Pyramid Schemes - What They Are and How To Spot One

Updated: May 4



Scams and fraudulent activities have been around since the Ancient Greeks with the first ever recorded attempt of fraud occurring in 300BC. Over the years, we have become wiser to the fake emails and phoney calls that we think we'll never get caught out. However, in times of financial difficulties for many people, the allure of acquiring an additional stream on income can be enticing and the scammers know it. They have gotten better at dressing up the scams and packaging it as a lucrative deal that you MUST act on with hast. But what exactly is a pyramid scheme?


PYRAMID SCHEME - 'a form of investment in which each participant must recruit additional members with the promise of payment for each member they recruit'.


This type of business model is illegal in the UK. Pyramid schemes began in 2005 with waves of schemes making significant headway in Ireland in early 2006. A scheme called 'Give and Take' dominated in the UK between 2008-2009 involving at least 10,000 victims based in England and South Wales. They were able to generate a sum of £21 million from these victims over this time period. The leaders were prosecuted however in 2015 and ordered to pay £500,000 in compensation and fees.


WAYS TO SPOT A SCHEME

• There is a large monetary investment upon sign up (joining fee)

• Members are required to sell goods or services to other members as opposed to directly to customers

• Members are required to sell goods that hold little monetary value but instead promote the brand or service eg information platforms.


The biggest tell-tale sign is that the bulk of your income is derived only from the recruitment of new members. If you are encouraged to bring your friends, family and colleagues in order to generate a profit, the chances are it is actually a pyramid scheme.


Always remember to tell yourself, 'if it seems too good to be true, it probably is'.


Also ask yourself this, if it was so easy to make money from sitting at home then why would people still work? Wouldn't everybody be doing it?


If you are still unsure as to whether or not to proceed, ask a third party - a parent, relative or anyone that you trust. Sometimes, a second opinion can be the difference between having money and losing it.


A lot of these pyramid schemes will dress themselves up as 'wealth generation' or help you to generate a 'passive income stream'. Before making any decisions either online or in person, make sure you follow these recommendations:


DO NOT give any large sums or payment details on the spot

DO your research before agreeing to anything

DO NOT commit to anything you're unsure of


Protect yourself and do your research before committing your time and money to anything, you'll thank yourself for it!

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