SEC Division of Enforcement Warns Against Pyramid Schemes

STOCKBROKER LAW - Posted on April 12, 2016

On March 2, 2016 Andrew Ceresney, Director of the Division of Enforcement of the U.S. Securities and
Exchange Commission addressed the public on violations that target retail investors with pyramid
schemes noting “we protect the interests of retail investors by bringing bad actors to justice and by
returning money to victimized investors.” The presentation noted the proliferation of pyramid schemes
often targeting working class and the retirement community and other vulnerable retail investors.

The SEC’s Pyramid Scheme Task Force and other initiatives are designed to investigate and prevent
multi-level marketing schemes which also can operate as effective pyramid schemes in which participants
profit not from a product they are selling but almost exclusively through recruiting other people to
participate in their programs. Oftentimes, there is no genuine product or service being sold but rather,
they are merely lulled into a recruitment scheme oftentimes focusing on internet services, internet
website marketing, e-commerce businesses and cloud computing services and other new technologies or hot
businesses.

Social media has played a significant part in these pyramid schemes and with the proliferation of websites and internet based
communications, the prosecution and apprehension of pyramid scheme and multi-level marketing scheme type
scams have become more difficult. As certain of these schemes involve investments falling under the
definition of securities for the purposes of federal securities laws, the SEC has stepped up
prosecutions.

We offer a free initial consultation to investors who feel they may have been victimized in a
securities industry based investment involving pyramid schemes and multi-level marketing scams. For
a free initial consultation contact the Law Offices of Timothy J. O’Connor at (518) 426-7700.