MLM, pyramid scheme and Ponzi scheme, NFT and crypto come into play

When your nephew offers you an annual return of 650% through WhatsApp thanks to multilevel sales methods … Think of the Ponzi pyramid.

Financially, times are tough, with inflation, the energy crisis and stagnant wages. While some practice over-employment to complete the end of the month, others are turning to the Internet to work as money mules (bank mules) on behalf of cybercriminals. Still others fall into the trap of pyramid selling and NFTs.

MLM, Ponzi scheme and cryptocurrencies

As mentioned the twitter thread by journalist Constance Vilanova, MLM and her sisters are scourges that generally fall on gullible, misinformed or isolated people. By chance: young retirees in financial difficulty or individuals with little experience in criticism.

What are we talking about now? the MLM (for multilevel marketing) translates into French with multi-level sale, a concept invented in the 1940s in the United States, thus predating Tupperware’s famous sales. Depending on the areas, we will also talk about relationship marketing, network sales by co-optation, or even sales by co-opted network. All this to describe the same process through which resellers (or distributors, collaborators …) sponsor (or recruit …) new sellers. This then allows them to be partially remunerated by a commission calculated on the basis of the sales of new hires. The process is therefore based on word of mouth, on trust … It is no coincidence that the MLM that lived its golden period in the 60s within the Pentecostal religious movement and is reborn today through the well-being of the second generation New Age.

Legal in the United States, MLM is closely monitored in France by the consumer code in order to avoid the proliferation of pyramid sales, a distant cousin of MLM. With the sale of the pyramid, the earnings obtained do not come from the sale of products or services, but from the recruitment of new distributors. And where there is a pyramid scheme, there can be a Ponzi scheme. In France, the Autorité des marchés financiers warned already in 2017: “Beware of the right investment that would be reserved only for a privileged few and which you would hear about from the mouth of a loved one. (…) A so-called independent consultant manages to convince people to make a first payment. This money is used to pay false income to other savers who, by placing their trust, advertise it around them. (…) Each saver is responsible for finding new savers and the payment of some rewards the others. When the scammer can no longer get new payments or refund whoever wants their money back, he disappears. It is at this moment that the victims realize the deception. ”

We therefore speak of a “pyramid” because only a handful of individuals, the initiators of the system, those comfortably installed at the top, can earn money at the expense of others. Does this remind you of anything? For some critics of cryptocurrencies and NFTs, the latter would be nothing more than a Ponzi scheme. Certainly, when the buyers of Bored Ape Yacht Club, a collection of NFTs featuring ugly monkeys, are wealthy individuals like TV presenter Jimmy Fallon or heir Paris Hilton, the financial consequences are negligible. In other cases, it can be much more painful.

“I don’t know if you know cryptocurrencies and trading?”

Coming home from work, Sibylle * IT project manager in Lille receives an audio message from her grandson on WhatsApp. The message, lasting five minutes, is delivered in the tone of a salesman who has learned her text well and she immediately realizes that she is not the only recipient of her.

“I don’t know if you know cryptocurrency and trading, but these are two little-known activities on the Internet, which are a bit scary, especially when you think about Bitcoin. At 32, Donatien * works alone as a landscaper in the south-east of France Last week, a company with an Anglicizing and futuristic surname rolled it out through Zoom in on a Power Point presentation explaining how to make ends meet.

“This company allows you to train with a subscription that is self-financed if you find 3 people”, specifies the young man. The words are sometimes confused, the voice a little hesitant. “The company trains us on … er … lots of videos with themes, trading and cryptocurrency. You can take the training if you have the time, or put the money, and the people in the company work there, like on the stock market. . They have access to our money but they can’t leave, you can get everything back whenever you want. So that’s already a certain point. The service proposal is vague, the returns tempting. “The earnings, I couldn’t believe it, but during the presentation the woman he showed us the figures, they are 650% of earnings in the year. You can imagine that compared to that, the booklets A, booklets young thing, are gnognotte. ”

Donatien learned about the plan from one of his clients a year ago. Since then he would have invested 500 euros in the company, which would have turned into 9,000 euros. He hasn’t got his money back yet. “The founder quit his job several years ago to start his own micro-business with his wife, he makes a profit. You can imagine this is serious, otherwise they would be in shit. ”

Sibylle will not follow up on the proposal. After seeing the message from her niece, she did a quick check and with a few clicks of her she smelled the scam. Comments from ruined and angry Internet users abound on the forums dedicated to cryptocurrencies and trading. Some are mired in legal remedies, others have given up. Like philPPEdu44 who comments annoyed: “I can’t find the money. ”

* The name has been changed.

Leave a Comment