Pyramid Schemes

What is a Pyramid scheme?

Pyramid schemes are fraudulent investment models that primarily generate income through the recruitment of new participants rather than through the sale of legitimate products or services.

How Do Pyramid Schemes Work?

Money from Recruitment: Pyramid schemes promise big earnings if you recruit others. The person at the top collects an upfront fee from new members they bring in, and this money flows upwards.

Growing Levels: Each recruit is pushed to bring in more people. For instance, if one person recruits ten, and those ten each recruit ten more, the group quickly grows. This sounds great but creates an unsustainable chain.

Inevitable Collapse: Eventually, it’s impossible to find enough new recruits to keep the money flowing. When this happens, the scheme falls apart, leaving most participants with losses while only a few at the top profit.

Types of Pyramid Schemes

• Classic Pyramid Scheme:
  One person recruits others, who then recruit more people to earn money. Each new recruit pays a fee that goes up the chain.

• Eight Ball Model:
  Participants recruit two people each, creating a fast-growing chain. It’s often disguised as something like a “gifting circle” with fancy tier names like “captain” or “co-pilot.”

• Blessing Loom:
  This scheme works like a circle where you recruit two people with the promise of turning a small payment into big returns. It often pops up online under different names but is illegal in many places.

• Matrix Scheme:
  You pay to join a waiting list for a product, but only a few ever get it. It looks like a pyramid and collapses because there aren’t enough recruits to sustain it.

• Chain Emails:
  These work like digital pyramid schemes, where you send money to people at the top of the email chain and recruit others to join.

• Fake MLMs:
  Some pyramid schemes pretend to be Multi-Level Marketing (MLM) companies but focus on recruiting people instead of selling real products.

• Ponzi Scheme:
  Not a pyramid, but similar. Ponzi schemes promise big returns using money from new investors instead of real profits. You don’t have to recruit anyone directly to join.