Are You Being Scammed? Here’s How To Tell
Ever been offered the chance to make easy money by barely working from the comfort of your own home? In the age of the internet and social media, you could be fending off offers like these from all sides. Sometimes, you might even be tempted, because the promised returns are too great. But what if it’s a scam? How do you know?
It’s getting harder and harder to tell if something’s a scam or not, because scammers are getting trickier. So you have to be smart, because it’s up to you to ferret out the scams from the legitimate opportunities. Here’s how to tell if something is a scam:
1. The company is not registered with the SEC or DTI
A quick way to tell if an MLM (multi-level marketing) scheme legit or not is simply by going to sec.gov.ph and checking if the company you’re wondering about is registered there. If they’re not registered, then they’re not allowed to take money for “investments”. Any business involved in selling or investing anything has to be registered with the Securities Exchange Commission (SEC) or Department of Trade and Industry (DTI).
Before giving your money to one of these schemes, just look up the company name on the SEC website for registered businesses or check if SEC has taken any action against the company for unlawful activities . If they’re not registered, don’t give them your money, and warn your friends and family against the scam. You can also check with DTI on whether the company is licensed to operate or run a promotion.
2. There’s a joining fee, or you’re required to buy a lot of inventory
One of the first things you should look out for is a joining fee. A lot of scammers will even “guarantee” you a certain amount of income in exchange for an “upfront fee”. But what will happen is that they’ll take your money and you’ll never hear from them again. So if you’re being asked to pay a certain amount upfront, even if it’s just ₱1,000, and you’re not sure what you’re getting for it in return, keep your money and run fast in the other direction.
Another way the scam can get money from you is by forcing you to buy a lot of inventory or useless products to keep your status in the company. New recruits are often told that they need to buy a lot of the products to join the business. If you do this, you’ll have spent a significant amount of money and stuck with products that you’ll most likely have a hard time selling off while the scammer enjoys your hard-earned money.
3. There’s no actual product or service for sale
Do you even know what the MLM is selling? If you can’t name a specific product or service being offered by the MLM, it’s probably a scam.
The main goal of a legitimate MLM scheme is to sell products to people who aren’t already in the program. So find out what you’ll be selling before you give any money, and if the recruiter can’t explain to you what you’ll be selling, it’s a huge red flag.
Pyramid scams hook people by selling them the dreams and making the person they’re talking to feel like they deserve to be rich. Usually, they won’t even mention what product is being sold after their 20 minute presentation.
4. The focus is on recruiting, not selling
If you’re promised more money for recruiting others than actually selling any products, you should be wary. This is a major red flag indicating that something is a pyramid scam. “If a program primarily focuses on recruiting others to join the program for a fee, it is likely a pyramid scheme,” advises the United States SEC.
If the scheme you’re being offered relies mostly on recruiting and not sales of its purported product, then what you’re being sold is a scam. Avoid it at all costs.
5. It’s just too good to be true
Remember the old chestnut: if something’s too good to be true, it probably is.
This is a huge red flag. “High returns and fast cash in an MLM program may suggest that commissions are being paid out of money from new recruits rather than revenue generated by product sales,” the US SEC says. In simpler terms, if they’re promising you fast cash, they’re probably getting that cash from new recruits, instead of legitimate profits from product sales. So when defenders of the scam come forward and say they’ve been paid so it must be legit, keep in mind their money most probably came from new recruits to the program who’ve just paid their upfront fee.
When considering MLM schemes, don’t let greed and the promise of easy money lure you. Do diligent research. The US Federal Trade Commission recommends that you ask these questions:
- What are your annual sales of the product?
- How much product did you sell to distributors?
- What percentage of your sales were made to distributors?
- What were your expenses last year, including money you spent on training and buying products?
- How much money did you make last year — that is, your income and bonuses, less your expenses?
- How much time did you spend last year on the business?
- How long have you been in the business?
- How many people have you recruited?
- What percentage of the money you’ve made — income and bonuses less your expenses — came from recruiting other distributors and selling them inventory or other items to get started?
If the company gives you satisfactory answers to these questions, and your research backs them up, then it may be safe to proceed with them, if you want. But if they don’t give you good answers, or you do your research and something smells fishy, then trust your instincts and don’t join the scheme.