From Abracadabra to Zombies
reader comments: pyramid schemes
04 Jan 2001
Thanks for an excellent and truly informative site.
A few years ago, the government of Sali Berisha in Albania ran a pyramid scheme which many Albanians invested in. The scheme subsequently collapsed driving the a large section of the populace into abysmal poverty, indirectly provoking the unrest which led to Berisha's fall. It is important to note that this pyramid scheme was part of a larger criminal operation run by the Albanian government (and incidentally involving the Kosovo Liberation Army) which involved heroin smuggling, gun running, the smuggling of contraband and an extremely lucrative prostitution racket in nearby Italy. Pyramid schemes are not only illegal, but also tend to be run by hardened criminals.
However, the gullibility of the public, and especially those in dire
financial straits, is almost bottomless. In my country, South Africa,
there is currently a con man who fleeced thousands of investors of their
hard earned money by means of a pyramid scheme. However, it has turned out
that his most ardent supporters during his trial were precisely those who
had lost all of their money. In fact, his level of support was such that
he actually went on to launch a small political party!
Eric Goodwin
reply: Go figure. I suppose, in part, denial is a matter of saving face and partly a matter of trying to sucker others into making the same mistake with you that you made with others.
4 Jan 2001
In your reply to a letter posted on 1/4/2001, you express some surprise at
the fact that some people still support the scammers who took all their
money in pyramid schemes.
Actually this is not a rare occurrence at all. As the (excellent) antifraud web site www.quatloos.com shows, it is more a rule than an exception. Almost every financial scam has its "true believers" - the original Mr. Ponzi included (irate investors almost lynched the cops when they came to arrest Ponzi for fraud.)
An extreme example of such behavior is at:
http://www.quatloos.com/cm-omega/cm-omega.htm
It has to be seen to be believed. Not only did the scammers in this case sell the "lenders" (investors) worthless bonds called "Omega", but EVEN AFTER "Omega" didn't pay one cent, they managed to get the SAME people to sign up to another identical scam called "Destiny". When that scam didn't pay out one cent either, they STILL got the SAME people to invest in what they called "refund units" for their original Omega "investment" - e.g., sending the same scammers MORE money on the promise that THIS time they will get their money back. Currently, the same scammers are trying to raise yet more money from the scammed - this time, to contribute to the main scammer's defense fund (he was finally arrested and charged with fraud.)
How on earth can some people be so stupid as to be scammed again and again and again? www.quatloos.com have their opinion:
"The promoters of Omega chose well in their victims, being either fundamental Christians who "keep the faith" no matter what, or New Agers who are so stupid that they will believe in anything (Omega today, pyramid power tomorrow!)."
This choosing of victims is not, of course, limited to the crooks in Omega. As Allen Henderson says in his book, "How Con Games Work", religious people are prime targets for scams. Scammers take advantage of religious people's capacity for blind faith and their trust in the authority of their clergy. They know that all they have to do is to get the community's local religious leader scammed, and they have it made:
"Ironically, the very qualities that distinguish [Mormons] as fine, upstanding citizens proceed to be their financial downfall at the hands of con artists. Because they were religious, law-abiding and community- and church-oriented, they tended to be sheltered and trusting... if the preacher [who was scammed] said yea, who were they to say nay?"
This is food for thought, for those who think that there is no
downside to religious beliefs and new-age wackiness.
Avital Pilpel
08 Nov 2000
Hi, I am really puzzled. I was approached by a friend to join a
"Gifting Club" which I immediately recognized as a pyramid
scheme. I warned my friend to avoid this. I even found many sites on the
web that explained these scams and warned against them. Well, My friend
didn't listen. She got involved for 5000.00 as did her daughter and many
other family members that I know well. I warned them all. The amazing
thing is that within a very short period of time she and several family
members all made a lot of money as promised. They were paid amounts
ranging between ten and twenty thousand. I saw the cash. Now I look like a
chump to them and they are having a good time gloating. I don't
understand. I know this shouldn't work and I understand why it is a scam.
Everything I've read says that at best a few people get paid but most lose
their money. However, so far I have seen at least 7 people get paid big
money. In fact, everyone that I know that got in on the deal got paid and
they tell me they have witnessed several others get paid substantial
amounts of cash at their weekly "birthday" parties where the
people get together to watch others get their money. I'm not thinking of
joining. I still see it as a scam but I'm sitting here looking like a
chump to them and, quite frankly, feeling like one. What gives? Any ideas
that would explain why this is working even though it shouldn't? I would
appreciate your comments.
Louis
reply: Give it time. What they're doing may be violating state law and is violating federal law if they don't plan to pay taxes on the money. They can call it a "gift" but the IRS will recognize it for what it is and want its share. If they give the money with the intention of getting more money in return, the IRS will not consider their behavior "gifting." Many people will get burned down the line and some are bound to report the scheme. You were wise to stay out of it.
read the following response:
13 Nov 2000
This is in response to Louis and the money his friends are receiving, just
wanted to let you know that a friend of mine tried to get me into a
pyramid scheme years ago, and also showed me lots of money that he had
received from it. As it turns out, he had received no money from his
venture, but he had showed me the cash in order to induce me to join,
since if no one signed up after him, he would surely loose all of his
money. I always wondered that if it was such a great deal, why the people
who do get money don't just put it all right back in under their
children's (or other relatives) names, and really make a lot of money.
Rob
9 Aug 2000
My name is David Brookshier and I find your website outstanding. I receive at least 3 chain letters every week and a few pyramids as well. Of course the get rich quick systems are to good to be true. Real businesses don't start out rich I know I am attempting to run my own photography business and it's hard. I have also lost all of my patience with fraudulent people I don't have time to sift through 5 billion pieces of worthless mail get rich quick schemes. After visiting sites of the BBB and Us postal inspection I now can stop these con artists from sending me their junk. I now can tell any cons I come in contact with "Thank you very much for the great system you sent me, unfortunately I believe only in hard work and actually earning my money by the way I have sent your fraudulent info to my local postal inspector, have a nice day." Please tell the readers of your website to do the same with any con mail they receive so that the authorities can track them all down as recommended by the US postal service turn in any fraudulent schemes to your local post office inspector and crack down on fraud.
sincerely,
David Brookshier
17 Mar 2000
I noticed in your Ponzi Scheme listing that Social Security was not
mentioned.
S Ruth
reply: Good observation. I don't list insurance companies, either. Anyway, I think Social Security is only something like 80% a pyramid scheme. Remember, if the government steals or gambles it's ok because they make the rules.
22 Aug 1997
Dear Critic,
I found your page after I searched "pyramid scam" in Yahoo. I read the whole thing. Thank you for writing all that. I didn't know the file Winca$h was a pyramid scam, or what a pyramid scam was. I downloaded the file from the millionth page I saw it posted on. None of the other links worked--I didn't know why. I read the instructions and thought it sounded great. I sent out my $5, which makes me a victim to some, and posted the file on LOTS of online message boards like the instructions said, which also makes me the criminal, even though I had no idea. Then someone who owned one of the message boards said it was a scam and such and I didn't believe him because the file states the exact postal lottery laws which make it legal. More and more people I talked to told me it was illegal and I got scared. I'd even made a websight to get the file out. After I read your page on pyramid schemes I quickly deleted the file and the page from my directory at Geocities. But it's too late. I've already posted my name and the file and everything on lots of BBS's, even a websight that gets many hundreds of hits a day. And my address is in the file. I wish I would've read your file sooner. I'm just a kid, almost 14 and I'm afraid of going to jail. Well, thanks for having that page up so things don't get any worse than they are. I'd like you to mention WinCa$h too. I thing that’s the biggest one out there.
PLEASE DO NOT MENTION MY NAME OR ADDRESS ON YOUR PAGE!!!
Thanks again.
pyramid
schemes
