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Millions of Americans have lost money in pyramid schemes. A pyramid scheme can take many forms, but generally involves the promise of making money by recruiting new people. Pyramid schemes are illegal, and most people lose money.
Multi-level marketing programs, where participants sell products to the public and earn commissions both from their own sales and from the sales of the people they recruit, can be a legitimate business using a network of independent distributors to sell consumer products. However, not all multi-level marketing programs are legitimate. Some are illegal pyramid schemes in disguise. Be careful and ask questions before signing up.
If an opportunity has one or more of the following, it could be a pyramid scheme:
If you are considering buying into a multi-level marketing plan, ask a lot of questions and get details about the company and the products. Be careful about fraudulent marketing practices and potentially useless or unsafe products. Remember that your sponsor and others above your sponsor’s level will make money if you join—so take your time to make a smart, well-informed decision.
You may find additional information about pyramid schemes and multi-level marketing from the Federal Trade Commission, U.S. Postal Inspection Service, and Securities and Exchange Commission.
If you believe you were invited to join an illegal pyramid scheme, you may notify the consumer protection division of your local district attorney’s office, and file a complaint online with the Attorney General’s office by visiting https://oag.ca.gov/contact/consumer-complaint-against-business-or-company.