United States v. Maike: Pyramid Schemes as Per-Se Mail Fraud & “Emperor” Packages as Securities

1. Introduction

United States v. Richard Maike, Nos. 22-6114/6121/23-5029/5560/5561/5563 (6th Cir. 2025) presents the Sixth Circuit’s most comprehensive treatment to date of criminal liability arising from a multilevel marketing (“MLM”) venture that operated as a pyramid scheme. Three leaders of “Infinity 2 Global” (I2G) – Richard G. Maike, Doyce G. Barnes, and Faraday Hosseinipour – appealed their jury convictions for (1) conspiracy to commit mail fraud and (2) conspiracy to commit securities fraud.

After a 25-day trial and three dozen appellate issues, the court (Judge Kethledge, joined by Judges McKeague & Nalbandian) affirmed across the board, issuing a published majority opinion and an extensive concurrence. The decision does four headline things:

Re-affirms – in the criminal context – that a pyramid scheme is itself a “scheme to defraud” under the mail-fraud statute, but cautions district courts that instructing on “pyramid schemes” is ordinarily unnecessary because federal law punishes fraud, not pyramids as such.
Holds that I2G’s $5,000 “Emperor Packages” are securities under the Howey investment-contract test, marrying MLM law with classic securities doctrine.
Clarifies the limited role of an “anti-saturation” defense and rejects it where recruitment, not retail sales, drives revenues.
Offers practical guidance on crafting jury instructions in complex fraud trials to avoid reversible error.

2. Summary of the Judgment

I2G generated over $34 million, almost entirely from participants who purchased distributor “packages.” Ninety-six percent of investors lost money. The jury found – and the Sixth Circuit agreed – that defendants knowingly ran a fraudulent pyramid scheme, used the mails to advance it, and sold unregistered securities through the Emperor package. The panel:

Sustained the sufficiency of the evidence on both conspiracy counts.
Approved the district court’s instruction that “a pyramid scheme constitutes a scheme or artifice to defraud.”
Rejected the defence request for an “anti-saturation” instruction because the 5,000-Emperor cap did not de-link recruiting rewards from product sales.
Held that the Emperor package satisfied each Howey element: upfront investment, pooling of funds, expectation of passive casino income, and profits reliant on others’ efforts.
Affirmed the prison sentences (120, 48, and 30 months). One narrow Rule 33 issue for Hosseinipour was remanded but did not affect the convictions.

3. Analysis

3.1 Precedents Cited & Their Influence

In re Koscot Interplanetary, 86 F.T.C. 1106 (1975) & In re Amway, 93 F.T.C. 618 (1979)
Origin of the two-part FTC definition of a pyramid scheme (pay to join + rewards for recruiting unrelated to retail sales).
United States v. Gold Unlimited, 177 F.3d 472 (6th Cir. 1999)
First Sixth Circuit criminal case approving a jury instruction equating a pyramid scheme with a “scheme to defraud.” The Maike court relies heavily on Gold Unlimited and elaborates the instruction’s proper use.
FTC v. BurnLounge, 753 F.3d 878 (9th Cir. 2014)
Illustrates how “rewards unrelated to sales” signal pyramid fraud; cited for its “labyrinth of obfuscation” language and for updating Koscot in the digital-product context.
SEC v. W.J. Howey Co., 328 U.S. 293 (1946) & progeny
Classic test for investment contracts; used to classify the Emperor package as a security.
Jackson v. Virginia, 443 U.S. 307 (1979) & Griffin v. United States, 502 U.S. 46 (1991)
Set the sufficiency-of-evidence and multiple-theory frameworks the panel applies.
S.E.C. v. C.M. Joiner Leasing, 320 U.S. 344 (1943)
Underlines that courts look to economic reality and the promoters’ representations in deciding whether an instrument is a security.

3.2 Court’s Legal Reasoning

a) Mail-Fraud Conspiracy

The government did not need to prove each defendant personally committed all elements of mail fraud; only that they agreed to do so (18 U.S.C. §1349). Judge Kethledge catalogues lies that supported fraudulent intent: phantom $100 million software offer, celebrity endorsements, oversized checks, concealing bankrupt developer “Bob Johnson,” and representing casino payouts as “passive income.”

Instruction 8 controversy: Defence said the pyramid definition let the jury skip finding intent to defraud. The panel rejected that view, reading the instructions as a whole: material misrepresentation, intent, and agreement were each charged separately. The opinion nonetheless suggests that future district courts may dispense with a pyramid-scheme definition and simply instruct on mail fraud.

b) Anti-Saturation Defence

Tethered to Gold Unlimited, defendants proposed that a 5,000-member cap on Emperors proved a good-faith attempt to prevent saturation. The Sixth Circuit labelled the argument “meritless”: the cap only pushed saturation to the level below, did not cure misrepresentations, and in practice did not even come into play because sales never reached the cap.

c) Securities-Fraud Conspiracy

The novel question: Is a high-priced “distributor package” in an MLM a security? Applying Howey:

Investment of money: $5,000 upfront + $2,400 annual renewal.
Common enterprise: All Emperor funds pooled; casino profits shared pro-rata.
Expectation of profits: Marketing stressed “passive income” from the casino.
Efforts of others: Emperors were told they could “sit on the couch” – the casino vendor and I2G management would create the profits.

Even though recruitment bonuses existed, the court deemed them intermingled security and non-security aspects; the added Emperor packages bought by savvy participants proved that the passive casino share was “very substantial” economically. Hence the packages were investment contracts and a proper object of §78j(b) conspiracy.

3.3 Likely Impact of the Decision

Criminal prosecutions: Prosecutors now possess on-point Sixth Circuit authority for charging pyramid operators with mail-fraud conspiracy without having to plead separate fraud theories.
MLM industry: Comp plans stressing recruitment over verifiable retail sales risk both FTC civil enforcement and federal criminal scrutiny.
Securities regulation: High-tier “founder” or “VIP” positions that promise revenue shares (e.g., casinos, NFTs, tokens) may be classified as securities even when embedded in a broader MLM.
Jury-instruction drafting: District courts in the circuit are nudged to streamline instructions—focus on “scheme to defraud,” avoid unnecessary pyramid gloss, and cautiously handle mixed theories to avert reversal.
Defence strategy: The debunking of “anti-saturation” defences signals that caps on memberships, without a genuine retail-sales linkage, are unlikely to shield promoters.

4. Complex Concepts Simplified

Pyramid Scheme vs. Legitimate MLM
• Pyramid: rewards mainly for recruiting; retail sales are minimal or contrived.
• Legitimate MLM: participants earn mainly by selling product to outsiders; recruiting bonuses are capped or tied to verified sales.
Scheme or Artifice to Defraud
A plan intended to obtain money or property through lies or deceptive omissions.
Investment Contract (Howey Test)
1) Money invested; 2) In a common venture; 3) Expectation of profits; 4) Derived chiefly from others’ efforts.
Anti-Saturation Policy
Internal MLM rule meant to prevent endless recruitment by linking commissions to genuine retail sales. Merely capping headcount is insufficient.

5. Conclusion

The Sixth Circuit’s decision in United States v. Maike firmly anchors two propositions in federal criminal law: (i) a pyramid scheme is a per-se “scheme to defraud” for mail-fraud purposes, and (ii) top-tier distributor packages that promise profit-sharing can be securities under the 1934 Exchange Act. Equally important is the court’s practical advice: over-inclusive “pyramid” instructions may be superfluous, while “anti-saturation” defences must show real retail-sales linkage. For promoters, compliance counsel, and prosecutors alike, Maike sketches a clear roadmap: where recruitment eclipses product value, both fraud and securities exposure follow.