What are pyramid schemes?

You may hear about a pyramid scheme from friends, family or neighbours. Usually, pyramid schemes recruit members at seminars, home meetings, over the phone, by email, post or social media.

In a typical pyramid scheme, you pay to join. The scheme relies on you convincing other people to join up and to part with their money as well. In order for everyone in the scheme to make a profit there needs to be an endless supply of new members. In reality, the number of people willing to join the scheme, and therefore the amount of money coming into the scheme, will dry up very quickly.

Some pyramid scheme promoters disguise their true purpose by introducing products that are overpriced, of poor quality, difficult to sell or of little value. Making money out of recruitment is still their main aim.

The promoters at the top of the pyramid make their money by having people join the scheme. They pocket the fees and other payments made by those who join under them. When the scheme collapses, relationships, friendships and even marriages can be damaged over money lost in the scam.

A lot of ICOs are pyramid schemes and I hope this post will help you filter some crappy ICOs off of your investment list.