How to Avoid Work-at-home Scams and What to do When You're a Victim

HOW TO AVOID WORK-AT-HOME SCAMS AND WHAT TO DO WHEN YOU'RE A
VICTIM
Author Vishal P. Rao
As more and more people opt-out of conventional jobs and instead choose
to work from their homes, the number of work-at-home scams has also
increased. Each year thousands of people find out the hard way that
opportunities which are too good to be true usually are but not before they
invest and waste millions of dollars a year.

You don't have to be one of those unfortunate people. All you need to
do is to become more informed, ask the appropriate questions, and know
what to do if you are the victim of illegitimate opportunity.

Become More Informed

One of the first things you should become aware of are the types of
business opportunities which are most frequently scams.

One of the oldest of these scams are stuffing envelopes and/or
assembling items in your home. You'll find these opportunities in lots of
sources, even some that are legitimate. However, what most of these ads fail
to say is that you have to pay them a fee to begin. Then after you
complete your job, your work is often rejected as substandard and, of
course, you never see a penny. The other thing that happens is that you have
to send in money only to receive instructions on how to place an ad
just like the one that you've just placed in order to bring individuals
just like yourself.

Another common work-at-home scams are Pyramid schemes. Pyramid schemes
are often passed off as MLM (multi-level marketing) opportunities, but
there is a key difference. Pyramid schemes are more concerned with
having you bring in more people and less concerned with selling products.
The reason is that they aren't making their money off of selling
anything to actual customers but from taking money from hopeful entrepreneurs
like you. Most of these schemes ask you to make an investment or a
purchase in order to become a full-fledged participant and/or to receive
all of your potential profits. Generally, you never see any of the
earnings promised in their advertisements.

If an opportunity you've found seems to fall into one of these
categories, you should start asking questions before signing up for anything.

Ask the Appropriate Questions

Even though these work-at-home opportunities often state that you have
to act now or join by a certain time to secure your spot, you must take
the time to ask questions. Then, don't join unless your questions are
answered to your satisfaction.

Here are some of those questions:


Ask exactly what type of work you will be expected to perform.

Ask how you will be paid. If you are going to be paid by commission, be
sure to ask exactly what your percentage will be.

Ask exactly how much money you need to spend, including fees, supplies,
inventory, etc.

Ask how long the company has been in business since non-legitimate
companies frequently change their name to go out of business.

Ask to get copies of the company's sales materials and product
descriptions, so you can determine how product-focused the company is.
Know What to Do If You Are a Victim

If you are the victim of one of these scams, then you need to know what
to do next.

Your first course of action should be to notify the company. Talk to
someone as high up in the business as possible and be sure to make them
aware that your plan to contact the appropriate authorities.

If you don't receive any satisfaction from the company, your next step
is to report the company to the authorities. You should file a
complaint with at least one, if not all, of the organizations below:


The Federal Trade Commission – You can file a report through their web
site at www.ftc.gov

The Better Business Bureau – You can contact them through their web
site at www.bbb.org.

The Attorney General of Your State – You can find out how to contact
the attorney general in your area by doing a search for “Your State
attorney general” at Google.com. The right page should be the first or
second that appears in the search results.
The bottom line is if a business opportunity seems to good to be true,
then it's worth checking out. Any business that tries to pressure you
into making a hasty decision isn't a business you should be working
with.

© 2004 Vishal P. Rao


About The Author

Vishal P. Rao is the editor of Home Based Business Opportunities - A
web site dedicated to opportunities, ideas and resources to help you
start and run a home based business. Visit his site at:
http://www.home-based-business-opportunities.com

What Is Ponzi Scheme

Ponzi schemes: what are they?

The words "ponzi" and "pyramid" can often be seen on online investment
forums and scam warnings. In this article, I intend to clearly explain
the nature of these schemes and why people should be careful about
them.

Ponzi schemes are a type of illegal pyramid scheme named for Charles
Ponzi, who duped thousands of New England residents into investing in a
postage stamp speculation scheme back in the 1920s. Ponzi thought he
could take advantage of differences between U.S. and foreign currencies
used to buy and sell international mail coupons. Ponzi told investors
that he could provide a 40% return in just 90 days compared with 5% for
bank savings accounts. Ponzi was deluged with funds from investors,
taking
in $1 million during one three-hour period—and this was 1921! Though a
few early investors were paid off to make the scheme look legitimate,
an investigation found that Ponzi had only purchased about $30 worth of
the international mail coupons.

Decades later, the Ponzi scheme continues to work on the
"rob-Peter-to-pay-Paul" principle, as money from new investors is used to pay off
earlier investors until the whole scheme collapses.

In the classic "pyramid" scheme, participants attempt to make money
solely by recruiting new participants into the program. The hallmark of
these schemes is the promise of sky-high returns in a short period of
time for doing nothing other than handing over your money and getting
others to do the same.

The fraudsters behind a pyramid scheme may go to great lengths to make
the program look like a legitimate multi-level marketing program. But
despite their claims to have legitimate products or services to sell,
these fraudsters simply use money coming in from new recruits to pay off
early stage investors. But eventually the pyramid will collapse. At
some point the schemes get too big, the promoter cannot raise enough money
from new investors to pay earlier investors, and many people lose their
money.

Pyramid schemes now come in so many forms that they may be difficult to
recognize immediately. However, they all share one overriding
characteristic. They promise investors large profits based primarily on
recruiting others to join their program, not based on profits from any real
investment or trading activities. Some schemes may purport to be trading
currencies, stocks, or bonds, but they often simply use these excuses to
hide their pyramid structure.

A Ponzi scheme is closely related to a pyramid because it revolves
around continuous recruiting, but in a Ponzi scheme the promoter generally
has no product to sell and pays no commission to investors who recruit
new "members." Instead, the promoter collects payments from a stream of
people, promising them all the same high rate of return on a short-term
investment. In the typical Ponzi scheme, there is no real investment
opportunity, and the promoter just uses the money from new recruits to
pay obligations owed to longer-standing members of the program. In
English, there is an expression that nicely summarizes this scheme: It's
called "stealing from Peter to pay Paul." In fact some law enforcement
officers call Ponzi schemes "Peter-Paul" scams. Many of you may be
familiar with Ponzi schemes reported in the international financial news. For
example, the MMM fund in Russia, which issued investors shares of stock
and suddenly collapsed in 1994, was characterized as a Ponzi scheme.

Both Ponzi schemes and pyramids are quite seductive because they may be able to deliver a high rate of return to a few early investors for a short period of time. Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth's population. When the scheme collapses, most investors find themselves at the bottom, unable to recoup their losses.