Most states have laws making activities that constitute a pyramid scheme or a Ponzi scheme illegal. Although these terms are often used interchangeably, they actually involve different circumstances. While a pyramid scheme usually includes a group of people, a Ponzi scheme generally involves one person. It's important to remember that regardless of whether classified as a pyramid scheme or a Ponzi scheme, conduct that's deceptive or fraudulent is generally considered a crime.
In Illinois, the statute outlawing pyramid schemes falls under the umbrella of criminal offenses that involve deception and fraud. Under these laws, it's illegal to knowingly sell, offer to sell, or attempt to sell the right to participate in a pyramid sales scheme. While there is no specific statute addressing Ponzi schemes in Illinois, there are federal agencies, such as the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC) that have the power to prosecute these types of schemes. In fact, the SEC has taken various enforcement actions against Ponzi schemes.
Illinois Pyramid and Ponzi Scheme Laws Overview
Below you'll find key provisions of pyramid and Ponzi scheme laws in Illinois.
Illinois Statute Chapter 720. Criminal Offenses § 5/17-60
A pyramid scheme is defined as any operation or plan in which a person, in exchange for money or other thing of value*:
- Acquires the opportunity to receive a benefit primarily based upon inducing additional people to participate in the same operation or plan; and
- Is not primarily contingent on the volume or quantity of goods/services sold or distributed to persons for purposes of resale to consumers.
*In the context of this statute, "money or other thing of value" does not include payments made for sales demonstration equipment and material furnished on a nonprofit basis for use in making sales and not for resale.
||Violation of this statute is a Class A misdemeanor.
|Conviction of a Class A misdemeanor can result in less than one year in prison and/or fines of up to $2,500 (for each offense). If probation or conditional discharge is imposed, it cannot last for more than two years. It is also possible that a person convicted under this statute may be required to make restitution.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
Illinois Pyramid and Ponzi Scheme Laws: Related Resources
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Get Legal Help with Your Pyramid and Ponzi Scheme Case in Illinois
Violation of pyramid and Ponzi scheme laws can result in imprisonment and/or an imposition of fines. If you're facing charges under Illinois pyramid and Ponzi scheme laws, it may be in your best interest to contact a criminal defense attorney in Illinois as soon as possible.