Idaho Pyramid and Ponzi Schemes Laws
While pyramid schemes come in many shapes and sizes, the scams' promoters always promise participants a large payout in exchange for paying a fee to join and then recruiting others to join the scheme. Pyramid and Ponzi schemes are both fraudulent scams in which participants make money primarily from enrollment fees paid by new recruits rather than by selling products or services.
While a Ponzi scheme is similar to a pyramid scheme in that they both create the illusion of profit via continuous recruiting, a Ponzi scheme promoter generally doesn't have a product to sell or pay participants for recruiting new investors. Instead, Ponzi schemes usually operate with one promoter who recruits rounds of investors with the promise of extraordinary returns on their investments.
Common examples of pyramid and Ponzi schemes include:
- Mail Fraud
- Wire Fraud
- Real Estate Fraud
- Commodities Fraud
- Lottery Fraud
- Securities Fraud
The table below outlines Idaho's pyramid and Ponzi scheme laws.
|Idaho Code section 18-3101: Pyramid Promotional Schemes Prohibited|
|It is illegal to establish, promote, offer, operate, advertise, or grant participation in any pyramid promotional scheme.|
What Qualifies as a "Pyramid Promotional Scheme?"
|A pyramid promotional scheme means any plan or operation in which a participant pays for the right to receive compensation that is derived primarily from the recruitment of other participants in the plan or operation rather than from the sale of goods, services, or intangible property to participants or by participants to others.|
Violating Idaho's pyramid promotional scheme law is a felony offense that is punishable by imprisonment for up to five years, and/or a fine of up to $50,000.
Any violation of this statute shall also be deemed an unfair and deceptive practice in violation of the Idaho Consumer Protection Act. Any person harmed by a pyramid scheme can recover monetary damages pursuant to the Idaho Consumer Protection Act.
Related Offense - Referral Selling
In Idaho, it is also illegal to engage in "referral selling." Referral selling is similar to a pyramid scheme in that participants are compensated from the recruitment of new participants, however, in a referral sale scheme participants buy into the scheme by providing the names of perspective participants. In order to qualify as referral selling, the participant's compensation must be contingent upon the occurrence of an event subsequent to the time that the participant joins the scheme. For the text of Idaho's referral selling statute see Idaho Code section 48-603(15).
- Financial Crimes
- Multi-Level Marketing (MLM) vs. Pyramid Schemes
- The Telltale Signs of a Pyramid Scheme
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