MLM and Ponzi Scams
The most common MLM scams are in fact Pyramid Schemes that exist in various forms. In the most crude form, the scheme does not offer any value other than the promises of wealth by simply asking others to contribute to the pool and hence creating a huge base.
Basically someone in the “upline” will approach you asking for a small sum of money to join the scheme. After doing so, all you need to do is the same, asking others to join by paying the money. The money gets to passed upwards, each upline making a little from it. If you have just joined the scheme, you will start off at the base and your risk is the highest.
Such a scheme that do not offer any value other than the pyramid system (i.e. passing money upwards) is not sustainable and is proven to fail, as in the case of the Ponzi system in the early 1990s.
Pyramid Systems may exist in different names, e.g. Matrix Schemes, Ponzi System, Chain Letters, etc. Although not the first of its kind, Charles Ponzi (picture below) was the one who made the scheme famous in the United States due to the large amount of money involved.
What isn’t important is what people may call them, because only the most stupid scammers would call their system a Pyramid, Ponzi, Matrix, HYIP or Chain Letter, or they would attract the attention of the authorities. Moreover, do not be enticed by the complicated “paperworks” involved. There are many ways to make the system look legal.
So far, we have known a few systems that offer value products and legal, e.g. Amway. (caveat emptor)