Friday, October 13, 2006

Scam Alert: Group Pyramid scheme

Affects: Anyone who might be invited to join a group ( so pretty much everyone)

Modus Operandi: Scammer creates a group and requires a fee to join. They promise easy money to people who recruit other people to join the group and pay the fee by paying them a cut of the fee. However, this is practically the definition of a pyramid scheme. I'll get to that in a bit.

How it goes down: The group or people in the group send out random invites or spam to "people to get them to join the group and pay the 10L fee. In doing this they get the other people to recruit people and so on down the line. Nothing is really gained, only money changes hands.

Seeing through the Scam: First thing is first, to define a pyramid scheme, I'm going to just quote the wikipedia:

The essential idea behind each (pyramid) scam is that the individual makes only one payment, but are promised to somehow receive exponential benefits from other people as a reward. A common example might be an offer that, for a fee, allows the victim to sell the same offer to other people. Each sale includes a fee to the original seller.

Clearly, the fundamental flaw is that there is no end benefit; the money simply travels up the chain, and only the originator (or at best a very few) wins in swindling his followers. Of course, the people in the worst situation are the ones at the bottom of the pyramid: those who subscribed to the plan, but were not able to recruit any followers themselves.

Damage control: Of course in this instance, the best way to prevent it is to be aware of it and not get involved. Politely decline the invitation to such groups. Be sure to have a look at the groups mandate before joining. Chances are if it sounds too good to be true, it probably is. The only person who really benefits from this sort of thing is the one person at the top.

An example of such a group(yes this is a real group):

Share Investments inc

"Want to Make Money? Pay 10 Linden and Join this group, then Invite 5 More people to Join it, The More people that Join the More $$ WE will make. All Proceeds made from Joining is Split Equally to US, So hop on board the MONEY TRAIN, and HELP SPREAD THE WORD!. Its Easy to Join and Only 10L. Think 10000 People Join SL daily, This Can EXPAND Greatly. and, WE get a cut of that 50000L daily if they all joined this. So Join and invite ALL of your friends lets all get this money together....... Have fun...."

As you can see, its pretty clearly a pyramid type scheme. Pay money for the promise of money IF you swindle your friends out of their 10L. As the group grows the payments would be small anyway, if they actually go to the members at all.

These sort of scams have been around in one form or another for a long time, its best that we don't waste our L$ on scams like this.

If you'd like more information on Pyramid schemes, check out the entire wikipedia article.


At 4:59 AM, February 01, 2007, Anonymous Anonymous said...

I went to your blog to find out about selling my items. I found it to be very little help. As for the copyright on artwork, why didnt you tell us how to protect yourself. You told alot on how to watch out for it and what to do after the fact, thanks for that, but how do you keep it from actually happening? I have my own artwork and am new to SL and I just need to know the basics of selling. I do know that I will rent a store, display and hopefully all will go good, that is once I figure it out. Maybe you should title your blog as "Looking out for scams in Second Life". Now on to search some more for some useful info.


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