Scam Alert

Old Pyramid Schemes are Back to Take Your Money

NBC 7 Responds found pyramid schemes are growing in popularity as people stay at home

NBCUniversal, Inc.

Millions of people are looking for ways to earn money, and more people are falling for pyramid schemes. These schemes usually ask you to pay a fee, but promise a big payout if you can recruit other people to pay in as well.

"Con men never let a good crisis go to waste," said San Diego's Deputy District Attorney Hector Jimenez. "Nothing is more believable than what you want to hear."

Pyramid schemes often gain popularity because they do work for the few people at the top. A popular one that NBC 7 Responds was told about is known as "Blessing Loom" or a "Loom Circle." Several viewers have seen their friends making social media posts asking people to join.

The most common form of the "Loom Circle" scheme asks people to pay $100 to put their name on the circle, with the founding member's name in the center. Once the circle is full, the founder takes the $800 and then the other people start their own circles asking people to pay $100 to join. The scheme continues as long as people continue to buy into it.

Eventually, no one is left to buy into the circle. That means everyone who had bought in is now left without their money. That's why San Diego County's District Attorney's office is warning people against these schemes.

"If they are asking you to part with your money, be diligent and do a little homework," said Jimenez. "Someone is lying to you to get your money."

Jimenez said to look online to see if it is a scam, even if it is a post by a friend. If it sounds too good to be true, it probably is.

On Friday, the Federal Trade Commission said it sent warning letters to 10 multi-level marketing companies. Several of the companies were making claims that their products can help protect you from the coronavirus or help you make a lot of money.

"[MLM's] are responsible for the product and earnings claims those distributors are making," FTC Consumer Protection Director Andrew Smith said in a statement. "We are on the lookout for false income claims for work-at-home opportunities."

The 10 companies that received warning letters are doTERRA International, Pruvit Ventures, Total Life Changes, Tranont, Modere, Arbonne International, IDLife, It Works Marketing, Rodan & Fields, and Zurvita. You can read more about these letters in the FTC's press release.

"Watch out for red flags," said Jimenez. "Always run it by another person."

California's Attorney General has more information on pyramid and multi-level marketing schemes here. You can report scams and schemes to the San Diego District Attorney's Consumer Protection Division here.

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