Multi-Level Marketing Investment Scams

What are Multi-Level Marketing (MLM) Investment Scams? 

Multi-Level Marketing investment scams pitch themselves as real businesses that offer people an opportunity to make money if they recruit or sign-up people in their social or family network These fraudulent MLM’s are often called pyramid schemes because they depend on a constant flow of new members. 

Each new person who joins usually pays a fee or buys products upfront. That money is used to pay the people who joined earlier. Instead of earning revenue from real sales, the MLM investment scam survives only as long as more people sign up. 

In short: In a pyramid scheme, you’re not being paid to sell something – you’re being paid to bring in more people. Once recruitment slows down, the whole scam collapses, and most participants lose their money. 

How do MLM Investment Scams Work? 

Fraudulent MLM investment scams often promise significant returns through trading in crypto, forex, or stocks. Investors are told they can withdraw their purported return but are encouraged to reinvest in the scheme to and increase their overall investment. However, “reinvested” funds and new incoming money is used to fund withdrawals by other investors. Fraudulent MLM investment scams rely heavily on recruiting a “downline” of new salespeople. As recruitment slows – which is inevitable in a pyramid model – most investors lose their money while the scammers profit. 

Watch out for these characteristics of MLM investment scams: 

• Investment income tied to recruitment: Monetary or prize incentives to bring in new investors. 

• Unrealistic profit claims: Be wary of promises of “financial freedom,” “passive income,” or high earnings with little effort. Fraudulent MLMs often promote the idea of a luxury lifestyle, showcasing vacations and designer products, even though these images don’t reflect what most participants experience. These “testimonials” highlight rare top-earner outcomes rather than the far more common results for the average person – they can also be fake. 

• Warning signs: Unreasonably high rates of return, the need to act quickly, a claim of using a proprietary trading strategy, and the use of third-party encrypted messaging apps (like WhatsApp or Telegram) for communication. 

• Heavy taxes and fees for early withdrawal.  

• Frequently changing website domains 

• Claim of being registered with a securities regulator: Scammers often fabricate registration numbers or say they are registered with some type of regulator. Investors should always verify if an individual or an investment firm is registered by searching the Canadian securities regulators’ official national database.