Norwegian Gaming Board suspects Lyoness is a pyramid scheme
Citing the ongoing receival of ‘many tips and questions from the public asking if Lyoness is a pyramid scheme‘, the Norwegian Gaming Board has provided an update on their current investigation.
Following their first investigation into Lyoness in 2013 the Gaming Board concluded that, while they might have once operated as one, Lyoness’ current business model didn’t classify them as a pyramid scheme.
Unfortunately it was later revealed the Gaming Board’s decision was primarily based on marketing material Lyoness had provided.
This didn’t address the root of the problem (that Lyoness operates as a pyramid scheme), and so the Gaming Board continued to receive complaints and queries from the public.
Earlier this month the Gaming Board announced they were reopening their Lyoness pyramid scheme investigation.
The since-published update reveals the Gaming Board initially contacted Lyoness on April 6th, 2017.
In this letter the Gaming Board reiterated Norway’s pyramid scheme laws and informed Lyoness they’d received ‘around fifty tips and/or enquiries about Lyoness in the past year‘.
According to the tips we have received, Lyoness / Lyconet permit to participate in a pyramid-like sales system, where they receive an opportunity to earn income by rewarding new members.
The tippers state that the size of the income of the company and affiliates largely depends on how much money one pays to participate and the number of new members being recruited.
The Lottery Authority has also been informed that some individuals have paid or are considering paying hundreds of thousands NOK to Lyoness / Lyconet to get the opportunity to get paid ten times as much in three years.
Furthermore we have received information about the recruitment of participants right down to the age of 18-19 who place their savings money in this system.
For most of the people who contact us, it is unclear where the deposit is placed in Lyoness / Lyconet, and the source of the promised payouts.
The impression most are left with after Lyoness meetings is that it is the recruitment of new participants into Lyoness / Lyconet who finance the payments, and not the sale of real product.
In several of the tips we have received, it is argued that Lyoness / Lyconet holds meetings in which they give incorrect and misleading information about the business of the company and companies they collaborate with.
Among other things some of the tips indicate that Lyoness / Lyconet does not have a direct cooperation agreement with all the companies they refer to at their meetings, and that they only pay out a theoretical salary that can be used to act for.
Some have also reported attending meetings where aggressive and classic tricks of pyramid companies have been used, like “You have to hurry now, soon the opportunity will disappear”.
The Gaming Board asked Lyoness to clarify their concerns.
Lyoness replied via letter on May 30th, however the details of their reply have not been made public.
What we do know is the Gaming Board wasn’t satisfied with their answers, prompting a followup “for further explanation” on July 14th.
The Gaming Board find grounds for considering investigating Lyoness Norway AS’ and Lyoness Europe AG’s operations in Norway, which violate the pyramid provisions of the Lottery Act.
This is because the business of Lyoness in Norway is in fact a pyramid-like sales system where compensation is paid for the opportunity to earn income due, in particular, others being recruited into the system and not the sale or consumption of goods, services or other benefits.
Lyoness’ May response appears to have attempted to differentiate Lyoness’ global operations from those in Norway, as the Gaming Board makes a point of clarifying they are only investigating Lyoness with respect to business in Norway.
One argument seemingly raised by Lyoness is that its affiliates might be disseminating false information about the business.
The Gaming Board responded by stating
if it were to be that the tips we received are based on a wrong perception of the actual business of Lyoness, this also raises questions about the marketing activity of the company in Norway and potential violation of other laws that are intended to protect consumers.
This includes the use of unfair terms and conditions and misleading and aggressive marketing.
On July 30th the Norwegian newspaper Bergensavisen (BA) published an account of a Lyoness meeting held by local affiliates.
The outdoor venue Una at Bryggen in Bergen has been a partner company with Lyoness’s distribution program for several years and is widely used as a venue for marketers in the Lyoness system.
One of the Norwegian main characters in the network, Terje Duesund, is an owner of the venue.
Over a beer at the brewery Una at Bryggen, she (a Lyoness affiliate) tries to persuade BA journalists in attendance to pay to become a sales agent in the controversial, international business Lyoness.
She is casual, well dressed and speaks fast – and clearly.
She does not know that it’s a BA journalist she’s talking to, and states you’d have to be an idiot not to pay 430 kroner to join the controversial marketing system.
And she strongly recommends paying 19,000 kroner to become a “premium” marketer. Then you get the chance to earn much more money, she insists.
The Gaming Board meanwhile also included media reports of judicial decisions requiring Lyoness to refund affiliate investors “who feel foolish” in their followup letter.
Lyoness has been given until August 15th to respond to the Gaming Board’s requests. Stay tuned…
Update 20th January 2018 – On January 11th the Gaming Board sent Lyoness a letter informing them of their findings.
Lyoness has been declared an illegal pyramid scheme in Norway and ordered to immediately cease all business operations.