Cyber Talk: All You Need to Know About Multi-Level Marketing Scams

Hyderabad: Companies that engage in a multi-level marketing (MLM) sell their products or services directly to individuals. An investment in a multi-level marketing scheme is known as a 'distributor,' 'participant,' 'contractor,' or a 'founder.' You can earn money in one of two ways: (a) as a direct retailer; or (b) by recruiting new members and earning commissions on what they buy and resell directly or via their new members.

Fraudsters will offer you the opportunity to invest your money and make a lot of money with no risk. After collecting money from existing investors, they pay new investors and hold the bulk of the shares for themselves.

Most MLM scams have no actual revenues, and they rely on a steady stream of new money to stay afloat. When it gets difficult to acquire new members, they just vanish. In a typical multilevel marketing plan, existing members receive more commissions if they recruit new members. In multi-level marketing, the vicious loop is that "you get cheated to cheat others."

MLM company marketers make a lot of claims about how much money you can make. Most multi-level marketing firms run extensive sponsored public relations efforts using social media influencers to get consumers to invest by promising big profits. (a) Pyramid schemes are a type of MLM scam that is prohibited in India. b) Illegal money-laundering schemes) A Ponzi scheme

There are a handful of online MLM scams doing the rounds on the internet. A few of the models are: getting paid for buying applications, cryptocurrencies, and stocks; authoring e-books; and getting paid for clicks. They use attractive slogans like (a) "earn dollars just by joining the scheme." (b) earn Rs 50,000 per month working from home. (c) You are the owner of your company. (d) Do you want to earn extra by sitting at home? (e) Enrol with us for a healthy and wealthy life.

MLM companies aren't all awful. There are a few outliers, such as Amway, Avon, MaryKay, Forever Living, Herbalife, and Tupperware, whose only mission is to grow direct sales and give work possibilities to unemployed or underemployed individuals.

Legislations That Regulate Deposit Collections:

* The Banning of Unregulated Deposit Schemes Act, 2019

* The Chit Funds Act of 1982 (the Chit Funds Act) governs the operation of chit funds.

* Prize Chits and Money Circulation Schemes (Banning) Act, 1978

* Companies Act of 2013, as amended by the Companies (Deposit Acceptance) Rules of 2014.

* The Securities and Exchange Board of India Act, 1992, and the Securities and Exchange Board of India Act, 1999

Some MLM Scams' Modus Operandi Is:

Pyramid schemes with a vertical network expansion in which a person earns a commission regardless of the sale.

Ponzi schemes do not entail a sale and involve money laundering over a network of people.

Pump and Dump Schemes: After the victims have made a purchase, the schemers dramatically reduce the price.

Exit Scam: Promoters who take money from victims and then vanish, leaving them in the dark.

Some Red Flags To Be Considered:

* High returns with zero risk.

* The earlier you join, the richer you become.

* Being compensated for bringing in new members.

* The more you invest, the more money you get.

* They over-promote but never deliver.

* You have been asked to sell products that you either haven’t seen or are still in the development phase.

* Avoid joining MLM companies selling stocks, cryptocurrencies, web spaces, clicks, advertisements, receiving SMS, and receiving emails.

* Never blindly trust a social media influencer’s videos claiming they became rich by investing in an MLM scheme.

Some Homework To Do Before Investing:

* Research the company with the Registrar of Companies.

* Research the investors’ complete social profiles on the Internet.

* Research on what investors are saying

* Consider the products or services they are selling.

* Ask about the refund policy during the purchase.

* Visit the company if it has a local office.

* Read the paperwork and have a financial advisor review it.

* Never buy from unregistered sellers.

Contact Us If You Are Scammed:

* Send a legal notice with the help of a reputed lawyer.

* File an FIR against the fraud MLM Company on the link or call 155260 and let the police investigate further.

* File a complaint with the Registrar of Companies.