Internet Pyramid Scheme Alleged

From Bloomberg News

The Securities and Exchange Commission is seeking to shut down a network of 25,000 websites, accusing operators of running a $15-million pyramid scheme that promises to shower participants with easy cash.

Prosperity Automated System, which bills itself as a marketing network, “is destined to collapse and leave the vast majority of investors with substantial losses,” the SEC said Wednesday.

The complaint targets the network and its creator, William M. Osterhout of Citrus Heights, Calif.


The websites, with such names as and typically offer testimonies from people claiming to make thousands of dollars by buying into the group, the SEC said.

One site says the network “Showers You with Hands-Free Cash!”

Visitors to the sites fill out forms and are later called by representatives selling memberships for as much as $3,895, the SEC said. New members are issued their own websites and eventually can receive a share of the money when more people buy memberships via their sites, according to the allegations.

“Websites that come with the memberships do nothing but sell more memberships,” said Stephen Donahue, an SEC enforcement official in Atlanta.

Though some websites offer links to products or services, “those were attempts to cloak what is a fraudulent pyramid scheme, giving it the appearance of multilevel marketing,” Donahue said.

The defendants’ attorney, D.J. Poyfair, could not be reached for comment.