Pyramid Scheme
- Pyramid Scheme
- A scheme
that generates money by recruiting others to join the scheme and not from sales
of tangible goods. It is known as a pyramid scheme because each new member (who pays someone
higher up the pyramid) is required to recruit a number of new members. It is
only when those members have in turn recruited new members, or when those new
members in turn have recruited new members, that any payment might be received.
Thus for every person who makes money out of the scheme there will be between
ten and a hundred who are out of pocket.
This is a form of scam (or fraud) and is best avoided.
Pyramid Schemes also go by the name Multi-Level Marketing (MLM).
For more information see:
- www.ftc.gov/speeches/other/dvimf16.htm - lengthy article on the international problem of pyramid schemes.
- www.homepage.net/pyramidcalculator - calculator showing how many people would need to be recruited for someone to actually make any money out of the scheme.