Pyramid Schemes

Typically the founder of a company finds an initial group of people to buy whatever they’re selling to start the scheme. This first group of people is then asked to recruit more members in order to earn a portion of what new members invest. This then repeats when new members recruited are asked to recruit more members in order to earn a portion of those new members’ investments. This continues with new members bringing in more and more people so that part of all the new investments always funnels its way to the top. When the pyramid scheme grows, it becomes harder for new recruits to earn profits when recruiting new people (Market Saturation).

Pyramid schemes always try their hardest to look like a genuine company just trying to sell their products to the customers. However, the truth behind most of the “Get rich fast” companies involve making money in a typical pyramid fashion. By recruiting other people to “market your products”.

Pyramid schemes usually disguise their entry fees like registration fees to enter the business or for training, etc.

Pyramid promoters would usually ask you to join a meeting that “not a lot of people get the opportunity to be in”. They Hype up recruitment meetings by creating a fake atmosphere where they make promises of large sums of money and play with people’s greed and fear of missing out on a good deal. And they rarely ask you questions. At these meetings, you’ll probably hear things like “this is an opportunity which will change your life”, “You need to think outside the box”, “You can earn x amount of money every month just by sitting at home doing absolutely nothing” or “You can do this online without doing a 9–5 job.”.

Here’s how you can prevent getting involved in a pyramid scheme.

• Be skeptical of plans that claim you will make money through continued growth of “multi-level marketing”. i.e The commissions on sales made by new distributors you recruit, rather than through your own sales of products.
• Be careful regarding income or earnings claims. Many recruiters boast about the incredibly high earnings of a few top performers.
• Beware when presented with “testimonies” from other distributors. These “success” stories rarely reflect reality.
• Illegal pyramid schemes often sell products at prices well above retail or sell products that are difficult to value.
• Never sign a contract or pay any money to participate in a multi-level marketing program, or any business opportunity, without taking your time and reading all of the paperwork.
• Talk the opportunity over with a spouse, knowledgeable friend, accountant, or lawyer.

Recent incidents involving a popular store selling Phones at prices way below the market price showed us how Illegal Pyramid and Ponzi schemes can come crashing down at any time and that many people can lose a lot of their hard-earned money if they invest in such suspicious businesses.

If you decide to become a part of a pyramid scheme, remember that you are legally responsible for the claims you make about the company, its product, and the business opportunities it offers. Be sure to represent the opportunity honestly and avoid making unrealistic promises. If those promises fall through, remember you could be held liable.

Always remember, “if it’s too good to be true, it’s probably not”.