[vc_text_separator title=”Article” color=”white”]
What is pyramid scheme and why is it illegal?
As the name says, Pyramid Scheme is structured like a pyramid. The basic concept behind this scheme is very simple; however they are presented to the investors in camouflaged way. Because of this reason, it is advised to get familiar with all the hidden features before you invest in it. In 2008, a disgraced investor Mr. Bernard Medoff was arrested in this case after he cheated one of his investor’s $60 million, is one of the best examples of pyramid scheme.
It typically starts with one person, who will be on the top of the pyramid. This person will recruit the second person who will be working beneath him and will invest in the scheme which will be paid to the first person. Now this second recruit will add more people under him to get his money back and the chain continues. If the recruits get more than 10 people investing under him, he can make good amount of profit by investing just small amount initially. Every time a new recruiter is added, he will add 10 more people under him resulting in a total of 100 more people.
The scheme will definitely tempt you to invest but practicing one is road to fraud and deception as not everyone in the chain will be profited that was promised in return. Although the people on the top level will claim that there will be endless possibility to earn but in reality this possibility cannot be materialized due to market capacity.
Despite what the initial recruiter tells about the legality of this scheme, they are still not legal. Therefore it is very important to know the in and out of such investment plan before you get in. Pyramid schemes are not only illegal but also a waste of time and money. The scheme generally collapse once the potential of filling new recruits is reached. And when the scheme collapses, most of the people lose their money except the one or two at the higher level. Always keep in mind that if any plan promises to make you rich in no time and does not reveal how they going to invest your money, you should get cautious before getting onboard.
[vc_widget_sidebar sidebar_id=”content-bottom”]