Pyramid schemes traditionally prey on people looking to make money quickly with the promise that a small investment will garner a big return. The illegal scheme has been around for decades—preying on housewives and college students in different ways, each with different products and branding tenured to fit a target demographic. But in the digital age a new type of pyramid scheme has come into fruition—one that promises no product or business, only the illegal exchange of money by leveraging social media followers for profit.
For the American housewife, companies like Tupperware, Mary Kay and DoTerra essential oils each promise their own “massive” incomes in return for a hefty sign up fee, usually requiring the signee to purchase large amounts of product in order to “launch” their own version of the business. These programs require women to reach out to their in-person and online friendships to sell not product, but commitment, to the program that they once fell victim to.
Multi-level marketing has historically targeted women.
One famed multi-level marketing scheme that unraveled in recent years asked women to sell clothing products to their circle of friends and family. In order to participate, sellers had to buy the product upfront and then resell it using the marketing materials provided by the brand they were working for. But instead of a lucrative career, most women were left with a mountain of unsold products and a lot of lost cash.
Operating under the guise of feminism and financial independence, many multi-level-marketing schemes target women more often than men. The programs often provide women with a new social circle in addition to the promise of added income, meaning that women with kids at home could suddenly find a new level of support that they never had access to before.
In the early 2010’s multi-level-marketing schemes like Verve energy targeted college-aged kids with the promise of a hangover-curing energy drink. Students were encouraged to sign up and purchase the product in bulk before encouraging their own friends to join in with their own venture.
Just as pyramid schemes shifted to accommodate a changing consumer landscape in decades prior, they’re doing so once again today. New schemes that regularly make their way through social media sites like Instagram and Facebook target users looking to either make some quick cash or get some trinkets in the mail.
Wellness is a major facet of Instagram’s community, where millions of users share their tips and tricks for ‘manifesting’ a better life. Now Ponzi schemes aim to take advantage of those same communities.
One scheme, branded to attract a community of social media users focused on wellness and personal growth simply asks participants to send each other money. The not-so-new scheme makes its way through Instagram every few months, and asks users to sign up for “manifestation looms” with language that matches the branding of personal growth seen on so many Instagram profiles today.
A search for the hashtag #manifest on Instagram garners over 3.7 million results, demonstrating the popularity of personal growth on a platform that focuses on aesthetic beauty and digital popularity. Where Tupperware once targeted stay at home moms looking to feel financially independent, new pyramid schemes branded with notions of personal growth prey on social media users with $100 to spare.
In many cases, the scheme asks users to give their bank information in order to send and receive money, putting them at greater risk of being taken advantage of by complete strangers that are much higher in the pyramid—or in this case, loom—than they are. While many see a return on their finances, their information has been compromised. Others may never see a return if they don’t invest time into finding new social media users that will invest.
Some schemes expose financial and bank information, others ask recruiters to commit mail fraud in order to participate.
Other social media schemes circulate platforms like Facebook each holiday season and ask users to participate by sending a gift worth around $10, or sometimes a book of their choosing, in order to receive potentially dozens of “gifts” in return. Often labeled something like “the secret sister gift exchange,” these groups usually target women and depend on using the mail system in order to send and receive gifts.
Not only are these programs considered pyramid schemes, as they rely on the participation of new members in order to see a return on your investment, but the United States Postal Service considers it a form of gambling—which is a form of mail fraud. “The U.S. Postal Inspection Services explains that these gift exchanges are considered a form of gambling and that participants could be subject to penalties such as jail time, fines or a lawsuit for mail fraud,” explained the Better Business Bureau in a blog post about the secret sister gift exchange in particular.
While it may seem as if a small investment of, say, $100 or a $10 book might seem innocent enough, it contributes to a larger problem of data breaches, mail fraud and participation in a Ponzi scheme. As soon as members of the scheme stop recruiting new members, the money dries up and those at the bottom are left with nothing but a loss in profit—or worse—while those at the top get rich. It might seem like a tempting way to make a quick $800, but the risks mean that you could face long-term stress (and legal trouble) for participating.