KNOWN SCAMS
Pyramid
Schemes
You
might sooner or later receive a message offering you a business
opportunity which is a Pyramid Scheme. You will be offered the chance
of making a huge amount of money, and the method is detailed in
an explanation. If you think about it a bit, it may seem plausible.
WHAT
IS A PYRAMID SCHEME?
You
have to pay a small sum to someone first. This is sometimes connected
with a deal involving signing up with some kind of money e-mailing
company or sometimes it's a matter of sending cash. You pay the
money to Person1 on the list. The list has three (or more) people
on it, and then you move everyone along the list by one, put your
own name on the list, and wait for the money to come rolling in.
The letter will tell you that this is a sure way for everyone to
make a fortune, and the explanation seems convincing. After all,
if you have been convinced by it and sent the money, others will,
so sooner or later an increasingly large number of people will be
paying YOU money. So, brilliant, eh?
WHAT'S
WRONG WITH PYRAMID SCHEMES?
The
problem is the mathematics, which can be explained logically and
the problem exposed. You don't need Advanced Level Exam mathematics
to see this, but O-level helps. Part of the trouble is that the
purveyors of pyramid schemes will try to distract you from the mathematical
fault. Here, as clearly as can be explained, is the fault: For every
person in the scheme who makes money, a preset number (n) will have
to pay out money. For any level of the scheme, an ever-increasing
next-level will be required. So, even though YOU might make money,
sooner or later a lot of people will be sold a deal which will LOSE
MONEY. So, you might make money, but others will lose. The problem
is that it is very likely that this over-the-hill point has already
occurred, so YOU will LOSE MONEY! If this sounds too complex to
understand, a simpler explanation is this: As no money is being
actually generated and it's just being moved about, there is no
real money to be made, at least not long term, by everyone.So,
to sum it up, although a few people may get rich, the chances are
it won't be you. Furthermore, whether you make money or not, a very
large number of other people will lose money. It's a mathematical
fact about the system.Pyramids
schemes are illegal in some countries and not in some other countries,
but it's largely irrelevant.
Pyramid
schemes are sometimes disguised as MLM / Multi-Level Marketing,
and often appear in the background as a sales method for a real
product. So, when the whole thing collapses you may end up with
a load of soap or some reports or some such thing; well it's better
than nothing. However, for any scheme, you should check how much
of it is about a real product and how much of it is just blather.
The
Nigerian Scam Defined
It is also referred to as "Advance Fee Fraud", "419
Fraud" (Four-One-Nine) after the relevant section of the Criminal
Code of Nigeria, and "The Nigerian Connection" (mostly
in Europe). However, it is usually called plain old "419"
even by the Nigerians themselves.
The Scam operates as follows: the target receives an unsolicited
fax, email, or letter often concerning Nigeria or another African
nation containing either a money laundering or other illegal proposal
OR you may receive a Legal and Legitimate business proposal by normal
means. Common variations on the Scam include "overinvoiced"
or "double invoiced" oil or other supply and service contracts
where your Bad Guys want to get the overage out of Nigeria (Classic
419); crude oil and other commodity deals (a form of Goods and Services
419); a "bequest" left you in a will (Will Scam 419);
"money cleaning" where your Bad Guy has a lot of currency
that needs to be "chemically cleaned" before it can be
used and he needs the cost of the chemicals (Black Currency 419)
; "spoof banks" where there is supposedly money in your
name already on deposit; "paying" for a purchase with
a check larger than the amount required and asking for change to
be advanced (Cashier's Check and Money Order 419); fake lottery
419; chat room and romance 419 (usually coupled with one of the
other forms of 419); employment 419; and ordering items and commodities
off "trading" and "auction" sites on the web
and then cheating the seller. The variations of Advance Fee Fraud
(419) are very creative and virtually endless, so do not consider
the above as an all-inclusive list!
At some point,
the victim is asked to pay up front an Advance Fee of some sort,
be it an "Advance Fee", "Transfer Tax", "Performance
Bond", or to extend credit, grant COD privileges, send back
"change" on an overage cashier's check or money order,
whatever. If the victim pays the Fee, there are often many "Complications"
which require still more advance payments until the victim either
quits, runs out of money, or both. If the victim extends credit
on a given transaction etc. he may also pay such fees ("nerfund"
etc.), and also stiffed for the Goods or Service with NO Effective
Recourse.