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.

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