{"id":376489,"date":"2016-03-31T21:36:48","date_gmt":"2016-04-01T02:36:48","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/state\/tennessee-law\/tennessee-pyramid-and-ponzi-scheme-laws.html"},"modified":"2016-06-20T23:00:00","modified_gmt":"2016-06-21T04:00:00","slug":"tennessee-pyramid-and-ponzi-scheme-laws","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/state\/tennessee-law\/tennessee-pyramid-and-ponzi-scheme-laws.html","title":{"rendered":"Tennessee Pyramid and Ponzi Scheme Laws"},"content":{"rendered":"\n
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Tennessee Pyramid and Ponzi Scheme Laws<\/h1>\n
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Created by FindLaw’s team<\/a> of legal writers and editors<\/i><\/p>\n\n | Last updated\n

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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

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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

Pyramid schemes are one of the most well known of the white collar crimes<\/a>, thanks to people like Bernie Madoff. Generally these schemes involve paying money into a system where a few at the top get lots of money while many new people are suckered into the scheme by others. The idea is to sell people on joining rather than on selling products to people. Pyramid or Ponzi schemes<\/a> aren’t legal in Tennessee.<\/p>\r\n

On July 1, 2014 a new bill criminalizing pyramid promotional schemes came into effect in Tennessee. There were other laws on the books already, but this law strengthens Tennessee’s ability to fight pyramid schemes.<\/p>\r\n

Tennessee Pyramid or Ponzi Scheme Laws: Statutes<\/h2>\r\n

The main provisions of Tennessee’s laws on pyramid schemes are outlined below.<\/p>\r\n\r\n

Code Sections<\/b><\/p>\r\n<\/td>\r\n

Tennessee Code Sections 39-17-506: Lotteries, Chain Letters, and Pyramid Clubs<\/a>, 47-18-104: Unfair Or Deceptive Acts Prohibited<\/a>, and Title 47, Chapter 18, Part 56: Pyramid Promotional Schemes<\/a><\/p>\r\n<\/td>\r\n<\/tr>

What is Prohibited?<\/b><\/p>\r\n<\/td>\r\n

Tennessee prohibits several pyramid scheme related activities, including:<\/p>\r\n

Penalties<\/b><\/p>\r\n<\/td>\r\n

Civil Penalties<\/u><\/p>\r\n

A restraining order or injunction can be ordered by the court to stop bad acts. If a pyramid promotional scheme<\/a> violation occurred, the court can impose an up to $10,000 civil penalty per violation per person. Funds collected from this will be deposited in the state’s general fund. Unfair and deceptive practices can have a civil penalty of $1,000 to 10x the amount collected for each violation.<\/p>\r\n

Additionally, a person who was harmed by a deceptive act or pyramid scheme can sue the perpetrator in civil court<\/a> for their losses.<\/p>\r\n

Criminal Penalties<\/u><\/p>\r\n

Creating, operating, or promoting a pyramid promotional scheme is a Class A misdemeanor. The criminal penalty for participating in a pyramid club or chain letter scam depends on the amount of money involved:<\/p>\r\n

Who Enforces these Laws?<\/b><\/p>\r\n<\/td>\r\n

The Tennessee Office of the Attorney General and Reporter<\/a> enforces the prohibition of pyramid schemes in Tennessee. However, the federal Department of Justice<\/a> may be involved in a pyramid scheme case, if the scheme involved areas outside of Tennessee. Local prosecutors<\/a> may also go after pyramid scheme violators for crimes related to the fraud in their counties.<\/p>\r\n<\/td>\r\n<\/tr>

Where Can Victims Get Help?<\/b><\/p>\r\n<\/td>\r\n

If you’re a victim of a pyramid scheme, report it to the Tennessee Department of Commerce & Insurance<\/a> at 1-800-342-8385 or online<\/a>. Learn more about pyramid scheme red flags<\/a> to protect yourself from scams.<\/p>\r\n<\/td>\r\n<\/tr>

Where Can Accused Perpetrators Get Help?<\/b><\/p>\r\n<\/td>\r\n

If you\u2019re charged with any pyramid scheme related crimes, you should quickly contact an experienced Tennessee criminal defense attorney<\/a>.<\/p>\r\n<\/td>\r\n<\/tr><\/tbody><\/table>\r\n

Note:<\/i><\/b> State laws change frequently — it’s important to<\/i> verify the state laws that you’re researching<\/i>.<\/p>\r\n

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