Fabulous promises of winnings for low deposits: Ponzi schemes work because more and more people add their money. But if the system falters, the illegal businesses collapse.
The most important thing in brief:
- Pyramid schemes are illegal, but this type of scheme is often advertised on the Internet with supposedly high profits.
- They usually run out of steam quickly – and then only a few have made any money.
- We provide clues as to how you can recognize the forbidden scam.
High returns and long-term “passive income”: So-called pyramid schemes are advertised with impressive profit margins – now mostly online and in social networks.
What is a pyramid scheme?
Pyramid systems are business models that require an ever-increasing number of participants in order to function. For these you get a “bounty”, similar to a snowball rolling down the slope and growing steadily.
Profits for participants arise almost exclusively from recruiting new participants, who in turn invest money without receiving any service or product. Rapid spread brings money into the system like a flash in the pan. But you can also get out of this system just as quickly. The growth in new members cannot last long.
What are the risks of pyramid schemes?
However, fast ball systems are not designed to last for long periods of time. Only those who started the whole thing and collect shares can really benefit. Everyone else will probably even lose their bet.
Consumers already complained in 2018 about providers who lure people into dubious investments with cryptocurrency deals. Pyramid schemes could also be hidden behind such offers.
