(1) As used in this section, the following definitions apply:
(a) "Chain distributor scheme" means a sales device whereby a person, under a condition that the person make an investment, is granted a license or right to recruit for consideration one or more additional persons who are also granted a license or right upon condition of making an investment and may further perpetuate the chain of persons who are granted a license or right upon the condition.
(b) "Person" means a natural person, corporation, partnership, trust, or other entity and, in the case of an entity, includes any other entity that has a majority interest in the entity or effectively controls the other entity as well as the individual officers, directors, and other persons in act of control of the activities of each entity.
(2) It is unlawful for a person to promote, sell, or encourage participation in any chain distributor scheme.
(3) A person violating the provisions of this section shall, upon conviction, be imprisoned in the state prison for a period not to exceed 1 year or be fined not to exceed $1,000, or both.
(4) A person convicted of a second offense under this section shall be imprisoned in the state prison for a period not to exceed 5 years or be fined not to exceed $5,000, or both.