{"id":375470,"date":"2016-03-31T21:36:15","date_gmt":"2016-04-01T02:36:15","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/state\/north-carolina-law\/north-carolina-pyramid-scheme-laws.html"},"modified":"2016-06-20T23:00:00","modified_gmt":"2016-06-21T04:00:00","slug":"north-carolina-pyramid-scheme-laws","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/state\/north-carolina-law\/north-carolina-pyramid-scheme-laws.html","title":{"rendered":"North Carolina Pyramid Scheme Laws"},"content":{"rendered":"\n
\n \n
\n

North Carolina Pyramid Scheme Laws<\/h1>\n
\n
\n

Created by FindLaw’s team<\/a> of legal writers and editors<\/i><\/p>\n\n | Last updated\n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

In North Carolina, "Pyramid<\/a>" and "Ponzi<\/a>" schemes are types of investment fraud<\/a>. Some people confuse pyramid and Ponzi schemes with legitimate multilevel marketing businesses (MLMs). MLMs have a real product to sell and don’t require consumers to pay anything extra to join the MLM system.<\/p>\r\n

North Carolina Pyramid Schemes<\/h2>\r\n

In a pyramid scheme the products or services are gimmicks or overpriced such as health and beauty aids, new inventions, or "miracle" cures.<\/p>\r\n

Here’s an example of how a pyramid scheme promoter might try and lure in other members. A promoter will make a claim that you can get rich quick, just like her, by recruiting people to become "distributors" in an exciting new company that sells a wonder weight loss drug. She explains that if you bring people into the business, and they recruit more people, you would earn a percentage of all of their sales. All you have to do is pay a membership fee to join.<\/p>\r\n

Here, the emphasis is on recruiting others with no legitimate product to sell. If a program primarily focuses on recruiting others to join the program for a fee, it is likely a pyramid scheme. Be skeptical if you will receive more compensation for recruiting others than for product sales.<\/p>\r\n

North Carolina Ponzi Schemes<\/h2>\r\n

In a Ponzi scheme, the scammer pays old investors with the money he or she gets from new investors. All one has to do is hook a few investors who are willing to get in early on a once-in-a-lifetime business venture. The details of the investment don’t matter. What fools people is the promise of fantastic returns on investments.<\/p>\r\n

Here is a brief overview of how North Carolina combats pyramid and Ponzi schemes to protect consumers.<\/p>\r\n

See White Collar Crimes<\/a>, Financial Crimes<\/a>, Securities Fraud<\/a>, Wire Fraud<\/a> and Property Crimes<\/a> for more information.<\/p>\r\n\r\n
Code Section<\/b><\/td>\r\n NC General Statutes 14-291.2<\/a><\/td>\r\n<\/tr>
Nicknames<\/b><\/td>\r\nPyramid Nicknames: "Chain Letters" "Cash Gifting Schemes"<\/td>\r\n<\/tr>
What is Prohibited<\/b><\/td>\r\n

Pyramid Scheme<\/b>: A pyramid scheme is any plan in which a participant (1) pays money (2) for the chance to receive money (3) upon the introduction of new participants into the program, whether or not a product or service is offered.<\/p>\r\n

Ponzi Scheme<\/b>: A swindle in which a quick return, made up of money from new investors, on an initial investment lures the victim into much bigger risks. Generally prosecuted as a federal crime, but can be prosecuted as state-crime under fraud and other state statutes.<\/p>\r\n<\/td>\r\n<\/tr>

Type of Crime<\/b><\/td>\r\nFelony<\/a> or Misdemeanor<\/a>-varies on nature of the crime<\/td>\r\n<\/tr>
Who Prosecutes this Crime? <\/b><\/td>\r\nNorth Carolina Attorney General, Local Prosecutors<\/td>\r\n<\/tr>
Punishment <\/b><\/td>\r\nState Prison or County Jail, Probation, Fines, Restitution, Community Service, Injunction, Revocation of Business License, Freezing Business Assets.<\/td>\r\n<\/tr><\/tbody><\/table>\r\n

There are several federal protections that may be available to you. To learn more about federal consumer protection laws, contact the following agencies:<\/p>\r\n