Scams - Pyramid Schemes
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Pyramid Schemes or the Ponzi schemes have been around since ages. They are just flavored differently each time. The system involves different tiers and resembles a pyramid, which is broad at the base and tapers at the apex. This implies that the number of people at entry-level is high and goes on decreasing at the next level.
They attract people with an apparently easy and moneymaking scheme. You recruit two people, they further recruit two more, and the process continues. You are paid on the recruitments and they claim that you can make a bit of money within few months.
However, if you analyze it minutely all you are doing is to enlist people, hope that they enlist some more people and again hope that the process carries on. So in essence, it is only a recruitment business with no substantial product or concept to fall back on.
Many genuine multi-level marketing companies too employ this method. They too are affected because of the “fraudulent” pyramids. The Government has set down certain rules to safeguard the genuine companies and protect people’s interests. According to the rules, the distinguishing factor between a fraudulent pyramid scheme and a legal Multi-Level Marketing scheme is the actual product value and the way that people are involved.
If the product or service is genuine and is capable of being bought and sold and can generate revenue, then the program is certified as legal. If the only criteria of a pyramid scheme revolve around making money from recruitments irrespective of product or service then it is against the law. The product or service must be genuine and not only a matter of formality.
A pyramid scheme has to go on and on for people to profit from it. The reality is it just will not. A small breakdown will cause the entire structure to collapse. The prospect of making money is always alluring. However, be cautious of such illegal schemes.
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