United States v. Doyce Barnes: The Sixth Circuit Declares Pyramid Schemes Per Se Mail-Fraud and Unveils the “Emperor-Package” Investment-Contract Test

Introduction

In United States v. Doyce Barnes (consolidated with Maike and Hosseinipour), the United States Court of Appeals for the Sixth Circuit delivered a 2025 published opinion that will reverberate across white-collar criminal law, multilevel-marketing (MLM) compliance, and securities regulation. The appeals stem from the collapse of “Infinity 2 Global” (I2G), a purported MLM that in reality consumed USD 34 million within a year through what the FBI determined to be a classic pyramid scheme. After a 25-day jury trial, defendants Richard Maike (founder), Doyce Barnes (vice-president), and Faraday Hosseinipour (top recruiter) were convicted of:

Conspiracy to commit mail fraud (18 U.S.C. §§ 1341, 1349); and
Conspiracy to commit securities fraud (15 U.S.C. § 78j(b); 18 U.S.C. § 371).

The Sixth Circuit affirmed all three convictions—while remanding Hosseinipour’s Rule 33 motion for limited reconsideration—rejecting roughly three dozen alleged trial errors. Two doctrinal pivots make the decision noteworthy:

Pyramid schemes are a subset of “schemes to defraud” under federal mail-fraud statutes; therefore, once a jury properly finds a pyramid scheme, the first element of mail fraud is satisfied per se.
“Emperor” packages—high-priced entry tiers conferring a passive share of casino revenue—qualify as “investment contracts” (and thus “securities”) even when bundled with recruitment bonuses.

Summary of the Judgment

Judge Kethledge, writing for a unanimous panel (Judges McKeague and Nalbandian concurring; Nalbandian adding a 20-page concurrence), upheld the district court on all major fronts:

Sufficiency of the Evidence: The government proved beyond a reasonable doubt that defendants knowingly participated in and agreed to a scheme to defraud I2G distributors, satisfying Jackson v. Virginia.
Jury Instructions: Although the instruction substituted “pyramid scheme” for “scheme to defraud,” the charge—read as a whole—still required findings on intent, material misrepresentation, and use of mails. The court noted that defining “pyramid scheme” was “largely superfluous” but not reversible error.
Anti-Saturation Defense: A 5,000-member cap on “Emperor” positions did not entitle defendants to an affirmative-defense instruction; the cap merely created an artificial saturation point without unlinking recruitment from profit.
Securities Fraud: The jury rationally found Emperor packages to be investment contracts because investors (1) paid money, (2) pooled that money in a common enterprise, and (3) expected passive casino profits from the efforts of others.
Sentences and Remaining Errors: Other evidentiary, venue, multiplicity, and instructional challenges were dismissed as meritless.

Analysis

1. Precedents Cited and Their Influence

United States v. Gold Unlimited, 177 F.3d 472 (6th Cir. 1999)—Earlier Sixth-Circuit case approving a jury instruction that a pyramid scheme constitutes a scheme to defraud. Barnes adopts its core holding but clarifies that federal fraud law does not require separate “pyramid” analysis and warns district courts against unnecessary complexity.
SEC v. W.J. Howey Co., 328 U.S. 293 (1946)—The seminal “investment-contract” test. The panel applies Howey’s tripartite structure (investment of money; common enterprise; profits from efforts of others) to the Emperor packages.
SEC v. Edwards, 540 U.S. 389 (2004)—Confirms that fixed-return arrangements can be securities. The Sixth Circuit analogises the I2G casino “revenue share” to Edwards’s pay-phone returns.
In re Koscot Interplanetary, 86 F.T.C. 1106 (1975) and FTC v. BurnLounge, Inc., 753 F.3d 878 (9th Cir. 2014)—Classic FTC pyramid-scheme authorities; furnish language transplanted into the jury instruction.
Jackson v. Virginia, 443 U.S. 307 (1979)—Sets the sufficiency-of-evidence standard applied to both mail and securities fraud counts.
Griffin v. United States, 502 U.S. 46 (1991)—Permits affirmance when one of multiple alternative theories is valid; addressed in Judge Nalbandian’s concurrence.

2. Legal Reasoning

a. Mail-Fraud Conspiracy

The panel reaffirmed that conspiracy liability demands only an agreement and intent; the government need not prove individual commission of every element. The record revealed concerted action to lure recruits through:

Misstatements of casino profitability and celebrity endorsements;
Deception about software value (e.g., claiming a \$100 million offer for an unfinished “I2G Touch” platform identical to freeware);
Visual theatrics (oversized six-figure checks never paid);
Concealment of the software developer’s true identity and bankruptcy;
A revenue model 96 % dependent on distributor payments.

These facts satisfied the “scheme to defraud” element; mailing of promotional materials and payouts completed the statutory nexus.

b. Pyramid-Scheme Instruction

Defendants attacked the instruction as letting jurors skip a specific “intent to defraud” finding. The court disagreed: sub-parts requiring material misrepresentation and intent remained intact. Nonetheless, Judge Kethledge admonished trial courts that inserting elaborate pyramid definitions into federal fraud cases is usually unnecessary; ordinary fraud instructions suffice.

c. Anti-Saturation Rebuttal

Borrowing dicta from Gold Unlimited, defendants argued that their 5,000-Emperor cap precluded saturation. The court rejected this on two grounds:

The cap only deferred, not eliminated, the inevitable point where recruits outstrip available prospects.
No anti-saturation policy can cure affirmative misrepresentations that induce investment.

d. Securities-Fraud Conspiracy & the “Emperor-Package” Test

Whether the Emperor bundle was a security was treated as a fact question for the jury (Joiner). Applying Howey:

Investment of Money: \$5,000 buy-in plus annual fees.
Common Enterprise: pooled casino revenue divided pro-rata; fortunes of Emperors rose or fell together.
Profits from Others’ Efforts: Defendants repeatedly pitched “passive income”—“sit on the couch,” “no recruiting necessary.”

Because an Emperor already received enhanced recruitment bonuses after purchasing one package, additional packages had value only for extra casino shares—a pure investment motive. Ten witnesses testified they bought packages solely for casino income. Hence, the panel minted a practical rule: when a premium paid above ordinary distributorships buys a passive, pooled revenue share untied to personal effort, the instrument “to a very substantial degree” bears the hallmarks of an investment contract—regardless of simultaneous recruiting incentives.

3. Impact of the Judgment

Criminal Fraud Prosecutions: Prosecutors now have published Sixth-Circuit authority that proving a “pyramid scheme” automatically satisfies the “scheme to defraud” component of mail/wire fraud.
MLM Compliance Programs: The decision underscores that capping top-tier positions, without linking compensation to retail sales, will not salvage an MLM from pyramid status.
Securities Regulation: The “Emperor-Package” analysis broadens Howey’s application to hybrid MLM instruments, signaling that passive revenue shares—even if masquerading as “membership perks”—may be regulated securities.
Jury-Instruction Drafting: District courts are cautioned to avoid redundant or overly technical pyramid-scheme definitions; plain fraud language normally suffices.
Defense Strategy: Anti-saturation or “capped pyramid” theories face a high evidentiary bar; they must show genuine de-linkage between recruitment and rewards.

Complex Concepts Simplified

Pyramid Scheme vs. Legitimate MLM: A legal MLM pays commissions primarily for retail sales; a pyramid pays primarily for recruiting. The latter eventually collapses when recruits run out—hence inherently fraudulent.
Investment Contract (Howey): Even without formal “stock,” an arrangement is a security if people invest money in a common venture expecting profits from someone else’s work.
Mail-Fraud Conspiracy: Agreement + intent to commit mail fraud = crime, even if the mails are used by only one conspirator.
Anti-Saturation: A purported safeguard (e.g., capping participants) must meaningfully prevent endless recruiting; cosmetic caps fail.

Conclusion

United States v. Doyce Barnes crystallises two critical propositions: (1) a pyramid scheme is intrinsically a “scheme to defraud” under federal mail-fraud law, and (2) premium MLM tiers promising passive revenue shares can constitute securities under an “Emperor-Package” variant of the Howey test. By affirming convictions amidst complex instructional challenges, the Sixth Circuit offers prosecutors a streamlined blueprint for future pyramid-scheme cases, warns MLM operators that cosmetic safeguards are insufficient, and signals to securities regulators that investment-contract analysis will reach creative hybrid instruments. The opinion thus tightens the net around fraudulent direct-selling ventures while refining doctrinal clarity for courts and compliance professionals alike.