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Author Topic: Press Release from Pyramid Scheme * Sun, December 14, 2008  (Read 1153 times)


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Press Release from Pyramid Scheme

Date:      Sun, December 14, 2008 8:10 pm

PSA Logo

International Association to Expose, Study and Prevent Pyramid Schemes


Pyramid Scheme Alert
Pyramid Scheme Alert is a non-partisan, non-profit, all-volunteer
consumer education group.
Contact Robert L. FitzPatrick, Pres. at
Press Release - December 15, 2008

PYRAMID SCHEME ALERT Calls Madoff Scandal a Failure of SEC and FTC to Enforce Laws
Against Pyramid and Ponzi Schemes
December 15, 2008
For Immediate Release
Pyramid Scheme Alert, the only consumer group in the world focused directly on
scheme fraud, charges
that the Bernard
Ponzi Scheme

the tip of a far wider pattern of pyramids and Ponzis. In a letter to the chairmen
of the FTC and SEC

PSA charges that the lapse of FTC and SEC regulation has led to an epidemic of
pyramid frauds, and it demands renewed regulation.

Madoff, a famous Wall Street financial manager, has been arrested and charged
with defrauding investors of nearly $50 billion in a Ponzi investment scheme.
(In both pyramids and Ponzis, earlier investors are paid by later ones in an
model, promoted deceptively. In pyramids, the investors recruit new investors; in
Ponzi's, recruitment is managed by the organizer.)
In the letter to FTC Chairman, William E. Kovacic and SEC chairman, Christopher
Cox, PSA President Robert FitzPatrick noted the following:
PSA Logo
illegal pyramid scheme is now ubiquitous on the internet, camouflaged
as "matrix
 selling" and "cash gifting." These naked pyramids lure millions of Americans by
 boldly asserting their legality and citing lack of government action as evidence
of their legitimacy. In just one case (
of a widespread type of internet-based pyramid scheme, called "Autosurfing", the
 promoter raked in $500 million in a few months.
PSA Logo
******** The
"direct" selling industry has transformed into "pyramid" selling
in which consumers/investors are deceptively induced to purchase (not sell) several
thousand dollars worth of goods a year and then recruit other consumer investors
 to do the same in an endless chain reward plan. Little or no goods are retailed
 and 40-60% of the inflated price of the goods is transferred directly to the pyramid
promoters at the top.
PSA Logo
"direct selling" companies that operate as endless chain recruitment schemes are
 now listed on major stock exchanges or on the over-the counter markets. The aggregate
capitalization of these eight schemes is approximately $5 billion. One of these,

 Your Travel, is currently prosecuted by the California Attorney General
who called it "a gigantic pyramid scheme." The other publicly trade companies using
the pyramid model operate with impunity.

PSA Logo
******** The
publicly traded schemes are supported by a clique of analysts who hype the stocks
and obscure the nature of the business and the losses they inflict on consumers.
 Their untenable business models continue only by gaining the investments of a churning
base of "salespeople" who are in fact new investors and the source of the revenue
paid to earlier investors. 99% of the investor/salespeople (last ones in each year)
ultimately lose money and 60-80% of them quit the schemes within a year, after losing
money. Overall, the securities market has little knowledge or understanding of the
true nature of the schemes.
PSA Logo
SEC and the FTC over the eight years of the Bush administration have assiduously
 avoided investigation of Ponzi and Pyramids

After receiving detailed reports about failures to disclose the endless chain nature
of Usana Health Sciences and Herbalife International, the SEC issued "take no action"
The first FTC chair, appointed by President Bush in 2001, Timothy Muris, came to
 the post directly from a law firm representing the largest of all pyramid selling
schemes, Amway. Under his leadership, 30 years of FTC policy was reversed and
and prosecutions of pyramid selling schemes abruptly ended. Amway is currently the
target of a government prosecution in England seeking to close it down for operating
an endless chain. The "multi-level" Amway business model was banned in China in
2005, while retail-based direct selling was allowed. Amway is currently embroiled
in a major class action suit in the USA that charges it with operating an illegal
pyramid scheme.
Regulation of pyramid schemes and Ponzis requires vigilant oversight and prosecutorial
will. Outwardly they appear normal and, until total collapse, they seldom produce
large-scale complaints or controversy. The pyramid selling schemes operate in a
state of continuous collapse as most investors quit the scheme each year, but the
schemes are able to continue by deceptive recruitment of new investors.
The basic fraud of a pyramid or Ponzi can be revealed only upon closer examination
of the operations. Reliance upon complaints or blatant financial irregularities
as cause for government action leaves the public exposed and allows the schemes
to operate unfettered. Normal market mechanisms such as word of mouth warnings from
consumers that were harmed or obvious indicators such as bankruptcies or police
records of promoters do not apply in the white collar and well disguised world of
pyramids. Until his first indictment, the infamous Charles Ponzi never missed a
payment to investors in his namesake fraud of the 1920's and, therefore, did not
 generate "complaints."
Madoff's respected stature as former chair of NASDAQ is typical in the world of
pyramids and Ponzis where the promoters are viewed as upright business people who
claim religious faith and who engage in philanthropy. Many are prominent in churches
or the chambers of commerce.
The PSA letter noted that regulators waiting for complaints or other obvious signs
of fraud recently resulted in a great tragedy in the US and Canada. More than 1,000
family farms were lured into a pigeon-breeding Ponzi scheme

The promoter paid investors regularly for seven years, relying purely on new investors
for his revenue, as the scam spread widely across the country and into the USA.
When the scam collapsed in June of this year, the farmers were ruined with many
facing foreclosure on their family farms. Reputable banks had made loans to the
farmers to participate in the scam. Though several state Attorneys General in the
US banned the scheme in their respective states or warned consumers, no regulatory
agency in the USA or Canada ever brought charges against the promoter.
Each month, the Pyramid Scheme Alert website
is visited by consumers, educators, regulators, attorneys and journalists from over
100 countries.


Special Reports for Consumers...
The Myth of MLM Income Opportunity
The "Non-Retail" Direct Selling Company
Recognizing the Disguises of Pyamid Schemes
Understanding MLM and Pyramid Schemes, a Radio Interview (MP3)
When MLM Operates as a Consumer Fraud, a Speech to Regulators (MP3)
SignUp to Receive PSA Updates
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False Profits Blog
for Analysis, Commentary, Discussion

Contact Information
Pyramid Scheme Alert
Tel: 704-334-2047
Fax: 704-334-0220,


Pyramid Scheme | 1800 Camden Rd. Ste. 107, #101 | Charlotte | NC | 28203
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