Does limiting levels legalize a pyramid scheme?
The reasons participants in pyramid schemes come up with to justify their participation in one are just as numerous as the schemes themselves.
Here on BehindMLM we regularly bear witness to all sorts of logic-fails, ranging from the tired “everything is a pyramid scheme” to “why hasn’t X company been shutdown if it’s a pyramid scheme?”
Typically these excuses ignore an opportunities business model, and instead attempt to shift focus onto something else. Whatever “something else” turns out to be is then typically used to override the recruitment driven nature of the business model.
One such argument I’ve seen of late however does actually focus on an opportunity’s business model, asserting that the restriction of payout levels somehow negates the recruitment driven nature of the scheme.
The opportunity in question is You Get Paid Fast, a gifting scheme in which participants pay a $28 entry fee (split into four $7 payments which are sent to existing gifting participants), to qualify themselves to receive $7 payments from those they recruit.
Due to the $28 gifting payments being split four levels above the immediate upline, this equates to a maximum of four levels deep a participating gifter is able to receive payments from (assuming the admin does not
steal reallocate any positions).
Ken Russo is currently listed as the number 2 recruiter in the You Get Paid Fast leaderboards, with the top two positions owned by the scheme’s admin, Paul Darby.
Not surprisingly, Darby’s top two You Get Paid Fast gifting positions have more participants attached to him (473) than the next eight combined (470).
In an effort to attract more gifting participants to the scheme and address the obvious pyramid nature of the scheme, Ken Russo routinely makes the following claim in his marketing spiels:
Nothing illegal going on here folks and YGPF is most certainly not a pyramid scheme since it pays only through 4 levels.
Not an illegal pyramid scheme because it’s capped at four levels? Huh?
Russo’s logic-fail kicks in when one considers what makes a pyramid scheme a pyramid scheme is that fact that affiliates are paid to recruit.
This can be paid out on a single level by attaching something to a membership fee, and then having said membership fee qualify affiliates to earn commissions on the recruitment of new members.
Or it can be paid out over multiple levels, similarly by attaching something to membership and then distributing membership fees out over multiple levels.
How many levels these membership fees are distributed over is entirely irrelevant, as it is the act of getting paid on recruitment that defines the opportunity as a pyramid scheme, rather than how many levels a payment si spread out over.
In the case of You Get Paid Fast, participants are paid when a new member joins and gifts four levels of upline $7 each. Whether it’s four levels at $7 each, one hundred levels at 28 cents each or one level at $28 – the fact remains that affiliates in You Get Paid Fast are paid to recruit.
Thus, in addition to the gifting nature of the opportunity (new participants directly gifting existing participants), You Get Paid Fast (and any other opportunity that pays on recruitment) is quite obviously an illegal pyramid scheme.
They are “redefining” terms, just like a cult would do.
The illegal part in a pyramid scheme is about MORE than a “getting paid to recruit” system. That system can easily be bypassed, e.g. by paying people indirectly.
A pyramid scheme has to be about a chain recruitment system, where the participants themselves (ANY of them) will introduce new participants into the scheme, and where payments to participants (ANY of them) derives directly or indirectly from the “consideration” paid by ANY of the participants.
That vague and complicated description should also cover most of the methods people can use to bypass the more simple definition.
A fixed matrix can include spillovers, i.e. you don’t need to recruit anyone PERSONALLY, but you can still be paid from new participants’ “consideration”.
A passup system will pass the commissions upwards = you will only be paid indirectly for recruitment.
A pyramid scheme can include product purchases, i.e. you will be paid indirectly from over priced products rather than directly from recruitment.
To cover all those methods to bypass direct payment for recruitment, the definition will need to be vague and complicated.
There are many insidious methods that MLM companies are taking right now to distant themselves from the whole irksome “pyramid scheme” implication … even though they clearly are.
Even Vemma, which has been only growing due to its hyper bombastic (and unfounded) income claims, is now attempting to alienate itself from MLM by altering the company’s jargon to “affiliate” rather than “network marketing.”
Oh, and I was glad to see that BehindMLM isn’t caving in to all sorts of (vain) extortion endeavors … that’s cool.
It may be a good idea to point how how YGPF fails the Koscot Test. Obviously that’s US only, but most other nations have adopted nearly the same language when it comes to pyramid schemes or endless chains.