How to spot a pyramid scheme

pyramid-scheme

NAME: Pyramid Scheme

NATURE: illegal

SOLE PURPOSE: Recruitment

PROFIT GENERATION: Recruitment commissions

ENTRY MODE: Payment of entry fee ‘investment fee’

PRODUCT/SERVICES: None but if present, they are usually

  • overpriced
  • poor quality
  • difficult to sell
  • little value to the consumer

OPERATIONS:

  • Recruitment into the scheme is done through payment of a certain amount of money (investment fee)
  • The initial recruiter recruits a 2nd person who is also required to pay the entry fee which is then used to pay his recruiter
  • the 2nd recruiter then recruits a 3rd person who also pays the entry fee which is ultimately used to pay his recruiter and the process goes on and on

INTERACTION WITH SCHEME PROMOTER: None since the recruits join at different levels

COLLAPSE: The scheme collapses when there are no more recruits to fund the scheme

BENEFICIARIES: Those at the very top of the pyramid

LOSERS: Those at the bottom of the pyramid

REFUND: None

Related Posts: How to spot a multi level marketing plan ; How to spot a ponzi scheme

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