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Following an investigation into Lyoness Europe AG, the Office of Competition and Consumer Protection in Poland are claiming Lyoness “can be a Ponzi scheme“.

Not surprisingly, the OCCP’s claim relates to the accounting unit investment scheme Lyoness have buried within their merchant shopping network:

The company offers participants the opportunity to receive material benefits that are conditional on the recruitment by them of other people into the program.

The program participant must first make a down payment on the purchase of vouchers or gift cards of Lyoness partners or make purchases with them.

Using gift cards and vouchers as a cover to mask the injection of funds by new Lyoness affiliates is a well-entrenched excuse used by Lyoness affiliates to defend the scheme. Unfortunately though, there’s no escaping the fact that if a Lyoness affiliate deposits money with the company, recruits enough new investor affiliates who do the same, that ultimately they will receive a >100% cash ROI.

Theoretically one can wait for shopping to generate enough units, but this in no way negates the much quicker accounting unit investment route.

The OCCP’s investigation into Lyoness follows an unsuccessful attempt to shut Lyoness down by the Public Prosecutor’s Office of Kielce (a city in Poland). Due to a ‘lack of evidence justifying suspicion of (Lyoness) having committed an offense under Art. 286 pairs. 1 of the Penal Code‘, the Public Prosecutors were ‘order to discontinue‘ the case.

At this stage the OCCP investigation appears to be in its early stages, with the agency currently seeking ‘all persons who may have information on this subject, to submit it to the agency‘.

Should the OCCP then take further action upon analysis of information submitted to them by the Polish public, the agency itself can issue “penalties” against Lyoness Europe AG, with the possibility of “criminal liability” facing those who are running the scheme locally.

At the time of publication there are an estimated 100,000 Lyoness affiliates in Poland.

Following the OCCP’s announcement, Lyoness spokesperson Mathias Vorbach issued a response:

Receiving benefits in the Lyoness loyalty program is conditional only on purchases carried out by its members. A member of the program is also able to command the program to other consumers. If a person invited to make a purchase, a member of the program receives up to 0.5 percent of the purchase in the form of a bonus.

The benefits of participation are paid after reaching a fixed minimum amount and do not depend in any way on contributions of new participants. There is no question of any criterion that would suggest the construction of a pyramid scheme.

All the benefits in Lyoness are due to the fact that companies are paying affiliates individually agreed commissions, so they can sell products or services directly or by using coupons.

With this commission we finance cashbacks, bonuses and all the other benefits.

Therefore, the program Lyoness does not require any payment from the new entrants to the participants, who are already members of the program.

Like I said before, you can generate a ROI via the creation of account units by shopping, but that in no way negates the direct investment in units by affiliates and the subsequent recruitment of new affiliates (who also invest), to generate that same ROI.

Following the flow of money through Lyoness would quickly reveal that the merchant network isn’t conjuring up the hundreds of dollars (or thousands at the upper levels), that Lyoness pay out each time an account unit position matures.

Affiliate money goes in, affiliate money goes out to affiliates who deposited earlier. It’s that simple.