Legal Question in Consumer Law in Missouri
Pyramid scheme
I am involved in a network marketing business. A prospective client referred to the business KM.NET as an illegal pyramid scheme. What is the legal definition of a pyramid scheme? How do I determine if the company I am involved with is operating within the law?
1 Answer from Attorneys
Re: Pyramid scheme
An unlawful pyramid scheme is one in which only the people at the top of the heap make any money because the mathematics are such that the later entries can't win. Usually a person gets money based on the number of people they get working for them. But, as in most ventures, there are only so many people you can have out there selling soap, or whatever, to other people. To determine if your scheme is an unlawful venture, you can look at (a) how long the company has been in business, (b) how many people below you are actually making money, (c) how many people above you are actually making money, and (d) look at whether this passes the "sniff" test; remember, what looks too good to be true, generally is. If you need professional services to evaluate your issue, you can contact me and I can put you into touch with someone.