Not everyone realizes how much financial damage a pyramid scheme can do. Pyramid schemes are like scams that deceive people into unfair financial deals. Knowing how a pyramid scheme works and noticing the red flags may help you avoid them yourself. However, if you were impacted by a scam and find yourself falling into bankruptcy, then consider asking a Tullahoma bankruptcy lawyer for advice.
What is a Pyramid Scheme?
A pyramid scheme is similar to the get-rich-quick schemes you may have heard about. This type of scheme lures people in by promising high income for easy work. The way a pyramid scheme works is by constantly recruiting new people to join their group and having those people recruit more people.
As this group grows, the money made by the pyramid scheme operator grows. The usual requirement to join the group is an investment of money. Pyramid scheme operators will usually promise a quick financial return or income if you invest in their program.
This is similar to how a multi-level marking (MLM) company works. MLM companies operate by having you sell their products to people in your immediate vicinity or online. These companies make money off your sales or off recruiting new people who are willing to sell their products.
You will know an MLM company is not a pyramid scheme when they do not require you to recruit new people to join the group. An MLM will pay you based on your sales. However, many people still do not make much money working for MLM companies.
You can expect to make even less money from a pyramid scheme. Many people actually lose money from pyramid schemes because pyramid schemes are scams. The money you invest in pyramid schemes will often not be returned. Working harder in a pyramid scheme often leaves people drained, both financially and emotionally.
How to Spot a Pyramid Scheme
Look for common pyramid scheme red flags to avoid falling into this trap. A pyramid scheme will make exaggerated promises of fast high income. They may market this as passive income for easy work like recruiting people or advertising for them.
You will often find that pyramid schemes do not actually have any products or services to sell other than what they falsely promise. Strange prices for the products are advertised as normal. Most pyramid schemes require you to pay a fee to start, whether this be buying a product or a standard fee.
When the main focus is on recruiting rather than selling products, you might be dealing with a pyramid scheme. Remember, pyramid schemes make money off recruiting fees rather than selling products. If you ask questions about proof of revenue and receive strange answers, the company might be trying to hide its true intent.
Contact Tom Bible Law Today
You may not have to go through your financial struggles alone. Feel free to call us at Tom Bible Law today at (423) 424-3116 for a consultation about your financial situation. Our legal team of Tennessee bankruptcy attorneys might be able to help you escape your financial dilemma through bankruptcy. We serve clients in the Tennessee cities of Chattanooga and Tullahoma.