Business opportunity scams

8 September 2009

SCAMwatch is warning consumers to be extremely cautious about getting involved in business opportunity schemes that promise a lot of income for little or no effort.

Don’t be taken in by schemes or products claiming to guarantee you either a job or a certain level of income. There are no shortcuts to wealth – the only people who make money are the scammers!

SCAMwatch has received reports of business opportunities involving the sale of ‘personal development’ products. Investigations reveal the personal development products are a mix of CDs, DVDs, journals, workbooks, plastic pens and rubber wristbands.

Scammers place advertisements in the 'Business opportunity' or 'Employment opportunity' sections of newspapers to attract the attention of consumers looking for a new job. The scammer will try to tempt you by making crafty statements like:

  • Potential for Executive-level pay without Executive-level stress working PT from home. Call xxxx xxxx.
  • Miss your kids? Working way too much for way too little? Potential to earn executive level pay from home. Learn how now: xxxx xxxx.
  • No education, no experience, no matter! Got drive & desire? UNMATCHED profit potential. Call xxxx xxxx for details.
  • A business that workswhat a novel concept! Are you looking for a lucrative business model? Call for details: xxxx xxxx.
  • Serious entrepreneur? Looking for serious profits. No franchise fees, no royalties, fastest growing opp in industry. Call now: xxxx xxxx.

Scammers use a wide range of marketing tools to attract people to these schemes. You may see ads in community magazines, online classifieds, social networking websites and free-to-air or pay television programming. Posters at train stations and on busy roads, and flyers left on cars, in letterboxes or handed out at train stations are common tactics used to lure unsuspecting punters.

They may also try to sell tickets to conferences or seminars costing thousands of dollars. Ticket prices generally don't include airfares, accommodation, transfers or most meals. Many people are convinced to purchase a conference ticket to gain accelerated promotion in the scheme. Unfortunately most soon realise that they have paid or borrowed a lot of money for no return.

Scammers also try to disguise pyramid schemes as business opportunities. SCAMwatch warns that promoting or even participating in pyramid schemes in Australia is illegal. Pyramid schemes make money by recruiting people rather than by selling legitimate products or providing genuine services.

They are very risky ‘get-rich-quick’ schemes which inevitably collapse leaving participants out of pocket and often with relationships in tatters.

While SCAMwatch advises you to be cautious, do not be discouraged from carefully researching business opportunities based on commissions. There are many legitimate multi-level marketing opportunities that provide legal income streams from selling genuine products or services.

Warning signs

  • Promises of guaranteed or very large returns.
  • You are offered a chance to join a group, scheme, program or team where you need to recruit new members to make money.
  • The scheme involves offers of goods or services of little or doubtful value that serve only to promote the scheme.
  • Offers to teach you ‘secret’ or ‘exclusive’ techniques for building wealth.
  • Claims like ‘this is not a pyramid scheme’ or ‘this is totally legal’.
  • Expensive conferences or seminars promising fast-tracking through the system.

Protect yourself

  • If it looks too good to be true, it probably is.
  • Beware of products or schemes that claim to guarantee income or winnings and require you to pay an up-front fee.
  • NEVER let anyone pressure you into making decisions about money or investments.
  • Always investigate money-making schemes very carefully before you agree to participate – they may be illegal!
  • Take time to seek independent legal, financial or other professional advice before you pay or sign anything.
  • NEVER rely on the person approaching you or anyone they recommend for advice.
  • Before you respond to a business opportunity advertisement, ask yourself why somebody would offer you this opportunity without even knowing you. If someone had a guaranteed way of making a lot of money, why would they tell you about it?
  • Remember there are no get-rich-quick schemes: the only people who make money are the scammers.

As well as following these specific tips, find out how to protect yourself from all sorts of scams on SCAMwatch.

Report

If you have received information about a business opportunity that sounds like these scams, or you have responded to an offer and you now suspect it is a scam, you can report a scam through SCAMwatch. You should also spread the word to your friends, family and colleagues to protect them.

More information

Visit SCAMwatch for details of similar scams, including Job and employment scams, Chain letters and pyramid scams, and Computer prediction software scams.

You can also read about a pyramid schemes alert issued by the New South Wales Office of Fair Trading.[link no longer available]

Back to the SCAMwatch radar.

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