This post is not required for class. I provide it because it may be of interest to those whose curiosity was piqued by our class discussion of Ponzi/pyramid schemes, Bernie Madoff, and affinity fraud. For better or worse, multi-level marketing is bigger in Utah than in other places, and multi-level marketing is often associated with both Ponzi/pyramid schemes and affinity fraud.
Anyway, the supplement maker Herbalife is publicly traded. Late last year, a whale of a private investor shorted* Herbalife stock, and began a publicity campaign arguing that it was a pyramid scheme whose stock value would soon fall.
If you’re interested, you can read more in “Let Herbalife Customers Decide” in Holman Jenkins weekly column, from the February 20 issue of The Wall Street Journal.
* Shorting is when you borrow shares of stock (rather than money), and then sell them. In essence, you are betting that the stock price will fall, so that you can buy the shares back at a lower price, and then repay off the loan.