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Any feedback on pyramid schemes where a lump sum is invested & then you ask two friends/familyto invest the same amount

by mao44 20 January 2009 |

6 comments | Love

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and you then gradually move to the top and once you reach the summit you receive a lump sum far in excess of the amount originally invested. There is a scheme in my area being run by women and a friend, who has already invested, has asked me and another friend to join the scheme which will enable him to move up the ladder?? I have heard that this is a scam but any feedback would be welcome.

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MikeGG1 posted
Take your information to the Police immediately, before many more get caught by it.
Posted on 20 January 2009 | Love 0 loves Report
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TMFJoker posted
I'd like to second MikeGG1's answer and suggest you contact the police immediately. This is definitely a scam.

http://en.wikipedia.org/wiki/Pyramid_scheme
Posted on 20 January 2009 | Love 0 loves Report
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prodigy9 posted
Wow! I hate to be rude but are you crazy? This is wrong on so many levels I don't know where to start.

In the worst (or ironically most successful) schemes whole regions can be swept up in the scam and suffer greatly.

Apart from the fact that they are illegal in many countries, you will put yourself under enourmous pressure to "recruit" other participants.

I suspect these schemes flourish in tough economic times when people can ill afford to lose money so best to avoid it and as the above posters have said, call the police because for sure there will be people less diligent that you who will take it at face value, not investigate and lose money.
Posted on 20 January 2009 | Love 0 loves Report
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seriousmoneyFool posted
The only ones profiting from this scam will be the people who set it up in the first place. Tell your friends to stay well clear and please follow MikeGG1 and TMFJoker's advice and take the matter further.
Posted on 20 January 2009 | Love 0 loves Report
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ThatLindseyGuy posted
Everyone who commented earlier is 100% right: keep your money and call the cops.

However your question suggests you're not quite sure what is happening so I'll elaborate.

Money in a pyramid scheme is not 'invested' anywhere, its only meant to appear that way. What really happens is that contributions from new entrants are simply handed to those who join earlier.

In order to ensure that the scheme makes money for early entrants, there is usually a requirement for new entrants to invite more than one person.

As an example, a pyramid scheme may require £100 to enter and pays £500 when you bring in 5 people who also pay £100 (which is £400 profit and 4 times what you 'invested').

As stated before your money is not invested: the money from new entrants is simply handed to early entrants. If those 5 people bring in 25 more people, they share £2,500 between them. If those 25 people bring in 125 people, they share £12,500 between them.

So far, so harmless.

The problem comes when the population of the group gets so large that interested new entrants can no longer be found -- given the exponential nature of the scheme, this doesn't take long.

What happens then is that the very last group of new entrants are guaranteed to lose 100% of what they put in.

This tends to be a very large group of people: the 10th level of the pyramid described above has 9.8 million people in it.

This is the reason why pyramid selling schemes are against the law.
Posted on 20 January 2009 | Love 0 loves Report
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a2a posted
Hi you say pyramid schemes are against the law.
I have gone to two meetings run by 'Success University'. First thought pyramid scheme.
A friend of mine is doing well with S.U. left his job, bought a flat etc. The product that they offer with the price is valuable knowledge. But something has always niggled at me saying scam, stay clear away and I have followed my gut feelings.
Posted on 22 January 2009 | Love 0 loves Report

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