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  1. #1
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    This subject is the focus of one my articles I plan on releasing in the future so I thought I would share a little bit of it with others here and probably on another affiliate forum as well.

    I am hoping to educate people here a little bit and don't want to get into any arguments. I just want to share the facts. First - let me state my background. I have served as National Sales Director of a traditional MLM company as well built sales organizations as a distributor in traditional MLM companies. I am not at the moment actively promoting any traditional MLMs but do receive checks from a couple of companies. I just am not in the "recruiting mood" that is necessary to build a traditional MLM at the moment.

    I focus mainly on domain name sales and building simple websites promoting affiliate programs and 2-tier affiliate programs (non traditional MLMs).

    What? Are you saying a 2-tier affiliate program or affiliate network is a MLM? Yes I am. The definition of MLM according to the Direct Selling Association is "In a multilevel compensation plan, representatives/distributors are compensated based not only on one's own product sales, but on the product sales of one's downline."


    That is right - you probably are a MLMer and don't know it! There is no ifs, ands or buts about it. If you promote a 2-level or more affiliate program/network - you are a MLMer!

    Now - with that said - the truth is that traditional MLM companies and affiliate programs/networks could probably learn a lot from each other. In fact that is occurring in a few situations and we will see it more often which is great! A good example is Cognigen, which has successfully combined traditional MLM with affiliate program marketing. Instead of requiring purchases by their distributors/affiliate, customer purchases/accounts count towards their monthly quota. Believe me - I feel much more secure receiving long-term residual checks from Cognigen compared to any affiliate program out there. The funny thing is that the founder of Cognigen dislikes traditional MLM and that is probably why his company has attracted both affiliate marketers and MLMers because he created a great hybrid program. MLM companies need to remove monthly purchase quotas for their distributors and have customer purchases count towards that monthly volume needed. They also need to drastically lower the monthly volume requirements needed or in some cases remove volume requirements all together and let the product/service value provide the sales. The truth is though that I don't see much change in the MLM industry at the moment.

    Now - some affiliate programs and affiliate networks are learning a little from traditional MLM companies by offering lifetime residuals off customers/webmasters they introduce as well expanding into 2 or more tier levels (multi-level). That is fabulous as all affiliate program marketers would probably agree.

    Now a little education on pyramid schemes - different states in the US have different definitions on what a pyramid scheme is. Generally a pyramid scheme is where you get paid a "headhunter fee" for recruiting others and not actually on product/service sales which should be the primary focus. Also - the last person into a MLM should be able to make money (product/service retail sales provide that opportunity). Sadly to say - some MLM companies are pyramid schemes and the only people that loathe those companies more than non-mlmers are people in legitimate MLM companies. One could argue that the $2-$5 webmaster recruitment commissions we receive for recruiting webmasters into affiliate networks fits the definition of a pyramid scheme in certain states. I personally don't think that will ever be a problem with affiliate networks at all though. I saw a post recently on a message board saying that a MLM company was a pyramid and probably was illegal. That person does not know what a "pyramid scheme" is obviously because "pyramid schemes" are absolutely illegal. Most people that use the term "pyramid scheme" are unable to provide the definition when asked. Can you?

    With that said - I hope I have educated all my co-affiliate marketers/mlmers.


    Larry Wentz http://www.AffiliateNetwork.org

  2. #2
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    Nice post!

  3. #3
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    Yes, nice post! If it WEREN'T posted on EVERYONE webmaster msg board, I wouldn't see it as COGNIGEN SPAM! :rolleyes: :rolleyes: :rolleyes: :rolleyes:

    Shrimp

  4. #4
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Shrimp_Dipped_In_Butter:
    Yes, nice post! If it WEREN'T posted on EVERYONE webmaster msg board, I wouldn't see it as COGNIGEN SPAM! :rolleyes: :rolleyes: :rolleyes: :rolleyes:

    Shrimp
    <HR></BLOCKQUOTE>

    LOL - I didn't realize that the 2 message boards (here and Geek Village) that I made the post on was considered "everyones" message board. Surely there are more message boards than that! As I had stated before that I would probably share the info on another affiliate forum as well which I did. Both of the boards "severely" needed to get people properly educated on what MLM actually is. I just want to point out the truth that in reality - we all are in MLM.

    Actually I pointed out Cognigen because they are the first MLM to understand affiliate program marketing and built their business accordingly. They were the best example to use. Yes - I do highly recommend them though I haven't actively promoted Cognigen other than redirecting one of my domains. I should spend more effort with them in reality.


    I think it is important for everyone to realize (especially affiliate program/network managers) that when they bad-mouth mlmers as a whole that they are actually bad-mouthing their best prospects. Many MLMers (enterpreneurs) are tired of traditional MLM and are open for a different way to make money (like myself) and affiliate marketing is one route. Think about it - why should someone join your affiliate program after you just called them a schemer? That is something to ponder about about especially when you realize that you are actually promoting MLM as well (2-tier + affiliate programs/networks). I say "educate" and don't "irritate".

    Larry Wentz http://www.AffiliateNetwork.org

  5. #5
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    Most affiliate marketers on these boards are not anywhere near traditional MLMs. That would be like saying if you step on an ant and kill it - you are the same as an axe wielding homicidal maniac.

    This reminds me when you ask people what kind of person Jesus was (using him as a historical figure who this works best with.) People see whatever group they are part of as who Jesus was. To the hippies, he was a hippie. The punks, he was a punk etc. Being part of the world of the definition you want to cast over another segment of the world does not make you the best source for the comparison, but the worst.

    Why is it that people feel the need to try and define affiliate marketing as MLM? Do you need some justification? Some legitimacy. Look at amazon, the biggest affiliate program on the web - no downline. Is that MLM? No. From what I read here, most affiliate marketers make their money on sales not on downline - so they are much closer to being ad agents then mlm.

    By the way the FTC working with the FBI a federal agency defines and handles pyrmaid scheme complaints.

    How do you know a snake is a snake? They are the ones constantly telling you they aren't a snake.

    Chet

  6. #6
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    No it's not the same! There is a major difference between affiliate programs that give you a bonus for signing up others and mlm. The difference lies in the focus of the business. All MLM companies focus are on signups not selling products. They only sell to their own salespeople and rarely venture out of their group for sales.

    PS I thought these threads were going to be deleted.

    Not trying to offend anyone here selling cognigen but their program is no different. I recently signed up and placed their links on a new site of mine and because the site isn't very active yet cognigen is telling me I have to produce a sale in x amount of time or I'll be removed from the system. Conveniently they tell me I should buy some of the services myself.

    It's my opinion that cognigen is a great system to sell but they need to stop trying to get me to buy and wait for sales to come in from my website.

  7. #7
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Chez Noir:
    Most affiliate marketers on these boards are not anywhere near traditional MLMs. That would be like saying if you step on an ant and kill it - you are the same as an axe wielding homicidal maniac.

    This reminds me when you ask people what kind of person Jesus was (using him as a historical figure who this works best with.) People see whatever group they are part of as who Jesus was. To the hippies, he was a hippie. The punks, he was a punk etc. Being part of the world of the definition you want to cast over another segment of the world does not make you the best source for the comparison, but the worst.

    Why is it that people feel the need to try and define affiliate marketing as MLM? Do you need some justification? Some legitimacy. Look at amazon, the biggest affiliate program on the web - no downline. Is that MLM? No. From what I read here, most affiliate marketers make their money on sales not on downline - so they are much closer to being ad agents then mlm.

    By the way the FTC working with the FBI a federal agency defines and handles pyrmaid scheme complaints.

    How do you know a snake is a snake? They are the ones constantly telling you they aren't a snake.

    Chet
    <HR></BLOCKQUOTE>


    True - most affiliate marketers here are not near traditional MLM. If you promote an affiliate program/network that has 2 or more tiers - it's MLM. "In a multilevel compensation plan, representatives/distributors are compensated based not only on one's own product sales, but on the product sales of one's downline." (Direct Selling Association).

    Amazon is not a 2-tier affiliate program thus is not MLM. Affiliate marketers making the majority of money off product sales is something that traditional MLMs should focus more on - that's a fact.

    Pyramid schemes should be shut down by the FTC,FBI, Attorney Generals, etc.....

    As far as your comment "How do you know a snake is a snake? They are the ones constantly telling you they aren't a snake." I really don't get your point. I mean traditional MLMs know they are MLM and call themself MLM. However - most 2-tier affiliate marketers put their blinders on fail to realize that they are MLM or pretend that they aren't MLM. 2 or more tiers is MLM - face the facts. Required product purchases/sales are what seperate the difference in most peoples minds between MLM and affiliate programs. However - product purchases/sales requirements is not actually involved in the true definition of what MLM is.

    Affiliates, distributors, representatives, dealers,agents, etc.... basicly mean the same thing.

    It's all kind of a grey area when you think about.

    Larry Wentz http://www.AffiliateNetwork.org

  8. #8
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Heyder:
    No it's not the same! There is a major difference between affiliate programs that give you a bonus for signing up others and mlm. The difference lies in the focus of the business. All MLM companies focus are on signups not selling products. They only sell to their own salespeople and rarely venture out of their group for sales.

    <HR></BLOCKQUOTE>

    If you replace the phrase "All MLM companies focus are on signups not selling products." with "Most MLM companies focus are on signups not selling products." - I will then agree completely on that matter.

    There really isn't that big of difference at all off % bonuses received off others' sales in 2 or more tier affiliate programs (MLM) and a traditional MLM. Both use a commission override.

    Larry Wentz http://www.AffiliateNetwork.org

    [ 05-23-2002: Message edited by: wentzco ]

  9. #9
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    Kind of like Sam's Club and Costco, right Heyder.

  10. #10
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Most MLM companies focus are on signups not selling products<HR></BLOCKQUOTE>

    wentzco - Technically I would agree that by the definition by the DSA, and others, 2 & above 2 tier aff. programs are MLM's.

    But what's the use of this education ?

    The difference is HUGE, when it comes to practicality.
    99% of those type of MLM's are one's aiming on paid member signups with over priced products/services.

    Now if like the 2 tier networks you sell the consumer a product at the same rate then I would feel nothing wrong in promoting most MLM's.
    Second point, MOST MLM's require me to Pay & join them to sell their producs.
    Now with CJ & their friends, I do not feel like joining those MLM's.

    So you see just the 1 or 2 simple points are so very significant !

    [ 05-23-2002: Message edited by: ceo ]

  11. #11
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by ceo:


    wentzco - Technically I would agree that by the definition by the DSA, and others, 2 & above 2 tier aff. programs are MLM's.

    But what's the use of this education ?

    The difference is HUGE, when it comes to practicality.
    99% of those type of MLM's are one's aiming on paid member signups with over priced products/services.

    Now if like the 2 tier networks you sell the consumer a product at the same rate then I would feel nothing wrong in promoting most MLM's.
    Second point, MOST MLM's require me to Pay & join them to sell their producs.
    Now with CJ & their friends, I do not feel like joining those MLM's.

    So you see just the 1 or 2 simple points are so very significant !

    [ 05-23-2002: Message edited by: ceo ]
    <HR></BLOCKQUOTE>


    The reality is that affiliate programs,traditional MLMs, affiliate/MLM marketers do need to get educated and pay attention to what works in both forms of marketing.

    Affiliate programs need to be educated on the fact that they should treat affiliates as lifetime partners paying on future customer purchases and webmasters downline sales (like traditional MLM). Also 2 or more tier overrides provides "viral marketing" and rewards webmasters for sharing the affiliate program.

    MLM companies need to be educated on how internet marketing works by paying close attention to the product sales focus used by most affiliate programs. MLM's required purchases/sales need to be either drastically lowered or removed completely IMO. A large amount of MLMs (maybe 80%?) also have over-inflated prices on their products as you you point out. Some don't and many retailers (health food stores, salons, etc..) are often involved in those companies. Those are solid MLM companies that will last because they are "product-driven". Over-inflated prices do occur in affiliate programs as well. Many marketing, hosting or domain-related affiliate programs are good examples of over inflated prices.

    Your 2 points are very valid and I agree with them completely plus I would like to add a 3rd point - Recruiting in traditional MLM is very time-consuming plus money-consuming. Show me a mlmer that is actively recruiting and I will show you someone with large phone/postal expenses. Most MLMs also make you jump through hoops to get paid on the organization that you built and introduced. That sucks!


    I say throw out the bad points in MLM and affiliate programs and focus on the good points to create successful hybrids. Those points are fair pricing, lifetime commissions, 2 or more tier commissions, zero (or very low) purchase/sales requirements and internet driven marketing and education.


    Larry Wentz http://www.AffiliateNetwork.org

    [ 05-23-2002: Message edited by: wentzco ]

    [ 05-23-2002: Message edited by: wentzco ]

  12. #12
    ABW Veteran Student Heyder's Avatar
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>If you replace the phrase "All MLM companies focus are on signups not selling products." with "Most MLM companies focus are on signups not selling products." - I will then agree completely on that matter.
    <HR></BLOCKQUOTE>

    Okay, Done deal. Let's say most.

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Kind of like Sam's Club and Costco, right Heyder. <HR></BLOCKQUOTE> [img]/infopop/emoticons/icon_biggrin.gif[/img]

    Yep, but don't worry Fred, I swing both ways on this issue. All I want plain and simple is a multi level program that isn't hounding me to buy the products. Especially in order to keep my membership BS.

    Don't give me the crap about how as a person selling something it's more effective to be a user BS either.

  13. #13
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    You guys really bring up some good points. One thing I'd like to note, and more directed at Heyder. Even if I wasn't selling those products, I probably would be using them through somebody else. By signing up for my own services, I've cut my long distance (both residential and business) by about 40%. My wife uses dial-up on one of her computers and we had it set up using Prodigy. Prodigy raised their rates to $21.95 a month. By using Cognisurf, we cut that almost in half as well. I don't like the fact that you have to keep 4 active customers, but I would have been shopping around for 4 of those services anyway.
    A guy that was doing sales at our radio station (wasn't with us that long) joined an MLM and tried to get the other employees to join as well. It cost him $500 dollars just to join, and he is required to keep something like 15 active customers. Their prices weren't that much cheaper either. The internet access was going for $19.95 a month. That is an MLM that makes money off of the downline because that downline has to pay $500 just to get in. That is rediculous, and I don't believe in having to pay somebody to sell their products.
    As I have previously pointed out, I have saved money on my monthly bills by using the one company. I also think their products are reasonably priced, and do make a good match for small businesses.

  14. #14
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    Larry has been Cog since 1998
    I've been in the same "sub-agent group" under Kevin since early 1999

    We have 11 active [over $200] sub-agents that generate about $34,000 in gross LD revenue per month and we get the override on that business. We do NO MLM.

    How long have you been at it TH ?

  15. #15
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    If you can make money from a MLM without referring others, then that is a big plus.

    For example: In Amway you can buy the stuff at what they term wholesale and marke it up and sell it...you do not need to refer anyone to make that profit. Same deal with Avon.

    Same deal with most hard product companies.
    Heck one guy I know in Florida went around to medical offices and signed up over 100 doctors so they could buy Body Wises' Cardiowise wholesale...the doctors sold over $1 million worth of the stuff and never recruited anyone. My friend worked the MLM just like you do any other rep business...get clients who sell products.

    The big problem with MLM is most people think they are gooing to get rich tomorrow when it take at least a year to maybe 5 years to do it and they don't want to SELL or do any work.

  16. #16
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    Adam,
    I signed up with Cognigen a few years ago. I didn't start to promote them, however, until earlier this year. I never believed in MLM, and thought most were scams. I signed up to check it out...then waited to see what happened. Cognigen kept its door open and appears to be successful. It wasn't a fly-by-night MLM or get rich quick scheme. I sat on it for so long just to be sure. I now regret sitting on it for that long.

  17. #17
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    I had to bump this topic back up because of Haiko's comment in another thread (now locked)

    "Is it a MLM thing or a tiered affiliate offering?

    Haiko "


    Haiko - Haiko - a tiered affiliate offering is a MLM thing! MLM (Multi-Level Marketing) actually is description of a "compensation plan" which means you receive override commissions off the sales of others. 2 or more tier affiliate programs are MLM.


    Larry Wentz http://www.AffiliateNetwork.org

  18. #18
    ABW Founder Haiko de Poel, Jr.'s Avatar
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    Larry,

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>2 or more tier affiliate programs are MLM<HR></BLOCKQUOTE>

    Is that the rule of thumb?

    I left that thread because it was about a merchant who also is a merchant at CJ, but I closed it because the flames and MLM propaganda.

    Haiko

  19. #19
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    >Is that the rule of thumb?

    Isn't MLM making money from the RECRUITING of others. Getting a share of their investment or something like that.

  20. #20
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Haiko:
    Larry,



    Is that the rule of thumb?

    I left that thread because it was about a merchant who also is a merchant at CJ, but I closed it because the flames and MLM propaganda.

    Haiko
    <HR></BLOCKQUOTE>


    Yes - 2 or more tiers is MLM (Multi-Level Marketing). The reality is that Commission Junction is MLM because we get paid 5% override commissions off webmasters we refer. As I mentioned before most people associate MLM with required sales/purchases but in reality that has nothing to do with what the definition of MLM is.

    Larry Wentz http://www.AffiliateNetwork.org

  21. #21
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Adam Ward:
    >Is that the rule of thumb?

    Isn't MLM making money from the RECRUITING of others. Getting a share of their investment or something like that.
    <HR></BLOCKQUOTE>


    No - getting paid off the sales of the people you recruit is MLM. Getting paid to recruit people falls in the definition of "pyramid" in various states.

    Larry Wentz http://www.AffiliateNetwork.org

  22. #22
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    All those under me at CJ must have picked the real looser merchants or those above 30% reversal rates. CJ's 2nd tier shows ZIP for ever, like all the MLM deals. They must have one of the worst conversion rates for their own affiliate recruiting program. Anyone ever earn anything from the CJ banners??

    [ 06-10-2002: Message edited by: EcomCity.com ]

  23. #23
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    Well, it is strange. I never made anything from Cj program so I thought I had taken all the CJ banners down. Then today, out of nowhere, I got $2.00 from them. Maybe, if I take ALL the banners down for All the merchants, I will make money, at last. [img]/infopop/emoticons/icon_wink.gif[/img]

  24. #24
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    SSanf - I feel your pain.

    Last month I set out to remove all CJ banners from all of my sites, as I had not made one nickel from them, over the course of about 5 months, despite reasonable performance from all the other programs I used.

    That was my project for the day.

    But when I went to the CJ site to gather my list of merchants, there it was - a $26.00 balance. Then another sale the next day. Another couple dollars here and there since then.

    No big $$ by any means, but progress anyway.

    Don't get discouraged! [img]/infopop/emoticons/icon_wink.gif[/img]

  25. #25
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    Mike, Ssanf, and Deelz--

    In the CJ program, I get the occasional $2, and for most of the time, only had one that very rarely made a sale. So rare, in fact, that I figure "GG" has never made enough to get a check, in 2 years.

    But now I can vouch for the legitimacy of the CJ Referral Program, because I got one signup that consistently makes sales.

    It's my mother! And she consistently makes sales because I personally steer her away from the dud merchants and hammered in just what makes a "good" merchant/product. I never realized how a newbie would be interested in some of the lesser merchants and products...and after I saw that, put it like this--she knows what's a dud and what's good NOW! Maybe when she gets a solid base built up she'll be interested in trying out the iffy merchants but it was NOT her intention to use them at this point! (When an affiliate has solid merchant base already built up it's not such a big deal if a 2 $-sign place sells 0 items, they're just a Lotto ticket that didn't win--and some of them DO win so I still say keep 'em in the network! [img]/infopop/emoticons/icon_wink.gif[/img] But my mother doesn't have that base built yet so I advised her to stay away from those at this time.)

    I have to say, it wouldn't be worth doing all the mentoring for anyone else. 5% of 2-tier commissions at CJ just isn't worth it! But that's what it took to get good performance from a 2-tier. (It's A LOT more work than selling products!) Now she's pretty good at spotting out good products, and knowing what a dud is before Bad Experience does the teaching.

    And I also now know that when she makes a sale, it does show right up in my 2-tier report. As in Instantly! And, no sales have been missed by the 2-tier reporting.

    Of course, now that she's got some success she keeps wanting to get on the computer [img]/infopop/emoticons/icon_wink.gif[/img]

    AS FOR MLMs.

    Wentzco, you asked ahwhile ago if anyone knew the definition of a pyramid scheme. The way I understand it, an actual "pyramid scheme" is also known as a Ponzi Scheme, where the money from the incoming people (the newbies) is used to pay off the older members. There isn't money coming in from elsewhere--the old are simply feeding off of the new.

    It typically does not involve a product, however there are some "investment" Ponzi Schemes where people are led to believe they have invested in some unbelievably, incredibly great stock or other financial instrument which is responsible for their returns. Those that are paid rave about how much they made (a natural response even if they're not aware of the scam nature--some scams pay a few people that are unaware, to build credibility), which brings in more newbies.

    With the "financial" ones, eventually it crashes under its own weight (usually) and the guy at the top is usually apprehended at some airport or dock. These crashed ones, of course, are the ones that get printed in the paper--because it's when they crash that they get busted.

    The name Ponzi Scheme comes from a guy (Charles, I think) Ponzi, who got busted years and years ago for running one. Apparently it was a biiiigggg deal, and now his name is on that type of scam!

    These scams are not always admitted (to investors) to be any kind of pyramid/MLM--but when the Feds investigate, that's what they find in the case of a Ponzi Scheme.

    I don't know the state-by-state specifics but I believe my example of Ponzi Schemes would be considered a scam in all of them.

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