Marketing Fraud: Why Multi-Level Marketing Pyramids and Financial Ponzis are Ignored By Law Enforcement


pyramidDear Colleagues, Consumers and Pyramid Scheme Alert Supporters,

A new essay recently posted on the False Profits Blog addresses a question many of you  have raised.

Why are multi-level marketing pyramids and financial ponzis able to ensnare so many people today? What is the power behind this Main Street epidemic?

This question goes beyond the lack of law enforcement, the failure of the FTC and SEC, or the difficulty of grasping “exponential expansion.”

The False Profit Blog ventures an answer: It is that pyramid schemes, operating as multi-level marketing, are a new form of fraud that public awareness and law enforcement have not caught up to. This new form of fraud is called “marketing fraud.”

Marketing fraud evolved from the earlier  stages of “product frauds” and “financial frauds.”  Its uses bogus or overpriced products and deceptive money transactions like older models of fraud do, but that is not the heart of this new fraud. The power of this fraud is in marketing. It employs the most powerful tools of business today — branding, positioning, community and identity — to swindle.

Like all powerful marketing, frauduklent marketing promises to fulfill basic and crucial needs, much more valuable  than just money or the hyped up benefits of products. The needs that these pyramid marketing scams claim to fulfill address people’s deepest longings and their greatest fears. The sophistication of the marketing program, complete with Washington DC lobbyists, trade association, “education” foundation, gifts to charity, celebrity endorsements, sports sponsorships, national conventions, and church affiliations – prevent many in the media and government from grasping the extraordinary deception or to accept the devastating financial consequences they inflict on millions of people. Even many of the victims cannot believe they were defrauded by an organization of such benevolent outward appearance. Many choose instead to take on personal blame for their misfortune rather than face this reality. Powerful marketing, whether in the employ of legitimate business or pyramid frauds, has the ability to transcend verifiable reality and hard cold facts with its own fictional narrative.

The blunt instrument used by marketing frauds to carry out their theft is the “endless chain” or “closed market” a.k.a. pyramid scheme.  This is a classic swindle but is now carried out within a  marketing program so powerful it leads the victims not only to fall into the financial trap but to to support the perpetrators against exposure and to enroll their  closest friends and relatives into the scam as well.

I will appreciate your comments and thoughts on the Blog.


Robert L. FitzPatrick, Pres.
Pyramid Scheme Alert

6 thoughts on “Marketing Fraud: Why Multi-Level Marketing Pyramids and Financial Ponzis are Ignored By Law Enforcement

  1. Can you or FitzPatrick provide an example of a business/entity that has engaged in a pyramid marketing scheme? I’m still having a little trouble wrapping my head around these explanations without a real world example… Thanks!

  2. Hinton

      I am so glad to see someone talking about this. Once again my husband and I were approached by a couple we know, their eyes wide with excitement over their newest cure all.  This time it is water.  You put it through the machine they are selling and the water “works on a celullar level”.  Last time it was something else that worked on a celullar level.  They all seem to say that.  I’ve known people who have quit  good jobs to push these types of products – and they were always one step away from making a living off it. And all these products have similar claims – some ingredient with a scientific name – with patent pending, the people on the bottom of the pyramid have an almost religious belief in the product and it’s makers, they are lead to believe they are going to save people, the stuff/thing is absurdly expencive, always works on a celullar level and you too could make a ton of money selling it – just like they will some day. It’s sad, and just wrong.         

  3. And it seems to me that people are so wanting to find a magic financial product that they’ll believe anything. Even when they are reminded of how a Madoff managed to pull off the biggest Ponzi scheme of all time, they think theirs is different. As if they insist on throwing their money away.

  4. Maynard

    My wife and I were on the verge of joining one of these companys called Online Business Systems.a.k.a. work at home,income at home Global Online Systems,etc. etc. We had to start with a $9.95 draw with my credit card to receive our “Decision Package” and set up a phone appt with our “Coach”. The package has a video and CD telling us we could be making thousands a month.Selling Herbalife? sounded to good,too easy to me..Got to Googleing around before they got another $40. to pay for the package and found this to be a huge Pyramid scheme out of Canada.They’ve been busted in Canada and they then change the name of nthe company to something else..People have lost thousands to them.And some have innocently drawn their friends and family into it.Check out Scam Busters,Scam alerts,Pyramid Schemes,etc.I haven’t yet told our coach I just cancelled my credit cards.Hope she can get out before losing her savings like too many other unsuspecting souls have.

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