Pyramid scheme

A pyramid scheme is a way of making money that cannot continue very long. It involves promising people payment, services or ideals, primarily for enrolling other people into the scheme or training them to take part. It does not supply any real investment or sale of products or services to the public. Pyramid schemes are a form of fraud. Pyramid schemes are not legal in many countries. This type of scheme has existed for at least a century (100 years). The way the scheme is described is sometimes changed to hide what they are doing. Many people believe that multilevel marketing (MLM) is also a pyramid scheme. Concept and basic models A successful pyramid scheme combines a business that seems real with a simple-to-understand money-making description which is used for profit. The idea is that the first person, Mr. X, makes a payment. To get money, Mr. X has to recruit others like him who will also make a payment. Mr. X gets paid out of money received from those new people (recruits). The recruits go on to involve others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised always increasing benefits as the "business" expands. Such "businesses" do not have real products or services. To make them more believable, most such scams are well equipped with fake letters from successful members and information. Only the first person (sometimes called the "pharaoh") and a very few at the top levels of the pyramid make a lot of money. The amounts get much smaller further down the pyramid. Someone at the bottom of the pyramid lose money. They paid to enter, but cannot get anyone else to join.

Adapted from Wikipedia entry Pyramid scheme