Don't be Fooled!

Watch Out for These Popular Internet Work-At-Home Scams, Investing Scams and MLM Scams!

It's safe to say that there are more business opportunities out there than you can shake a stick at. But that doesn't mean you should jump in with both feet. No, better to get a little education now, and avoid a lot of wasted time, money, and effort later on.

BE WARNED !!!

BE CAREFUL !!!

Here's the low-down on some common Internet and direct mail scams:

Envelope Stuffing - "Earn Big Bucks Stuffing Envelopes from the Comfort of your Own Home!"

BACKGROUND: This scam works because so many people want something for nothing; are YOU one of them ?

Basically, you are promised that if you send some money, they will sell you information on how you can make $1000's each week stuffing envelopes. This scam often includes references to "Make $2.00 for every envelope you stuff!", implying that you can just sit there all day in your underwear, stuffing envelopes, and racking up money like a lawyer. It should be a CLUE to you that they are asking you to send them $2.00 for the "FREE" information to cover shipping and handling.

Actually, some of these schemes go a bit further and ask for even MORE money (around $20) for the "complete" package, once you have paid $2.00 for the "application". You may even be required to send a SASE with your initial $2.00.

TRUTH: They sell you a one-page instruction sheet, poorly copied and mostly illegible, that tells you how to run classified ads and scam other people out of their $2.00. You are told to copy the sheet you just received, and for every "order" you receive from other unsuspecting boobs, "stuff" an envelope with this flier and mail it to them. Technically, you do get $2 for every envelope - only it is not "every envelope you are physically capable of stuffing", but "every envelope you receive from some poor slob whom you've just defrauded". Once again, some of these schemes go even further to make it "seem" as though you are in the publishing business. We won't go into the details here as there are MANY variations on this one.

VERDICT: STAY AWAY! Not only is this unscrupulous, it is illegal - you can be prosecuted for mail fraud, a federal offense.

Computer Work - "Earn Great Money Working From Home On Your Computer!
Free (or "Low-cost") Course Reveals COMPLETE Details!"

BACKGROUND: Basically, you are promised that if you send some money, they will sell you information on how you can get a job working on your computer, or "selling information". Essentially, this is the high-tech version of envelope stuffing - the information you buy ends up being a worthless guide to defrauding others in the same way!

Another variation of this scam (although more legitimate) is to offer to sell you an expensive package of billing software that will supposedly let you take over Medicare billing for local doctors in your area. There are one or two companies that offer good software packages, and several that are true scammers. 

TRUTH: The software you get with these "Make Money on Your Computer" programs is often nothing more than an eBook, an executable version of a text file or web site, and possibly some freeware version of an accounting package. It usually offers trite and outdated information that supposedly will teach you the secrets to making millions on the Internet - most often by selling this same material to others! 

Or by taking over the billing efforts of a large number of businesses in your area. If you think it is easy to get that business, TRY to get a contract FIRST, then invest in the course or software package. 

The problem with even the honest software sellers is that it is not as easy as it sounds to get doctors (for instance) to let you take over their billing. If you plan on trying this business out, we recommend you FIRST write a letter to 3-5 local doctors, set up a business appointment (not an office visit!), and sit down with them. Ask them if they would consider outsourcing their billing. If they would consider it, ask them for a price point at which it would make sense for them to outsource it (i.e., what price would they be willing to pay because it would then be cheaper than having an office worker do it). If you can get a decent commitment from at least 2 of them to give you their business, THEN invest in the software package!

VERDICT: Be very careful. Same rules apply as for envelope stuffing scam. There are some legitimate experts out there selling tried and true information on the subject of selling on the Internet, and in fact, we recommend you try one or two of them. But as a general rule, avoid most. To see which ones we think are the best, you should visit the Selling Pans to Gold Miners Page.

Investing on the Internet - Learning to Protect your Assets.

BACKGROUND: The Internet has revolutionized stock market investing - and opened the door to a whole new breed of scammers. There are many ways to fleece the unwary...

• Stock Market "Secrets to Investing" - Courseware, website access, newsletter subscriptions, and stock picks all dressed up in the language of secrecy, implying that the purveyor knows something that NO ONE else in the world knows (yeah, right!).
• Churn-n-Burners - Stock market broker / advisors who get you to "churn" your investment portfolio, always chasing after the latest hot stock. 
• Chat Room Pump-n-Dump - In this scam, you're visiting a stock chat room to see what the skinny is on the street. Suddenly, someone claiming to have inside information ("My cousin works on Wall Street, and he just told me that he heard the CEO of XYZ company saying they were going to announce tomorrow that the US Patent Office was awarding them a patent to secure the entire Internet! You'd better get in now, it's going to take off like a rocket tomorrow!") 

TRUTH: If anyone truly had the secret to printing money from the stock market, do you honestly think they would sell it to you? Why not just make the money and protect the "secret"? 

If churn-n-burners really had your best interests at heart, they'd leave your portfolio alone. What people often don't realize is that the broker makes money off of commissions selling you the latest hot one. He could care less if it goes up or down - they'll just tell you to "sell high" or "cut your losses" next week - and generate a new round of commissions for himself. If the broker is so smart, why aren't they investing THEIR money instead of YOURS.

Pump-n-dumpers are becoming more and more notorious, and several have been prosecuted. Stupid investors who buy on such sourceless gossip inevitably get burned by the eventual truth - the CEO is actually being indicted tomorrow for looting the company's assets, and he wanted to pump you up, then dump his stock before heading for Zurich!

VERDICT: Look, investing is NOT as complicated as everyone makes it out to be. Just buy a diversified portfolio of strong, blue chip stocks, and hold it for at least 20 years. Not only will you ride out the inevitable ups and downs of the stock market, you'll save on taxes and commissions, and your account will grow that much faster. Make regular contributions to your account, and tell everyone who is trying to give you advice on the latest investment fad to stick a sock in it!

MLM - Multilevel Marketing, Pyramid Schemes, Ponzi Schemes, and Chain Letters

BACKGROUND: "Get in on the ground floor! Spillover, unlimited geometric expansion, get paid for doing nothing, and lose 10 pounds at the same time! Your investments will earn 50% compounded monthly! Send everyone on this list $1.00, and then everyone else will send a buck to you!"  

TRUTH: Multilevel marketing sounds so good on the surface. You really have to dig a little deeper to understand that there are some fundamental flaws with this approach - at least from the perspective of you, the person thinking of becoming involved.

First of all, understand that MLM, pyramid schemes, ponzi schemes, and chain letters are ALL variations of a theme. 

• MLM refers to companies selling their goods primarily through an MLM arrangement. That means you sell products to your downline, and encourage them to become re-sellers of those products also.
  

• Pyramid schemes are blatant recruiting schemes whereby you pay for a place in a growing matrix, with the understanding that your fee goes to someone in the upline, and you hope to recoup your money from someone in the downline. Since there are a finite number of suckers in the world, (although they say one is born every minute) such schemes must ALWAYS collapse, leaving the bottom tier members holding the bag, and the top tier members laughing all the way to the bank.
  

• Ponzi schemes are pyramid schemes dressed up as investment vehicles. The distinction is that in a pyramid, all of the suckers KNOW that they are doing something illegal and stupid, they just hope to get out before it collapses. With a ponzi scheme, the promoter doesn't tell everyone coming in that what he is doing; he just pays off early joiners with proceeds from later ones, and skims as much as he can before the whole thing collapses.
  

• Chain Letters are a popular paper form of Pyramids. You pay to get on the mailing list, and then hope that subsequent members actually pay you as they request to join.

The only one remotely legal is MLM, and that business model is constantly under attack and investigation by the federal authorities. Some companies, such as Amway (d.b.a. "Quixtar" on the Net) have so far eluded the long arm of the law - but some analysis will reveal that there at least some concerns with their approach. 

MLM purports to be different from pyramid schemes in that they focus on selling products, NOT recruiting new members into the pyramid - even though the truth of the matter is thinly veiled. If you want to make real money in MLM, you MUST recruit new members - and THAT is the hallmark of pyramids, ponzi's, and chain letters.

Here are some simple facts to consider:

• MLM models ALWAYS result in an OVERSUPPLY condition. That is, they always result in suppliers wanting to sell MORE of the goods (be it Amway's soap, or a ponzi's investments), and thus they are DOOMED to a supply collapse in the end. 
  
  Think of it this way - if you were an Amway distributor, why would you want to enroll more salesmen, who would then be competing against you to make sales? Amway's answer is that you will make a profit from their sales. Now we have devolved to the pyramid recruiting scheme (see next bullet). Either way, too soon, there is too much supply, or too many suppliers - and not enough new recruits for the current bottom tier to actually make money.
  

• A pyramid scheme suffers from a similar fate - that is, it will soon collapse of it's own weight due to an oversupply of people wanting to sell the product. Consider a standard "matrix" (code word adopted by schemers to avoid the bad word 'pyramid'). You are told that you are "getting in near the top" (this tells you that everyone understands it will collapse in the near future). You are told you will earn commissions on the next 4 levels of sales, so that if you sell 10 (level 1 = 10 people), and they each sell 10 (level 2 =100 people), and they each sell 10 (level 3 = 1000 people), and they each sell 10 (level 4 = 10,000 people), you will have 11,111 people in your "cell", or organization. 
  
  But do you REALLY think you are in the the top? What happens if you are one of those 10,000 coming in on level 4. Then you are in the company of people (the 10,000) who will be seeking to recruit 100,000 members, and your 2nd level will be seeking to recruit 1,000,000, your 3rd level = 10,000,000, and your 4th level peers will be seeking 1 BILLION new members! Does this remotely seem plausible to you? If it does, I have some mountain-top real estate in Florida you might be interested in. 
  
  By the way, the HALLMARK of a pyramid scheme is that you are paid to recruit, not to sell products. If a company is asking you to sell a very questionable product, it is only a thinly disguised pyramid scheme. 
  

• Ponzi schemes offer unbelievable rates of return on unsecured and uninsured, usually private placement investments. If there are not enough red lights going off in the corner of your vision from the words in that sentence, then you might as well close your bank account and mail me a check for the proceeds - at least I will do some good with the money!
  

• Chain letters are very straightforward things - and so they often collapse the fastest. They are WAY to easy to cheat - consider, why would you play fair? Why not copy the letter, set up your name and four confederates in the positions, and send it out so that YOU are the entire "top" of this pyramid? Why play from the bottom of the deck? 
  

• This family of schemes typically have have a very common structure:

  • A "big name" at the top - probably running from the law, or has been convicted in the past, since many of these guys just move on to fleece new people once one plan collapses. You will be told what a philanthropist this guy is, and what a successful businessman he is, and how much he lives to help others succeed! Don't be fooled, contact that person directly and add that e-mail address to YOUR contact list.

  • There will be a layer of testifiers - these are shills or insiders who supposedly provide independent verification that the cons at the top are solid gold, and that the business plan being touted is a surefire winner. About the only testifier you should ever pay attention to is the Federal Trade Commission - call them and ask what they think of this guy and his new scheme.

  • Then there is a layer of motivators. These people spend a lot of time bucking up the troops, to prevent the confidence game from collapsing. They often develop a secondary shell game of selling motivational tapes, books, courses, and other goods, to fleece still more money from the victims. The motivators are often those near the top who have been made very rich by all the new suckers flooding in - thus, they are held up as an example of what could happen to you if you just have a burning desire to succeed, and if you just upgrade to this premium membership and motivational tape package.

  • Then there is a layer of strugglers - this will be YOU for a while, until you give up and enter the last group. Strugglers are those believers who think that it is not too late, that they can join and find enough people out there to follow them into the organization until it becomes profitable. These are prime targets for the motivators to sell their "how-to" products to. Some make enough to stay above water (i.e., their downline business generates enough to prevent them from going in the hole each month, so they stay in it).

  • The final layer are the dropouts. These are the ones who "didn't have what it takes" - or so the motivators will tell you. They spent their monthly nut to stay in the program, they have a garage full of soap, and they have finally given up, since after a year, they can't recruit anyone, and their friends and family avoid them out of fear of being pitched.
    

VERDICT: The bottom line is that MOST MLM is questionable, ALL pyramid schemes and chain letters constitute a "willing" fraud, and ponzi schemes are an unwilling fraud.

Notice that the door is left open a little on MLM's. Amway (a.k.a. QIXTAR) for instance has been in business for many, many years, and they are not going away. There are a new generation of hungry entrepreneur types emerging every year, and if you work hard, you can become successful in this program. There are elements of this business model that are not completely kosher, but if you want to give it a try, Amway is the only one we recommend from a pure "merchant" aspect (i.e., you really intend to buy and sell their products).

If you are in it for the money, that's fine. We'll make no judgments against you. But go in with your eyes wide open!

If you decide to participate in this field from a purely moneymaking perspective, then we believe you should maximize your chances for success. Join a downline program - this is a club that puts people in downline pipelines, and points the pipeline at a particular MLM program, usually one with a low matrix to fill or one that is just starting out.

In such an arrangement, people "pre-join" the MLM program by joining the downline club first; then an organization is built after you, and when you bubble to the "top" of your particular cell, you have a willing downline behind you ready to buy into whatever MLM the club has targeted.

Your chances for succeeding at MLM are greatly enhanced if you are in a GOOD downline club, one whose members all agree to join when it becomes their turn. Some of the doubt of being able to fill a downline is removed with this program, and it speeds your ability to get "in the money". But remember, there are NO GUARANTEES in the MLM business, so don't play the MLM game unless you're willing to gamble a little. For more information about MLMs see our MLM Page.

Don't forget the Honor System!