The Matrix Scheme

The Matrix Scheme: How It Works

(with video below) While the Matrix scheme may sound like something involving alternate realities and Keanu Reeves in slow motion, what is involved is a scam as old as the hills. This month it's making a huge comeback!

A variation of the chain letter and pyramid scheme, it makes the rounds promising free merchandise such as HDTV's, computers, and iPods. How does the scam work

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Watch the video below to see Matrix scheme explained or read on:

Matrix Scheme Exposed Video 

The scheme offers this free merchandise if you purchase a relatively low-priced item – usually around $30 to $50 – such as a SIM card, e-book, or a CD-ROM of ringtones. You are then required to bring in a number of people to buy the lower priced item as well, and your name is added to a list. Once your name reaches the top of the list, you receive your free item.

However, the math involved makes obvious the chances that you will ever receive your free item slim to none. For example, if your name is number 100 on the list and you are required to bring in 20 new recruits, 2,000 people will have to purchase the low-cost item before it would be gifted to you.

The scammers have essentially sold you and your friends and family overpriced merchandise, and you get nothing except your initial purchase.

The Matrix Scheme: How To Avoid

Be aware that the easiest way to avoid being caught up in the Matrix scam is not to get involved in the first place. Any setup requiring one to buy overpriced merchandise to get a gift is only out for one objective – to sell overpriced merchandise to as many people as possible.

You also run the risk of alienating your friends and family by trying to get them to make these purchases. The most important point is, there is no such thing as getting something for nothing; keep that in mind and you can protect yourself from most scams.

If you do get victimized by this scam, contact the Better Business Bureau and report the company for unfair business practices and making false claims.

According to Wikipedia, "the operation of matrix schemes varies, though they often operate similarly to a pyramid or Ponzi scheme. Some of the former participants of these schemes consider them to be a form of confidence trick, although others are happy with their purchase. To move upward on the list, a person must wait for new members to join or refer a certain number of individuals to the list.

This is accomplished through purchasing a token product of marginal value: usually e-books, cell phone boosters, screen savers, or other software CDs/DVDs. When a pre-defined number of people have purchased the token product, the person currently at the top of the list receives their reward item, and the next person on the list moves to the top.

The rewards for those at the upper part of the matrix list are usually high-demand consumer electronics, such as portable digital audio players, high-definition television sets, laptop computers, and cellular phones. Reaching the point on the list where one receives the expensive goods is termed cycling.

In many cases, the token product alone could not be reasonably sold for the price listed, and as such legal experts claim that, regardless of what is said, the real product being sold is the reward in question in those situations. In these cases, the operator could be charged with running a gambling game or failing to supply ordered products.

The Matrix List by which the sites receive their name would be what is known as a straight-line matrix, or one-by-X matrix. This is similar to many MLMs that use Y-by-X matrices to fill a down-line.

For example, one situation may be a one-by-10 matrix for a Sony PlayStation 2 (a typical reward). In such a matrix the site would usually sell an e-book for $50 to be placed on the list. After nine additional people purchased a spot, the first person would receive either a PS2 or cash value equivalent and would be removed from the list. The person who had been second would move up to the first spot, and an additional ten people would have to purchase spots for that person to receive a PS2. It is this orderly movement which has also given the name "elevator scheme" to these sites, as people move up the 'elevator' (escalator, ladder) to the top at which they would then 'cycle' out of the matrix.

In such a matrix, nine out of 10, or 90 percent, of all customers will not receive the reward item, because the rules of the scheme are that one reward is issued for every ten customers that join. (The fact that the reward is issued to the customer at the top of the list doesn't change the proportion of rewards given to customers signed up.) Supporters claim that additional revenue streams from advertising are used to keep the lists moving. However, detractors claim that it is impossible to generate enough outside revenue. If the entire world were to join the list, 90 percent of the world would be unable to cycle if the site did not draw sufficient alternate revenue streams. Adding more people to the list does not change the fact that the majority would receive nothing without these streams.

Additionally, the amount of time needed before a given individual will receive the product in question is often mistaken. In a matrix in which ten people must sign up before cycling, the first person to join only needs nine additional sign-ups to cycle, but the second person needs 18 additional sign-ups: eight more for the person above him, and then ten more for himself.

The third person on the list likewise needs 27 additional signups: seven for the person on top of the list, 10 for the person directly above him, and then 10 for himself. The number of people required continues to grow for each new person joining the list. For the 10th person to cycle a total of 100 people would have to sign up, 1000 for the 100th, and so on.

Through this process, the matrix scheme generates substantial profit for its organiser. At the time of its popularity, a PlayStation 2 cost a maximum of $299. After selling 10 $50 e-books, the organiser has made $500, and can purchase a PS2 for $299 to send to the first bidder while retaining a $201 profit.

This same process repeats every time the matrix cycles. For example, if the matrix cycles ten times, the organiser will have sold $5000 worth of e-books, of which $2990 will have been spent on 10 PS2s, leaving them with a profit of $2010."