Delaware

MLM Law: Delaware Pyramids and Chain Schemes

§ 2561. Definitions.

As used in this subchapter:

  (1) "Pyramid or chain distribution scheme" means a sales device whereby a person, upon a condition that he part with money, property or any other thing of value, is granted a franchise license, distributorship or other right which person may further perpetuate the pyramid or chain of persons who are granted such franchise, license, distributorship or right upon such condition. A limitation as to the number of persons who may participate, or the presence of additional conditions upon the eligibility for such a franchise, license, distributorship or other right recruit or upon the receipt of profits therefrom, does not change the identity of the scheme as a pyramid or chain distribution scheme.

  (2) "Person" includes an individual, corporation, trust, estate, partnership, unincorporated association, or any other legal or commercial entity.

§ 2562. Unlawful practice.

The use of a pyramid or chain sales distribution scheme in connection with the solicitation of investments in the form of money, property or any other thing of value is hereby declared to be an unlawful practice under § 2513 of this title.

§ 2563. Prohibition.

  (a) No person, either directly or through the use of agents or other intermediaries, shall promote, sell, attempt to sell, offer or grant participation in a pyramid or chain distribution scheme.

  (b) Whoever, directly or through the use of agents or intermediaries, violates subsection (a) of this section shall be fined not more than $5,000, or imprisoned not more than 3 years, or both.

  (c) The Superior Court shall have exclusive jurisdiction of offenses under this section.

§ 2564. Contracts void; civil liability.

  (a) Any contract made in violation of § 2563 of this title shall be void and any person who, directly or through the use of agents or intermediaries, induces or causes another person to participate in a pyramid or chain distribution scheme shall be liable to that person in an amount equal to the sum of: (1) Twice the amount of any consideration paid; and (2) In the case of any successful action to enforce such liability, the costs of the action together with a reasonable attorney's fee, as determined by the court.

  (b) An action under this section may be brought in any court in this State otherwise having jurisdiction over the dollar amount being sought by way of recovery within one year from the date on which the consideration was paid.

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