~ The idea for sale: Financial freedom ~
Do you want quick, easy, and risk-free investment opportunities? Or better yet, long-term financial freedom starting sooner than you ever thought possible? So does everyone else in the world. A variety of social and economic factors, both locally and globally relevant, are creating the perfect environment for the spread of irresistible promises in the form of Multi Level Marketing (MLM) and Pyramid Schemes on the island, primarily via social media.
Even business-people and workers with stable, decently-paid jobs are getting involved. The promises are delivered right to you, on your smartphone. If (right, “if”) like most people, you check your social media daily, you’ve probably been exposed to a barrage of too-good-to-be-true offers.
These have been flooding local online groups such as the various buy/sell/borrow groups on Facebook, especially since the last quarter of 2018. There’s a good chance someone you know on Facebook seems to have had their profile hijacked – and it is now more of a marketing vessel than a personal page.
The offers are also making the rounds on WhatsApp – sent to you by familiar people who wanted to make sure you knew about this “opportunity”. The perks of assisted, near- effortless word-of-mouth.
The Weekender has been keeping track of various offers, and has taken a particular interest in one MLM programme that has gained the most popularity by far: Total Life Changes (TLC).
While anyone now associated with the programme would shriek at the thought of it being mentioned in the same sentence as “pyramid scheme,” MLM programmes are close relatives to the pyramid scheme at best, and many MLM programmes are simply product-based pyramid schemes with a fresh coat of paint and (maybe) a few modifications.
Even experts and financial, consumer protection, and legal authorities find it hard to agree on how to view MLMs: Are “all” of them product-based pyramid schemes, “most” of them, or “some” of them? That, however, is the full range of options – no one can claim that most MLMs are not in this category.
While researching the topic, it became glaringly obvious that most people, whether happily in a programme, or considering it, do not actually know what “pyramid scheme” means at all – it’s just a bad thing, something illegal and definitely not the win-win opportunity they have been exposed to.
Because of the need for an introduction to the world of MLMs in the first place, the MLM programme TLC will only be discussed in the next edition of The Weekender. As such, the content of this article is not specific to the TLC.
Hopefully, however, after reading this, you will know what aspects of any MLM to be critical of before signing up.
The Weekender has interviewed Rosina Romeo, the now-Regional Director who was the first on St. Maarten to join TLC in June, and who shortly afterwards introduced it to others, because she liked the product, made money, and wanted to let others in on the deal.
Romeo is busy as ever with the programme, is happy with it, and has attracted almost 80 participants locally so far.
She explained to The Weekender why she believes TLC is not a pyramid scheme, and why the company is different from other MLM companies. Indeed, there are some small differences that The Weekender noted, which seem to lessen – but sometimes just defer – some of the pitfalls associated with MLM companies.
Besides the business model, ethical and possibly legal issues surrounding some of the surreal medical claims made by TLC will also be discussed. Note: They are not supposed to be viewed as “claims”, officially, but they are typically presented, even pushed, as such. More details to follow next week.
A number of other local TLC participants and prospects was also interviewed on the basis of anonymity.
Examples of schemes in circulation
Besides the more popular TLC, another MLM company, focused on travel, is noticeably being marketed on social media. “Become your own travel agent, get paid to travel, and enjoy great residual income” with Surge 365, part of The Money Team International. The individual travel agents, of course, also make their own “company” names.
The Surge 365 is hard to find details on, which is in itself a red flag, and complaints listed on the Better Business Bureau (for one) show tell-tale signs of the company being misleading, frustrating, and even predatory. The programme has now made its way to St. Maarten from the U.S., via a participant in the Bahamas.
Another scheme in circulation is a straight-and-simple pyramid scheme, no sale of any product is involved. While it would appear there is no pretence to it being a scam, it has surfaced in different places at different times, and has been “packaged” as people supporting each other, women in particular.
In this recycled scam, the amount of money needed to enter differs, depending on where in the world it pops up. Apparently in St. Maarten, you can buy in for $100, and have two friends join who will make the same “investment.” As newer members keep joining, your position moves towards the middle of “the flower” and you can be rewarded with $750 once you’re at the centre.
Obviously, the only money coming in is from the new recruits. Apparently, $50 goes to administration costs, so at least one person is not being a complete idiot, just a scam artist.
This one is also active now in the Netherlands and Curaçao. The Dutch Kansspelautoriteit (gambling authority) warned the public of the scheme via Dutch news outlets late November. Centrale Bank van Curaçao en Sint Maarten (CBCS) has also published a warning.
CBCS has also published warnings of other pyramid schemes and other forms of fraudulent business opportunities on its website, including iMarketsLive, which deals with the Foreign Exchange (FOREX) market. CBCS shares tips on recognising pyramid schemes; See www.centralbank.cw/investor-education-pyramid-schemes.
Another Facebook user, apparently from the United Kingdom, has been repeatedly posting easy investment opportunities on local Facebook groups, another Nigerian profile, and other fake profiles have been doing the same. One fake profile was even posting TLC products locally, and the TLC market is already so saturated, people from other islands have been posting on our local groups as well.
Oversaturation is a typical problem with MLM schemes. According to the person who coached the local beginners, Stanecia Graham, you should be posting ads all over, a minimum of 10-20 times per day. The flooding of ads and their overlapping isn’t a surprise.
While there are other red flags to look out for, CBCS has published the following characteristics on pyramid schemes:
1. Emphasis on recruiting
Main focus is to recruit others to join the program. Beware if you receive more for recruiting others than for product sale.
2. Promise of high return in short term
High return and fast money may indicate that commissions are being paid out of money from new recruits rather than based on the revenue generated by product sales. Therefore, the structure may collapse and many investors may lose money.
3. Complex commission structure
Commissions are not based on product and services being sold outside the program.
4. No genuine product or service is offered
There is no underlying product or service being sold to others or what’s being sold is speculative or appears inappropriately priced.
5. Easy money
Participants are often offered compensation for placing advertisements, making payments or recruiting others.
6. Generated sales revenues are not demonstrated
No certified financial statements or other evidence demonstrating that the generated revenues are indeed from selling products or services to people outside the program.
7. The goal is not to sell products
The goal is not to sell products and often requires the participant to pay a one time or recurring fee, to buy-in or become a member of the program.
The waters are muddied, though, in more sophisticated schemes and MLMs. For example, the goal not being to sell products. Product-based pyramid schemes do sell products, but the name of the game is still recruitment, and the system is structured so that you will only gain money if you recruit other people to be part of your downline.
Second, what is a “genuine” product or service? It ends up seeming too subjective. Is the product really overpriced? Marketing and far-fetched claims would have you think that no product is overpriced.
Upwards of 90% of people either lose or don’t make significant money on pyramid schemes, and mathematically, 88 per cent of participants are on the bottom level of any type of pyramid scheme.
Both MLMs and product-based pyramid schemes take advantage of vague, subjective definitions and tend to operate where there are significant loopholes, such as the herbal supplement and homeopathy industry, where both the products and marketing claims are extremely hard to regulate.
These schemes tend to do well (for themselves) in smaller communities where everyone knows everyone, and the local economy is of course facing stalemate, especially now following a disastrous hurricane season in 2017.
Many are looking for work and/or side hustles, and everyone is constantly on social media. Even the fact that people want to help each other, can be something taken advantage of, and according to a 2016 article in The Economist, that’s part of the reason these types of schemes are so successful with women in particular. The companies are by nature masters of marketing. Be sceptical.
The chart shows the unsustainable exponential progression of a classic pyramid scheme (here with a branching factor of 6). Graphic retrieved from Stuff news source, New Zealand.
