[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:07.10,0:00:08.59,Default,,0000,0000,0000,,In 2004,
Dialogue: 0,0:00:08.59,0:00:10.67,Default,,0000,0000,0000,,a new company called Vemma Nutrition
Dialogue: 0,0:00:10.67,0:00:13.43,Default,,0000,0000,0000,,started offering a life-changing \Nopportunity
Dialogue: 0,0:00:13.43,0:00:17.10,Default,,0000,0000,0000,,to earn full time income \Nfor part time work.
Dialogue: 0,0:00:17.10,0:00:19.18,Default,,0000,0000,0000,,Vemma’s offer was open to everybody,
Dialogue: 0,0:00:19.18,0:00:22.90,Default,,0000,0000,0000,,regardless of prior experience \Nor education.
Dialogue: 0,0:00:22.90,0:00:25.37,Default,,0000,0000,0000,,There were only two steps to start \Nget started earning:
Dialogue: 0,0:00:25.37,0:00:29.43,Default,,0000,0000,0000,,purchase a $500-600 kit \Nof their liquid nutrition products,
Dialogue: 0,0:00:29.43,0:00:32.58,Default,,0000,0000,0000,,and recruit two more members \Nto do the same.
Dialogue: 0,0:00:32.58,0:00:34.84,Default,,0000,0000,0000,,Vemma Nutrition Company grew quickly,
Dialogue: 0,0:00:34.84,0:00:36.40,Default,,0000,0000,0000,,becoming a global operation
Dialogue: 0,0:00:36.40,0:00:41.14,Default,,0000,0000,0000,,that brought in 30,000 new members \Nper month at its peak.
Dialogue: 0,0:00:41.14,0:00:42.84,Default,,0000,0000,0000,,There was just one problem—
Dialogue: 0,0:00:42.84,0:00:48.61,Default,,0000,0000,0000,,while the company generated $200 million\Nof annual revenue by 2013,
Dialogue: 0,0:00:48.61,0:00:52.86,Default,,0000,0000,0000,,the vast majority of participants \Nearned less than they paid in.
Dialogue: 0,0:00:52.86,0:00:56.23,Default,,0000,0000,0000,,Vemma was eventually charged with \Noperating a pyramid scheme:
Dialogue: 0,0:00:56.23,0:00:57.56,Default,,0000,0000,0000,,a common type of fraud
Dialogue: 0,0:00:57.56,0:00:58.83,Default,,0000,0000,0000,,where members make money
Dialogue: 0,0:00:58.83,0:01:01.74,Default,,0000,0000,0000,,by recruiting more people to buy in.
Dialogue: 0,0:01:01.74,0:01:04.61,Default,,0000,0000,0000,,Typically, the founder solicits an initial\Ngroup of people
Dialogue: 0,0:01:04.61,0:01:06.96,Default,,0000,0000,0000,,to buy in and promote the scheme.
Dialogue: 0,0:01:06.96,0:01:08.90,Default,,0000,0000,0000,,They are then encouraged to recruit others
Dialogue: 0,0:01:08.90,0:01:12.12,Default,,0000,0000,0000,,and promised part of the money \Nthose people invest,
Dialogue: 0,0:01:12.12,0:01:14.100,Default,,0000,0000,0000,,while the founder also takes a share.
Dialogue: 0,0:01:14.100,0:01:17.85,Default,,0000,0000,0000,,The pattern repeats for each group \Nof new participants,
Dialogue: 0,0:01:17.85,0:01:21.95,Default,,0000,0000,0000,,with money from recent arrivals funneled \Nto those who recruited them.
Dialogue: 0,0:01:21.95,0:01:23.80,Default,,0000,0000,0000,,This differs from a Ponzi scheme,
Dialogue: 0,0:01:23.80,0:01:25.60,Default,,0000,0000,0000,,where the founders recruit new members
Dialogue: 0,0:01:25.60,0:01:28.92,Default,,0000,0000,0000,,and secretly use their fees to \Npay existing members,
Dialogue: 0,0:01:28.92,0:01:32.46,Default,,0000,0000,0000,,who think the payments come \Nfrom a legitimate investment.
Dialogue: 0,0:01:32.46,0:01:34.44,Default,,0000,0000,0000,,As a pyramid scheme grows,
Dialogue: 0,0:01:34.44,0:01:37.90,Default,,0000,0000,0000,,it becomes increasingly difficult for new \Nrecruits to make money.
Dialogue: 0,0:01:37.90,0:01:42.22,Default,,0000,0000,0000,,That’s because the number of participants\Nexpands exponentially.
Dialogue: 0,0:01:42.22,0:01:46.96,Default,,0000,0000,0000,,Take a structure where each person has \Nto recruit six more to earn a profit.
Dialogue: 0,0:01:46.96,0:01:49.40,Default,,0000,0000,0000,,The founder recruits six people to start,
Dialogue: 0,0:01:49.40,0:01:51.81,Default,,0000,0000,0000,,and each of them recruits six more.
Dialogue: 0,0:01:51.81,0:01:54.94,Default,,0000,0000,0000,,There are 36 people in that second\Nround of recruits,
Dialogue: 0,0:01:54.94,0:01:57.49,Default,,0000,0000,0000,,who then each recruit 6 people—
Dialogue: 0,0:01:57.49,0:02:01.15,Default,,0000,0000,0000,,a total of 216 new recruits.
Dialogue: 0,0:02:01.15,0:02:03.10,Default,,0000,0000,0000,,By the twelfth round of recruiting,
Dialogue: 0,0:02:03.10,0:02:07.10,Default,,0000,0000,0000,,the 2.1 billion newest members \Nwould have to recruit
Dialogue: 0,0:02:07.10,0:02:11.00,Default,,0000,0000,0000,,over 13 billion more people total \Nto make money–
Dialogue: 0,0:02:11.00,0:02:14.12,Default,,0000,0000,0000,,more than the entire world population.
Dialogue: 0,0:02:14.12,0:02:15.25,Default,,0000,0000,0000,,In this scenario,
Dialogue: 0,0:02:15.25,0:02:16.75,Default,,0000,0000,0000,,the most recent recruits,
Dialogue: 0,0:02:16.75,0:02:19.85,Default,,0000,0000,0000,,over 80% of the scheme’s participants,
Dialogue: 0,0:02:19.85,0:02:22.48,Default,,0000,0000,0000,,lose all the money they paid in.
Dialogue: 0,0:02:22.48,0:02:23.94,Default,,0000,0000,0000,,And in real life,
Dialogue: 0,0:02:23.94,0:02:27.03,Default,,0000,0000,0000,,many earlier joiners lose out too.
Dialogue: 0,0:02:27.03,0:02:29.82,Default,,0000,0000,0000,,Pyramid schemes are illegal \Nin most countries,
Dialogue: 0,0:02:29.82,0:02:31.91,Default,,0000,0000,0000,,but they can be difficult to detect.
Dialogue: 0,0:02:31.91,0:02:34.26,Default,,0000,0000,0000,,They are presented as many \Ndifferent things,
Dialogue: 0,0:02:34.26,0:02:36.05,Default,,0000,0000,0000,,including gifting groups,
Dialogue: 0,0:02:36.05,0:02:39.68,Default,,0000,0000,0000,,investment clubs, and multi-level \Nmarketing businesses.
Dialogue: 0,0:02:39.68,0:02:44.12,Default,,0000,0000,0000,,The distinction between pyramid schemes \Nand legitimate multi-level marketing
Dialogue: 0,0:02:44.12,0:02:46.09,Default,,0000,0000,0000,,can be particularly hazy.
Dialogue: 0,0:02:46.09,0:02:47.66,Default,,0000,0000,0000,,In theory, the difference is that
Dialogue: 0,0:02:47.66,0:02:50.24,Default,,0000,0000,0000,,the members of the multi-level \Nmarketing companies
Dialogue: 0,0:02:50.24,0:02:54.62,Default,,0000,0000,0000,,primarily earn compensation from selling\Na particular product or a service
Dialogue: 0,0:02:54.62,0:02:56.10,Default,,0000,0000,0000,,to retail customers,
Dialogue: 0,0:02:56.10,0:03:01.06,Default,,0000,0000,0000,,while pyramid schemes primarily compensate\Nmembers for recruitment of new sellers.
Dialogue: 0,0:03:01.06,0:03:02.38,Default,,0000,0000,0000,,In practice, though,
Dialogue: 0,0:03:02.38,0:03:05.67,Default,,0000,0000,0000,,many multi-level marketing companies make \Nit all but impossible
Dialogue: 0,0:03:05.67,0:03:08.40,Default,,0000,0000,0000,,for members to profit purely \Nthrough sales.
Dialogue: 0,0:03:08.40,0:03:11.51,Default,,0000,0000,0000,,And many pyramid schemes, \Nlike Vemma Nutrition,
Dialogue: 0,0:03:11.51,0:03:15.32,Default,,0000,0000,0000,,disguise themselves as legal multi-level\Nmarketing businesses,
Dialogue: 0,0:03:15.32,0:03:19.79,Default,,0000,0000,0000,,using a product or service to hide the\Npay-and-recruit structure.
Dialogue: 0,0:03:19.79,0:03:25.41,Default,,0000,0000,0000,,Many pyramid schemes also capitalize \Non already existing trust within churches,
Dialogue: 0,0:03:25.41,0:03:28.61,Default,,0000,0000,0000,,immigrant communities, \Nor other tightly knit groups.
Dialogue: 0,0:03:28.61,0:03:32.29,Default,,0000,0000,0000,,The first few members are encouraged \Nto report a good experience
Dialogue: 0,0:03:32.29,0:03:34.64,Default,,0000,0000,0000,,before they actually start \Nmaking a profit.
Dialogue: 0,0:03:34.64,0:03:37.17,Default,,0000,0000,0000,,Others in their network follow \Ntheir example,
Dialogue: 0,0:03:37.17,0:03:39.31,Default,,0000,0000,0000,,and the schemes balloon in size
Dialogue: 0,0:03:39.31,0:03:43.52,Default,,0000,0000,0000,,before it comes clear that most members\Naren’t actually profiting.
Dialogue: 0,0:03:43.52,0:03:46.77,Default,,0000,0000,0000,,Often, the victims are \Nembarrassed into silence.
Dialogue: 0,0:03:46.77,0:03:51.18,Default,,0000,0000,0000,,Pyramid schemes entice people with the\Npromise of opportunity and empowerment.
Dialogue: 0,0:03:51.18,0:03:53.59,Default,,0000,0000,0000,,So when members don’t end up making money,
Dialogue: 0,0:03:53.59,0:03:56.57,Default,,0000,0000,0000,,they can blame themselves \Nrather than the scheme,
Dialogue: 0,0:03:56.57,0:04:00.33,Default,,0000,0000,0000,,thinking they weren’t tenacious enough \Nto earn the returns promised.
Dialogue: 0,0:04:00.33,0:04:02.08,Default,,0000,0000,0000,,Some victims keep trying,
Dialogue: 0,0:04:02.08,0:04:04.15,Default,,0000,0000,0000,,investing in multiple schemes,
Dialogue: 0,0:04:04.15,0:04:06.64,Default,,0000,0000,0000,,and losing money each time.
Dialogue: 0,0:04:06.64,0:04:08.47,Default,,0000,0000,0000,,In spite of all these factors,
Dialogue: 0,0:04:08.47,0:04:11.49,Default,,0000,0000,0000,,there are ways to spot a pyramid scheme.
Dialogue: 0,0:04:11.49,0:04:13.77,Default,,0000,0000,0000,,Time pressure is one red flag—
Dialogue: 0,0:04:13.77,0:04:19.23,Default,,0000,0000,0000,,be wary of directives to “act now or \Nmiss a once-in-a-lifetime opportunity.”
Dialogue: 0,0:04:19.23,0:04:24.39,Default,,0000,0000,0000,,Promises of large, life-altering\Namounts of income are also suspect.
Dialogue: 0,0:04:24.39,0:04:28.17,Default,,0000,0000,0000,,And finally, a legitimate multi-level \Nmarketing business
Dialogue: 0,0:04:28.17,0:04:33.44,Default,,0000,0000,0000,,shouldn’t require members to pay for the\Nopportunity to sell a product or service.
Dialogue: 0,0:04:33.44,0:04:37.38,Default,,0000,0000,0000,,Pyramid schemes can be incredibly \Ndestructive to individuals,
Dialogue: 0,0:04:37.38,0:04:40.98,Default,,0000,0000,0000,,communities, and even entire countries.
Dialogue: 0,0:04:40.98,0:04:42.83,Default,,0000,0000,0000,,But you can fight fire with fire
Dialogue: 0,0:04:42.83,0:04:45.56,Default,,0000,0000,0000,,by sending this video to three \Npeople you know,
Dialogue: 0,0:04:45.27,0:04:48.56,Default,,0000,0000,0000,,and encouraging them to do the same.