Skip to Content

Autoblog reviews all the hottest cars

YourTravelBiz (YTB) sued by Attorney General for being "gigantic pyramid scheme"

More
Text SizeAAA

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.
Subscribe to Walletpop

Reader Comments (Page 1 of 1)

Add your comments

Please keep your comments relevant to this blog entry. Email addresses are never displayed, but they are required to confirm your comments.

When you enter your name and email address, you'll be sent a link to confirm your comment, and a password. To leave another comment, just use that password.

To create a live link, simply type the URL (including http://) or email address and we will make it a live link for you. You can put up to 3 URLs in your comments. Line breaks and paragraphs are automatically converted — no need to use <p> or <br /> tags.

Your Frugal Tips

dollar bill in sandwichBeing frugal is now hip, but many don't even know where to start. Share your best money-saving secrets here!

    AOL Safeguards

    Jennifer Horn
    Jennifer Horn Filed under: Food, Saving

    Penny-Pinching Picnics: Summer party tips that will save you money

    Summer is here and that means it is BBQ season. We all want to have a fun, stress-free backyard get-together without breaking the bank. Here are some tips to make you a BBQ bigshot. Don't buy ...
    Jason Cochran
    Jason Cochran Filed under: Extracurriculars, Technology, Travel

    Live, from Walt Disney World, it's the Obamabot!

    Disney's big new attraction this year? The same as the media's: Barack Obama. Walt Disney World in Orlando, hunkering down for the economic storm, is in the rare position of not having any major ...
    Jane Tuv
    Jane Tuv Filed under: Sex Sells

    Ukraine outlaws possession of porn, but can't define what it is

    Make love, not porn, because if you live in the Ukraine, you'll get fined and sent to jail. Tuesday, Ukrainian President Viktor Yushchenko signed a bill into law, making the possession of pornography ...
    Jason Cochran
    Jason Cochran Filed under: Extracurriculars, Technology, Travel

    Taken for a ride: 5 clever ways theme parks bleed you for extra

    Some people think it's already pretty outrageous that a one-day ticket to a single Disney park will hit you for nearly $80. But when you're budgeting for your big summer vacation, you can't assume ...

    Headlines from WalletPop Partners