More people are lured into pyramid schemes during COVID. Stay skeptical, says financial advisor

Multi-level marketing is when companies recruit people to sell a product and get a portion of their profits in return. It’s legal in the U.S. and fertile ground for scams, where recruits are promised profits for products that don’t exist. Image by Steve Buissinne from Pixabay

Imagine being out of work for a while and receiving a phone call from a friend you haven’t spoken to in a long time. They say you can work from home and make some fast cash. You have to join their team and sell some product, be it hair conditioner, essential oils, or makeup. Then watch the money roll in. Right? 

Not so. This system is called multi-level marketing. It’s legal in the U.S. Think of companies like Avon or Mary Kay, where a makeup seller recruits other people to sell the product and gets a portion of their profits in return. 

But it’s also a business practice that’s fertile ground for scams, where recruits are promised profits for products that don’t exist. 

Since COVID-19 wreaked havoc on employment, recruitment for these companies is up. Now the FTC and social media companies say they’re cracking down.

"The illegal pyramid schemes, the focus is almost exclusively on recruitment, in fact in many cases there really isn't a product per say,” says Michelle Singletary, Washington Post personal finance columnist.

She continues, "I understand people are trying to make money, it's a tough, tough economy, but the scammers know that. They are using current events to lure you in."

Credits

Guest:
Michelle Singletary - Washington Post Personal Finance Columnist

Host:
Madeleine Brand

Producers:
Sarah Sweeney, Angie Perrin, Michell Eloy, Amy Ta, Rosalie Atkinson, Brian Hardzinski, Bennett Purser