pyramid scheme

Jeunesse Is a Pyramid Scheme, Says Expert

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In October, a billion dollar class action lawsuit was filed against Jeunesse, alleging that the multi-level marketing company (MLM) is actually a pyramid scheme. Truth in Advertising summarizes the lawsuit:

The lawsuit, which was filed Oct. 12 in California federal district court by three current distributors and one former distributor, names 15 defendants and 100 unknown defendants that plaintiffs allege are responsible for the injuries and harm they incurred. Named defendants include Kim Hui, who held the second-highest distributor rank in Jeunesse as a Presidential Diamond director, and her company US Global System (USGS), as well as four Diamond directors in Hui’s downline, May Chang, Yvonne Yen, Samson Li and Lisa Wang.

The lawsuit says Jeunesse Global makes tons of money in Hong Kong and China by exploiting Chinese American distributors, and the company’s “… conduct violates foreign laws and constitutes money laundering and tax evasion.” Truth in Advertising reports:

The complaint most likely implicates violations of foreign law because in 2005, the Chinese government enacted a law called Regulation of Direct Sales and Regulation on Prohibition of Chuanxiao (Chuanxiao roughly translates to MLM). According to this regulation, direct sales are permitted in mainland China but MLMs are not. The suit seeks to hold defendants liable for fraudulent business practices, false advertising, and violations of the Federal Racketeer Influenced and Corrupt Organization Act (RICO) and the Foreign Corrupt Practices Act, among other things.

This lawsuit was the latest in a series of class action lawsuits filed against Jeunesse  recently. A July 2016 suit alleged that the company is  pyramid scheme and there are secret compensation packages. A December 2016 lawsuit alleged that the company is a pyramid scheme and preys on Chinese American Immigrants.

Read moreJeunesse Is a Pyramid Scheme, Says Expert

WorldVentures Pyramid Scheme Lawsuit

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Back in May, a class action lawsuit was filed against multi-level marketing company WorldVentures. This is the travel MLM that encourages distributors to share photos of themselves holding signs saying “You Should Be Here.”  It is marketed as a direct sales travel club, yet the “start a business” part of their website doesn’t even mention what you will be selling or doing. The World Ventures compensation plan mentions making money from selling products and from recruiting others, yet the entire document speaks only to the money that is made from enrolling new distributors (called enrolling new product customers). Making money from selling something seems to be wholly disregarded.

It’s not surprising then, that the lawsuit filed against WorldVentures by Melody Yiru accuses the company of being an endless chain recruitment scheme that is prohibited under California law. The lawsuit says, among other things:

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LuLaRoe Review: Bad “Business”

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lularoe-scam-fraudLuLaRoe leggings have become popular, and therefore the multi-level marketing (MLM) “business” of LuLaRoe has taken off. I’ve said over and over that multi-level marketing is not a business because more than 99% of participants lose money. But I wanted to take a look at this company specifically, because it’s been getting so much press.

Business Insider promoted the idea that LuLaRoe is making women rich. While there ARE a handful of women who are making a ton of money from the company, only an incredibly tiny fraction of participants can make this type of money. Why? Simple math. If you’re making a 3% to 5% commission on your downline (as you’ll see below), it takes $700,000 of wholesale purchases by your downline to earn $35,000 in a month. (I realize that various bonuses change the math, but I’m using these numbers to simplify things.)

Imagine how many people need to be in the downline and how much they each need to buy to generate this volume. Simple math tells you that everyone below the woman earning $35,000 can’t build a pyramid of this size. There simply aren’t enough people on the planet, and there are only so many customers available for each distributor.

Let’s talk about some of the specifics downfalls to this fake business.

Read moreLuLaRoe Review: Bad “Business”

MLM: It’s About Recruiting, Not Sales

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pyramid-scheme-mlmI’ve been telling you for years that multi-level marketing is NOT about selling products. It’s about recruiting people into a fake opportunity. The products are the “front,” meant to make MLM look like a legitimate business. In reality, very little product is retailed to actual consumers. Instead, it’s sold to new recruits into the scheme, who have little chance of ever retailing those products for a profit.

Look no further than the case of Herbalife to prove my point. (This point is usually difficult to prove, as MLMs do their best to hide the numbers so we never see the truth behind the scam.) This month Herbalife entered into a settlement agreement with the FTC that has them paying $200 million and substantially changing how the company does business.

Herbalife falsely claimed: “Settlement Does Not Change Herbalife’s Business Model as a Direct Selling Company.”

The FTC clearly disagrees, and said in its press release about the settlement (emphasis mine):

Read moreMLM: It’s About Recruiting, Not Sales

Herbalife Report: “Pyramid Shakedown”

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herbalifeThis week New York State Senator Jeff Klein and Public Advocate Letitia James issued a scathing report on multi-level marketing company Herbalife (NYSE: HLF). The report, The Amercian Scheme: Herbalife’s Pyramid ‘Shake’down, is based on complaints filed by 56 Herbalife victims. It definitively calls the company a pyramid scheme and highlights the company’s deceptive practices.

The key findings include:

  • Since 2004, only 56 Herbalife victims in New York have been brave enough to file complaints against the company. Most victims are afraid of betraying family, friends, and neighbors.
  • The 56 victims that have filed complaints reported nearly $1 million in financial losses ranging from $90 to $100,000. The average amount loss was approximately $20,000.
  • Over 60 percent of new members make initial investments larger than the required $60 to $100 for the new member kit. The average initial investment is $1,800, but some are as high as $10,000.
  • Herbalife distributors purport that supervisors can make as much as $20,000 in monthly income.
  • Of 56 complaints analyzed, only eight victims received a check directly from Herbalife for their royalty claims. The average amount was $100.

Read moreHerbalife Report: “Pyramid Shakedown”

Multi-Level Marketing is not a Business (It’s a Pyramid Scheme)

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direct-selling-pyramid-schemeOver the weekend, cracked.com posted an insightful article about the realities of multi-level marketing. Simply put, MLM is the same thing as pyramid scheme. It’s not a business. Almost everyone loses money. The behaviors are cult-like. And you will NOT be successful with MLM, so don’t bother trying to recruit your friends and family.

Author Kathy Benjamin calls pyramid schemes the world’s fastest growing industry, and she is right. You see the evidence all over Facebook. Several of you friends are inviting you to their party, or they’re posting staged before and after pictures and leaving cryptic messages that say “ask me how!” They often will not mention the name of the product they’re pushing, because they know they’ll lose you as a potential victim if you Google the product before they can fill your head with lies about how good the product is.

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Herbalife’s Fake Business Opportunity

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MLM bussines structure.In a video released this week, Pershing Square (the hedge fund that exposed the Herbalife fraud) contrasts Herbalife’s public statements about the “business opportunity” with the statements made behind closed doors.

Herbalife claims to offer “the best business opportunity on the face of the earth.” But the reality is that it is an opportunity in which you are almost guaranteed to fail, with 96% of distributors making less than half of what is earned by employees making minimum wage (per the video). Despite Herbalife executives and high level distributors publicly repeating how lots of money can be made, the numbers really look like this (according to the video):

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Why Products Offered by Multi-Level Marketing Companies Are So Expensive

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usana-health-sciences-chinaMulti-level marketing companies (MLMs) are nothing but legalized scams. Make no mistake… they are pyramid schemes, but the government allows them to operate. Why are these obvious Ponzi schemes (which, by the way, the MLMs will swear up and down they are not… thou doth protest too much) allowed to operate? Who knows why the government will not crack down on this massive consumer fraud. The best thing we can do is educate consumers about the evils of multi-level marketing so they can avoid these companies… that means NOT becoming a distributor and NOT buying any of their products.

MLMs use products to make their companies look legitimate. They can’t be a scam if they are selling an actual product, right? WRONG. They absolutely can be a scam, because the product is simply a “front” for the scheme they are running. The product is meant to make the company look legitimate and hide the fraud.

The products from nearly every MLM are overpriced. That is, they cost more than comparable products available through legitimate channels (i.e. real retailers). The distributors will tell you it is because the products are very high quality!!! The magic juice has vitamins that are more bio-available! The make-up has better ingredients! The clothes are made better! The pills have super secret magical powers that cure all illnesses! These are all lies. The products are not better.

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Proof that Herbalife Sucks

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mlm-scheme-pyramidI have researched multi-level marketing companies for nearly a decade. During that time, I came to the conclusion that the vast majority of participants fail. What does that mean? 99% or more lose money. Since the participants are largely getting in because of the “business opportunity” to “earn unlimited income” and find “financial freedom,” failing to turn a profit is indeed a failure.

A few weeks ago, a wonderful article on Herbalife was published on Seeking Alpha. It started out by discussing hedge fund manager John Hempton’s blind (and incorrect) defense of the Herbalife business model. In essence, he claims that since meal replacement shakes are sold, this is a legitimate business opportunity.

This is the defense that every MLM company uses. “We have a product. People buy it. Therefore we are not a pyramid scheme.”

Read moreProof that Herbalife Sucks