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 Known Scams

 

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.