Who has lost the most to pyramid scheme scams? And how can you avoid them?

Have you lost money to a pyramid scheme scam? Find out which UK regions have lost the most, and three red flags to look out for to help you avoid them.

Amid recent reports that Elon Musk has asked a judge to throw out a $258 billion lawsuit accusing him of running a pyramid scheme, Scams.info decided to uncover which UK regions have lost the most to pyramid scheme scams, using data from the National Fraud Insurance Bureau (NFIB).

Read on to discover which areas have lost the most, three red flags to look out for when being offered an opportunity, and what to do if you think you may have been scammed.

What is a pyramid scheme?

So what is a pyramid scheme? Here’s Wikipedia’s definition:

“A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.”

We’ve been investigating the MLM industry for many years now, and believe that most of them are pyramid schemes.

We don’t believe it is possible to make money from selling products in an MLM. Indeed, an industry expert even confirmed that “Network marketing companies focused 99% of their attention on selling products or services to their representatives” rather than to the general public – which by definition makes them a pyramid scheme.

We are delighted to observe that all the signs point to a (hopefully terminal) decline in the MLM industry. Many network marketing companies are struggling, and data from the Direct Selling Association (DSA) shows that the industry is struggling in the UK.

Even so, people are still being recruited to MLMs and taken in by job scams – with significant losses.

Which UK regions lost the most money to pyramid scheme scams?

So which UK regions lost the most money to pyramid scheme scams? The data shows that London residents lost the most to pyramid scheme scams in 2022, losing almost £1.3 million (£1,292,540.73) per 100k residents. This is 13 times more than neighbouring county, Essex which lost £92,941 per 100k population (10th).

Despite this, there were just 8.03 reports of pyramid scheme scams in London per 100,000 people last year, almost four times fewer reports per 100,000 people than the Welsh region of Gwent (28.36 per 100k residents). 

Bedfordshire places second having lost £879,743 per 100k residents in 2022. This is 87% more than neighbouring county, Hertfordshire, who lost £108,278 per 100k people in the past year. Overall, Bedfordshire had the second highest number of reports per capita (15.90), over five times more than Lancashire in sixth place, which had the fewest number of pyramid scheme scam reports per 100,000 people (2.99). 

Dorset ranks third with £367,173 lost per 100,000 people in 2022. The coastal county lost 82% more in pyramid scheme scams than in neighbouring country Hampshire, who lost £62,495 per capita — ranking 16th. In total, there were 12.59 pyramid scheme scam reports per 100,000 people in Dorset – over six times the amount recorded in neighbouring area, Devon (1.98). 

Three ways you can spot (and avoid) a pyramid scheme

Scams expert, Nicholas Crouch from Scams.info, shares three red flags to look out for when trying to avoid pyramid schemes.

1) They set unrealistic expectations

Possibly the biggest red flag for pyramid schemes is the huge promises made by ‘employees’ to entice people. These typically come in the form of flash cars provided by the scheme, holiday homes, the idea of being your own boss and the freedom to retire early, thanks to the scheme. If it sounds too good to be true, it probably is.

We would add to this any promise of a luxury lifestyle – as shown off by people at the top of MLMs. This includes designer handbags, boasts about ‘retiring’ their husbands, fancy cars (usually on lease plans) and ‘free’ holidays. The real truth about MLMs is that, according to research published on the FTC website, 99.6% of people who join, on average, will lose money once business expenses are taken into account.

As we investigate here, even the enviable lifestyles shown off by people at the top of MLMs aren’t quite what they seem. And the cost of maintaining those lifestyles can lead even the most apparently successful people into debt.

2) You are expected to pay large sums before employment 

Pyramid schemes are constantly promoting what ‘great value’ their service is. The reality is quite different, with new recruits expected to pay extortionate fees for onboarding, such as: mandatory training courses, equipment needed to do the job and company events – often before starting the job. The constant reiteration of money is a massive tell that the pyramid scheme is a scam.

And the money you need to pay when joining a pyramid scheme isn’t always immediately obvious. Many MLMs (as mentioned, we believe most MLMs are pyramid schemes) require you to invest in a starter pack of some kind. You’ll also need samples to give out and personally use (you are told you need to be a ‘product of the product’) and have other business costs – not least of all training.

And finally, most MLMs will have an ‘active’ requirement (this has different names in different companies). Basically this means they will require you to sell a specific volume of products within a time span – either monthly or within three rolling months.

If you don’t meet the requirement, you are usually removed from being a representative of the company and lose any commission you have earned. This leads to many people buying products in order to meet their quota. We also hear of people being pressured by the people above them to buy in order to help them meet their quota or achieve a promotion.

This has even led to a common term in MLM: garage qualifying. This means you need to buy so many products in order to qualify for a rank, bonus or promotion that you need to store them in your garage. Sadly, we have seen so many Facebook posts from people who have left an MLM trying to sell hundreds and sometimes thousands of pounds worth of products they bought to garage qualify – always making a huge loss. Here’s just one of dozens of examples we have seen:

3) The products sold are overpriced and of poor quality 

The products pyramid scheme scammers are trying to get you to sell are often vastly overpriced, of poor quality and new recruits are often discouraged from asking about the products they are expected to sell. Just by shopping around you’ll find that better quality products are already on the market and sold for more reasonable prices.

This is a common issue with MLMs, and one read why it is so hard for people to make money selling the products. We price checked products sold by MLM Forever Living here, and found cheaper – and in some cases superior – products available on the high street. We also investigated Utility Warehouse and discovered that many people lured in by their seemingly cheap prices only to regret their decision.

What should you do if you think you have been scammed by a pyramid scheme?

If you are concerned that you have been scammed by a pyramid scheme the first thing you should do is contact your bank immediately. Then contact either Action Fraud or your local police service to report the details of the scam.

If you believe you have been misled by someone working for an MLM, we don’t recommend contacting the DSA. They are not a regulatory body, and have never acted appropriately on any of the income or health claims we and others have reported to them.

We do recommend contacting the ASA. While they have got better at recognising how MLMs operate, they still don’t act quickly or appropriately enough, in our opinion. But the more they hear from people, the more they will be forced to take action.

We also recommend holding newspapers like The Times and The Sun accountable for helping promote these companies with slack reporting and lazy (or non-existent) research, in our opinion.

Over the past few years, the anti-MLM movement has grown, and we believe is partly responsible for the decline in the MLM industry. The more we are all aware of scams, the more we can protect ourselves and warn others. And the more pressure the authorities will be under to take action to protect consumers. And hopefully, the sooner these companies will go out of business.

One person’s experience of working for a pyramid scam

Scams.info spoke to an unfortunate victim of a pyramid scheme scam, who wishes to remain anonymous. Here’s their story:

“The job was advertised as a standard business marketing role, which said we would expect to receive training in sales and marketing, travel around the UK, trained leadership roles and bonuses and rewards.

“The recruitment was pretty straightforward, I had a quick zoom call initially with a group of people and then a private conversation. The in-person interview involved travelling to the office and knocking on doors for hours before the job was offered on the spot (red flag!)

“The day-to-day involved knocking on doors from about 10 am to 8 pm every day including Saturdays. The culture was don’t talk about things that aren’t positive, if you aren’t surrounding yourself with people better than you, you’re wasting your time.

“I was overworked, on cold streets until late at night when it was dark and couldn’t complain. I would have my manager ring me during the day if I wasn’t making sales, shouting at me, and asking why I wasn’t making any sales.

“I was initially told I was going to have my travel paid for, but this never happened. I was also promised a base salary when I joined, which never materialised. I was underpaid from the sales that went through. I spent three months fighting to get what I was owed – around £2,000 by my own calculations although this was refuted by them.

“I eventually had to stop working on the field one day when I was having intense chest pains whilst knocking on doors and went to the hospital where I was told I was stressed, had lost over a stone in weight and was exhausted. It was this that really made me realise what I was doing and the stress on my family who had been very worried about me. 

“My biggest advice is to leave. There is no shame, no guilt, you just have to do what is right for you – and you shouldn’t be made to feel guilty about it – there are ALWAYS better jobs out there. I wanted to prove I could do it, work up and become successful, but after nearly six months, it didn’t happen and the reality sunk in.

“Look out for red flags, and just know that there are positive, great companies to work for out there that don’t take advantage of you.”

Read more about the MLM industry

If you’d like to learn more about MLMs, and why we believe they are so harmful, we recommend reading these articles:

We also recommend reading the experiences of some of the former MLM reps we have interviewed here:

Photo by Brooke Cagle