Pyramid Scheme

Search Dictionary

Definition of 'Pyramid Scheme'

A pyramid scheme is a fraudulent investment operation where people are promised high returns on their investment by recruiting new investors into the scheme. The new investors are then required to pay a fee to join, and the money they pay is used to pay the original investors. This process continues until there are no new investors willing to join, and the scheme collapses.

Pyramid schemes are illegal in most countries, and they can be very costly to the people who invest in them. The Federal Trade Commission (FTC) has warned consumers about pyramid schemes, and it has published a list of red flags that can help you identify a pyramid scheme.

Here are some of the red flags that the FTC has identified:

* The investment is promoted as a way to make easy money.
* The promoter promises high returns with little or no risk.
* The promoter uses celebrity endorsements or testimonials to promote the investment.
* The promoter claims that the investment is backed by a government agency or a well-known company.
* The promoter requires you to pay a fee to join the investment.
* The promoter requires you to recruit new investors in order to make money.

If you see any of these red flags, you should be very wary of the investment. It is possible that the investment is a pyramid scheme, and you could lose all of your money if you invest in it.

Here are some additional information about pyramid schemes:

* Pyramid schemes are often disguised as legitimate businesses, such as multilevel marketing companies or investment clubs.
* Pyramid schemes can be very difficult to detect, because they often operate in secret.
* Pyramid schemes can cause financial ruin for the people who invest in them.
* Pyramid schemes can also damage the economy by taking money away from legitimate businesses.

If you are thinking about investing in an investment opportunity, you should be very careful. Do your research and make sure that you understand the risks involved before you invest any money. If you have any questions, you should consult with a financial advisor.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.