I am not sure about this

surfnearnzone Well-Known Member

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#1

I want to launch a program but i am afraid if it is ponzi scheme.

I will give a little description about this program here.

Actually, people need to signup for a program and then they will be paid according to their activity.

The problem is, the ROI is very tiny. So an active downline is necessary to earn a substantial amount.

If i market the individual program not many will come. But if i claim an earning of $200-$300 per month then it might be wrong because it will be based on downline income.

So there is income on individual signup but not good untill the downline is built.

My scheme signs up people for individual program and then builds downline for them. For this i don't charge anything. But they will have to spend on advertising.

Will this be called a ponzi scheme. I am really confused.

surfnearnzone, Jan 17, 2007 IP

clade Peon

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#2

See an attorney.

clade, Jan 17, 2007 IP

marketjunction Well-Known Member

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#3

alwiser said: ↑

See an attorney.
Click to expand...

You can say that again.

It's better than watching the FBI walk into your office or home as they come to arrest you.

marketjunction, Jan 20, 2007 IP

Nonny Notable Member

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#4

IANAL, so I can't really comment on your business idea directly, but you probably should read what the FTC has to say.

First read the rules for marketing on the internet, with special focus on the MultiLevel Marketing (MLM) section:
http://www.ftc.gov/bcp/conline/pubs/buspubs/ruleroad.htm

Take note of what they warn consumers to watch out for in MLMs - does this sound like your business?
http://www.ftc.gov/bcp/conline/pubs/alerts/pyrdalrt.htm

1. Avoid any plan that includes commissions for recruiting additional distributors. It may be an illegal pyramid.
2. Beware of plans that ask new distributors to purchase expensive products and marketing materials. These plans may be pyramids in disguise.

3. Be cautious of plans that claim you will make money through continued growth of your downline, that is, the number of distributors you recruit.
Click to expand...

Read all the other information the FTC hase for businesses and consumers about "franchising and business opportunities".
http://www.ftc.gov/bcp/menu-fran.htm

Read and understand 16 CFR 436
http://www.ftc.gov/bcp/franchise/16cfr436.htm

Then, read this speech about pyramids and ponzi schemes - do you recognize your business?
http://www.ftc.gov/speeches/other/dvimf16.htm

Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. Some schemes may purport to sell a product, but they often simply use the product to hide their pyramid structure. There are two tell-tale signs that a product is simply being used to disguise a pyramid scheme: inventory loading and a lack of retail sales. Inventory loading occurs when a company's incentive program forces recruits to buy more products than they could ever sell, often at inflated prices. If this occurs throughout the company's distribution system, the people at the top of the pyramid reap substantial profits, even though little or no product moves to market. The people at the bottom make excessive payments for inventory that simply accumulates in their basements. A lack of retail sales is also a red flag that a pyramid exists. Many pyramid schemes will claim that their product is selling like hot cakes. However, on closer examination, the sales occur only between people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.

A Ponzi scheme is closely related to a pyramid because it revolves around continuous recruiting, but in a Ponzi scheme the promoter generally has no product to sell and pays no commission to investors who recruit new "members." Instead, the promoter collects payments from a stream of people, promising them all the same high rate of return on a short-term investment. In the typical Ponzi scheme, there is no real investment opportunity, and the promoter just uses the money from new recruits to pay obligations owed to longer-standing members of the program. In English, there is an expression that nicely summarizes this scheme: It's called "stealing from Peter to pay Paul." In fact some law enforcement officers call Ponzi schemes "Peter-Paul" scams. Many of you may be familiar with Ponzi schemes reported in the international financial news. For example, the MMM fund in Russia, which issued investors shares of stock and suddenly collapsed in 1994, was characterized as a Ponzi scheme.(2)
Click to expand...

Once you've read all that, and you still think your business plan is legal, consult with an attorney.

Nonny, Jan 22, 2007 IP

surfnearnzone likes this.

surfnearnzone Well-Known Member

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#5

Thank you so much for this reply I think my program is legal because i am just trying to build an affiliate downline. This is an establihed business which pays affiliate commission for bringing new users and does not depend on affiliates to pay commsions to the affiliates.

I am just trying to leverage on affiliate commisions by providing a framework of a system so that i am able to bring more affilates under me in that and couple of other programs.

Once again thank you for providing me the link to useful information.

Nonny said: ↑

IANAL, so I can't really comment on your business idea directly, but you probably should read what the FTC has to say.

First read the rules for marketing on the internet, with special focus on the MultiLevel Marketing (MLM) section:
http://www.ftc.gov/bcp/conline/pubs/buspubs/ruleroad.htm

Take note of what they warn consumers to watch out for in MLMs - does this sound like your business?
http://www.ftc.gov/bcp/conline/pubs/alerts/pyrdalrt.htm
Read all the other information the FTC hase for businesses and consumers about "franchising and business opportunities".
http://www.ftc.gov/bcp/menu-fran.htm

Read and understand 16 CFR 436
http://www.ftc.gov/bcp/franchise/16cfr436.htm

Then, read this speech about pyramids and ponzi schemes - do you recognize your business?
http://www.ftc.gov/speeches/other/dvimf16.htm
Once you've read all that, and you still think your business plan is legal, consult with an attorney.
Click to expand...

surfnearnzone, Jan 23, 2007 IP

CompuByte Well-Known Member

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#6

Why would you invest your time in a business like this if you have any of the questions you have? I would stay away from this program if I were you, and if you are seriously considering it, seek an experienced lawyer that has a lot of experience in this.

CompuByte, Jan 23, 2007 IP

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