Pyramid schemes are a type of white-collar crime that can have a large impact on individuals, communities, and affinity groups. Fortune Hi-Tech Marketing (FHTM) was a Kentucky-based pyramid scheme that operated from 2000 to 2013, when they were ultimately shut down by the Federal Trade Commission. FHTM sold a variety of products, from hair care products to third-party television subscriptions, but emphasized recruitment of new participants over sales of products or services. Over the company’s lifetime, there were over 500,000 participants, with at least one recruit in 95 percent of US counties. Of those who joined, nearly all left within a year and six percent or less earned more than they invested in the scheme. Analyzing FHTM participant data, this research explores factors that may make an area more susceptible to pyramid scheme fraud. In particular, we explore the theoretical concepts of strain and opportunity to identify potential sources of place-based vulnerability to this form of financial fraud. In order to complete the place-based analysis, social capital, unemployment, demographic, and other socioeconomic data are merged with FHTM’s participation data. We use the group-based trajectory model, which has been used in criminal justice literature. This model clusters similar trajectories of pyramid scheme joins, allowing us to detect differences within the variables that identify common features of places that experienced similar adoption patterns and levels. The unique application of these criminal justice theories to pyramid schemes, along with the rare access to the participant-level data, sets this research apart from previous studies on pyramid schemes and contributes to the discussion around fraud prevention.
