Pyramid Scam Illustrated

The perpetrators of Ponzi or pyramid schemes function by recruiting people to join a platform that claim to generate passive online income. This is a non-sustainable money game where culprits take advantage of the participants’ gullibility.

Pyramiding use a pyramid-shaped money distribution system where participants on the lower level of the pyramid are required to send money to the topmost level individual and a relatively smaller amount to the company.

The topmost player, after collecting the money, leaves the system and the bottom participants move upwards. The bottom participants strive hard to continue the process until they reach the topmost level at which point they start to receive money.

To fully understand how a pyramid scheme works, take a look at the figures below:

A. The uppermost level participant receives money from the lowest level.

B. The topmost level participant leaves the system, thereby making 2 new pyramids with 2 new top levels.

C. The lowest level moves up and new participants on the lowest level send money to the new topmost member.

Take note that the company continuously receives part of the money which they refer to as processing fee.

It should be made clear that it is not the shape of the organization that makes it a pyramiding scheme. It is the way the organization operates. In the case of legitimate leveraged marketing companies, they have genuine products as returns of investment, making it risk-free because marketing participants benefit from the products.

For example: When a new networker joins a company, he purchases products which serve as his qualification to the marketing system. He does not lose anything because he has products to consume or sell, thereby, earning additional income besides the ability to make passive income from the system itself.

Social/political establishments also have pyramid structures:

Other Pyramid schemes mask themselves as legitimate online businesses by including products in their schemes. Although they seem to be legitimate, they will eventually reveal their true colors after they are discovered to have worthless and/or non-beneficial products.

Pyramid schemes are illegal businesses. Extra care should be taken in joining business opportunities on the internet. Simple fraud emails can contain traps that might look like easy passive income opportunities.

In the end, thousands of participants lose money when the system collapses and the perpetrators disappear. No money scam stay in business for a long time. They always end up being chased by the law and members being dead broke.