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Online pyramid scams flourish

Posted November. 21, 2000 14:35,   


A new type of pyramid sales on the Internet is springing up like mushrooms after rain.

The ¡°cyber pyramid sales¡± firms claim that their business is legal, but a look of the true picture shows that they are very similar to illegal pyramid sales companies. Industry observers warned of possible damage from the new method of sales.

Industry sources said Monday that some of the companies recruit salespersons on the Web without revealing that they are pyramid sales firms. They also promise a good income and as a result, the number of subscribers is sharply increasing, according to the sources.

Firms dazzle people into joining:

A company employee, identified only by the initial K, recently clicked the Web site of an online shopping mall and telephoned it out of curiosity. A company official explained that if he pays 980,000 won to the company, it would construct an individual shopping mall for him and would give him 5 percent of the proceeds from the sales through the mall.

There is no such an explanation on the site, but the company lured those who make an inquiry through phone, promising they can earn big money.

The company also told him that if he introduces other persons to individual shopping malls, the company would give him 200,000 royalty. If the newcomer makes the third person join the firm, it will give K 5 percent of the subscription fee of 980,000 won.

This means that the more people join the company, the more K will earn without doing anything.

Advertising that 10,000 won investment will make 1 billion won, a company identified only as G, is advertising that anyone who pays 11,000 won will be registered as a member of the company and will get 1,000 won every time until the sixth step is concluded to secure new members.

The number of new members will snowball from one to 1 million after the sixth step and the final income will reach 1 billion won, according to the company. In one word, the company presents a nonsensical calculation under which anyone who invests 10,000 won will earn 1 billion won.

¡°It will be illegal for us to receive the subscription fee without paying for it, but we are offering game-related Internet services to them, so it is not illegal,¡± an official of the company claimed.

An S company is recruiting Netizens, advertising that it will give commissions to those who join its Web site as semi-subscribers and publicize the site. It also induces Netizens to join its site, proposing that a regular member who subscribes to its monthly magazine at US$29.95 will get double commission.

Its Web site carries a phrase, ¡°Earning an annual salary of US$100,000 is as easy as earning US$15,000,¡± attracting Netizens dreaming of making a fortune at a stroke.

The commission of the first-step subscriber is decided on, depending on how many regular members he or she will secure and how the total number of subscribers expand in a very similar form of the pyramid sales.

Fear of damage to people close to subscribers:

Soh Young-Kyong, chief of the consumer policy team at the YMCA¡¯s Citizens¡¯ Voice Office said, ¡°The company where the size of income of the first-step subscriber depends on the number of subscribers he or she attracts is virtually pyramid sales firm. An extremely small number of salespersons in the upper class in the pyramid sales companies can earn money, but most of others have no way to recover even their investments.¡±

He added that those who join the illegal pyramid schemes not only suffer financial losses, but inflict damage on their relatives or friends in the collapse of their personal relations with them.