FAQ Friday: Pyramid Schemes
March 19, 2021
Every Friday, we share the answer to one of the most frequently asked questions (FAQ) from the hundreds of consumers who contact us each week. This week we take a look at pyramid schemes. Here’s what you need to know about how they work and what to watch out for:
What is a pyramid scheme?
A pyramid scheme is a fraudulent business model that promises you a way to make quick and easy money in return for an initial investment. However, they are actually designed to con you into investing significant amounts of money which can never be recovered.
How does a pyramid scheme work?
Pyramid schemes can come in many forms, but they all work the same way – they make money by recruiting people who all put money into the scheme.
They are often marketed with the promise of “free” money if you invest in the scheme. When a person “buys in”, their money goes to those above them in the pyramid. In order to move up the pyramid they are usually asked to recruit new members. In theory, the further up the pyramid you go, the more money you make, but this does not happen because there are never enough people to join the scheme.
How might I be targeted?
You may be approached by email, letter, phone, online (including social media) or you may be invited by a friend or family member to attend a meeting about one.
How to identify a potential pyramid scheme:
- Recruiting others: Watch out for schemes where your income is based on introducing other people to the scheme, rather than selling a product or service.
- Personal invitations: Be sceptical if you are told about the scheme by word of mouth, online sharing or personal invitation, rather than it being openly advertised or marketed.
- Promise of unusually high investment returns: Be wary of business models which offer high return on investments, which seem too good to be true – they probably are.
- Constantly hearing how ‘easy’ it is: Pyramid schemes will often emphasise how ‘easy’ it is to make money quickly with a ‘hard sell’ by the promoters telling you how much you can make. Take plenty of time to do some research on the company or scheme.
Who do I contact about a suspected pyramid scheme?
If you are approached to join any kind of pyramid promotional scheme, be sure to contact us immediately through our helpline on 01 402 5555 or by clicking here.Return to News