I have been seeing numerous posts of EmGoldex on my online newsfeed for the past few months. And then someone I knew asked me for my advice about it. So I asked him to tell me briefly how it works. After he gave me an overview, my gut feel was that it was indeed a scam — more specifically, a pyramid scheme.
I am not saying this as a layman. I was a legitimate high-level multi-level marketer many years back. I was a speaker and a trainer. I have devoted considerable time studying many different marketing plans from different companies, and I have also studied how unscrupulous people use these techniques to perpetuate pyramid and ponzi schemes. It was very important in my previous line of work for me to know how to explain these things because I usually got many objections and questions at the end of a presentation. Also, a considerable number of people have the mistaken notion that ALL networking companies are scams.
(For those who are interested, I wrote a three-part series a few months back entitled “Truth and Lies of Network Marketing.”)
Like Liam Neeson in the movie, Taken, I can say that I “have a very special set of skills” when it comes to smelling out what is legitimate and what is not.
However, to truly understand EmGoldex and to give it a fair chance, I decided to browse through their company website as well as watch a couple of presentation videos (one in English and one in Filipino) made by actual distributors.
These are the facts I gathered about their company and marketing plan:
- The company sells gold. You may purchase these gold bars directly from the online retail store.
- The company has a marketing program that you can enroll in that allows you to order the gold bars, and then make money (eventually) by getting two other people to enroll in the program as well. Enrollment costs 540 euros or roughly PHP35,000.
- The two other people you recruit have to recruit two more each (four people) and those four people have to recruit two more each (eight people), and then you will “exit” with PHP180,000. In other words, in order for you to earn your PHP180,000, fifteen other people must have also invested PHP35,000 each into the system.
- Recruit more, or reinvest your earned income into the system to earn more.
The US Securities and Exchange Commission (SEC) has come out with clear guidelines over what constitutes a pyramid scheme:
- No genuine product or service. Unlike many legitimate MLMs, EmGoldex does not even have a unique product. There is no reason why one might prefer to buy or sell gold at EmGoldex except for the opportunity to participate in its recruitment system. This is a huge red flag.
- Promises of high returns in a short time period. Promises of easy money or passive income. If there were really such a thing as easy money, don’t you think the business tycoons in our country would already be building businesses such as this? Why don’t we ever hear of the Henry Sys and the Ayalas in our country going into this business if it is indeed that lucrative? Why don’t major banks and investment companies do this? Let that sink in for a moment.
- No demonstrated revenue from retail sales. Emphasis on recruiting. Does EmGoldex really make money from buying or selling gold? Or does it make money because people are buying in to the recruitment program? Think about this. Sixteen people paying PHP35,000 each is PHP560,000. The company pays out PHP180,000 to the “exiting” distributor, where does the remaining PHP380,000 go?
So it is quite clear that the company earns its money mainly from recruitment, and that is a hallmark of pyramid schemes. The money used to pay the “exiting” distributors comes from the money paid in by new distributors. This will eventually lead to a collapse because there will come a point when there will simply not be enough new distributors to pay out all the existing ones.
Think about it. In order to pay out 1 person, the company needs 15 more people to join. So in order to pay out all 16 of them, they would need 256 more people (16×16). In order to pay out those people, they would need 4,096 more people (256×16). The more people who join, the more people they will need in order to pay out everyone who joined before them. Is that realistic and achievable? No, in due time, they will run out of new distributors coming in to support the existing user base, and if you are one of those who come in at that unfortunate time, you will lose your money, pure and simple. This is the time when the scammers pack up and run, when bonus checks bounce or no longer come in. I have seen too many of these kinds of schemes to know that it won’t last, and I can even prove to you mathematically why it is not sustainable.
I am not saying, however, that ALL those involved in this are scammers. No, I believe a lot of the distributors doing this sincerely believe that it is a legitimate enterprise and that they are helping other people in the process. What I am saying is that the people behind EmGoldex themselves are the scammers and they have fooled all these people who have joined them. Oh, but don’t take my word for it. Please do your research into “pyramid schemes,” “ponzi schemes,” and look for old news articles about Multitel, Aman Futures, and the like. Please, learn from history and do not get enticed by all the rosy visions these scammers paint.
In the heyday of Multitel and Aman Futures, people also earned from those and their participants staunchly defended the company, the founders and so on. But when they came down, they came down hard. I personally know someone who lost millions in one of those scams. Life for him and his family wasn’t pretty for the next few years as he struggled to recover.
If you are one of those who were still able to cash out, consider yourself fortunate. But I would strongly advise you against reinvesting or perpetuating this scam because there will come a time when you are either going to get hurt or you will hurt a lot of people in the process.
And some things just aren’t worth their weight in gold.
See the following video and links for your further information and education:
Originally published in Sunstar Davaoo.