Most Common MLM Scams & How to Avoid Them
MLM pitches often promise financial freedom. Some are legal, but many use deceptive income claims or operate as illegal pyramid schemes. Learn the common tactics, red flags, and how to protect your family.
Table of Contents
Quick Facts
About this scam type
MLM scams present themselves as business or job opportunities, often promising high earnings for selling products and recruiting others. While some MLMs are legal, many use deceptive income claims and focus on recruitment over genuine retail sales, making them illegal pyramid schemes. Victims are often drawn in by promises of financial independence, flexible work, and community success, only to face losses through mandatory fees, inventory, and event charges.
How scammers contact victims
Scammers leverage platforms like Instagram, TikTok, and YouTube to showcase lifestyles and recruit new members. They also use direct messages, private chats, online group calls, and in-person events to build trust and pressure targets. Social media's reach and the appeal of testimonials make it especially effective for spreading MLM pitches quickly to large, trust-driven audiences.
Who is most at risk
MLM scams heavily target young adults, college students, stay-at-home parents, military spouses, and tight-knit faith or ethnic groups. These groups are often appealing because of limited job opportunities, a need for flexible income, and strong community networks. Scammers take advantage of trust and affinity within these circles, making their pitches seem more credible.
Understanding the risk level
The financial risk is high, including losses for starter kits, monthly inventory, event fees, and training subscriptions. Even legitimate MLMs often result in little or no earnings, with most participants losing money rather than making it. Besides financial loss, victims may also experience strained relationships and emotional distress.
Most Common Multi-Level Marketing (MLM) Scams
How it works: This scam promotes trading education, passive income, and luxury lifestyles. Recruits are sold monthly subscriptions to access a multi-level trading program, while the real profit comes from recruiting others. Social media is used heavily for flashy success stories. In 2025, the FTC and Nevada Attorney General sued IM Mastery Academy (rebranded as IYOVIA), alleging over $1.2 billion in losses to participants. Most recruits left within a few months after losing money to fees.
Typical Social Media Pitch (2025)
Make money in minutes with our academy! Retire in your 20s and earn income in your sleep—no experience required! Real FTC Complaint Language
Trainers make promises of luxury lifestyles but are really paid to recruit newer members, not actual trading results. Red Flag Signs:
- • Monthly fees in the hundreds.
- • Over half of recruits cancel in a month and 90 percent within six months.
- • Salespeople with no trading credentials.
- • Income relies on recruiting, not real trading success.
- • Constant upsells and pressure to enroll friends.
How it works: These scams promote supplements or weight-loss products through dramatic testimonials, before-and-after photos, and stories of changing lives. Selling product is often secondary to recruiting new distributors. Trainings push members to sign others up and keep their own autoship (monthly orders) active.
MLM Training Slogan (FTC Example)
Find two people who find two people. Recruit, recruit, recruit—your income is unlimited! Health Testimonial Recruitment (2024)
Our team makes more in a month than most do all year! Just share your story and build your team. Red Flag Signs:
- • Products come with unproven health claims.
- • No realistic income disclosures are shown.
- • Pressure to buy starter kits and monthly autoship products.
- • Success stories with no mention of actual results for most people.
How it works: Recruits are told to buy large 'business builder' product packs and meet monthly order minimums to qualify for bonuses. Compensation is tied to what you and your downline buy, not end-customer sales. Many end up with unused products and losses rack up monthly.
Startup Pack Upsell (2024)
Serious entrepreneurs get the Platinum Builder Pack—$1,299 today to unlock every bonus. Don’t miss out! Red Flag Signs:
- • You must buy inventory or autoship products to earn rewards.
- • Most sales are to other distributors, not outside customers.
- • Ranks and bonuses require large personal purchases.
- • Little evidence of legitimate consumer demand.
How it works: You receive an offer for a remote sales role or 'brand ambassador' job. After applying or attending a webinar, you discover it is actually an MLM opportunity requiring up-front fees, and that real pay depends on recruiting others.
Job Offer Bait-and-Switch
Want to be your own boss and set your own hours? Sign up now to reserve your spot! Small starter fee applies. Red Flag Signs:
- • Pay-to-play: you must pay fees to join.
- • Webinars reveal the need for large start-up purchases.
- • No reliable income documentation is available.
- • Pressure to recruit others as your main earning method.
How it works: MLM promoters target students, military spouses, or faith groups using community events or social media pages. They use trust-based language and testimonials from 'people like you' to lend credibility. Participants pay fees and sign up for autoship but unemployment and other vulnerabilities are exploited.
Student-Focused Outreach (2025)
Perfect for busy students—work from anywhere, earn extra cash, build your network! Testimonial in Faith Community Setting
So many friends at church are earning with us every month. Everyone can do this. Join now! Red Flag Signs:
- • Pitches are tailored (“perfect for students” or “ideal for military spouses”) to specific groups.
- • Upfront fees and monthly costs are emphasized.
- • Testimonials play up community, but lack proof of typical results.
- • Recruiting runs through trusted social or faith groups.
Red Flags & Warning Signs
Top 5 Phrases Scammers Use
- 1 "Be your own boss"
Promises independence, often disguising the risks and required purchases.
- 2 "Financial freedom"
Appeals to dreams of leaving a regular job—often without evidence.
- 3 "Retire in your 20s"
Taps into the desire for early wealth, but almost never realistic.
- 4 "Earn money while you sleep"
Suggests effortless passive income; in reality, most lose money.
- 5 "Recruit, recruit, recruit"
Shifts the focus from sales to signing up others, a pyramid hallmark.
Scam Warning Signs
- Upfront fees and monthly autoship requiredLegitimate jobs or businesses do not require ongoing payments to participate.
- Earnings claims with no proof of typical resultsScammers talk about big pay but do not show real average earnings.
- Main focus on recruiting over sales to real customersPyramid schemes reward recruitment, not actual product sales.
- Bait-and-switch job pitches or hidden costsOffers morph into MLM sign-ups with unexpected fees.
- Requests for high-risk payments like crypto, wires, or gift cardsSafe companies accept traceable, refundable payments only.
Legitimate Communications
- Written, independently verified income disclosuresYou can see what most participants actually earn, net of costs.
- No inventory or autoship requirement to earnYou are not forced to buy monthly just to stay active.
- Rewards are for sales to retail customers, not just sign-upsYou earn commissions only when you sell to real customers.
- Time allowed to review agreements without pressureNo rush—legitimate companies let you read and ask questions first.
- Secure, traceable payment methods with a clear refund policyPayments are processed by credit card, not by crypto, and you can get a refund.
How to Protect Yourself
Prevent MLM scams by researching thoroughly and demanding proof. Here are practical ways to stay safe:
- 1. Slow Down and Investigate the Company
Search the company's name along with words like 'complaint,' 'scam,' and 'income disclosure.' Look for press releases from the FTC or state agencies to see if there are lawsuits or warnings.
- 2. Ask for Written Earnings Proof
Ask for income disclosure statements that reflect actual average or median earnings, ideally net of costs. Walk away if they only share vague success stories or cannot show these documents.
- 3. Add Up the True Costs
Include everything: starter kits, autoship, event fees, online tools, and training subscriptions. Most people lose money once all expenses are calculated.
- 4. Check for Real Retail Demand
Only join if there is clear outside customer demand and retail pricing makes sense. Watch out if most buyers are also sellers or all customers are in the network.
- 5. Protect Your Money and Payment Info
Pay with a credit card for added protection and the right to dispute charges. Never use crypto, wire transfer, or gift cards.
- 6. Get a Second Opinion From Someone Trustworthy
Show contracts or promotional materials to a trusted friend or advisor who is not involved in the company for an unbiased view.
Ask for the last two years of income disclosures and make sure earnings shown are net of expenses, not just total sales.
Lifeguard helps you and your loved ones monitor for scam pitches and protect against fraud. Stay proactive—sign up for alerts today.
What to Do If You're a Victim
If you think you have been caught in an MLM scam or paid for products you do not want, quick action can limit your losses:
- 1. Cancel Autoship and Subscriptions (Do immediately)
Immediately cancel any product autoship and online subscriptions in writing. Take screenshots and save confirmation emails as proof.
- 2. Contact Your Card Issuer (Do immediately)
Call your credit card company or bank. Dispute recent charges, request a new card number, and explain the situation.
- 3. Request a Refund and Return Inventory (Within 24 hours)
Send a written request for a refund and ask about buyback policies if you bought inventory. Ship products with a tracking number and keep all records.
- 4. Report to Authorities (Within 24 hours)
File a complaint with the FTC at ReportFraud.ftc.gov. If trading or investment claims were made, also report to the SEC and your state securities regulator.
- 5. Report to Your College, Employer, or Platform (Within 24 hours)
Alert your school’s student affairs office if targeted on campus, and flag recruiting posts to social media platforms to help others avoid harm.
- 6. Monitor Your Bank and Credit
Watch your accounts for suspicious activity and consider a credit freeze if you shared personal information.
- 7. Reach Out for Support
Military families and older adults can get free support and guidance from the AARP Fraud Watch Network at 877-908-3360.
More recovery resources, official reporting links, and practical support are available at ReportFraud.ftc.gov and from AARP’s Fraud Watch Network.
Frequently Asked Questions
Some MLMs are legal but others are actually illegal pyramid schemes. The FTC looks at how you earn rewards, if there are real sales to outside customers, and whether earnings claims are fair.
If the main rewards are for recruiting others and you must buy products to qualify for bonuses but there are not many outside customers, it is likely a pyramid scheme.
Promoters should have proof, like income disclosure statements, showing what most participants actually earn after expenses. They must provide this information if you ask.
Be cautious of offers with phrases like 'be your own boss,' 'retire in your 20s,' 'earn while you sleep,' or 'recruit, recruit, recruit.' These are red flags.
Students, military spouses, stay-at-home parents, and people in close-knit faith or ethnic communities are major targets for MLM scams.
Cancel autoship, request refunds, document your losses, and report the company. If trading or investment opportunities were promised, file with the SEC or your state regulator.
Refunds depend on how you paid, the company’s policies, and whether regulators ordered refunds in a settlement or enforcement action.
As of January 2025, the FTC has proposed new rules to address deceptive earnings claims in MLMs and to update business opportunity regulations. These changes could allow for more refunds and tougher enforcement.
Avoid Costly MLM Scams Now
Protect yourself and your loved ones by staying informed about MLM risks. Lifeguard provides scam alerts and practical help for families. Sign up for complete peace of mind.
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