Internet Pyramids

Schemes, Scams, Frauds.

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Pyramid Scheme Internet Fraud Examples

Blaming the Government For a Pyramid Scheme's Downfall

To survive, pyramids need to keep and attract as many members as possible. Thus, promoters try to appeal to a sense of community or solidarity, while chastising outsiders or skeptics. Often the government is the target of the pyramid's collective wrath, particularly when the scheme is about to be dismantled.

FTC attorneys now know to expect picketers and a packed courtroom when they file suit to halt a pyramid scheme. Half of the pyramid's recruits may see themselves as victims of a scam that they took too long to stop; the other half may view themselves as victims of government meddling that ruined their chance to make millions.

It Hurts To Put You in the Drivers Seat

Credit Development International (CDI) and Drivers Seat Network (DSN) marketed their pyramid scheme through recruitment seminars and sales meetings across the country.

You'd get promotional materials to use in recruiting new participants which you sent out in numerous ways, including unsolicited commercial e-mail, postings on USENET groups and through Web sites.

In the FTC v. Cano case, which targeted Credit Development International ("CDI") it was shown that consumers could join CDI's "Platinum Infinity Reward Program" and become a participant in its "3x7 Forced Matrix" -- a structure that promised commissions going seven layers deep and that required each participant to recruit just three new members. CDI represented that participants could earn more than $18,000 per month in this program.

Besides the promise of high profits, the real attraction of CDI was its offer of an unsecured Visa or MasterCard, with a $5000 credit limit and a low 6.9% annual financing rate. This offer was especially attractive to consumers with poor credit histories, to whom CDI advertised saying "Guaranteed Approval, No Security Deposit! No Credit Check, No Income Verification and Bankruptcies No Problem!"

CDI representatives claimed that they could offer such attractive terms because they had a special marketing relationship with a large overseas bank, the Banque Nationale de Paris (BNP). According to the transcript of a taped sales meeting, CDI hinted that a broad conspiracy prevented U.S. banks from offering such favorable terms.

A CDI representative claimed, "normal banks do not want people to know that they could have a 6.9 [percent] credit card." In the same meeting, CDI painted itself an alternative to a regular bank and said "our whole concept is to have the largest membership credit union in the world." "We're the bank."

In fact, CDI had no business relationship with Visa, MasterCard, or BNP, and no relationship with any bank willing to issue credit cards to CDI members and likely misled the one bank with which they did have a relationship.

When investors paid by credit card to join CDI, the defendants apparently processed these payments, not through CDI but through a different "front" company with a VISA merchant account. Consequently, the defendants put their own merchant bank at risk for any charge backs that VISA might credit to angry investors.

People who paid the $130 initially, followed by monthly payments of $30, never receive sums such as $18,000 per month nor do they receive an unsecured MasterCard or Visa credit card and at least 89 percent of them would never have made enough money to recoup their initial investment.

Over the five-month life of CDI, more than 30,000 consumers from the U.S., Europe, Australia, and Southeast Asia are estimated to have lost $3 to $4 million dollars in this alleged scam.

Net Nuts

FutureNet, Inc., which was promoted on the Internet, claimed that its recruits could earn substantial income for the rest of their lives by joining a multi-level marketing program selling Internet access devices.

You paid fees ranging from $195 to $794 to become a distributor.

The promoters claimed that their recruits —so called "Internet Consultants" —would receive $200 - $400 when they personally recruited another consultant, and $25 - $50 when a person in their downline recruited a new member.

The bulk of the income from the marketing plan did not depend on sales of the Internet devices they were purportedly selling, which were available at other retail distributors, including Sears and Circuit City, at lower prices, but rather almost entirely on the recruitment of new distributors who would in turn recruit more distributors, and continue to seek to recruit and collect fees from an endless "downline" of new distributors.

Since almost 90% of investors in any pyramid program actually lose money, their earnings claims were false.

Make Nothing Partners

The Alabama Securities Commission closed down the MN Partners, Inc. (MN) loan businesswhich attracted over 20,000 investors in other states and 16 other countries.

The defendants, Frank De Lucca, David Cox, Jynelle Cox, Ron Clark, and Janice Clark waived any further rights to appeal the Injunction and a receiver has been appointed to control all assets of MN.

To invest into MN Partners, Inc. (MN) you paid either a $300 loan fee or $100 and got two new members to enter the program, and signed a promissory note. Then you received a $50 loan, and every consecutive month you signed a new promissory note and received another loan that was twice as large.

During the ninth monthand thereafter when the monthly loan exceeded $10,000 per month, you then volunteered to loan back one-half of the proceeds for an additional 4% interest.

After 12 months you were to have received over $200,000 in loans. In one year MN promised investors $88,160.64 in spending cash after fees, principal and interest payments back to the company. The MN brochure promised even more--within two years a participant would net over $1,000,000 of non-taxable loans which never have to be paid back.

It was determined that they would have had to issue an astronomically large amount of new loans to keep their promise. For the first 20,000 members they would need $10.36 billion over a two- year period and 34.5 million people paying the $300 application fee for the program.

For them to keep their promise to only 4 million of the 34.5 million customers, who theoretically would have funded the first 20,000 customers, you would need over 6.8 billion new members paying the $300 application fee which exceeds the present estimated entire world population of 6.1 billion human beings.

And Stay Out

The Alabama Securities Commission has issued a Cease and Desist Order against UNITE1 Investments, an Arizona Business entity which has used the following addresses: 2733 North Power Road, Suite 102-410, Mesa Arizona 85206 and Box 20370, Mesa Arizona 85277.

They received information that UNITE1 engaged in the offer and/or sale of securities in the form of units in a twelve month term loan agreement without being registered to do so.

It appeared to have a striking resemblance to MN Partners, Inc., another scam that was operating out of Phoenix City, Alabama which was shut down by the Commission. The UNITE1 loan program claims to pay investors up to $125,000 within twelve months for a one-time advance fee ranging from $250.00 to $750.00.

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