Pyramid schemes con participants to pay money in what are suppposed to be money making ventures.
There are generally no services or products being sold by the participants of this scam. The only revenue stream for the scheme comes from
recruiting more members of soliciting more money from current members.
The people who start the scheme are at the top of the pyramid and they will take most of the money out of the scheme.
There is no guarantee that you will get any money out of the scheme. Pyramid schemes collapse because they become unsustainable. Eventually,
there is not enough money coming into the scheme to pay everyone and those lower on pyramid lose everything.
Ponzi schemes are similar in operation to a pyramid scheme. Ponzi schemes are fraudulent investment schemes that entice honest investors to
invest with the promise of higher returns is the norm.
Early investors are paid their returns through the proceeds of investments by later investors. The person running the scheme will take money
from one investor to pay original investors and themselves a return. Where possible the person running the scheme will also try to get participants
to reinvest their returns to keep the scheme viable.
Many pyramid and ponzi schemes are presented to people by friends or people that they know. They may or may not know that the
scheme that they are promoting is a fraudulent enterprise.
- Don't make decisions without doing your homework. Research the opportunity that is being presented to you and seek other
peoples advice before committing any funds.
- Never commit to any opportunity where high pressure tactics are used.
- If there is no product or service being provided consider where your return on investment will come from.
- If you are approached to get others to buy into a scheme where no product or service is provided ask yourself if this is legal
- If the stated return on investment is higher than usual be wary. If it is too good to be true it probably isn't true.