Pyramid Scheme (redirected from Pyramid schemes)

Pyramid Scheme

An illegal investment scam based on a hierarchical setup that relies on new recruits' funding as the source of money, or so-called returns, to be provided to those earlier investors/recruits above them in the pyramid.

Notes:

A pyramid scheme is initiated by an individual or a company that starts recruiting investors with an offer of guaranteed high returns. As the scheme begins the earliest investors do receive a high rate of return, paid for by the new recruits' funds - not a return on any real investment. The pyramid's liabilities, from the day the scam is initiated, exceed its assets because it cannot generate wealth any other way than promising extraordinary returns to new recruits and paying these returns by getting additional investors. Invariably these schemes lose steam and the pyramid collapses.

See also: Bucketing, Bucket Shop, Caveat Emptor, Churning, Front Running, Guilt Edged Investment, Jitney, Ponzi Scheme

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Pyramid scheme

An illegal, fraudulent scheme in which a con artist convinces victims to invest by promising an extraordinary return but instead simply uses newly invested funds to pay off any investors who insist on terminating their investment.