MLM Scams & How to Spot Them

"My friend called me after ages with an exciting opportunity. Should I invest in?" You probably should not.

Short for Multi-Level Marketing, an MLM scam has several other names, such as:

• Ponzi scheme (named after Charles Ponzi, a scammer),
• Pyramid scheme,
• Network marketing,
• Direct selling, and
• Rich Dad scam (Mr. Farooq Baloch, a business journalist, introduced the author to this term).

MLM scams can be as simple as recruiting a minimum of two subordinates (binary scheme) to the number going up to six.

IMPORTANT NOTE: This article does not delve into the technical aspects of how an MLM scam looks and functions.

Telltale Signs of MLM Scammers

Perhaps, they were earlier on the scene, but MLM scammers have emerged largely since the pandemic. Hinging on the looming fear of the grave economic repercussions of the pandemic: recession, layoffs, and the job security myth, they 'bait their fishes' to join the 'vicious pyramid' and tell nothing short of fairytales. Here are more than a dozen characteristics of MLM scammers:

1. They act sugary, i.e., they sound so sweet that none can come close to their level of pretentiousness.
   
   
2. They are compulsive, i.e., you will receive repeated calls and messages from them to the level of (borderline) exasperation.
   
   
3. They insist you meet them in person, i.e., they won't finalize the deal over a phone. The underlying reason is to introduce you to their team of partners and mentors who emotionally manipulate you to join them since there is no other way around. Try saying to them that you have a busy schedule and would prefer closing the deal over the phone. The expected response would be, "A person should be flexible since such golden opportunities do not strike often."
   
   
4. They insist you take a personal loan for the investment, i.e., they won't hesitate to advise you to burden yourself with a loan. Financial experts recommend against borrowing a loan or using your life savings for a venture as risky as an investment.
   
   
5. They are in a rush, i.e., their desperation for preying on the savers' money sticks out like a sore thumb.
   
   
6. They desire to 'help' you, i.e., their strong urge to help you financially could even shy the late Edhi Sahab for once. Try asking them to further 'help' you by investing on your behalf for now with the personal guarantee of returning the money. You will see their desire vanishing in thin air.
   
   
7. They sound overexcited; they are enthusiastic about breaking you free from the shackles of poverty.
   
   
8. They act busy, i.e., although they will be pinging you day-in and day-out, somehow they get the time to juggle through several high-profile meetings. Busy day, huh!
   
   
9. They might be friends with you, i.e., in most cases, the scammers have called their friends who have not met for ages. Sometimes, they might be your colleagues or, in not-so-extremely rare cases, strangers who got connected with you on social media.
   
   
10. They brag about their life-changing moment, i.e., according to them, the best thing yet happened to them is being part of a scam.
    
    
11. They call you an 'a**licker' and 'someone into corporate slavery,' i.e., they want to 'help' you but won't resist humiliating you for working 9-5. Ambivalent much? This psychological phenomenon explains it all.
    
    
12. They share motivational, 'success thoughts' and condemn 'corporate slavery' on social media, i.e., most likely, the posts are from Robert T. Kiyosaki, the Rich Dad Poor Dad author (a callback to the term 'Rich Dad scam' in the opening paragraph).
    
    
13. They disillusion you into a dreamy future, i.e., they will sell you a 'Richie Rich' dream that will turn into reality in five years or less. Hustle is not that easy, my friend.
    
    
14. They do not offer a vivid explanation of their revenue model, i.e., they will beat about the bush or completely neglect your queries regarding the nature of the business and the revenue model. Financial experts recommend against investing in a venture you do not entirely comprehend.
    
    
15. They hand you substandard, pricey products, i.e., their products include supposedly luxury watches, health and wellness products (that are not clinically proven), beauty products, superficial products, etc.

Concluding the telltale signs with a typical first conversation an MLM scammer makes with you:

"Hello, brother. How are you doing in your life? I called you for an opportunity that might interest you. I own global distribution business. My senior partners are looking for partners-cum-investors willing to lend their time and invest between PKR 3-18 lacs. What you will get in return is access to exclusive global distribution rights and an opportunity to create a billion-dollar business empire in five years. I could not find someone better than you and recommended them your name. We are so excited to meet you at a cafe or a coffee shop. Should I schedule the meetup for Saturday?"

Does this sound familiar? Retreat.

Why Resist Joining an MLM Scam?

As if losing your hard-earned money is not enough reason, here are other reasons why you MUST resist the temptation of joining the honeytrap:

1. It is a zero-sum game. A zero-sum game, in economics, refers to the gain of one party at the cost of others' loss(es).
   
   
2. It is haraam in Islam. It brings the author to the second point that Shariah prohibits a zero-sum game.
   
   
3. It is illegal (in Pakistan). The Securities and Exchange Commission of Pakistan (SECP) prohibits any company from engaging in multi-level marketing. Both the SECP and the State Bank issue notices in the public interest time and again to warn them of ongoing MLM scams.
   
   
4. Your money is irrecoverable. The only choice left for recovering your money is to dupe others into losing their money. Would you do that to your fellow beings?
   
   
5. You are most likely to make peanuts. Like the income inequality prevalent in the capitalistic world wherein the wealth remains concentrated among the top 1 percent of the population, MLM scams rip off the bottom 99 percent of the recruits. In short, the very system that takes a dig at capitalistic slavery is an even worse replica of its supposed rival.

How to Prevent Falling for Such Scams?

Concluding this article with a no-nonsense, workable tip to prevent falling for MLM scams: Financial experts recommend due diligence before an investment. It is the act of critical inquiry that helps you arrive at a decision. The more the questions, the better. Remember, no question you throw at the person who introduced you to a venture should remain unanswered. Any unanswered question is a red flag.

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