Recognising a Pyramid Scheme

This is always a worry and I just got an alert from Google about a company in Canada, only to realise they were operating here.  I had not heard of them:

How to recognise a Pyramid.

A Pyramid?

In a nutshell, if there is not a customer buying something, it is a pyramid.  But this ones difficult to spot.  The website above is still up and although simplistic, it makes a good case.

“A visitor to the Banners Broker website would be told of an operation that would allow the viewer to advertise their product or services online, themselves become an online publisher in partnership with Banners Broker, or — in a “unique operation” – both buy and sell advertising space in a way that would allow the profits from selling the space to third parties offset (and then some) the cost of buying advertising from Banners Broker for the investor’s own product or service,” she said in a recent court affidavit.

She found that, unlike other online advertising ventures, the Banners Broker investor did not just rent a fixed space on a website and then earn revenue from the audited internet traffic the hosting website generated.

“Instead, before a banner could start to earn money for an investor, Banners Broker insisted the investor had to take steps to “qualify” the banner,” she said.

“This required a minimum number of ‘traffic hits’ to be earned depending on the panel category the banner belonged to. Those ‘traffic hits’ could be earned by the investor making referrals to Banners Broker or by directly purchasing the “traffic hits”, which was in essence paying for the banner to start generating revenue.”

Novice investors were tempted in by the fact that, initial packages did not have to be qualified and so, for every $10 in advertising that person bought, they would soon find they had earned $20 as a “publisher”. However, they would have to automatically have to re-invest at least half the money. However, after a couple of rounds of that they would have to start “qualifying”.

“Needless to say, with such a seemingly profitable scheme, many early investors saw the advantage of fully reinvesting their money, adding new money, upgrading to a more expensive panel of banners and referring other investors to the program,” said Ms Judd. “Once hooked, Banners Broker’s earning structure would encourage investors to pay more in real money to the company and recruit more investors or customers who, in turn, could be lured onto the same treadmill.”

She found that throughout the scheme, operators Chris Smith and Rajiv Dixit and their associated corporations had investors pay their investment money to merchant account providers, legitimate corporations that processed credit card payments.

“Those funds were then diverted by the suspects and their associated corporations to various offshore and other bank accounts. controlled by them,” Ms Judd said. “Except for limited window dressing to promote their fraudulent scheme, there was no bona fide advertising publishing operation and the investors were being misled as to the source and nature of their profits.”