on "investments", supposedly into stocks or goods, but which are actually paid for by new investors, while a central leading figure takes a portion as profit.
[25] Multi-level marketing lobbying groups have pressured US government regulators to maintain the legal status of such schemes.
[26] Pyramid schemes are illegal in many countries or regions including Albania,[27][28] Austria, Belgium,[29] Bahrain, Bangladesh,[30] Brazil, Canada,[31] China,[32] Colombia,[33] Denmark, the Dominican Republic,[34] Estonia,[35] Finland,[36] France,[37] Germany, Hong Kong,[38] Hungary,[39] Iceland, India,[40] Indonesia,[41] Iran,[42] Ireland,[43] Italy,[44] Japan,[45] Malaysia,[46] the Maldives, Mexico, Nepal, the Netherlands,[47] New Zealand,[48] Norway,[49] Oman, Peru, the Philippines,[50] Poland,[51] Portugal, Romania,[52] Russia, Serbia,[53] South Africa,[54] Singapore,[55] Spain, Ethiopia, Sri Lanka,[56] Sweden,[57] Switzerland, Taiwan, Thailand,[58] Trinidad and Tobago,[59] Turkey,[60] Ukraine,[61] the United Kingdom,[62] and the United States.
[63][clarification needed] In 2003, the United States Federal Trade Commission (FTC) disclosed what it called an Internet-based "pyramid scam."
The FTC alleged that the company's program was instead and in reality a pyramid scheme that did not disclose that most consumers' money would be kept, and that it gave affiliates material that allowed them to scam others.
[67] On 12 November 2008, riots broke out in the municipalities of Pasto, Tumaco, Popayán and Santander de Quilichao, Colombia, after the collapse of several pyramid schemes.
Finally, after the riots, the Colombian government was forced to declare the country in a state of economic emergency to seize and stop those schemes.
"[68] The Kyiv Post reported on 26 November 2008 that American citizen Robert Fletcher (Robert T. Fletcher III; aka "Rob") was arrested by the SBU (Ukraine State Police) after being accused by Ukrainian investors of running a Ponzi scheme and associated pyramid scam netting US$20 million.
)[69] In the United Kingdom in 2008 and 2009, a £21 million pyramid scheme named 'Give and Take' involved at least 10,000 victims in the south-west of England and South Wales.
TVI Express, operated by Tarun Trikha from India, has apparently recruited hundreds of thousands of "investors", very few of whom, it is reported, have recouped any of their investment.
[76] In August 2015, the United States FTC filed a lawsuit against Vemma Nutrition Company, an Arizona-based dietary supplement Multi-Level Marketing firm, accused of operating an illegal pyramid scheme.
[77][78] In March 2017, Ufun Store registered as an online business for its members as a direct-sales company was declared operating a pyramid scheme in Thailand.
It is also misrepresented as a Sou-Sou, a legitimate savings club model where the number of people paying into the pot is fixed and each person gets a payout on regular basis.
