What is a Pyramid Scheme?

The above proposition is actually a pyramid scheme, one that doesn’t profit from selling any products but instead is built on the basis of recruiting more people. If new people keep joining, money continues to be made. Soon, levels start to get created and each level requires more people. But this is where the problem starts.

Soon enough, there won’t be enough people to join. Money won’t be made and most of the people in the pyramid-like structure, especially near the bottom levels, will lose money. What makes it different from normal businesses is that the actual aim of a pyramid scheme is not to market and sell any products, but to keep recruiting people just to gain money.

People join pyramid schemes genuinely believing that they will be successful. They are recruited with promises of earning large sums of money, along with screenshots of their earnings, expensive vacations and a luxurious lifestyle. This is not necessarily false, some of the people in the pyramid may be profiting from the scheme but it’s a very small fraction and usually the people on the top.

Tempted by promises, it gets easy to believe that recruiting enough people will be possible and that the pyramid will grow, never stopping to calculate the higher chance of a loss.

Out of the desire to get rich or to have financial freedom, many people often fall into this trap, eventually losing money once the system collapses. It is important to know the risks that come with a pyramid scheme and also how to avoid falling into the trap.
Also Read: What is a Ponzi Scheme?

1. Pyramid schemes include you having to pay money upfront just to join, and no one informs you on what exactly is being sold. The recruiters or organizers would avoid answering any detailed questions.
2. If products are part of the scheme, then they are extremely expensive and have little to no value in the commercial market. Income is never guaranteed.
3. There is often pressure placed on you to join immediately, accompanied by promising statements like, “This opportunity is one of a kind”, or “Don’t regret a chance to get rich”. Huge income is assured to come very quickly.

The first few hours after joining a pyramid scheme, and realising it for what it is, is very crucial.
1. Break all contact. You should immediately stop contacting the recruiter or organiser. Instead, document all the interactions so far, including chats and transactions. This will be presented as evidence.
2. Keep your finances safe. Contact your bank in the case of any recent transactions and seek help regarding the matter. All banks have dedicated numbers serving as a fraud helpline. Change any security codes, such as passwords and enable a 2-factor authentication system.
3. Report it officially. File official complaints by reporting the incident with the recorded evidence. You can do so in spaces like the National Cyber Crime Reporting Portal, or also file a police FIR.

It is important to avoid signs of a pyramid scheme. The entire system is unsustainable, and since it is an illegal money-circulation scheme, joining it may mean legal troubles. The whole system depends on the pyramid falling and only the people on top getting the profits. The odds are always against you.

Always remember there are better ways to earn money rather than depending on a system that is unpredictable and guaranteed to invoke financial losses.