How to spot a 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


  • 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


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


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