Financial Crime World

Title: Caution Urged Against Pyramid Schemes Masquerading as Multilevel Marketing in Cyprus

Cyprus-based Law Firm Warns Against Potential Pyramid Schemes Disguised as MLM

Elias Neocleous & Co LLC, a Cyprus-based law firm known for its commitment to ethical legal services and innovative solutions, issues a warning against the proliferation of potential pyramid schemes disguised as Multilevel Marketing (MLM) in Cyprus.

MLM, or Multi-Level Marketing, is a common business strategy in the direct sales industry. Distributors recruit new members and earn commissions from their sales. While MLM is legal and unregulated in Cyprus, pyramid schemes are considered unfair commercial practices under the Law 112(I)/2021 on Consumer Protection.

  • MLM: Involves selling real products and earning commissions from sales and recruitment.
  • Pyramid Schemes: Relies on new recruitment to generate revenue, with no real product or service.

Pyramid Scheme Prohibitions in Cyprus

Pyramid schemes, also known as “Ponzi schemes,” are illegal in Cyprus. Participating or promoting them is a criminal offense, subject to a maximum fine of €200,000, imprisonment for up to five years, or both.

Key Differences Between MLM and Pyramid Schemes

The focus on profit is the primary distinction between MLM and pyramid schemes:

  • MLM: Earnings come from selling products and delivering services.
  • Pyramid Schemes: Earnings come solely from recruiting new members.

Exercising Due Diligence Before Engaging in MLM

Given the potential overlap between MLM and pyramid schemes, Cyprus consumers and businesses are encouraged to exercise due diligence before participating in MLM opportunities. Proper research into a company’s background, registration, legal obligations, and sales literature is essential.

Given the blurry boundary between MLM and pyramid schemes, seeking legal counsel is highly recommended for potential participants. A lawyer can provide invaluable guidance and ensure that the opportunity under consideration is a genuine MLM and not an illegal pyramid scheme.

Keep in mind that your protection as a consumer relies on your awareness and caution. Be sure to conduct thorough research and consult with legal professionals to make well-informed decisions.