YourTravelBiz (YTB) sued by Attorney General for being "gigantic pyramid scheme"
Filed under: Ripoffs and Scams
Yesterday California's Attorney General, Edmund G. Brown Jr., announced a lawsuit against YourTravelBiz.com (YTB) for being a "gigantic pyramid scheme." He says that the multi-level marketing company recruited tens of thousands of members with false earnings claims. YTB was supposed to a business through which members could operate online travel agencies. In reality, it was nothing more than a pyramid scheme meant to make those at the top rich, while thousands of people below them lost a lot of money. The operation is accused of being a pyramid scheme because the members were paid for recruiting new members, regardless of whether they sold any travel services.
Members pay $450 to join the scheme, and a monthly fee of $50 to stay active. In 2007, it is alleged that there were over 200,000 members, and that only 38% of them made any money from selling travel services. The median income for those making commission on travel services was only $39. (You read that correctly... not even enough made all year to pay for one month of fees!)
Mutli-level marketing companies like this pop up all over the place. Their defenders claim they are legitimate business opportunities because there is a product or service being offered. Yet those involved with the schemes soon realize that recruiting is the real name of the game, making these "business opportunities" appear to be more like pyramid schemes.
One recent player in the multi-level marketing game is Shop To Earn, a program which recruits "brokers" who each pay about $448 to become a member. As a member of Shop To Earn, they can be paid a small percentage of sales when they and others shop online using affiliate links. The real focus of Shop To Earn, however, is recruiting in new members who will pay the $448 fee to join (plus an annual renewal fee of $119). This doesn't seem all too different than that YourTravelBiz.com program that California is going after.
Schemes like this really only benefit the owners of the company and a handful of people at the top of the recruiting pyramid, usually the ones who get into the program early. In terms of real money to be made from shopping online, it would take thousands of dollars of shopping just to recover the membership fee. The payouts are skimpy, often less than 5% of purchases. Even at 5%, it would take $9,000 of shopping just to recover the initial sign-up fee.
There are also monthly minimums for those who want to be paid commissions on the people recruited into their downline. $100 a month must be spent on the "Shop To Earth" portion of the Shop To Earn site to even "qualify" to receive commissions. That's another $1,200 a year out of the pocket of the member to even be eligible to earn any money.
Consumers would do well to stay far away from these schemes which promise financial freedom to them (and a few of their friends and family). Studies suggest that 99% of participants in "business opportunities" like this lose money, making it a horrible "investment' for most consumers.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.



Reader Comments (Page 1 of 1)
8-07-2008 @ 6:23PM
John Frenaye said...
Nice post. We broke the story initially at 1am EST on the 5th. We have been following the MLM industry (in travel) and YTB for a year and knew it was a matter of time. Arrogance and ego are typically the culprit.
However, the masses of loyal RTAs are defending it and assuring us that Coach will make it all better.
Our blog is at
http://notravelmlms.blogspot.com
Thanks for a good piece!
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8-08-2008 @ 11:35AM
Jennifer said...
I have a co-worker who has been trying for months to get me to join YTB and for some odd reason I was just not feeling that company and how they operate. When I went to one of their seminar here in Florida not even 20 minuted into the presentation something in the back of my mind was screaming SCAM. When I left and met up with my co-work the next day she showed me a check for $1K that she claims was commission from booking travel vacations on her site. I was not impressed and told her I though that company came across as a scam. I am glad to see that I never joined because I would have been pissed.
Plus, over the past couple of days I noticed that a lot of the people she recruited are dropping like flies and are not to happy with her either. I am very interested to see how this all pans out. Hehehehe, so I can say I told you so.
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8-11-2008 @ 7:04PM
C. H. said...
Unfortunately it seems like we have three misinformed individuals again. Could it be perhaps that you were indeed in a pyramid scheme before, got hurt, and hence forth are trying to make everyone pay for someone elses mistakes.
I apologize in advance for another companies fickling of you or your friends' prior finances and emotions but I assure you that this is not only a legitimate company that is changing lives but it is a company that has three CEO's of integrity and obviously more tact in their fingers then most individuals.
First to John I feel that it is quite ridiculous to follow a company for a year just to desire their demise. How petty and arrogant that is not to mention quite shameful.
Secondly to Jennifer - it is a shame that you allow your fears to decide your future for you. Personally MLM is not a scam it is just a different business model that many countries have embraced like China, Japan and places in the continent of Europe. Yet, because of ignorance, fear, and classical teachings of the workplace many people and the majority of individuals in America even like myself get an excellent education, receive accolades and degrees ( I have 2 Master degrees) and go on to the work place only to find themsleves in a corporate structure that dictates when you work, when you see your family, has you working long tedious hours only to discover that the hefty income you believe that you are receiving from this great corporation only subtantiates itself to barely minimum wage and being stuck in position where you will never be the CEO of that company structure (maybe middle management) but never the top -- now that my colleague is a pyramid. So lets think about this - who really has been tricked.
I am a firm believer that what you put into anything, you will get back. Even looking at the law suit - which I feel is silly, the person sueing doesn't even have a travel agency. How foolish. YTB, I have done the research, is a 7 year company that trades publicly on the NYSE and the AMSE. It trades over the counter and is daily scrutinized bt the SEC (Security Exchange Commission). How can a company scrutinized by the SEC be a pyramid. That is impossible and quite ridiculous!!
I think the problem is that (A) fear and (B) greed dominiates most peoples emotions. But business is not emotional. It is work and it takes that to be successful. Tell me why only less than 5% of Americans are only able to retire making the same amount of money they were while working and most people are either dead, broke, or dead at retirement with only an average of $600 to retire with in this country. Its because people don't like to plan, they don't like to save, they don't like to work, and they want handouts, and by the way love to make excuses. Yes Tracy, studies show that 99% of people involved in different opportunities lose money - but look the stats - 99% of people are still struggling for those who are in these classical structured corporate business models or do most people who enter in corporate America end up becoming the CEO's and their own boss. What do you think?
I think most people like the person sueing wants a quick buck and wants to attempt to cash in on a legitimate company because they have been "hurt" before and because they are just "greedy" Fear and Greed.
Hence, please stop writing ill and quite frankly "spiteful" comments until you have all the facts. YTB is a legitimate travel company, ranked no.27 in the world. Its CEO was named one of the most influential in travel in the world and the company seems to be giving people great tax break options (home based business),savings on travel, and if they work their business -- money.
I just hope people start looking at the facts and not base their lives try to deter other people's dreams based on emotion. I don't see anyone writing articles on other companies like Pepsi Cola, Sony, McDonalds, You Tube, Samsung, Nokia, and Mercedes Benz just to name a few. They were all just recently sued. And guess what -- are poeple saying, oh Mercedes Benz and Pepsi is a scam because Mercedes was sued on patent infrigement. Absolutely not. So lets look at everything wholistically. And the bottom line is this - ultimately our little comments are not going to change the facts. The fact is that YTB is doing extremely well and yes, the business model of Multi Level Marketing (Advertising) is different and unique but if we all jumped the ship when something unique and different came aboard - where would we be now in the 21st century? Don't fear change - embrace it. And we need change in our economy today. We will always have rich, we will always have poor and we will always have people who just want a hand out and want immediate gratification due to things they want their way. Ultimately we make the choice. And if YTB is helping others get a trip to the Bahamas for a btter price or helping someone get a tax break from uncle same then God bless them.
Don't take it personal - just something to ponder upon.
8-11-2008 @ 7:08PM
Tracy Coenen said...
CH - It would serve you well to find out the difference between being sued by the Attorney General of California, and a company being sued by another company for patent infringement. There's a big difference. The "person" suing isn't suing because he got taken by a pyramid scheme.. and you're right.. he doesn't have a travel agency. He is the chief law enforcement official in California and he is suing to protect consumers in the state.
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