A pyramid scheme is a fraudulent business model where participants make money primarily by recruiting others rather than selling products or services. The hallmark of a pyramid scheme is that those at the top of the pyramid make money from the recruitment of others, while those at the bottom see little or no return on their investment. The eventual collapse of a pyramid scheme is inevitable as the pool of potential recruits dries up, and most participants lose money.
Pyramid schemes are illegal in most countries, including the United States, Canada, and the European Union.
They are often disguised as legitimate multi-level marketing (MLM) or direct selling businesses.
Participants in a pyramid scheme are typically required to pay an upfront fee or purchase a minimum quantity of products.
The promise of quick and easy wealth is common in many pyramid schemes.
Participants are encouraged to recruit as many people as possible to maximize their earnings.
In a pyramid scheme, only a tiny percentage of participants make substantial profits, while the vast majority lose money.
The sustainability of a pyramid scheme depends on a constant flow of new recruits, making it vulnerable to collapse.
Some pyramid schemes can last years and attract thousands of participants before collapsing.
Participants in a pyramid scheme can face legal consequences, including fines, imprisonment, and forfeiture of assets.
To avoid being caught in a pyramid scheme, it is important to thoroughly research any opportunity before investing money or time.