Contract & Property Law, Employment Law, Oddstuff

Pyramid Schemes

Get-rich-quick schemes must be as old as money itself. The 1980s saw a surge in pyramid-selling schemes, which popped up everywhere around the world and made handful of people very wealthy, but destroyed the hopes and bank accounts of thousands of others.

Although banned now pretty much everywhere and with consumer awareness at an all time high, some of the schemes are still around and operate under various disguises. So, how to detect such a scheme? Its main feature is essentially that the profit of the new member is dependent on the recruitment of other new members, and not based on the actual sale of the products or services. The more members you recruit, the more money you make. Which, in other words, means that the whole things startes to unravel once new recruits stop signing up. As the profits are not based on the actual products (which are usually rubbish anyway), everything collapses like dominos. The people who got in early will have made good money by then, though.

http://www.simpsongrierson.com/pyramid-scheme-direct-selling/#page=1