Matrix scheme: Difference between revisions

Revision as of 03:01, 26 August 2006

Revision as of 20:25, 18 November 2006

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==Operation==

The operation of matrix schemes varies, though they often operate similar to Ponzi schemes. <ref name =msn2>{{cite web | url = http://msnbc.msn.com/id/3078976 | title=$150 for a plasma TV? A bad bet | accessdate=2006-08-05}}</ref> 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 shareware CD’sCDs. 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 player]]s, plasma and high-definition [[television]] sets, laptop [[computers]], and [[cellular phone]]s.

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. Steven A. Richards, a lawyer who represents multi-level marketing companies for Grimes & Reese in Idaho Falls, Idaho, said there often aren’t 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 free gift, the scheme probably runs afoul of federal and state laws. <ref name = msn2/>

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==Legality==

While detractors of matrix schemes contend that the sites and business models are illegal, in America there are no laws naming the schemes as illegal, and no rulings stating that the business model operates outside of law. There are, however, some challenges currently in the court system. In addition, the U.S. [[Federal Trade Commission]] and the U.KUK. [[Trading Standards]] have issued warnings to the public about the sites, stating that due to the ease by which these models can be manipulated for fraudulent purposes, care should be taken and research done on the scheme in question prior to purchasing from them with the intent on receiving the list gift. The rewards for entering into a successful matrix scheme are substantial. However, several matrix sites have shut down whilst defending lawsuits, such as the civil action taken against the EZExpo.com. {{fact}}

The U.KUK. Office of Fair Trading, however, has declared some of them to be illegal. On July 1st, 2005, the Office of Fair Trading in England declared that two matrix schemes were a form of illegal lottery, pulsematrix.com and phones4everyone (at themobilematrix.com). <ref name =oftpress2>{{cite web | url =http://www.oft.gov.uk/News/Press+releases/2005/118-05.htm | title = Website schemes offering 'free' electronic gadgets stopped by OFT| accessdate = 2005-07-01}}</ref> In the UK some matrix sites may claim they are a private lottery, and thus operate legally. Opponents of matrix schemes believe otherwise. Nonetheless, neither the Office of Fair Trading or the Department of Trade and Industry has tested this argument in a court of law. All court cases to date have been in the civil court system, and so it is still unclear whether matrix schemes operate within the law.

In 2003 EZExpo and several payment processors were sued in the civil courts for running an illegal lottery in the state of California, with the payment processors abetting the scam.<ref>{{cite web | url =http://appellatecases.courtinfo.ca.gov/search/case/dockets.cfm?dist=0&doc_id=371626 | title = California Courts - Appelate Court Case Information -Docket Entries| accessdate = 2005-08-06}}</ref> <ref>{{cite web | url =http://wagelaw.typepad.com/wage_law/2006/05/prop_64_cases_t.html | title = Wage Law: Prop 64 Cases To Be Argued | accessdate = 2005-08-06}}</ref><ref>{{cite web | url =http://www.diaz-law.com/diazlaw/2005/05/prop_64_to_the_.html | title = The Antitrust Monitor: Prop 64 to the Rescue for Neovi, PaySystems, and PayPal But Not for Ginix| accessdate = 2005-08-06}}</ref> However, the civil case is still ongoing.