Many people like the idea of working from home and being in charge of their schedule. However, as the gig economy has grown, so has the risk of getting involved in a pyramid scheme. Companies all over the world operate under the guise of a legitimate business and are marketed as a fantastic investment opportunity. Under Ohio law, these operations are considered fraudulent, and those running them could face misdemeanor or felony charges. Below is an overview of what pyramid schemes are and the legal implications they have.

Understanding Pyramid Schemes 

How Do Pyramid Schemes Work? 

By definition, pyramid schemes are an investment scam created to model the networking marketing structure. Typically, they’re started by one person who introduces a fraudulent business and then acts as a recruiter to get others to join for a fee. Each new person makes money by signing additional people up for a fee who, in turn, will enlist more investors. This cycle will continue until interest in the company fades, and there’s no one left to join. At this point, the pyramid scheme ends, and those who already invested lose money.

Consequences of Running a Pyramid Scheme

Every state has laws governing fraudulent activity associated with pyramid schemes. In Ohio, the Anti-Pyramid Sales Act makes it illegal to run an operation that requires people to invest money when the only opportunity to earn a return is through the recruitment of other investors. This is the basis for distinguishing a pyramid scheme from multi-level marketing businesses that operate legally. Depending on the nature of the offense, the original pyramid scheme recruiter could face misdemeanor or felony charges punishable with jail time, fines, victim restitution, community service, and the loss of a business license. 

If you are accused of operating a pyramid scheme, turn to James F. Bogen, Attorney at Law, to discuss your legal rights and options. Backed by more than a decade of experience, he will help build a strong defense against the charges brought against you. He has in-depth knowledge of the law and is committed to advocating on behalf of all his clients throughout Cincinnati, OH. Call (513) 503-7251 to schedule a consultation, or visit him online to learn more about the various misdemeanor and felony cases he represents.