MLM FraudMLM Fraud is what comes to most people's mind when they're presented with an opportunity. If that is the case with you that means you were involved directly or indirectly with an mlm opportunity at one point in your life. MLM Companies are not schemes, scams, or pyramids; however there are some mlm companies that give a "bad name" to other companies in the industry. First let me start with the people. Even if the mlm company is honest and dependable that won't change the character of the Representatives involved in that opportunity. If we feel the mlm company was dishonest or promises weren't fulfilled we have to learn to discern where the problem is. We have to remember that network marketing companies have independent representatives that represent the company. Now if the representative tells you things like "we'll build your business for you," or "You won't have to talk to anyone," and you end up doing one or the other, you were probably lied to by the representative.
Remember some representatives are money hungry and concentrate more on making money rather than helping a new rep. Most new reps are lead astray because they lean on every word that their upline says. As soon as the company doesn't deliver on what the upline said they would do they want to label their network marketing company as practicing mlm fraud. An example would be a situation where a friend of mine was involved in an mlm company where his upline promised him a certain percentage of all his teams' earnings once he got to certain level. He figured out that this would get him a grand total of approximately $5500 residual income per month. Well, after he got to that certain level he realized his checks wouldn't increase. What he didn't know is the customer forms fine print stated he have to have 50 personal customers / sales to qualify for that residual. Was it the company's fault (or is it considered mlm fraud) for putting it in fine print or was it the upline’s fault for not telling the rep. Many companies have fine print. It is our responsibility to read each document we get. Regardless to what anyone may say there is no time limit to join any company. It is good to have an upline but we have to take responsibility to invest just as much time in learning how our business works as we spend learning how much we'll get paid to sponsor a certain amount of individuals.
Before we accuse a network marketing company of mlm fraud we have to know what mlm fraud is. Fraud is defined by the Merriam-Webster's online dictionary as intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right b: an act of deceiving or misrepresenting. Fraud is defined by West's Encyclopedia of American Law as a deception deliberately practiced in order to secure unfair or unlawful gain. The industry easily gets a bad reputation NOT because of these companies itself. It mainly has to do with the individuals representing these companies. MLM Fraud could range from anyone in the company participating in false advertising, identity theft, false billing, embezzlement , ponzi schemes or pyramid schemes. Some of the well-known frauds that have taken place include individuals such as James Paul Lewis, Jr. who was in charge of one of the longest running and most lucrative Ponzi schemes in US history grossing over $320 million in 20 years. Others include Charles Ponzi who was a fraudulent investor (Ponzi scheme named after him). Also Kenneth Lay who represented Enron Corporation being one of the highest paid CEO's in US history accused of accounting fraud.
Now as far as mlm companies there are a list of things you may want to look for. 1. Make sure the business as a legit business (company) contact number. There are mlm's in existence (especially online) that have no contact number but expect you to join their business simply because THEY make it sound good. You need to know that there is someone to talk to or speak with when you are experiencing a problem. It is not hard to provide a contact number but there are still those who don't provide one for fear of being contacted. 2. Do your own research as to how long the company has been in business. This is not to say that if the company is new it is no good. Even the most successful companies were new at one point. However, the longer an mlm company has been in business usually indicates it has a strong foundation. This is also not to say the mlm will not fail one day. As the saying goes "Business is Business" and poor business decisions are made sometimes which can cause a business to fail. However, the longer an mlm company is in business, the chance that it is a fraud lessens. Frauds don't last long. If an mlm is in business for at least 20 years it is a good indication that they have legit business practices. 3. See if the mlm operates as a Pyramid Scheme. Pyramid Schemes has money exchanging between different levels with NO products being offered. 4. Look at the mlm company to see if it is a Ponzi scheme. Ponzi Schemes are when money is being paid to earlier investors by new investors. For example, if 3 people pay money to join a business this month and next month 5 people join, the money from the five people will be distributed evenly (or however the mastermind sees fit) to the 3 people who joined earlier.
There are many frauds in existence and the more knowledgeable you are the better you'll be at noticing them when they come your way. Some of the illegal practices that are common in mlm fraud include:
Pyramids
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