Matrix scheme: Difference between revisions

Revision as of 23:06, 2 September 2022

Revision as of 21:05, 18 July 2023

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==Operation==

{{Section citations needed|date=July 2023}}

The operation of matrix schemes varies, though they often operate similarly to pyramid or Ponzi schemes.<ref name =msn2>{{cite web | url = http://www.nbcnews.com/id/3078976 | title=$150 for a plasma TV? A bad bet | access-date=5 August 2006}}</ref> Some of the former participants of these schemes consider them to be a form of [[confidence trick]], although others are happy with their purchase. To move upward in the list, a person must wait for new members to join or refer a certain number of people to the list. This is accomplished through purchasing a token product of marginal value: usually e-books, cell phone boosters, screen savers, or other software CDs/DVDs. When a pre-defined number of people have purchased the token product, the person currently at the top of the list receives their reward item, and the next person in the list moves to the top. The rewards for those at the top of the matrix list are usually high-demand consumer electronics, such as portable digital audio players, high-definition television sets, [[laptop]]s, and cellphones. Reaching the point on the list where one receives the expensive goods is termed "cycling".

The operation of matrix schemes varies, though they often operate similarly to pyramid or Ponzi schemes.<ref name="msn2">{{cite web | url = http://www.nbcnews.com/id/3078976 | title=$150 for a plasma TV? A bad bet | access-date=5 August 2006}}</ref> Some of the former participants of these schemes consider them to be a form of [[confidence trick]], although others are happy with their purchase.

The operation of matrix schemes varies, though they often operate similarly to pyramid or Ponzi schemes.<ref name =msn2>{{cite web | url = http://www.nbcnews.com/id/3078976 | title=$150 for a plasma TV? A bad bet | access-date=5 August 2006}}</ref> Some of the former participants of these schemes consider them to be a form of [[confidence trick]], although others are happy with their purchase. To move upward in the list, a person must wait for new members to join or refer a certain number of people to the list. This is accomplished through purchasing a token product of marginal value: usually e-books, cell phone boosters, screen savers, or other software CDs/DVDs. When a pre-defined number of people have purchased the token product, the person currently at the top of the list receives their reward item, and the next person in the list moves to the top. The rewards for those at the top of the matrix list are usually high-demand consumer electronics, such as portable digital audio players, high-definition television sets, [[laptop]]s, and cellphones. Reaching the point on the list where one receives the expensive goods is termed "cycling".

In many cases, the token product alone could not be reasonably sold for the price listed, and as such legal experts claim that, regardless of what is said, the real product being sold is the "reward" in question in those situations. In these cases, the operator could be charged with running a gambling game or failing to supply ordered products. Steven A. Richards, a lawyer who represents [[multi-level marketing|multi-level marketing (MLM)]] companies for Grimes & Reese in Idaho Falls, Idaho, has stated that often there are no clear legal tests for Ponzi schemes. But if the product sold has no value or very little value, and consumers wouldn't buy it without the attached gift, the scheme probably runs afoul of federal and state laws.<ref name = msn2/>

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In such a matrix, 9 out of 10, or 90 percent, of all customers will not receive the reward item, because the rules of the scheme are that one reward is issued for every 10 customers that join. (The fact that the reward is issued to the customer at the top of the list doesn't change the proportion of rewards given to customers signed up.) Supporters claim that additional revenue streams from advertising are used to keep the lists moving. However, detractors claim that it is impossible to generate enough outside revenue. If the entire world were to join the list, 90 percent of the world would be unable to cycle if the site did not draw sufficient alternate revenue streams. Adding more people to the list does not change the fact that the majority would receive nothing without these streams.

Additionally, the amount of time needed before a given individual will receive the product in question is often mistaken. In a matrix in which 10 people must sign up before cycling, the first person to join only needs nine additional sign-ups to cycle, but the second person needs 18 additional sign-ups: eight more for the person above himthem, and then 10 more for himselfthemself. The third person on the list likewise needs 27 additional signups: seven for the person on top of the list, 10 for the person directly above himthem, and then 10 for himselfthemself. The number of people required continues to grow for each new person joining the list. For the 10th person to cycle a total of 100 people would have to sign up, 1000 for the 100th, and so on.

Through this process, the matrix scheme generates substantial profit for its organiser. At the time of its popularity, for example, a PlayStation 2 cost a maximum of $299. After selling 10 $50 e-books, the organiser could make $500, and could purchase a PS2 for $299 to send to the first bidder while retaining a $201 profit. This same process could be repeated every time the matrix cycles; if the matrix cycled 10 times, the organiser would have sold $5000 worth of e-books, of which $2990 would have been spent on 10 PS2s, leaving them with a profit of $2010.