what is a pyramid scheme??

Answer 1

A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. Pyramid schemes have existed for at least a century. In addition, other methods of conducting business known as multi-level marketing (MLM) and as "matrix schemes" often closely resemble pyramid schemes (although unlike pyramid schemes, which are almost always frauds, MLM and matrix schemes are in many cases regarded — at least legally — as legitimate business methods).

Most pyramid schemes are attempts to confuse potential consumers into complicated but convincingly fool-proof money making scams. The essential idea behind each scam is that the individual only makes one payment, but somehow they are promised to receive exponential benefits from other people as a reward. A common example might be that a victim is enticed with an offer that, for a fee, allows them to sell the same offer to other people. Each sale includes a fee to the original seller. Clearly, the fundamental flaw is that there is no end benefit; the money simply travels up the chain, and only the originator wins in swindling his followers. Furthermore, the people in the worst situation are the ones at the bottom of the pyramid: those who subscribed to the plan, but were not able to recruit any followers themselves. To embellish the act, most such scams will have fake referrals, testimonials, and information.

Although pyramid schemes have been declared illegal in many countries, they still persist in various forms.

Answer 2

pyramid scheme
n.
A fraudulent money-making scheme in which people are recruited to make payments to others above them in a hierarchy while expecting to receive payments from people recruited below them. Eventually the number of new recruits fails to sustain the payment structure, and the scheme collapses with most people losing the money they paid in.

Pyramid Scheme

An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, given to the earlier investors/recruits above them.

Investopedia Commentary

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, but these gains are paid for by new recruits and are not a return on any real investment.

From the day the scam is initiated, a pyramid scheme's liabilities exceed its assets. The only way it can generate wealth is by promising extraordinary returns to new recruits the only way these returns can be paid is by getting additional investors. Invariably these schemes lose steam and the pyramid collapses.

Answer 3

A pyramid scheme is sometimes called a multi-level marketing scheme too. The person at the top of the pyramid gets other people to join the scheme and takes a cut of their earnings. They in turn get people to join the scheme and take part of the next level's earnings and so on. The reason they don't work is because eventally you run out of people to be on the bottom level of the pyramid and it collapses.

Answer 4

Pyramid schemes—also referred to as franchise fraud or chain referral schemes—are marketing and investment frauds in which an individual is offered a distributorship or franchise to market a particular product. The real profit is earned, not by the sale of the product, but by the sale of new distributorships. Emphasis on selling franchises rather than the product eventually leads to a point where the supply of potential investors is exhausted and the pyramid collapses. At the heart of each pyramid scheme is typically a representation that new participants can recoup their original investments by inducing two or more prospects to make the same investment. Promoters fail to tell prospective participants that this is mathematically impossible for everyone to do, since some participants drop out, while others recoup their original investments and then drop out.

Answer 5

An example of pyramid is the huge
prosperity of the cosmetic, scientific soap sales industry of
AMWAY in Grand Rapids, Michigan. The two DeVos, and another have contributed to hospitals, donated to the arts, continue to support artistic endeavors and grow their industry all the way to China, and around the globe. It began by sales that had a network of sales persons under them, and the more the ones at the bottom sold, the richer the ones at the top became due to the percentage of sales income.

Answer 6

It's where a business is set up where you sign up people and get a percentage of their business, and a percentage of anyone below them. The more people you sign up, the more you make from them, and the people that they sign up, etc, etc down the line. You make money from all the people on your 'dowline', so the schucks on the bottom make little, if any, and only the people near or at the top make the real money. Amway, Avon are good examples that come to mind, but there are a lot of these 'mulit-level marketing' schemes out there