N.Y. General Business Law § 359-fff: Chain distributor schemes prohibited

§ 359-fff. Chain distributor schemes prohibited. 1. It shall be

illegal and prohibited for any person, partnership, corporation, trust

or association, or any agent or employee thereof, to promote, offer or

grant participation in a chain distributor scheme.

2. As used herein a "chain distributor scheme" is a sales device

whereby a person, upon condition that he make an investment, is granted

a license or right to solicit or recruit for profit or economic gain one

or more additional persons who are also granted such license or right

upon condition of making an investment and may further perpetuate the

chain of persons who are granted such license or right upon such

condition. A limitation as to the number of persons who may participate,

or the presence of additional conditions affecting eligibility for such

license or right to recruit or solicit or the receipt of profits

therefrom, does not change the identity of the scheme as a chain

distributor scheme. As used herein, "investment" means any acquisition,

for a consideration other than personal services, of property, tangible

or intangible, and includes without limitation, franchises, business

opportunities and services, and any other means, medium, form or channel

for the transferring of funds, whether or not related to the production

or distribution of goods or services. It does not include sales

demonstration equipment and materials furnished at cost for use in

making sales and not for resale.

3. A chain distributor scheme shall constitute a security within the

meaning of this article and shall be subject to all of the provisions of

this article.