Multi-level Marketing Scheme

A multilevel marketing scheme is a type of pyramid scheme where participants are recruited into a "direct selling" program in which requires participants to purchase a fixed quantity of a product and sell it directly on a peer to peer basis to their friends and family. Participants are also typically disproportionately rewarded from recruiting other participants into the scheme who themselves must purchase products from the company, thus creating the requirement for an infinite chain of greater fools that must enter into the scheme in order for participants to recoup their loses.

Because of regulatory capture some MLM schemes are legal in the United States, although others have been shut down as illeal pyramid schemes. MLM schemes are largely perceived as being a form of predatory investing that preys on financially disadvantaged and marginalised groups who have been shut out of other opportunities.

See also Pyramid scheme, Ponzi scheme, and zero-sum game.

References

  1. Mims, Christopher. n.d. ‘NFTs, Cryptocurrencies and Web3 Are Multilevel Marketing Schemes for a New Generation - WSJ’. Accessed 14 March 2022. https://www.wsj.com/articles/nfts-cryptocurrencies-and-web3-are-multilevel-marketing-schemes-for-a-new-generation-11645246824.
  2. Krugman, Paul. 2018. ‘Bitcoin Is Basically a Ponzi Scheme’. The Seattle Times 30. https://www.seattletimes.com/opinion/bitcoin-is-basically-a-ponzi-scheme/.
  3. Stolfi, Jorge. n.d. ‘Bitcoin Is a Ponzi’. Accessed 19 March 2022. https://ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html.
  4. Sohale Andrus Mortazvi. n.d. ‘Cryptocurrency Is a Giant Ponzi Scheme’. Jacobin. Accessed 20 March 2022. https://jacobinmag.com/2022/01/cryptocurrency-scam-blockchain-bitcoin-economy-decentralization.
  5. ‘Why Bitcoin Is Worse than a Madoff-Style Ponzi Scheme | Financial Times’. n.d. Accessed 20 March 2022. https://www.ft.com/content/83a14261-598d-4601-87fc-5dde528b33d0.
  6. ‘Bitcoin Pyramid Schemes Wreak Havoc on Brazil’s “New Egypt”’. 2022. AP NEWS. 22 January 2022. https://apnews.com/article/cryptocurrency-technology-business-brazil-bitcoin-2dc801e5e3aa477ce7983d84dc8a64bb.
  7. Shri T Rabi Sankar. n.d. ‘Cryptocurrencies – An Assessment’. Reserve Bank of India. Accessed 2 March 2022. https://rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1196.
  8. Bartoletti, Massimo, Salvatore Carta, Tiziana Cimoli, and Roberto Saia. 2020. ‘Dissecting Ponzi Schemes on Ethereum: Identification, Analysis, and Impact’. Future Generation Computer Systems 102: 259–77.
  9. Corradi, Fiammetta, and Philipp Höfner. 2018. ‘The Disenchantment of Bitcoin: Unveiling the Myth of a Digital Currency’. International Review of Sociology 28 (1): 193–207. https://doi.org/10.1080/03906701.2018.1430067.
  10. Moore, Tyler, Jie Han, and Richard Clayton. 2012. ‘The Postmodern Ponzi Scheme: Empirical Analysis of High-Yield Investment Programs’. In Financial Cryptography and Data Security, edited by Angelos D. Keromytis, 7397:41–56. Lecture Notes in Computer Science. Berlin, Heidelberg: Springer Berlin Heidelberg. https://doi.org/10.1007/978-3-642-32946-3_4.
  11. Olson, Dan. 2022a. Line Goes Up – The Problem With NFTs. https://www.youtube.com/watch?v=YQ_xWvX1n9g.
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