A pyramid scheme is an illegal investment scam that involves promising people huge payouts on their investments, with the aim of defrauding them later. Most pyramid schemes are based on multi-level system whereby those who invested are often asked to bring new Investors, sometimes as a condition for them to get paid too.

Pyramid schemes have come in different formats and gone like the others before them, leaving behind a trail of tears, regrets and loss for the victims. In most cases, the victims cannot seek redress in Court or even go after the Owners of these fraudulent schemes because the ownership is usually shrouded in secrecy and confusion.

While some people willingly enter into pyramid schemes, hoping to “cash out” before it crashes, many of the victims are unwitting Investors who do not know that such schemes are pyramid schemes. This article outlines 5 tips to readily help you identify pyramid schemes so you do not become a victim unknowingly.

5 Tips To Identify Ponzi Schemes Couched As Legitimate Investments

Below 5 tips will help you dictate fraudulent investment offers disguised as legitimate opportunities.

Flamboyant Giveaways
Most pyramid schemes Scammers do giveaways that are often unjustifiable and usually publicized. There also seem to be an element of drama to the giveaways. All these are carefully coordinated to draw in victims.

Such giveaways tend to soften peoples’ mind, heart and love towards such Givers. They also tend to sway public opinion in the Scammers favor. In addition, the giveaways position them as rich and wealthy people who can afford to pay as much Investors as possible.

you need to recognize that no serious or true Business person throws around money like that unless its a carefully orchestrated move meant to draw you in and then strike when you least expect.

Referral System
Most pyramid schemes are built on multi-level marketing system. This simply means that Investors are encouraged and most times mandated to bring in new Investors either to qualify for payouts or earn referral bonuses.

This is a no-brainer since pyramid scheme is literally “robbing Peter to pay Paul”, new subscribers to the scheme are always needed so the old ones can be paid and it goes on till the system eventually gets saturated and collapses. If someone is actively marketing you to come and invest in a potentially life-changing investment scheme, you might be a potential victim of a pyramid scheme. Step back, think twice and ask relevant questions.

No Limit On Number of Investors
A pyramid scheme needs as much Investors as it can get. The higher the number of Investors, the longer the fraudulent scheme can put up before it collapses. There are usually no cap to the number of Investors a pyramid scheme can take on. Unlike real businesses that put a limit on the number of Investors or Shareholders who can buy into the business, because they are legitimate businesses.

Any investment offers that spends months and even years canvassing for Investors without limit, that is a huge red mark and a cue for you to do further due diligence before parting with your hard-earned money into such fraudulent schemes.

Assured Or Fixed Profits
One big sign of a pyramid scheme is the assurance of profits or return on investment. Ideally, profit is not assured in business. The business can make profit or loss or break even (no profit no loss). This is because there are many circumstances beyond the business Owners control that can cause the business not to make profits. Also, no business fixes its rate of profit for the same reason as above.

On the other hand, fraudulent investment schemes always promise profits which in most cases are usually fixed for example 30% per month. This is outrageous and a big question mark on the legitimacy of such investment offer. Next time a silver-tongued Scammer is trying to convince you to invest by offering fixed profits, ask them what gives them the assurance that the business must make such profits they are offering.

Use of Influencers/Celebrities
Finally, most pyramid schemes use Influencers and Celebrities to draw in victims, usually piggybacking on the general acceptance of these Celebrities. While even legitimate businesses sometimes use Celebrities for adverts too, pyramid scheme Operators usually look for Influencers and Celebrities with large followership on social media like Facebook, Twitter and Instagram.

Such Celebrities and Influencers act as mark of legitimacy on such fraudulent businesses as their large Followers take their words wholesomely and will likely invest in such schemes. Most times, such Influencers and Celebrities go further to claim they are Investors too, all in a bid to convince potential victims.

Conclusion
If you invest in a pyramid scheme knowingly or unknowingly, there is a big probability that you will lose your money. It is often more frustrating and annoying if you are an unwitting victim of pyramid scheme hence these 5 tips will guide you to vet properly before you commit to any investment opportunity.

Culled from:https://eduinfozone.com/5-steps-to-identify-a-pyramid-scheme/

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