Since 1980 a new form of sales and marketing, called multi-level marketing or network marketing, has spread worldwide and spawned an explosion of pyramid sales schemes involving tens of millions of consumers. The line between legal forms of network marketing and fraudulent
pyramid programs is a point of controversy, confusion and
inquiry in many countries. Pyramid Scheme Alert will provide much needed information to consumers and other interested parties to reduce the number of illegal and de facto pyramid schemes and victims-and to minimize the severity of effects on individuals and communities.
Government agencies, universities, attorneys, journalists, investment analysts and other interested parties have only fragmented and limited information when
confronted with this new market phenomenon. PSA will gather, analyze and distribute useful information and serve as a cohesive, reliable and consistent data exchange of data and analytical tools among interested groups and individuals.
The Internet has become a new vehicle which has facilitated the rapid spread of pyramid schemes. PSA will utilize the Internet’s global reach and rapid communication capability to expose and counter pyramid perpetrators, who recruit victims over the Internet.
The stock market boom of the 1990s and the emergence of a still undefined “new economy” have given further rise to pyramid schemes masquerading as speculative stock or equity investment programs. PSA will provide information and insight to investors and consumers on the abuses of pyramid schemes in the investment marketplace.
Affinity-based pyramid schemes that attack specific ethnic groups, churches, or other sectors of the community have dramatically increased in the last decade. With names such as Friends Gifting Network, Airplane Game, Hotel, and Corporate Ladder, among many others, these pyramid frauds have enrolled hundreds of thousands of consumers, most of whom are unaware of the schemes’ illegality and/or questionable ethics and of the devastating impact they have on personal and community relationships. PSA will assist the news media and law enforcement to expose and publicize such schemes and to educate consumers on how to recognize and avoid them.
Pyramid schemes are particularly destructive when the victims have low incomes and few reserves to fall back on in the event of a financial loss. The chaos and violence in Albania in 1997 caused by the collapse of pyramid schemes is a forewarning of the destructive impact of these frauds in the developing nations or in countries recently converting to free market economies. The international spread of pyramid schemes, often perpetrated by individuals or companies based in the USA, will be a special focus of Pyramid Scheme Alert.