Investor Beware – Pyramid Schemes

Pyramid Schemes are fraudulent and non-sustainable investment plans or business models. These schemes involve enrolling people under the fake promise of high profits through money-making business. The greed for earning easy money lures common people to take part in the scheme as it portrays the illusion of earning money just by making other people to join under them. Seems a pretty easy task, isn’t it? That’s the trap in which people get caught and often lose their hard-earned money.

These schemes strike the chord of greed and brainwash people but seldom do people realize or enquire how the money is being generated without the real sale of any products or services. The profit depends on the exponential growth of new recruits.

Pyramid schemes make fake promises of high profits by investing a nominal amount and recruiting new members under them called as ‘Down line’, give them easy mode of income. For example: – In such a fraudulent pyramid scheme one is at the top position whose recruits some people under him. The newly recruited people need to pay some money to their recruiter or ‘up line’. They then need to make other people join under them in order to expect earning high profits without creating any wealth, selling any product or providing any service.

This process continues as people continue recruiting new members under them to get their share of money. But these chains are sustainable in nature as the number of possible investors is finite i.e. somewhere this chain saturates where it is not possible to recruit any new member. The vulnerability of losing money is more towards the base of the pyramid. Where the long unbroken chain ensures high profit amount, the small chains or broken chains provides less value of money than promised. So, somewhere down the line people start losing money. About 90% of the people recruited in such schemes suffer from losses.

Pyramid Schemes or Multi-Level Marketing (MLM) is banned in many countries because of its fraudulent nature. In India, under the Under the Prize Chits and Money Circulation Schemes (Banning) Act 1978, it has been declared illegal.

The idea of earning easy money creates an illusion. The banning has though resulted in slight altering or disguising of these schemes in order to fool people. The revamped schemes seem to be legal but a close look on its working clears the web of illusion. So, one must be familiar with the many disguised forms of these schemes and investigating into the working mechanism and the characteristics can help in judging its legality.

Pyramid MLM schemes provide services or sell products with no inherent value. Thus the money-making business is the sole reason which lures people to buy the products sold by these schemes. Mailing letters and Ponzi schemes are some of the other disguised forms in which pyramid schemes are run.

Pyramid Schemes involve fraud and deception and very few people can reap benefits from them. So, it’s very important for people to know where their money is being invested and from where so much revenue is generated to provide all the members so much money. These schemes can thus rob your hard-earned money and can get you into trouble because of the legal issues. 

Pyramid Schemes are fraudulent and non-sustainable investment plans or business models. These schemes involve enrolling people under the fake promise of high profits through money-making business. The greed for earning easy money lures common people to take part in the scheme as it portrays the illusion of earning money just by making other people to join under them. Seems a pretty easy task, isn’t it? That’s the trap in which people get caught and often lose their hard-earned money.

These schemes strike the chord of greed and brainwash people but seldom do people realize or enquire how the money is being generated without the real sale of any products or services. The profit depends on the exponential growth of new recruits.

Pyramid schemes make fake promises of high profits by investing a nominal amount and recruiting new members under them called as ‘Down line’, give them easy mode of income. For example: – In such a fraudulent pyramid scheme one is at the top position whose recruits some people under him. The newly recruited people need to pay some money to their recruiter or ‘up line’. They then need to make other people join under them in order to expect earning high profits without creating any wealth, selling any product or providing any service.

This process continues as people continue recruiting new members under them to get their share of money. But these chains are sustainable in nature as the number of possible investors is finite i.e. somewhere this chain saturates where it is not possible to recruit any new member. The vulnerability of losing money is more towards the base of the pyramid. Where the long unbroken chain ensures high profit amount, the small chains or broken chains provides less value of money than promised. So, somewhere down the line people start losing money. About 90% of the people recruited in such schemes suffer from losses.

Pyramid Schemes or Multi-Level Marketing (MLM) is banned in many countries because of its fraudulent nature. In India, under the Under the Prize Chits and Money Circulation Schemes (Banning) Act 1978, it has been declared illegal.

The idea of earning easy money creates an illusion. The banning has though resulted in slight altering or disguising of these schemes in order to fool people. The revamped schemes seem to be legal but a close look on its working clears the web of illusion. So, one must be familiar with the many disguised forms of these schemes and investigating into the working mechanism and the characteristics can help in judging its legality.

Pyramid MLM schemes provide services or sell products with no inherent value. Thus the money-making business is the sole reason which lures people to buy the products sold by these schemes. Mailing letters and Ponzi schemes are some of the other disguised forms in which pyramid schemes are run.

Pyramid Schemes involve fraud and deception and very few people can reap benefits from them. So, it’s very important for people to know where their money is being invested and from where so much revenue is generated to provide all the members so much money. These schemes can thus rob your hard-earned money and can get you into trouble because of the legal issues.