UNTIL now, I am still getting e-mails and questions on two articles I wrote a few weeks ago: “Is Emgoldex a Scam?” and “Defending Emgoldex and Failing Miserably.” Today, I hope to share some of those questions and my answers to them in order to address a broader audience, in case you have the same questions lurking in your heads as well.
1) Aren’t there legal pyramids and illegal pyramids?
No, by definition, a “pyramid scheme” is illegal. It is an “unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.”
What is legal is Multi-Level Marketing (MLM) or Network Marketing although there have already been a number of MLM companies taken down for operating as a pyramid scheme, and this is what plagues the industry because laymen typically regard all of them, scams or otherwise, as “pyramids.”
2) You mentioned in your articles that you can prove mathematically why these schemes will fail. Can you please do that now?
Sure, this is a simple geometric progression. Emgoldex, in particular, operates on a 14:1 ratio -- meaning to sustain 1 person, you need 14 participants. To sustain 2, you need 28. To sustain 3, you need 42. In other words, for all 14 non-exiting initial participants, you need another 14x14 people = 196.
Extending this (multiply each level by 14):
Level 1 = 14
Level 2 = 196
Level 3 = 2,744
Level 4 = 38,416
Level 5 = 537,824
Level 6 = 7,529,536
Level 7 = 105,413,504 -- More than the Philippine population
Level 8 = 1,475,789,056
Level 9 = 20,661,046,784 -- More than the world population
In this example, there will be a sure collapse at Level 8 -- because it will be virtually impossible to achieve Level 9.
Now, you might say, that will still take a long time so why not make some money on the side in the meantime? But take note that we are assuming that everyone will eventually join Emgoldex...which is not the case in reality. In reality, A VERY SMALL percentage of the population joins ANY networking company and a much smaller percentage of that will join Emgoldex specifically.
What I mean to say is this. It seems that for the level 1 people to exit, they need to talk to 196 people only. Wrong. They need to talk to much more than that because most of the people they talk to will not join. So in order to get your 196 people, you may already have "burned" through a thousand or more people who refused to join. Therefore, the collapse may happen sooner than you think it will.
3) But Emgoldex people say that they can keep on reinvesting their money so the system will never collapse.
Not everyone will reinvest. In fact, only a small percentage will do so. When that happens, it will collapse because the system as it is constantly needs new funds for it to keep going. Consider this. 15 people invest approximately 35,000 each and only one exits with 180,000. Total cash into the system is P525,000, total cash out of the system is PHP 180,000. That means, for every peso you put into the system, you lose close to three pesos. That's not very smart, is it?
Tell me how this is sustainable if no new investor comes in and the same people keep putting their money in. And these people have to question, where does the difference of 345,000 go? Why to the pockets of the Emgoldex owners, of course, who are laughing all the way to the bank.
4) I have a friend who is heavily into Emgoldex. Can I please ask you to write her and hopefully talk some sense into her?
I think the best you can do is to show her the articles I wrote. If that doesn't convince her, I don't know what will. I don't think a chat with me will do it because I don't have a personal connection with your friend.
And besides these people are trained not to listen to "negative" people -- which is how they look at me, for sure. There are people who simply cannot be swayed by logic or reason and talking to them is like talking to a religious fanatic. Some people just like to take lessons the hard way, I guess.
5) Can you also do a review of Company X or Company Y which appeared in this particular TV show or which has that particular person as its endorser?
I'm sorry but I would have to decline. It is not my full-time job hunting down every bogus scheme, or analyzing the business model of each scam that pops up every now and then. What I hope to have done is to give readers a general sense of how to detect scams and to make them analyze better. I wrote about Emgoldex because it kept popping up on my Facebook feed and it was getting annoying and someone close to me asked me to look more deeply into it.
In closing, my advice is to exercise extreme caution and due diligence before you invest your hard-earned money somewhere. The old adage still holds true -- that if something sounds too good to be true, then it probably is.
And for those who haven't heard, Emgoldex has already changed its name to Global Intergold, but a scam by any other name will still suck money out of your pockets.
Published in the Sun.Star Davao newspaper on July 31, 2015.
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