Not Sure What to Do - Friend Getting Involved in Pyramid Scheme

The next time SHE brings it up I would say Oh yeah I looked into that company online and found out... and let it go from there.
I think as long as she brings it up first you should be all set.

I would say hey you know that money making idea you had? I thought it might be a great.way to bring money in too so i lookedup the company and found out some not so good information. This is what i have,.so just as i am you may want to have a differeny money option.

Okay, pyramid schemes are illegal. An example is what Bernie Madoff was doing - there was no product, just lots of people putting in money in exchange for a piece of paper promising them a return later on. Make sure that the info you have on investigations is not just from disgruntled distributors (who may have been kicked out for not being ethical). Make sure that the investigations are done by the state's attorney general's office or consumer affairs department. Not everything on the internet is correct, and rumors hurt everyone.

That's entirely different from direct sales or multi-level marketing which is honest and tends to give more money to distributors since all the middlemen are cut out. If the company is a member of the Direct Selling Association, then they have been vetted for over a year, their books scrutinized, and they have been invited to join a prestigious group. Direct selling/MLM is endorsed by financial expert Suze Orman (who herself is involved with Avon), economics expert Robert Kiyosaki, and many many top economists (there was a huge series done by USA Today last September that had articles by many experts.)

If there is an actual product involved, then it's not a pyramid. Still, there are ways to investigate whether it's a wise investment - is it a niche market and she can only sell to a small percentage of the popular (e.g. women who wear silver jewelry)? Is it likely to be something where people buy one item and then they are done (e.g. housewares, gourmet items)? It doesn't mean that the company is no good, but just that she has to work harder to keep finding new customers rather than re-sell to satisfied customers who buy something that is consumable and therefore needs to be replaced. Is there a big initial investment? Is there free training and support? Can she get customers and distributors below her in any number, or is she restricted to just two people (a binary system) and therefore she has very few ways to get paid.

Is the company's stock publicly traded on the NASDAQ or other stock exchange? If so, then it is a legitimate company - a complaint from even one of the 50 state attorneys general would stop public trading. Has it been written up positively in the nation's business magazines (Business Week, Success from Home, Forbes, etc.)??

Is there a guarantee such as a one-year buyback? There ARE companies that do everything right in the ways and it's possible she's with one of them and just isn't explaining it to you in the right way.

I wouldn't send anything anonymously as someone else suggested. You can agree just not to talk about it with her. But be sure you have your ducks in a row.

Ask her if she has googled the company just to be sure it sounds legit. Try not to sound judgmental. Just tell her you would do that before taking any job. I certainly would.

Also, there is a difference between a pyramid scheme and multi-level marketing. Multi-level marketing is legal and can be very lucrative and on the up and up. I am involved in multi-level marketing and there is nothing wrong with it.

Diane B explained everything really well I think. If there's a product, then it's not a pyramid. It may be MLM or direct sales which can be perfectly valid ways to market and distribute products.

While I don't know anyone getting "rich" off of direct sales, I do know many people who have supplemented their incomes with Mary Kay, Avon, Arbonne, Silpada, Southern Living, Pampered Chef, etc. I wouldn't be too concerned for her if it's something like that - many don't require the distributors to maintain inventory or buy minimum amounts of things. I am a distributor for Juice Plus and I do it to get the product at cost that I would buy anyway and if I make a little each month from stray sales here and there, great.

So don't dismiss it just because it's direct sales or MLM. If the company really is unsavory, though, and the investigations are legitimate, then do forward her some links with a note that "hey the company that you talked about sounded interesting so I looked it up and was surprised to come across this information. Just wanted to make sure that you checked this out before investing anything!" and leave it at that.

Can you tell us what company it is? Maybe someone here will have some direct experience that you can share with your friend.

I guess you'll have to decided if this approach fits in with your personality, but why not just say, 'Hey listen, I checked out the company you were thinking about joining and there are some concerns I think you should know about.' If she asks what they are, tell her. If she says she's not interested in knowing, say no more.

I think the only way you could screw up the friendship is if you're a jerk about it and badger her to stop. The only thing you're doing is dropping a nugget of information. Would you let a bad contractor work on a friend's home? Of course not.

I've had a cousin and a friend join a pyramid scheme. Both of them annoyed the heck out of my trying to get me to buy/sign up whatever it was they were selling. My friend thought her product could cure my son's genetic bone disorder! What?! Anyway, I don't think you would doing something wrong by saying something and then leaving it. But that's coming from me, and I am a very forward, speak my mind kind of gal.

Tell her you were considering joining her and so you started researching the company and were very disturbed by the fact that they are being investigated. Research a little farther for current articles or direct references (not just wiki) and then send her the links.

To Diane- A Ponzi scheme has no product but a pyramid scheme can have product but most of the product sales end up between members of the pyramid in such a way that the bottom ends up spending a lot of money while the top ends up reaping huge profits.

First, an investigation doesn't mean they did anything wrong. The outcome of the investigations tell a better story. Can you talk to her and see what, if any, research she has done? Say something like "Wow. I am glad you how found something to be excited about. So many people get taken w/ work from home scams, have you researched this opportunity to be sure it's legit? Remind her that if it sounds to good to be true, it probably is. During your discussion, you can probably work into the conversation what you saw online and state you just want to be sure that she is sure.

I have a work at home opportunity that I do part time but honestly don't work it much. The great thing about it is they tell you straight up..."this is not a get rich quick scam" the potential is there to make a LOT of money but you definately have to work it as a business.

By the way...what is the business your friend found?

I tried to warn a woman when she pestered me to join one. It took her losing a lot of money to learn. I would let it go, but be very firm that you are NOT going to even listen to a free presentation when she asks.
She will ask.

I would want my friend to tell me when I was thinking of doing something truly foolish, much less illegal.

I hope she would tell me kindly but truthfully, not shielding the reality of the business but not shaking a finger in my face and making me feel as if I were a stupid idiot for being interested in it. "Jane, I thought about what you said last time, so I looked it up online. Did you know these pyramid scheme businesses have a really bad reputation, legally? I mean, I know the prospects sound too good to be true, but... have you checked out the company for yourself?"

If my friend tried to tell me and I chose not to listen, I hope she would continue to be my friend. I would need one later (and, being this perfect imaginary friend, she wouldn't say, "I told you so!").

So many things look wonderful at first - it's like the proverbial glittering thing that isn't really gold.

Ditto, Diane B.
MLMs and direct sales are legit. They just cut out the middle man. The company I distribute for has been around for more than 55 years. It is very easy to verify that quality of the products. There are plenty of websites, like ewg.org that will give you the scoop on whether products are really natural, green, etc. You also look for published, peer-reviewed research. Funny how so many will buy any product at the store purely based on advertising, but won't buy a better, safer, less expensive product from a friend.
If she has joined a pyramid scheme, which is illegal, she could get into trouble herself, or lose some money.
I spent $15 to become a distributor with my company and have no renewal fees. It costs a little bit more now. And I don't have to meet a quota every month.

Well a lot of these companies out there that are "pyramid" like are not illegal...they have found loop-holes. My husband has been one who has come home a few times saying "so and so does this and they do o.k." or whatnot...I let them do their whole conversation thing and then show them the numbers and try to get them to realize that they will more then likely never make more then a $1000-2000 a month. They will work long hard hours to get into that 7k a month range but never get there because of how the pay is divied out and how many people already typically sell the stuff.

anyhow, it doesn't hurt her to do it...it's just a waste of time and money. The last couple to try to get us into selling CD's and whatnot that helped you be a better business person. They made aprox 1500 a month and had been working for the company for 7 years. I don't know how hard they worked but they seemed happy doing it...Maybe they will join the 1% who actually make more then 35k a year sometime in their life but I am not betting on it. They even showed me the form they printed out on what percent of people who work for the company and how much they make. 1% of self employed workers made 35K or more. They had som e130,000 or so self-employed workers. Thats some pretty low odds of making anything substantial.

I would tell her you thought about it and here is what you found during your research. That way it makes her feel validated and less defensive.

Just say no if it does not effect her. I have sold a lot of stuff and used a lot of stuff I really liked. I use Mary Kay and have sold it many many many moons ago.

I love Mellaluca products. The smell is so wonderful to me. I can't afford them at all though. There is no way I can sell the quota each month either. I might have the money to buy one or two items per year. So I could not do either of them.

She may really want to try this anyway. Many companies are built like this. The person above you makes money off your sales, the people under you make money for you. It all works together but if one block in the pyramid crumbles the rest do too.

I would be upfront and honest with her.

I hate it when so many unsuspecting people get into these scams not realizing it is a scam. They push products and recruit people until everyone avoids them like the plague.

As someone else mentioned... you would more than likely let her know if a shady contractor was working on her house... just give the info you have on the company and then the decision is still hers to make.

After you give your input, drop it and don't mention it again. It is a shame how these pyramids/MLM/Direct Sales trick people into thinking they will get rich quick or can make extra money without actually working for it.

I would get together all the documentation you found and mail it to her anonymously. Maybe it's the coward's way to approach this situation. But at least this way you are avoiding any face to face unpleasantness unless she asks you directly. I think you are a very good friend to be looking out for your friend in this way. :)

Tell her what you found out and why it makes you uncomfortable enough that you will not risk getting involved with it.
What she does after that is up to her.
I've seen friendships break up when one side insists EVERYONE should get involved with the scheme and the other side refuses to gamble with their money like that.
A real friend won't push like that.
My father in law never seemed to learn.
He went from one get rich quick scheme to the next in a never ending cycle.

My friend was planning on selling Arbonne because of how natural they were saying the products are. She is very into natural was was really pushing that point. I went online and found they are not as natural as you would think after their presentation. I told her and gave her the articles I read. She still chose to sell the products, but did not emphasize the "natural" part as much to her customers. We are still friends and I felt like I let my opinion be heard.