Shady Signs – 6 Indicators That You’re Dealing With A Pyramid Scheme


Whether you’ve been offered an “unbeatable” business opportunity by a friend or are simply considering the purchase of some quality essential oils, if red flags have arisen about the brand in question, you’ve done the right thing by engaging in research. 

Multi-level Marketing companies (MLMs) have been growing like weeds over the last few decades. Though the business model has inherent faults, not all MLMs are technically pyramid schemes. To help you spot problematic products and business propositions, here are six indicators that you’re dealing with a pyramid scheme: 

1. The products aren’t the whole story

MLMs all operate with a pyramid structure. Those at the top recruit new people who recruit new people, and the higher up you are, the more money you make. To be a legal MLM, there must be an exchange of goods or services involved. However, the presence of goods or services within the business model doesn’t automatically make it an ethical structure. 

If the real money is made by recruiting new members, this is the biggest red flag that you’re dealing with a pyramid scheme. In such a structure, only the top people who got in early can make any money. If you’re not coming in at the top three levels, your failure is baked into the business model. 

2. An incomprehensible business model

Speaking of the business model – if you cannot wrap your head around it, this is a major red flag. Don’t blame yourself for not understanding – MLM business models are designed to be confusingly complex. 

If you don’t understand how a business works, walk away. Otherwise, you’ll find yourself heavily invested and wondering why all your profits keep getting sucked up by mandatory stock purchases and other inscrutable rules. 

3. Bold promises

If you’re told you’ll be your own boss, make huge amounts of money in a short amount of time, and travel all around the world for fancy events, be very cautious. Even if it’s a friend telling you they’re already experiencing these things, you need to tread with care. 

Many people in pyramid schemes are told to “fake it til you make it,” using social media to paint a picture of the life they aspire to lead. They act like they’re already living this life so they can attract people into their downline, hoping that this will then make the lifestyle a reality.  

4. Overpriced products

MLMs sell everything from essential oils and beauty devices to workout gear and protein shakes. However, a common feature of pyramid schemes is that their products cost far more than the regular market price. While the company will make big claims to try to justify the higher price tag, you’ll generally find that the quality is not there to support it. 

5. There’s pressure in the language

If you’re being put under pressure in any way, this is a major red flag. Pyramid schemes aim to induce a state of anxiety, making you believe you have a limited time to act or you’ll have missed out on the biggest opportunity of your life. If you feel panicked or pressured, take a step back so you can make a decision from a calm place. 

6. Your gut is screaming at you

Never dismiss your intuition. The fact that you’re reading this article suggests that your instincts are telling you something isn’t right. If it doesn’t feel right, it ultimately doesn’t matter if it’s a scam or not – this opportunity is not for you. 

If you’ve seen even one of the red flags listed above, either walk away or continue researching the company to determine whether it is a pyramid scheme. 


Mia Johnson
Mia Johnson is a writer with a ten-year long career in journalism. She has written extensively about health, fitness, and lifestyle. A native to Melbourne, she now lives in Sydney with her 3 dogs where she spends her days writing and taking care of her 900 square feet garden.

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