MLM and Pyramid Schemes: A Radiography of a Recurring Scam

MLM and pyramid schemes: The business that never was

Every so often, an acquaintance calls. It’s been years since you last heard from them. They suggest meeting to discuss a "business opportunity." When you arrive, there’s no bar or drink: there’s a whiteboard, a compensation plan, and a promise of passive income. The scene repeats itself since the 1990s, when Amway sponsored the C.B. Zaragoza basketball team, and continues today with names like ACN, Herbalife, Lyoness, Xango, or Unetenet. The pattern does not change. The logo does.

The debate over these models has been dragging on for years. The material we analyze collects 118 responses accumulated over 5,125 days, from the initial forays with Amway to the rise of Lyoness and the closure of Unetenet. What emerges is not a debate about marketing: it is a catalog of broken friendships, volatilized savings, and family members who stopped talking about the subject.

What distinguishes a legal MLM from a pyramid scheme

The dividing line is thinner than it seems. In theory, a legitimate multi-level marketing business compensates distributors for product sales; a pyramid scheme pays for recruiting people. In practice, this distinction blurs when the product is unsellable and the only way to recover the investment is to bring in someone else.

A calculation circulating in the sector illustrates this: if you bring in three people, you earn commission on their sales; if those three bring in three more, you also earn on their sales. At fourteen or fifteen levels, according to the brochure they show you, practically all the money in Spain would pass through your pocket. The arithmetic is impeccable. The reality, no.

Spanish legislation banned pyramid schemes decades ago. Companies operating today present themselves as multi-level marketing, with physical products and compensation plans. But the product is often dispensable: coffee with fungal spores at gold prices, mangosteen juice at 22 euros per liter, vitamins no nutritionist recommends. The real business is not the product. It is the network.

The profile of the recruit: desperation and brainwashing

Documented cases share a pattern. Close individuals—friends, family, neighbors—who enter after a meeting where someone tells them they are "smart," "entrepreneurs," "chosen." Recruitment appeals to vanity and economic urgency. And once inside, the psychological mechanism closes: admitting the scam implies admitting you were fooled like a novice.

Some describe the phenomenon as sectarian. Defense of the product becomes identity. A relative involved in Herbalife or mushroom coffee does not admit doubts about quality: if you contradict them, you have a problem. And there is always someone who "earns 1,000 euros a week." Always. Although no one has seen it.

The collateral damage is the personal network. Multi-level marketing destroys friendships and family relationships. One case recounted: a friend who insisted for months, trying to prove actively and passively that it was a scam, and who one day stopped talking about the subject. He did not recognize the error. He simply avoided the issue. The humiliation of having fallen for it weighs more than the economic loss.

Lyoness, the pyramid that asked for 2,000 euros upfront

The Lyoness case occupies much of the most recent discussion. It presents itself as a "purchasing cooperative" with a discount card for affiliated merchants. The system, according to its defenders, is a form of referral marketing: you buy, accumulate cashback, and if you bring in others, you earn a share of their purchases. Entry is free. To obtain real yield from the "exclusive club," you must pay 2,000 euros.

The structure resembles a Ponzi scheme with a plastic card. Affiliated merchants hand over their customer lists in exchange for discounts and visibility. The data flow is opaque. And the question no one answers clearly is how long it takes to recover the initial investment. It depends on how much you work, they say. The same answer they give at ACN.

ACN is still alive. It has improved its presentations, but the conditions are the same. One documented case: an acquaintance involved for years who has not earned a significant amount and who continues to talk about the company as if it were to surpass Microsoft. Faith does not wane. The bank account, yes.

The business of desperation: why it works

The breeding ground is economic. When employment degrades and expectations narrow, the discourse of entrepreneurship becomes bait. The industrial crisis in Michigan portrayed by Michael Moore in Roger and Me showed the mechanism: entire communities with no job prospects fell into networks of salespeople who exploited the unsuspecting and their circle of friends.

Spain is not Michigan, but it shares the raw material: people in need of income and distrustful of traditional employment. Recruiters know this. That’s why they insist that "you are a smart guy," "you know how to spot business." Flattery is the entrance. The loneliness of those who have fallen is the exit.

Some distinguish between exploiting the desperate and pure fraud. Herbalife, Amway, or Avon have operated for decades within formal legality. But the result for most distributors is the same: loss of money, time, and credibility among their peers. Legality does not guarantee the business works. It only guarantees you cannot be sued for calling it a scam.

Unetenet and the cycle that does not close

The closure of Unetenet, a recent pyramid scheme, adds another link to the chain. Some announced on social media that they had started working there, convinced they were going to get rich. Shortly after, the whole setup collapsed. The sequence is always the same: promise, entry, recruitment, collapse. And start over with another name.

The prosecutor’s office rarely acts with the estimulante ilegal the victim expects. The structures appear legal, contracts are drafted by lawyers, and the line between multi-level marketing and pyramid schemes is defended in courts for years. Meanwhile, money changes hands and those at the top protect themselves.

What remains unsettling is this: every time a pyramid collapses, its victims do not disappear. Many try to recover what was lost by bringing in others. The cycle feeds itself. And the next business of the century is already looking for a name.