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4 Steps To Spot Illegal Pyramid Schemes In Malaysia (And Prevent Yourself From Being Scammed)

In a pyramid scheme, the best thing that can happen is you just lose money. The worst that can happen is you get charged in court for breaking the law.


If there is one thing Malaysians are famous for, it is for the many get-rich-quick schemes that are out there. While it has become an age-old adage that “if something’s too good to be true, it probably is”, it’s still perplexing that Malaysians are still falling prey to the greedy schemes of fraudulent scammers, year-in year-out.

The figures certainly do not lie. It has been reported that RM4.4 billion in losses were recorded involving 27 fraud investment schemes and 1.7 million victims in the country between July 2013 to September 2017.

To put that into perspective, RM4.4 billion could purchase 9,769 fully-equipped ambulance vans, multiply the Projek Rancangan Tebatan Banjir efforts by eightfold, or build another KLIA2.

The possibility of falling prey to investment scams is a reality more Malaysians should come to grips with and protect themselves against because of the impacts. Here are 4 points to help Malaysians evaluate any investments “opportunities” that come their way and figure out if they’re an illegal pyramid scheme or not.

 #1 Ask for Direct Selling Association of Malaysia (DSAM) or Suruhanjaya Syarikat Malaysia (SSM) certifications

Just to be clear: multilevel-marketing (MLM) companies are completely legal in Malaysia. Businesses like Avon, Cosway, Coway, Herbalife, Shaklee, Tupperware are legal direct selling companies offering useful products to consumers through direct sellers.

What is illegal is if the MLM company operates as a pyramid scheme, where a person’s commissions are primarily based on fees received from new recruits that they bring into the scheme. This business model is then just a recruiting business, which is not sustainable and will collapse when there aren’t enough new recruits to pay those in the lower rungs of the pyramid. Pyramid schemes are illegal in Malaysia, as well as in many other countries.

Thus, the first step towards evaluating whether an MLM company is legal in Malaysia is to ask for their Direct Selling Association Malaysia (DSAM) and Suruhanjaya Syarikat Malaysia (SSM) certificates. All MLM companies should be registered under DSAM and have a valid SSM certificate.

The absence of those should seriously trigger a huge red flag in your evaluation process. You can refer to this list of registered direct selling companies in Malaysia.

#2 More emphasis is put on you recruiting people rather than selling the products

The single-most tell-tale sign that an MLM company might be operating in an illegal pyramid scheme is their emphasis on getting you to recruit more people in, rather than selling the products that their company is supposedly founded to do.

Participating in a pyramid scheme is committing a serious offense under Act 500 of the Direct Sales and Anti-Pyramid Scheme Act 1993. So don’t be sweet-talked into a scheme. If you do, the best thing that can happen is you just lose money. The worst thing that might happen is that you get charged in court.

#3 Are there large upfront fees imposed when you join?

When was the last time you joined a company and the Human Resource manager asked you to pay for the induction and onboarding training?

Note that pyramid scheme fees could be clerverly disguised as membership fees, training costs, admin fees, buying a set of products as part of your sales inventory, platform subscription fees, and more.

#4 The key people in the company are of dubious backgrounds or have a disturbingly luxurious lifestyle

This should be one of the more obvious, if not cringe-worthy redflags of all. If you see that the founder/CEO/Managing Director/Chairman of the company parading off their luxurious lifestyles  on their social media while promoting and lauding their company and products, then that’s usually the red flag for you to run in the opposite direction as far as possible.

The only reason why they are showing off is to get you to become irrational and start thinking about all the luxuries you will be able to get if you join their pyramid scheme. Don’t fall for it.

Be extra vigilant

You should understand that people who are in fraudulent pyramid schemes have trained to be really convincing. They have approached countless of people in the past, and have experience in convincing plenty of people to join them.

They’ll probably use phrases like ‘passive income’, ‘once in a lifetime chance’, ‘the early birds get the worm’, or even using your own family like ‘getting your parents to perform Hajj/Umrah’, or ‘to send your kids to study overseas’. All these just to convince you to join them as their downline.

When you find yourself in such a situation, always apply these 4 steps to evaluate any “business opportunities” that come your way. Remember: If  it sounds too good to be true, it probably is.


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