Pyramid Scams

You invest (say) Rs. 10,000 and refer two more people. They join under you and you get back (say) Rs.1000. Further, when the tree grows under them, you get Rs.1000 for each person under yourself in the tree. So, within no time, you have recovered your investment AND you can make money each time someone joins under you …. For life!!!

How does that sound?? A great investment??? Or a pure scam???

Anyone with a basic sense of business knows there ain’t anything called a free lunch, let alone a free income. Ask for more details on how this is feasible and you would unearth a well covered up “Pyramid scam”, maybe in the guise of a multi-level marketing scheme.

So let us look at what one of the schemes actually promise – Each new investor must purchase a ‘rare numismatic coin’ (or any other commodity) at the cost of around Rs. 30,000 and agree to abide by the rules, policies and procedures of the company. He must then refer two other people to do the same who refer two more and so on. Everytime there are three referees on the ‘left downline’ AND the ‘right downline’, you get paid an amount of Rs.11,500. This continues infinitely. That means irrespective of how many levels below you a purchase is made, 3+3 new purchases (which is linked to referees) would give you the promised sum. So, in a nutshell, what is promised is this – Invest Rs.30,000 and refer two people => You will get a ‘numismatic coin of high value’ plus a passive income for the rest of your life even if you don’t work because your ‘downline’ would be keen to recover their investment and thus help in new recruits.



The thought that tens of people get paid around Rs.2000 each for a purchase of Rs. 30,000 defies business sense. Or does it? In one of the websites that an Independent Representative (IR) of one such company maintains, he claims that the scheme is workable for the company because of –

a) Mark Up - By increasing price of the product – Mark up the price until 125%
b) Floating - Invest the money for those are still cannot get balance network. (3 left/3 right)
c) Flush Out - Daily selling extra from all members who join it in a day. (limited to 18 left / 18 right or equal to USD 1500 per day)

This should more or less convince you and you would invest the amount with starry eyes imagining the future paycheques. The deal seems legal – You are being paid a commission for a sale. The claim that the money ‘on hold’ is profitably invested which ensures sustenance of the ‘business’ is more or less acceptable. You can see good incomes for yourself and by introducing referrals, you are a moral victor as ‘you have helped another person get rich’.

As nice and moralistic as it seems, this, on investigation, turns out to be a ‘pyramid scheme’, well covered-up; and with the company having suitable legal parlance to get out unnerved whenever a problem crops up.

Think of it this way. Say the payments are made to you every time two people join under you. Each of them have paid (say) Rs. 20,000/- and you get say (Rs. 1000/-) for your efforts. This means you are now at Rs. -19,000/- and they are at Rs. -20,000/-. The guy above you is at a hefty Rs. 59,000/-. Now lets say, each of the ones below you get two people added to their downlines. That means, out of the Rs.20,000*4= Rs.80,000/- that is funneled in, (Rs.1000*2 )*2= Rs.4000/- gets paid as ‘referral bonus’ or whatever and the guy at the top makes a neat Rs. 76,000/-. At the next level, the added amount is Rs. 20,000*8 = 1,60,000 – (Rs. 1000 * 3) * 4 = Rs. 1,48,000. Continuing further, at the nth level, the amount added is Rs.20,000*2^n – ((Rs. 1000 *n) * 2^(n-1)). When these two become equal, the business is no longer profitable.

For the hypothetical amounts quoted above, that happens only at n=40.

This is for the straightforward case. Companies usually have additional requirements that the amount will be credited only when the left and right trees are ‘balanced’ i.e. they have equal number of people on each tree and upto a maximum of 18 referrals per day etc. That might push the equalizing number up to say 50. So what happens then?? The business is no longer profitable and is likely to call it quits. At that point of time, there would be 2^50 people (hypothetically) who would have lost Rs.20,000 each at the bottom-most rung. Add to that 2^49 people at the rung above that who would have lost Rs. 19,000 each, 2^48 people at the rung above that who would have lost Rs. 18,000/- each and so on. The beneficiaries are the ones at the top of the chain. The higher you are, the more money you make – all the expense of the ones in the bottom-most rung. 

Forget the hypothetical case, 2^50 people might not even be on this planet. The point is, at any instant of time, the number of people who are in the negative is more than 75% of the total people involved in it. That leaves them vulnerable.






This is no new thing. It is a well established modus operandi called the Pyramid Scam –
(Taken from http://www.fraudsandscams.com/pyramid.htm)
As good as it sounds, here’s the hitch. While the letter keeps reminding you to think in terms of ten people, look at the big picture. It will require more than one billion people to fill the tenth tier in your pyramid and those people must lose their investment because it would take 10 billion people to fill the eleventh tier and there are not that many people on the planet.
No matter how you look at it, a Pyramid Scheme is a fraud on somebody. It has to be, since the system relies upon the distribution of a valuable consideration, ongoing distribution requires a rapidly growing list of participants and nothing of value is created anywhere in the process.
That is the key to identifying a Pyramid Scheme – does the system’s growth, prosperity and survival depend upon the value it creates, or is the value contributed by today’s recruits distributed to pay those who were recruited yesterday?.
As previously stated, the chain letter serves as the basic Pyramid Scheme model for purposes of illustration. Most Pyramid Schemes are substantially more complex, in that they are constructed to look like a multi-level marketing (MLM) operation such as Amway, where people buy in, and then benefit from their product sales and the sales of those that they recruit into the operation. In these cases, the only people who realize that the operation is a scam are those at the top of the pyramid; the other investors believe that they are involved in some sort of legitimate MLM enterprise.
Even if the deal is that you purchase something for that money, when you really think about it, it is in-fact a pyramid scheme albeit well disguised. Instead of saying “Pay me Rs. 20,000/- and you will get back Rs.2,000/- every time you introduce 3 people on your left and right downlines”, it says “Pay me Rs.30,000/- (for a product worth around Rs.10,000/-) and you will get back Rs.2,000/- every time you introduce 3 people on your left and right downlines”. As well covered up as it is, this is the truth.

Face it. This has got to end sometime. Now or in ten years time. But note that whenever it ends, either due to lack of customers or lack of products to sell, the Independent Representatives (IRs) at the bottom of the chain are the big losers. As the scheme mentions, the IRs would get their cheques only when 3+3 referees are introduced into the chain below them. This means, the last two levels of IRs lose the Rs.20,000/- they ‘invested’ and are struck with a Gold Coin worth (hopefully) around Rs.10,000/- they never even wanted to buy in the first place!! There is also a mention on the web that the coins are not delivered until each IR has 5+5 referees below him, which, if true, would mean they wouldn’t even have the Gold coin with them.






Some interesting links --

1. A similar scam in the United States was brought to light in 1999. The court judgement of the case of The United States of America versus Gold Unlimited is available at http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=6th&navby=case&no=99a0170p
The similarities of the two cases under consideration is glaring, to say the least.

2. An article by the WorldBank about pyramid schemes in Albania
http://www.worldbank.org/html/prddr/trans/so97/albania2.htm

3. A guide to Fraud schemes
http://www.quatloos.com/ftc_mlm.htm

4. A notice by the SriLankan Government
http://www.pyramidschemealert.org/PSAMain/news/srilanka.html
http://www.pyramidschemealert.org/PSAMain/news/SriLankaReport.pdf

5. A report about a very similar deal uncovered in Bangalore itself.
(From http://www.deccanherald.com/deccanherald/sep30/i7.asp)

Commission can be earned by referring two more people (maximum) who in turn must recruit two more depositors, thus building on a chain of investors. “Once a step of three people on the left and three on the right is completed, PGB sends a payout of US$ 30; this continues as every step is completed,” explains Mr Chandramurthy, the top-most agent of PGIPL functioning from Chennai.
Fancy tags such as referral systems are nothing but pyramid schemes in disguise that are banned in India under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

6. Less than a month ago, in the Hindu
http://www.hindu.com/2006/08/15/stories/2006081517700500.htm
Beware of money circulation schemes'
They are banned by law, says CID
________________________________________
• Gullible people are lured into making quick money by becoming members of these marketing agencies
• They sell consumer goods to camouflage their operations
• Some of them try to boost their image by offering donations to charitable organisations
________________________________________
HYDERABAD: The Crime Investigation Department (CID) on Monday cautioned people of the State against joining money circulation schemes being operated in the guise of Multi-Level Marketing Schemes (MLM) or Network Marketing (NWM).
CID Superintendent of Police (Economic Offences Wing) V.C. Sajjanar, in a press release said, of late, many companies had started luring gullible people to make money claiming themselves as MLM or NWM agencies. "Enrolment of members for making quick or easy money is nothing but money circulation scheme," he said. Such schemes were banned under the Prize Chits and Money Circulation Scheme (banning) Act, 1978.
Misleading prices
According to Mr. Sajjanar, some companies camouflaged their operations saying they were selling cosmetic products, computer spare parts or some other consumer goods. "The pricing policy of their products itself is misleading. Sale of consumer goods in the name of multi-level marketing is only to mislead people and cover up their cheating act," he observed.
Some companies try to boost their image by offering donations to charitable and voluntary organisations. In any MCS or MLM or NWM plans, individuals are asked to pay some amount ranging from Rs. 5,000 to Rs. 50,000. Later, the new members should get two to four new members enrolled. If they succeed, they get back the money in the form of commission and thus the chain goes on.
Appeal to people
He appealed to people to inform the CID about such companies on telephone numbers 040-23232889 or 040-23237474 or 040-23237575 or send e-mail to speow@cidap.gov.in
7. Two years ago -- http://www.hindu.com/2004/01/11/stories/2004011103310400.htm

8. In the site of the CID (Criminal Investigation Dept) AP
http://www.cidap.gov.in/EconomicOffences.aspx

4.Money Circulation Schemes
• Do not be taken in by schemes which promise fabulous returns dependent on your recruiting members to a scheme.
• Do not invest in schemes that require heavy investment initially to be recouped by the commissions out of the investments made by the new members.
9. http://www.outlookmoney.com/scripts/IIH021C1.asp?sectionid=10&categoryid=57&articleid=4330

The police moved in and took Rana into custody for alleged violations of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Section 3 of the Act says "no person shall promote or conduct any prize, chit or money circulation scheme or enrol a member to any such chit or scheme promising remittance of money in pursuance of the scheme." The penalty: imprisonment for a term up to three years.

The Last Leaf

Last weekend, struck in Bangalore, a huge bunch of KREC (former and present) inmates descended on Ranga Shankara to catch a rendition of O'Henry's short story titled "The Last Leaf". With memories of "Deep Fried Jam" still afresh in all our minds, the last thing we were game for was another of its kind!! Fervently praying that this play would match up to the last couple I had seen here ("Translations" and "BandawaLa illada baDayi"), I waited expectantly for the play to begin.

It was a packed house. No doubts about that. Crowds from far and wide (yeea rite!) had gathered in this theater hoping to drift away in time to old Greenwich village, a long time ago. Start, it eventually did. But, those (including me) who did not have a whiff of the story beforehand and were eager to get the characteristic O'Henry punch at the end of the play were in for a BIGGGGG disappointment!!! (Not that the ones who knew the story were happy!!! )

The narration began in a broken, Indian-accented English causing much debate among us. Some opined that it was Kandu-English, while others thought it to be Marathi-English and what not!! Bottomline, the accent sucked BIG TIME and put us off at the word 'Go'. But what the hell was he narrating?? THE ENTIRE STORY, for Goodness' sake!!! Within two minutes of us listening to him (the narrator, director blah blah), he had blurted out the entire story!!! That was a punch in itself!!!

So, a few of us guessed that we had paid fifty bucks to hear the story in as sad an accent as it was presented in, and prepared to leave. That would have been so much better!!! When a bunch of uncordinated dancers occupied front-stage and strutted their stuff, along with the realization that this was a supposed 'musical' came the sinking feeling of being taken for a ride again........

Not that I have anything against musicals or dancers or theater. Give me a decent presentation and I will take it with no qualms. But THIS .......... this was just beyond words ....... this wasn't the last leaf ... it was the LAST STRAW!!!! To borrow a line from Joey Tribbiani of Friends' fame, " I wanted to rip my arm off so that I have something to throw at them!!!".

The background singing was as bad as the narration, probably worse since we had to contend with it a lot more. Getting a Kannada singer to sing English lines for you is the biggest mistake a director can make. Given a choice, I would listen to the famous "Eeeeeeeeeeef youv caam todai" a hundred times than listening to this guy sing for the play!!!

(For those of you who don't know what the famous song is, check out http://www.youtube.com/watch?v=KIcA4aV86Sg

Its a Kannada movie song, fully in English .... The movie is Operation Diamond Rocket ... starring the evergreen Annavru - Dr. Raj!! With such a song, he is definitely unforgattable!!)

Getting back to Ranga Shankara .......
With such bad singing, the dancers couldn't be blamed for the uninspiring performance - or am I letting them off too easy?? The only positive word I can probably use to describe the dance without betraying the truth, is 'uplifting' - just because it just involved a MS Dhoni lookalike 'lifting up' everyone who came his way!!!!

And finally the actors .... yes; they were there too. Sue was good as she had nothing to do but lie in the bed and act like she was going to die any minute, Johnsy was better - a good English accent and talent - though it was funny seeing her suddenly break into a dance!! The painter Behrman was my favourite .... he made it look like I was in a play I paid for and not being forced to sit through a irrehersed conglomeration of supposed acting by a bunch of college idiots. (Thats what the rest were)

The real turn off was the Doc's paunch!! Even KREC mock dramas have people with better paunches!!! This guy's paunch was in a wierd shape - making it so very obvious that it was fake. He could have as well stuffed a few books under his shirt and tried to pass it off for a tummy .... or maybe thats what he did!!!

It was probably the last couple of minutes that I felt good during the entire torture session - the part depicting Behrman's death was well presented ... or maybe I had gotten used to mediocre performances ... or rather I was very happy that the play would end soon .......

To summarise, the fact that a quarter of the audience walked out before the completion of the play at Ranga Shankara (where such audience behavior is frowned upon) bears testimonial that this isnt a prejudiced ranting against the cast or the director .... What the hell, I even yelled "What an awesome performace it was!!" when the director passed by so that he would feel at least one person liked it!!!

Weekend in Bangalore

It was the weekend of November 5th and 6th when I stayed back in Bangalore last!! Since then, I have been on treks/trips continuously and it was finally the weekend of Feb 4th and 5th that saw me in Bangalore again. :) Interestingly, the November weekend was just after a 4 day trip to Charmadi Ghats and this weekend was after a 4 day trek from Kodai to Munnar!!!

By now, you would know tht I have no concept of moderation in anything I do!! And this weekend pretty much proved it!! Three concerts in three nights!

Friday night was set ablaze by Ian Anderson of Jethro Tull when he performed at Unmaad in IIMB. The report carried in the Deccan Herald says –
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Jethro Tull enthralls music lovers

DH News Service Bangalore

Ian Anderson, legendary flautist of the British rock band Jethro Tull, mesmerised the Bangalore week-end crowd at the Unmaad-2006 at IIM-B campus on Friday.

Ian, who is also the vocalist, song writer, and multi-instrumentalist, took music lovers by storm. The band’s classic Silhouette, a mix of rock with a touch of folk melodies, blues songs and off course several shifts in musical styles, made the evening a memorable one. The band, which was first called the Blades (who initially were into a mix of Jazz and blues), changed their name into John Evan band and later went to London and tried several names. Finally, they re-christened themselves as ‘Jethro Tull’ and are still going strong.It is his flute that has won him a sobriquet the Pied Piper of rock. Tull’s tunes touched the generations who have grown up on songs like This Sunday Feeling, Aqualung, and Budapest…….

Ian, dressed in black jeans, white T-shirt and a black cap, said “I hate Rock and Roll. But I don’t know what to call it”, he added amidst applause. He went on to add “If you want a great song, ask a 12-year old to write one! And that could stand out for a verse from one of the holy books.’’

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I was there with two of my colleauges - Ravi and Sriram - old enough to have heard of Jethro Tull before this week!! ;) My take on the show was that the flute by Anderson was worth it!! The melody still keeps ringing in my ear and the timbre’ of the sound is unforgettable.

Saturday night had loads of fun in store!! Though the concert by Jal (of Woh Lamhe fame) and Shivamani (the much-hyped percussionist) pretty much sucked, the company visavis Varsha, KP, Shruti, Ashwini and Gullu made it a fun-night!!

And Sunday night was with Div, Ash and Gul-lu at the Bryan Adams concert at Palace Grounds! It felt like a real concert with the crowd doing the singing and Bryan Adams having the confidence to let them!!! :D My sing-alongs were ‘The summer of 69′ and songs from his ‘Best of Me’, a tape which had run to tatters during my first year of engineering for the lack of a collection of tapes!!!

The Deccan Hearld reports ………….

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‘Come back to you’, Bryan’s promise to Bangaloreans

DH News Service Bangalore:
The Palace Grounds reverberated with bass, drums and the unmistakable gravelly voice of rock superstar Bryan Adams on Sunday.

Beginning at 7.50 with “Room Service” a song on the life of hectic travelling round the world, Bryan sang over 20 songs over the next two hours.

“The news papers say that this is my third trip to India. This is my fifth trip to India, but not my last,” he told the fans who responded with loud cheering. Fans can expect him again because (to put in his words), “Can’t stop this thing we started.”

Bryan wanted to know from the audience who were present during his last tow concerts in Bangalore and a majority of the hands went up. In response, he sang “Come back to you.” He even took a few photographs of the audience on his digital camera from the stage.

“I want to be young for the rest of my life/ I am going to be…” sang Bryan and the audience would chorus, “18 till I die.” He even sportingly played karaoke on the guitar, while the audience sang most of his popular song, “Summer of 69.”

“Great singing,” he complimented the audience, “want to join the band…..want to go on tour?” he asked and Shweta, a software engineer from Andhra Pradesh came on stage to sing a duet, “When you’re gone.”

He used the harmonica when he played the songs “Open road” and “I’m ready” and at times the acoustic guitar.

Earlier the college band, “Superfuzz Bigmuff” opened for Adams warming up the evening. It was indeed as Bryan sang, “Let’s make it a night to remember.”

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That was pretty much a weekend to remember!!! :)

Hello World??

As I enter the world of blogging, the first has to be about LIFE ... four letters forming one screwed up word in a screwed up world! I would warn those who do not like to dwell in philosophy to navigate away from this page asap!!!

What i ponder about is nothing new ... its the timeless classic question which has found little or no calming answers by anyone yet .... Why life? Questioning the purpose of my existence has been foremost on my mind for a long time, but I never had time to really think about it till my trip to the US of A last year .... Ample free time alone found me thinking on this subject quite a lot!!

But then...its almost a year now and I am no more close to the answers than what I was then :(
Too many philosophies .... all of them alluding to a GOD ... I do realise the need for the existance of a GOD for social and psychological reasons and I do accept that there is a force which is beyond us all ... I call it Nature ... But praying to Nature would make me no better .... Are we just an accident of Nature then?? Are we here just because some protoplasm found congenial conditions to evolve into us?? Or can I actually accept that we have been created by a GOD as a means to an incomprehensible end?? If so, why am I never told by Him what the end is ......

I can ramble on and on without making anything clearer ... If anything I would start to sound more muddled ... so let me end this now and life life to the fullest COZ I AM ALREADY HERE! And there isnt much I can do about it anyway .....................