There seems to be a never-ending stream of new scams to hit the Internet virtually every day. One of the more recent additions to this list are the so-called "Randomizers". These are nothing more than a variation of the classic Ponzi scheme, and are blatantly illegal. They sell no product. Their means of bringing money into the program is solely by recruitment of new members. The person at the top (scheme originator) is guaranteed a payout but the other members aren’t. The primary means of funding is from the members themselves, not by sales to people outside the membership. By legal definition, that is a Ponzi scheme.

If you think I am overstating this, I invite you to research the legal definition of ponzi/pyramid schemes as defined by the Federal Trade Commission. In it's simplest definition, a ponzi scheme can be identified by three main criteria:

1. they sell no actual product,

2. the members themselves are the sole contributors to the scheme

3. the focus is based on recruitment of new members

Randomizers are a classic example of those criteria.

There is typically a lottery associated with these programs. Of course, the scheme owners use some convoluted language to say it isn’t really a lottery, but all you have to do is look at how these programs work. Lotteries are legal, but only if you are licensed and officially sanctioned to do run one.

When a new member joins, usually for $10-$30, a part of that immediately goes to the program owner; he can’t lose, except perhaps legally when he/she winds up being indicted for fraud. Another part of the cut goes to the person who referred the new member, which makes the referrer an accessory to felony. And finally, a part (typically $5) goes into the “pool”. Each time a new member joins; someone within the program is randomly selected to receive the $5 pool allotment.

I don’t know any other way to say this, so let me be blunt. The people who think they are going to make money through this system obviously have no understanding of basic mathematics. Not only are the odds against you, those odds continue to decline as the program grows.

The math is painfully simple. If there are 100 people in the program and 5 new members join, your odds of being randomly selected for the $5 are 1 in 20 (5/100 = 0.05%, which translates to 1 in 20). When the membership increases to 500 and 5 new people join, your odds of winning one of the randomly selected pool slots drops to 1 in 100 (5/500 = 0.01%). When the membership reaches 1,000 members, the odds drop to 1 in 200. If the membership reaches 10,000 and 5 new members join, your odds drop to a rather daunting 1 in 2,000. If your "membership" fee was $25, you need to "win" the lottery pool (at the odds I have just given) five times simply to break even.

All Ponzi schemes are beset with a basic conundrum. The schemes need additional members in order to pay out to the current members, a structure typical of chain letters. But as additional members join, your odds of a payout decrease dramatically. Eventually, the scheme collapses due to the sheer weight of its increased membership. When that happens, the vast majority of people walk away with less money than they started with. The owner walks away with a profit. Yet people continue to get sucked into these scams.

Of course, you don’t have to rely solely on the lottery. You also receive a “commission” for bringing new members into the program. That means that in order to make money, you are now in a position of having to recruit people for what is an illegal activity. As is often the case with such scams, the people who are drawn in are all too often the ones who can least afford the membership fee: single moms, senior citizens, and so on.

Now, the owners of the Randomizer sites will try to convince you that they are perfectly legal. I have even seen a few such sites take a proactive approach and state on the site that their particluar version is completely legal. When that happens, you need only ask the owner a simple question: "Would you mind if I contacted the Attorney General's office of your state to ask them if your "opportunity" is legal." The owner will then become amazlingly quiet, or downright belligerent. That should tell you all you need to know.

The sad fact is that most of these schemes are penny ante operations and usually not on a District Attorney's radar unless enough complaints are received. There was a question about the legal aspect of these schemes directed to a Randmizer owner in one of the forums I occasionally frequent. The owners reply was that if it was illegal the government would have shut him down. Talk about convoluted logic. Just because he hasn't been shut down doesn't make it legal. It only means that the government considers him "small potatoes", or hasn't gotten enough complaint filings to initiate an investigation.

My wife and I run several web-promotion sites (traffic exchanges, classifed ad, etc). In all cases, Randomizers are specifically banned from those sites. Other diligent owners of such traffic promotion sites also ban these scams. Unfortunately, not all owners of such facilites are so diligent. As a result, these scams appear in promotion vehicles all over the Internet.

To anyone who is considering joining one of these schemes, you would be well advised to run far, far away as quickly as you can. If you aren't sure about a particular site, ask other Internet Marketers that frequent discussion groups such as Warrior Forum. If all else fails, ask an attorney. But don't let yourself become just another victim.