Utah is called the fraud capital of the United States for its incredibly high rate of scams. These scams likely succeed because of affinity fraud, which exploits close, personal relationships like family, friends and community members. Most of the time, they target stay-at-home moms and others looking to make a secondary income.

Multi-level marketing (MLM) walks this line of scamming innocent people. Utah’s economic landscape is dominated by MLMs, many of which have led to pyramid scheme lawsuits. Because of their organizational structure, MLMs should cause concern for Utahns looking for flexible employment. They rarely benefit employees and have left thousands of families in financial ruin.

Schemes in Utah

People often confuse MLMs with pyramid schemes, but the highly successful owners of these companies stress the difference between the two. MLMs use direct sales, meaning their “distributors” sell directly to buyers. In MLMs, you get paid by your sales and earn commissions off of others, people who you recruited to sell in your “downline.” A pyramid scheme is a scam that focuses on a constant stream of recruiting to create profit.

Both MLMs and pyramid schemes target those who want extra money and a work-life balance. Great distributors are those with close community connections who can convince others to join their downline.

Since 2018, there have been about 70 MLMs operating in Utah. The state’s low level of government regulation and intervention in businesses allows these scams to operate as they please. Utah also has the highest percentage of stay-at-home moms in the U.S., many of whom belong to a church or other community organization. These two factors create the perfect environment for MLMs to prey upon vulnerable individuals.

Curious to learn more, I interviewed Robert FitzPatrick, founder of Pyramid Scheme Alert, a nonprofit organization that helps inform Americans about pyramid schemes. He said, “multi-level marketing is disguised. It’s steeped in deception.” In his experience working on federal and international cases prosecuting pyramid schemes, the promises of direct marketing and income opportunity are lies.

Deceive and Destroy

Some of the most notorious MLMs — doTERRA, Nu Skin, LuLaRoe and Young Living — generate revenues in the billions. However, they have also faced complaints and lawsuits in which the companies were accused of being pyramid schemes. Most have recovered unscathed. For instance, NuSkin paid $47 million to settle a lawsuit in China accusing the company of fraud.

Success stories of people working in MLMs are few and far between. In 2017, 76% of doTERRA’s distributors, those at the lowest level and known as Consultant Wellness Advocates, made $375 a year on average.

I also talked to Anna Bravo, a former distributor for LuLaRoe, which continues to operate even after being involved in multiple pyramid scheme lawsuits. “It’s hard to find a job out there that will give you the flexibility you need to take care of your kids,” she said. “That’s why [MLMs] target women, because they know that [these women] are giving up part of their career life.”

Bravo spent thousands of dollars on clothing items she hoped to sell because, “once you’re there, they actually say, ‘You’re special, you can do this. Just put all your effort into this. The more you spend, the more you’re going to gain.’” She was only ever able to sell one item of clothing.

MLMs aren’t profitable for the majority of workers in the company and have sent many distributors into debt. To make minimum wage, you must recruit others to sell in your downline, which certainly sounds like a pyramid scheme.

FitzPatrick discussed the “tragedy” that he’s seen from his time with victims of pyramid schemes. “About $30 billion is lost. People invest their hope in it,” he said. “I’ve met people who’ve lost their homes.” He also said it’s a “grotesque deception and a distortion” that can destroy people’s lives.

Warning Signs

To protect themselves from these scams, people must thoroughly research these companies. Resources such as documentaries, Pyramid Scheme Alert and Reddit with posts from former employees all provide insight into these twisted operations.

Those looking for work, especially stay-at-home moms, shouldn’t buy into the success stories that these companies sell. They manipulate and convince people that they will provide legitimate opportunities for success, even though they very likely won’t. MLMs will never admit to being pyramid schemes, because as FitzPatrick said, “If people saw it as a pyramid scheme, they wouldn’t get near it.”