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A pyramid scheme is a business model which, rather than earning money (or providing returns on investments) by sale of legitimate products to an end consumer, mainly earns money by recruiting new members with the promise of payments (or services).
Investopedia explains pyramid schemes, how they work, their different forms, and how people can avoid these fraudulent money traps.
A pyramid scheme is a scam where a so-called marketing company promises to help you earn big profits in exchange for recruiting new participants into the scheme.
A pyramid scheme is a fraudulent business model that seeks to funnel revenue from recruited members to the scheme’s organizers by promising payments to members for recruiting new participants.
When fraudsters attempt to make money solely by recruiting new participants into a program, that is a pyramid scheme, and there is only one possible mathematical result – collapse. Imagine if one participant must find six other participants, who, in turn, must find six new recruits each.
What’s a Pyramid Scheme and How Do You Spot One? Pyramid schemes are scams. They can look remarkably like legitimate MLM business opportunities and often sell actual products, maybe even ones you've heard of.
Ponzi schemes simply require a cash investment to earn returns. Pyramid schemes, on the other hand, need you to pay a fee and/or purchase products and services in order to participate and...
A pyramid scheme is a fraudulent business model that involves recruiting new participants with promises of earning money by selling a product or service, but where the main source of income is based on recruiting more people into the scheme.
Pyramid schemes promise participants payment or services primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products. They are illegal because they are unsustainable, exploit members, and often turn into scams.
The main characteristic of a pyramid scheme is that participants only make money by recruiting more members. There are many different kinds of pyramid schemes, but the two most basic are product-based and so-called naked pyramid schemes. In a naked pyramid scheme, no product is sold. Here's how it works: