Ponzi scheme and Pyramid scheme

One difference that makes the pyramid system more difficult to understand than the Ponzi scheme is the large number of people involved, which provides credibility in the eyes of investors.

Fraudsters attract investors by promising them huge profits. Suppose, for example, that a Ponzi scheme developer receives an initial investor who offers him $ 1 million to invest with a promise of a return of 25% or better. Higher returns encourage investors to keep their money in the system, even if the operator does not pay.

Participants in the Ponzi scheme believe that their investment will bear fruit, and pyramid scheme participants know that they are only making money by hiring new participants. Ponzi schemes maintain the deception of a stable business, and new investors offer new funds, but the majority of investors do not want to be fully paid and believe in non-existent assets.

The Ponzi scheme is based on investment management scandals in which investors give money to a portfolio manager who promises a high return on investment, but investors demand the money they have paid for the revenue to be used by future investors. The Ponzi scheme says it relies on an esoteric investment approach to attract investors while the pyramid scheme says new money is a source of the initial investment.

The big similarity between the Ponzi scheme and the pyramid scheme is that they both need the constant flow of new investors to be able to feed themselves, which will dry up and the system will crash. Emphasis on selling a franchise for a particular product can lead to the supply of potential investors disappearing and the pyramid collapsing. If the system requires a continuous flow of investment to pay a higher return, the number of new investors will decrease, and eventually, the system will collapse because the operator is unable to pay the promised return, and if the return is too high it risks a collapse.

It turns out that the main difference between the pyramid scheme and the Ponzi scheme is that the former attracts new investors and participants in the system and is less involved in hiring, while the latter employs new investors to succeed. In a typical pyramid scheme, new investors pay for the right to sell the product or service and the right to place others in the pyramid as well as the rewards associated with the sale of the product or service.

Whether you are looking for a legitimate MLM business opportunity or you have become a marketer in a pyramid scheme, it can cost you, your employers, and your family and friends a lot of time and money if you don't. As an investor, there is a chance to fall into one of these programs. Or because the products or services sold by the promoters are not for sale or the promoters refuse to buy them, investors who believe that the products and services they sell are legal may find that they are participating in an illegal pyramid scheme.

Hiring more investors is an important part of any marketing practice, but many legitimate retailers incorporate solid products and services, and the company’s participants lose a lot. Unlike conventional investments, pyramid schemes (Ponzi schemes) offer regular returns as the number of investors continues to grow. A small group of top start-up facilitators needs a large base of recent investors to support the program and make a profit for the promoters.

Ways to take the key The Ponzi scheme is a pyramid scheme in which unscrupulous investors use unscrupulous individuals to profit by promising them extraordinary profits by exchanging their money. The pyramid scheme takes its name from the corporate structure where a large number of investors earn money divided between a small number of investors and the investors themselves. The pyramid schemes are unreliable and illegal because investors "money is used to repaying investors.

The most popular Ponzi scheme in recent history and the biggest investment fraud in the United States was set up by Bernard Madoff, who deceived investors through Bernard L. Madoff Investment Securities, LLC. At the beginning of the 20th century, Charles Ponzis influenced thousands of people to invest their money in stamps. Then in the 1920s, another Ponzi scheme tricked thousands of people into investing in a stamp program.

In the 1920s, Ponzi promised investors that they would return 50% in a few months by investing in postal coupons abroad. He has promised investors a higher return of 50 percent in the short term.

As the program progresses, the unscrupulous trader protects more investors and uses their money to continue investing in their portfolios, in exchange for the first groups to support the illusion that their investment creates profits. When each employee hires a certain number of people, they get products like camcorders and televisions that cost less than the amount paid out of the system matrix.

The Illinois Criminal Code makes it a Class A misdemeanor with up to a year in prison and a $ 1,000 fine on anyone who sells, donates, or tries to sell the right to participate in the pyramid scheme. Participants are promised huge sums of money if they hire others to pay a fee to participate in this illegal tower. The only people who make money are the few at the top of the pyramid.