Everything you need to know about multilevel marketing scams
Hyderabad: Companies that engage in multi-level marketing (MLM) sell their products or services directly to individuals. An investment in a multilevel marketing program is called a âdistributorâ, âparticipantâ, âentrepreneurâ or âfounderâ. You can earn money in one of two ways: (a) as a direct retailer; or (b) by recruiting new members and earning commissions on what they buy and resell directly or through their new members.
Scammers will give you the chance to invest your money and earn a lot of money without risk. After raising money from existing investors, they pay new investors and hold most of the shares for themselves.
Most MLM scams have no real income and depend on a constant flow of fresh money to stay afloat. When it becomes difficult to acquire new members, they simply disappear. In a typical multilevel marketing plan, existing members receive more commissions if they recruit new members. In multilevel marketing, the vicious loop is that âyou are tricked into deceiving othersâ.
MLM company marketers often claim how much money you can make. Most multilevel marketing companies have extensive sponsored PR efforts using social media influencers to get consumers to invest by promising big profits. (a) Pyramid schemes are a type of MLM scam prohibited in India. b) Illegal money laundering schemes) A ââPonzi scheme
There are a handful of online MLM scams floating around the internet. Here are some of the models: getting paid to buy apps, cryptocurrencies and stocks; creation of electronic books; and get paid for the clicks. They use attractive slogans like (a) âearn dollars just for joining the programâ. (b) earn Rs 50,000 per month working from home. (c) You are the owner of your business. (d) Do you want to earn more by sitting at home? (e) Join with us for a healthy and rich life.
Not all MLM businesses are awful. There are a few outliers, such as Amway, Avon, MaryKay, Forever Living, Herbalife, and Tupperware, whose sole mission is to grow direct sales and provide work opportunities for those who are unemployed or underemployed.
Legislation that regulates deposit collection:
* Prohibition of Unregulated Depository Systems Act, 2019
* The Chit Funds Act of 1982 (the Chit Funds Act) governs the operation of chit funds.
* Prize Tokens and Money Circulation Patterns Act 1978 (Prohibition)
* Companies Act 2013, as amended by Companies (Acceptance of Deposits) Rules 2014.
* The Securities Commission of India Act 1992 and the Securities Commission of India Act 1999.
The modus operandi of some MLM scams is:
Pyramid systems with vertical network expansion in which a person earns a commission regardless of the sale.
Ponzi schemes do not involve a sale and involve the laundering of money on a network of people.
Pumping and emptying schemes: Once the victims have made a purchase, the lobbyists drastically reduce the price.
Quit the scam: Promoters who take money from victims and then disappear, leaving them in the dark.
Some red flags to take into account:
* High returns with zero risk.
* The earlier you join, the richer you get.
* Be paid to bring in new members.
* The more you invest, the more money you get.
* They promote too much but never deliver.
* You have been asked to sell products that you have not seen or that are still in development.
* Avoid joining MLM companies selling stocks, cryptocurrencies, web spaces, clicks, ads, text messages and emails.
* Never blindly trust videos of a social media influencer claiming they got rich by investing in an MLM program.
Some homework to do before investing:
* Company research with the companies registrar.
* Search the internet for full social profiles of investors.
* Research what investors are saying
* Consider the products or services they are selling.
* Ask about the refund policy when purchasing.
* Visit the company if it has a local office.
* Read the documents and have a financial advisor review them.
* Never buy from unregistered sellers.
Contact us if you are the victim of a scam:
* Send legal advice with the help of a reputable lawyer.
* File an MLM Company Fraud FIR on the link or call 155260 and let the police investigate further.
* File a complaint with the Registrar of Companies.