AGO warns vs. investment scams
The Office of the Attorney General yesterday raised the alarm against the presence of investment scams in the Northern Marianas, as it urged consumers to take extra caution.
The Commonwealth has some pyramid, or multi-level marketing schemes, operating at the moment, said AGO in a media statement. Under no circumstances should one invest or participate in these schemes.
According to AGO, pyramids go by many names. They may be known as Ponzi schemes, mathematical tricks, endless chains, multilevel marketing agreements and distributorship agreements. Multilevel marketing is the current popular description.
It said regardless of what they are called or how good they sound, they are scams, cons, and flimflam, and will inevitably collapse sooner or later, after some dishonest people have made a bundle and left some gullible people holding the bag.
The AGO pointed out that pyramids are organizations in which the member monetarily benefits primarily from the recruitment of new members into the pyramid, rather than from the furnishing of goods and services to the public.
It is just a mechanism to transfer funds from one person to another without any real sales or other furnishing of goods or services.
Pyramids typically involve one person recruiting a number of others, with the promise of more rewards dependent on the number of people recruited. The pyramid will eventually collapse, with only the earliest participants having any chance of regaining their investment.
In a pyramid where one person enrolls five more, and that five then enroll 25 more, the total number of persons enrolled at that time is now 31.
Note that 30 of the 31 are on the bottom two levels, and 25 of those are enrolling 125 on the bottom level. This relationship will always continue, with the bottom 25 enrolling 125 more, and that 125 enrolling 625, who then enroll 3,125. At this point, the bottom two levels now contain 3,750 people, or about 96% of the total of 3,906, explained the AGO.
The pyramid must always recruit more people to keep itself from collapsing. But this is mathematically impossible. At the fourteenth level, the pyramid would require more people than the earth’s population.
One can encounter pyramids schemes anywhere, from right next door to on the Internet. The participants are mostly ordinary people who have been duped into participating.
“If you should attend a meeting or see an advertisement concerning one of these “distributorship” or “multilevel marketing” organizations, you should bear a few things in mind,” said the AGO.
Remember that they are simply mathematical tricks that cannot go on forever. If you see a chart like the example above, where 5 people recruit 5 more people apiece, and on and on-look out, it added.
The AGO also said that if there is nothing involved other than recruiting new members, you are definitely in a pyramid scheme. “If there is some type of product to sell, but the emphasis is on obtaining new members to do the selling for you, you are most likely in a pyramid scheme.”
Pyramid scheme operate by deceiving people. There is simply no realistic possibility of regaining your investment unless you are one of the first participants.
