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Why People Join: It's Not Just Greed.

Hundreds of thousands, maybe millions, of Americans have recently been solicited to join the various versions of the "Gifting" Pyramid Scheme? Why have so many joined? Why have so many continued to participate even after news reports and government rulings state plainly that the scheme is illegal and the participants can be prosecuted.

Typical news reports say its is demon greed. However, from the studies and analyses conducted at Pyramid Scheme Alert, we know that it is far more than that. In fact, it has never been shown that the people who join are the more avaricious people in their respective communities. Our observations show that most people who participate in pyramid schemes are not crooks and liars. The victims and the perpetrators (in a pyramid scheme, the victims recruit victims and are therefore also perpetrators) are, for the most part, ethical, spiritually minded, responsible, and law abiding. In fact, in several cities, it was the members of the local police or sheriffs' department who were the participants!

We see five factors causing this widespread fraud to be perpetrated by members of communities upon one another.

  1. The Scheme Appeals to Basic and Treasured American Values

    The schemes tell you that the program is based upon biblical concepts of giving and receiving, or the scheme is a way to finally achieve your constitutional right to pursue happiness, or that it brings people together to mutually share and support one another, or participation is an exercise in good citizenship or a way for people to compensate for years of discrimination against women or racial minorities. All of these stories sound good and true.

  2. The Scheme Is Spread with Beguiling and Insidious Lies that Mislead and Entrap People

    The lie most frequently accompanying the program is that the scheme is legal. In some areas, people were pointedly told that local authorities had already reviewed the scheme and given it a clean bill of legality and legitimacy. Some were told the state legislature had voted on it and approved it and that many legislators were themselves participating.

    In addition to the lie about legality is the usual deception about how the scheme actually works. People are told that it is not a pyramid and that everyone can and will win, that there are no losers. The mathematical contradictions are obscured. People are told to stay positive and not succumb to negative voices and doubters.

  3. The Mass Media have Conditioned Many People Today to Believe that Success and Wealth should Come Easily and Quickly,

    We are told that wealth is achieved mainly from being in the right place at the right time, not from contributing something of value to society. Knowledge and hard work have been downplayed by lotteries, gambling, mass advertising, stock market speculation, Hollywood, sports stars, TV game shows, etc., all of which are legal and publicly sanctioned. So, many feel entitled to wealth and, if they are not successful, they feel cheated. The Scheme plays upon these feelings of entitlement. The Scheme's perpetrators do not have to say very much or do a lot of persuading. Many people are ready and willing to accept the scheme's premises because it fits in with so much else they see and hear today.

  4. Consumerism, which Inundates the Media and our Communities, Equates Personal Success and Human Value with Money and the Things Money Can Buy.

Thus, many people feel chronically deprived. No matter how much they have, it is not enough. Insecurity is flamed by talk of a coming recession or being "downsized" or made obsolete by new technology. Many people have come to live beyond their means now and are strapped with credit card debt. They need more and they need it now. This is why the scheme has attracted many middle class or even upper income people who are seemingly well off.

  • The Government has not Clearly Defined Pyramid Schemes and has Allowed Businesses to Operate that Are also Based on Pyramid Expansion.
  • This has left many people confused, misled and unprotected. The multi-level marketing industry (MLM), with huge companies such as Amway and NuSkin in its ranks, has been allowed to operate for years, using exactly the same methods for spreading its sales schemes.

    Why are those pyramid plans legal and the Gifting Clubs illegal? This is hard to explain. The gifting schemes usually involve no product but are said to be based on simply giving money. But, it is not the lack of product that is the cause of their illegality; it is the mathematical certainty that the bottom levels must lose, since the scheme cannot go on forever.

    Amway and others are also based on a principle of exponential expansion (one recruits five who each recruit five more who each recruit five more, etc.). But rather than each one giving money, they must buy products each month to gain the promised reward paid for by new recruits below them. Instead of achieving levels of "appetizer, soup, main course, and dessert" as are used in the "Dinner Party" version of the Gifting Scam, the MLMs assign levels of Executive, Emerald, and Diamond. In both cases, the levels that make money are gained by recruiting levels below. Each level is given the same story that they too can make money by recruiting others below them in pyramid fashion.

    At present, some states have no laws against pyramids. Some have adopted weak or confusing laws. Some are using a law written by the MLM companies. Millions of people have been solicited to join MLMs. Most people quit within a year but the entire recruitment scheme is generally ignored or treated as legal by the authorities. Little wonder that consumers are confused.


    This page last updated on 7/25/07