Lyoness an “illegal pyramid scheme” in Norway, banned from operating
The Norwegian Gaming Board’s initial 2013 investigation into Lyoness concluded that, while there was evidence of a pyramid scheme, the company appeared to have remedied concerns by rebranding as Lyconet.
With a similar enough business model, complaints from the public detailing losses continued to pour in.
That prompted the Gaming Board to open a second investigation into Lyoness, the result of which was finalized on January 11th.
In an announcement dated January 18th, the Norwegian Gaming Board advised it had sent Lyoness a notice ordering to immediately terminate business operations in Norway.
The Gaming Board estimate Lyoness has 150,000 affiliates across the country.
As per the Gaming Board’s announcement, an internal investigation into Lyoness revealed the majority of affiliates earn the majority of their commissions via recruitment.
Based on the number of received tips in 2016 and 2017 and the content of these foundations, the Lottery Authority has assessed whether Lyoness is an illegal pyramid-like sales system pursuant to section 16, second paragraph, of the Lottery Act.
In the assessment, we have assumed that revenues from Lyoness’s business in Norway are mainly from the acquisition of participants, and not from sales or consumption of goods, services or other benefits.
Within the context of Lyoness’ business model, this is because trying to generate units via shopping is not practical.
In Lyoness it’s always been far easier to invest a few thousand dollars or euro, and then focus on recruiting others who do the same.
When those recruited invest, that pushes your own units toward maturity (upon which a ROI is paid out).
The equivalent through shopping at Lyoness merchants, of which there are purportedly 1000 or so in Norway, could take years.
We have paid particular attention to the fact that Norwegian participants in Lyoness do not receive or consume goods, services or other benefits from the sales system that correspond to the value of what is paid when paying for them.
As a result, the participants’ payments to Lyoness are considered as consideration to participate in a pyramid-like sales system.
The income of the company and individual participant comes almost exclusively from the replacement of new participants and their payments to Lyoness, and not from sales or consumption of goods, services or other benefits.
Lyoness has four weeks to reply to the Gaming Board decision.
Sounds like they’ve actually done their homework this time around though, so I’d be very surprised if the decision was reversed.
In the meantime Lyoness has come up for a third name for itself. The company now primarily markets itself under “Cashback World” branding.
Same AU investment scheme underpinning the operation though. Which ultimately means, as the Norway investigation revealed, Lyoness affiliates are still mostly just getting paid to recruit.