Wisconsin Pyramid and Ponzi Scheme Laws

Wisconsin prohibits "chain distributor" schemes, another name for pyramid or Ponzi schemes, under its gambling and unfair business practices laws. Since the Bernie Madoff scandal and similar notorious cases, pyramid schemes have become one of the best-known white collar crimes. Many pyramid and Ponzi schemes cross state lines. Therefore, the federal government, through the FBI and U.S. Department of Justice, is responsible for investigating and prosecuting these schemes and any related federal crimes such as securities fraud or tax evasion.

Wisconsin Pyramid or Ponzi Scheme Laws: Statutes

The main provisions of Wisconsin's pyramid scheme laws are detailed below.

Code Sections

Wisconsin Statutes Section 945.12 - Endless Sale Chains and Wisconsin Administrative Code: Agriculture, Trade, and Consumer Protection (ATCP) Chapter 122 - Chain Distributor Schemes

What is Prohibited?

The following types of chain or pyramid sale schemes are illegal in Wisconsin:

  • Chain Distributor Schemes - No person, partnership, association, or corporation can promote, offer, or grant participation in a chain distributor scheme where a person, after making an investment (buying any personal property, franchises, business opportunities, or services), is granted a right to recruit other persons for a profit, who are also granted that right after making an investment perpetuating a chain of people.
    • Unfair Trade Practice - Using a chain distribution scheme to solicit business investments from the public is an unfair trade practice. Other examples of unfair trade practices include closing sale when not bankrupt, liquidating, or closing or selling cigarettes in violation of the cigarette marketing laws.
  • Endless Sales Chains - Setting up or promoting a plan where motor vehicles are sold and the purchaser agrees to get one or more persons into the plan by making a similar purchase, and these individuals in turn get more people into the plan. Each purchaser given the right to something of value will be considered to have set up and promoted a lottery and can be punished under the gambling law.

Penalties

Violations of the chain distributor schemes law can be fined between $25 and $5,000 for each offense or imprisoned in county jail for a year or both. The state can bring a civil forfeiture action for $100 to $10,000 for each violation of an injunction to stop the chain distribution or pyramid scheme.

Endless sales chains are punished as gambling which is a Class B misdemeanor that can be punished by a fine not more than $1,000 and not more than 90 days in jail.

Additionally, any person who suffers a monetary loss because of a chain distribution scheme can sue the perpetrator for damages to recover twice the amount of his or her financial loss, any court costs, and reasonable attorneys' fees.

Who Enforces these Laws?

The Wisconsin Department of Agriculture, Trade, and Consumer Protection is the agency to file complaints about unfair sales practices and fraud, including chain distribution or pyramid schemes. However, other agencies could proceed with a legal action against the violator, including the Wisconsin Department of Justice and the local district attorney's office.

Where Can Victims Get Help?

If you've been victimized by a chain distribution or pyramid scheme, report it to the Wisconsin Department of Agriculture, Trade, and Consumer Protection online or call the Consumer Protection Hotline at 1-800-422-7128. Also, learn more about signs of a pyramid scheme. If anyone tries selling you investments or business opportunities and it feels like a pyramid scheme, ask them these questions.

Where Can Accused Perpetrators Get Help?

If you or a loved one is facing a chain distribution or pyramid scheme related criminal charge, it's best to consult with an experienced Wisconsin criminal defense attorney or your assigned public defender as soon as possible. If an alleged victim to a pyramid scheme has sued you in a Wisconsin civil court, you will most likely need a qualified Wisconsin litigation firm to defend you.


Note: State laws change all the time -- it's important to verify the laws you're researching with an experienced local attorney or by conducting your own legal research.

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