Expert: Dan Pepper - 7/17/2008

Question
QUESTION: Ok here it goes, im a college student and i had seen these matrix sites, or ladder sites or whatever you want to call them. I did some research and found a few places saying there is nothing illegal about them. So i was like sweet, ill start one of these up and make some money and provide people with cheap stuff. What i later learned is that these are considered a form of illegal lottery. So i then proceed to shut down the site and gave everyone refunds. Now this one guy is threatening legal action cause he wants the item from the ladder he was in. I gave the guy a refund and have been trying to work with him. Im from wa and hes from fl. I dont have to money, if he files, to go down to Florida and fight this. What should i do, at the time i didnt know it was considered illegal.
any advise??

i didnt know it was illegal and im just trying to make things right

thanks, im so stressed right now

ANSWER: There are many forms and types of these sites, some legal, some not.  Without more information and specifics about the venture in which you were involved, I am unable to give you any guidance.

---------- FOLLOW-UP ----------

QUESTION: the site is freewebs.com/paintballgearmatrix
its where you make a "donation" in return are places on a list, once so many people sign up the item is shipped to the person at the top of the list.

Answer
To my knowledge, there are no laws specifically naming matrix schemes as illegal.  The URL you sent appears, as best as I can tell, to fall within the classic matrix scheme.

As such, the person threatening to sue you would have to state a legal basis for the suit, which may not be easy to do.

This post should be construed as legal advice, and is not a substitute for retaining qualified legal counsel that can advise you regarding your specific situation.