Multi-level marketing, or MLM for short, is an old scheme rarely used anymore because people aren’t stupid enough to fall for it now. It isn’t that long ago that it wasn’t the case and BurnLounge made a small fortune with their pyramid scheme.
A pyramid scheme and multi-level marketing aren’t completely the same, and some forms are even legal in some places, but let us just say it is one thing for the sake of this article. BurnLounge promised the path to riches with its digital music store concept, but the only ones that got rich in the experience were the founders.
The site promised six-figure incomes, but most people didn’t even make back their initial investment. The company was shut down in 2007 after the FTC filed a suit against it. Since then BurnLounge has been fighting the case, hoping to end up as a winner. In 2011, a US District Judge issued a judgment that this was a pyramid scheme and illegal. That was appealed and BurnLounge lost again earlier this month.
On Monday, the FTC announced that it is mailing 52,099 checks totaling nearly $1.9 million (~£1.2 million) to consumers who paid to become BurnLounge “moguls.” A long case finally closed.
It worked the way that BurnLounge customers got their own online music store on a pre-made web page. There were several pre-paid plans and selling music led to rewards points, which could be traded for cash if the consumer paid to join the Mogul program for an additional fee. The company guaranteed a minimum commission of just 50 cents for selling a $9.90 album, while offering bonuses of $10 to $50 for selling product packages—in other words, for recruiting. The FTC’s expert found that 90 percent of the bonuses paid, minimum, would be for packages tied to recruitment, not for music.
Thank you ArsTechnica for proving us with this information