HOW TO DETECT A SCAM MLM AND HYIP BUSINESS IN NIGERIA

WHAT IS MULTI-LEVEL MARKETING?
Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant’s “downline”, and can provide multiple levels of compensation. Other terms used for MLM include pyramid scheme, network marketing, and referral marketing. Most commonly, the salespeople are expected to sell products directly to consumers by means of relationship referrals and word of mouth marketing. Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling, which started centuries ago with peddling. Companies that use MLM models for compensation have been a frequent subject of criticism and lawsuits. Criticism has focused on their similarity to illegal pyramid schemes, cult-like behaviour, price fixing of products, high initial entry costs (for marketing kit and first products), emphasis on recruitment of others over actual sales, encouraging if not requiring members to purchase and use the company’s products, exploitation of personal relationships as both sales and recruiting targets, complex and sometimes exaggerated compensation schemes, the company making major money off its training events and materials, and cult-like techniques which some groups use to enhance their members’ enthusiasm and devotion contrast to MLM is single-level marketing, where the person is rewarded only for the immediate income between the exchange of a product and monetary benefiting the multi-level marketing is often disputed; but it has been in existent since 1920s, 1930s with Nutrilite or California Perfume Company renamed as “Avon Products”, 1940s with the California Vitamin Company, 1960s, and even as late as the 1970s New businesses may use terms such as “affiliate marketing” or “home-based business franchising”. Many pyramid schemes attempt to present themselves as legitimate MLM businesses. Many courts, and portions of the public assert that all MLMs are essentially pyramid schemes even if they are legal. The U.S. Federal Trade Commission (FTC) states “Steer clear of multi-level marketing plans that pay commissions for recruiting new distributors. They’re actually illegal pyramid schemes IS HIGH-YIELD INVESTMENT PROGRAM?A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors. Most of these scams work from anonymous offshore bases which make them hard to track down. HOW THE SCAM WORKS:- Operators generally set up a website offering an “investment program” which promises very high returns, such as 1% per day (3778% APY when returns are compounded every day), disclosing little or no detail about the underlying management, location, or other aspects of how money is to be invested. The U.S. Securities and Exchange Commission (SEC) has said that “these fraudulent schemes involve the purported issuance, trading, or use of so-called ‘prime’ bank, ‘prime’ European bank or ‘prime’ world bank financial instruments, or other ‘high yield investment programs.’ (HYIP’s) The fraud artists seek to mislead investors by suggesting that well regarded and financially sound institutions participate in these bogus programs.” In 2010, the Financial Industry Regulatory Authority (FINRA) warned that “the con artists behind HYIPs are experts at using social media including:- YouTube, Twitter and Facebook to lure investors and create the illusion of social consensus that these investments are legitimate.” Though Ponzi schemes have existed since at least the early 1900s, the rise of digital payment systems has made it much easier for operators of such websites to accept payments from people worldwide. Electronic money systems are generally accepted by HYIP operators because they are more accessible to operators than traditional merchant accounts. Some HYIP operators opened their own digital currency companies that eventually folded; these companies include:- Standard Reserve, OSGold, INTGold, EvoCash, and V-Money. StormPay started in the same way in 2002, but it remained in business even after the HYIP that it was created to serve was shut down by the State of Tennessee. Some HYIPs have incorporated in countries with lax fraud laws to secure immunity from investor laws in other countries. The operators have been known to host their website with a web host that offers “anonymous hosting”. They will use this website to accept transactions from participants in the scheme. Some investors try to make money by attempting to invest in HYIPs at an early enough stage to create a return, and then by cashing out before the scheme collapses to profit at the expense of the later entrants. This is in itself a gamble as poor timing may result in a total loss of all money invested. To reduce this risk some of these investors use “tracker sites” listing the schemes and their current state. One expert states that there is not enough evidence to corroborate that tracker sites can actually help investors make more money. Many of the MLM and HYIP Businesses operating in Nigeria are a complete waste of time, energy and resources Many Nigerians have sad tales about their involvement in MLM and HYIP in Nigeria Scam MLM and HYIP exist in many countries of the world. Network Marketing is one of the best business models but has been abused by con artists who use it to defraud people. There are ways to easily detect the scam outfits in the market, no matter how cleverly disguised they are. The problem is that many Nigerians are gullible, greedy and undiscerning, therefore easily deceived by the con artists and their promises. A discerning Nigerian who can sit down to analyze MLM promises will be able to detect the fraudulent ones before signing up with any. There are a few legitimate MLM operating in the Nigerian market, not all are scam but many are scam and should be avoided. The key to success in MLM is the ability to know the right company i.e. the legitimate, rewarding ones to do business with, not jumping into anyone you see as Nigerians do. A MLM company that is focused on the recruitment of persons into the network and pays a recruiter a commission for recruiting others into the network, cannot be a legitimate MLM business to do business with. Many of the MLM and HYIP businesses that have crashed in Nigeria belong to this group. They are designed to benefit not more than 5% of the investors and eventually crash with the rest 95% frustrated. They have a product which cannot sell well in Nigeria and tell you that the way to make any money and move up in their network is by recruiting people and getting rewarded for that. Beware!!!! Frustration sets in when a recruit is unable to get new recruits. This happens when the market for new recruits quickly gets saturated as everyone is looking for a recruit who has already been recruited or is not interested. The MLM business to sign up with is that which focuses on the sales of its products, and recruits sales persons but does not pay any commissions or reward to anyone for recruiting others. It pays commissions based on products sold, not for persons recruited. They have products which sell easily. The following are the ways to detect them 1. Find and study the company’s track record 2. Look for their consistency in fixed returns throughout the life of the investment.3. Learn about the product 4. Ask questions 5. Understand any restrictions 6. Talk to other distributors.(But beware of shills) 7. Consider using a friend or adviser as a neutral sounding board or for a gut check 8. Take your time 9. Use tracker sites that list the schemes and their current state.10. Think about whether this plan suits your talents and goals. HYIP is a financial investment which promises consistent fixed returns throughout the life of the investment. That is a lie because in the real world of finance, there is no such thing as consistent fixed returns in the market. Interest rates always move up and down in the financial market. The promise of consistent fixed returns is a bait to lure in an undiscerning investor into their scheme. The returns are paid from the monies collected from earlier investors. When the promoters have collected enough money, they vanish or when they are unable to pay newer investors the promised returns, the scheme collapses under its own weight. Most HYIPs do not invest in anything. There are many other ways and methods to spot scam MLM and HYIP businesses operating in the Nigerian market which include:-1. Find and study the company’s track record 2. Learn about the product 3. Ask questions 4. Understand any restrictions 5. Talk to other distributors.(But beware of shills) 6. Consider using a friend or adviser as a neutral sounding board or for a gut check 7. Take your time 8. Use tracker sites that list the schemes and their current state.9. Think about whether this plan suits your talents and goals. Many of them come cleverly disguised as legitimate but are real scam outfits. Having knowledge of the various ways to detect them is essential to avoid falling into the wrong hands. Many of the fraudulent MLMs that have crashed out usually did so within 5 years of operation use. «««USE YOUR BRAIN»»»

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