Pyramid Schemes
Pyramids Are Illegal
These scams are called "pyramids" because they depend on an ever-increasing supply of willing participants. Pyramids inevitably collapse because it is impossible to recruit enough people to support the scam.
A nine-level pyramid, which is built when each participant recruits six friends, quickly exceeds the entire population of Oregon!
Level Participants- 6
- 36
- 216
- 1,296
- 7,776
- 46,656
- 279,936
- 1,679,616
- 10,077,696
USE YOUR COMMON SENSE. If you do not understand the offer, Do Not Join!
If the offer seems too good to be true or the profits seem exaggerated, Do Not Join!
If the oral sales pitch is different than what the written materials say, Do Not Join!
Call the Attorney General's Consumer Hotline instead.
Pyramid recruiters sometimes claim that the Attorney General or another organization has approved the scheme.
Wrong! The Department of Justice never endorses or approves any marketing plan.
What Could Happen If You Join A Pyramid Scheme?
Three things -- all bad.- You will almost certainly lose all of your money. Remember: every pyramid eventually collapses when there are no more willing recruits.
- You will probably cause the friends and relatives you have recruited to lose their money. They may even sue you.
- You may be investigated and prosecuted by the Oregon Department of Justice. Violators may be forced to refund all the money they have received and may be required to pay up to $25,000 per violation of law. Prosecution also results in public records which can lead to embarrassing publicity.
Frequently Asked Questions
Pyramid Schemes: Scams or Big Bucks?
| Q: | What is an illegal pyramid? | |
| A: | Pyramids typically involve a few people at the top who get their friends and relatives to give them money in return for the chance to recruit more participants. | |
| Q: | But my friend says her program is a multilevel marketing plan that distributes useful products. | |
| A: | Some illegal pyramids are disguised as multilevel sales companies. When the emphasis is on recruiting new members rather than selling products, then the organization is probably an illegal pyramid even though it distributes products. | |
| Q: | So how can I tell whether it is legal? | |
| A: | Ask yourself whether you would buy the product if you were not also getting the chance to recruit more people. If the product costs more to buy from the organization than it does in a local store, then your "friend" has probably invited you to violate the law. | |
Warning Letters
- Warning letters sent to operators of pyramid schemes.
Applicable State Law
Other Useful Websites
Federal Trade Commission
