The very phrase “pyramid scheme” evokes negative associations. And not in vain. After all, this is a great way to profit at the expense of other people, dishonestly luring their money. And despite the fact that the principle of the financial pyramid is used in many companies in 2021.
The financial pyramid is a model for making a profit, subsequently redistributing material resources from its lower members to those above.
The higher the position of the participants, the more income they have.
Often, these projects are presented as investment funds and various commercial enterprises that invest clients’ finances in ultra-profitable operations.
The existence of the pyramids is based on human psychology, because almost everyone wants to get a lot of money in a short time without much difficulties and efforts.
How to recognize a financial pyramid
Their can be determined by the following indicators:
- mandatory investment of significant material resources;
- promises of an early return of the invested money, along with interest;
- a condition for receiving a payment is attracting other members to also invest in the project;
- there are a lot of extraordinary action plans in the project that raise doubts;
- the project’s offices look far from being a successfully developing business;
- the organization does not have a license;
- members are not informed about possible risks;
- company details and its management are hidden.
Factors that provoke the emergence of active financial pyramids:
- The important instruments of these organizations are the stock market, bonds, the prices of which fluctuate sharply.
- The absence of legal restrictions aimed at prohibiting the establishment of financial pyramids as fraud.
- The crisis economy of a certain country, where the work of banks does not inspire confidence.
- Attracting clients who are in difficult financial position, in such projects.
How to distinguish financial fraud from financial pyramid schemes?
You should not all financial pyramids to take for fraud. Many network marketing organizations create their activities according to this principle. The functioning of such companies is not associated with fraud.
There are cases when an entrepreneur, by allowing incorrect actions by accident, creates a pyramid scheme based on financial fraud.
Basically, the issue is resolved through a loan to the founder of the business in order to correct the errors made.
The money received is used to pay interest income to investors.
In many states on the principle of financial pyramids organized pensions. People of retirement age receive pensions from the contributions of working citizens. The system works normally when the number of working citizens exceeds the number of retired people.
Construction (creation) of financial pyramids
With the advent of the Internet, the pyramids began to appear faster, using the opportunity to disguise themselves well. This is handy because here:
- creating a pyramid is easier, inexpensive, you can not go through registration intended for financial institutions, but still collect participants;
- you can act anonymously, without legalizing the creators of the pyramid, who will definitely be searched for after it collapses;
- it’s easy to organize an advertising campaign and attract new clients;
- no need to set up offices of a fake company.
Views financial pyramids
The types of financial pyramids are different, but they are united by a single principle of activity – the distribution of material resources.
The game is pretty illogical. Those who enter the game earlier get more than they invest, latecomers lose their money. The collapse of the pyramids is inevitable, since finances do not work here, but are accumulated by certain people and will not be able to enrich all members of the pyramid.
Multi-stage pyramid
Any of the participants must contribute money divided among all members occupying the top positions of the pyramid.
A new member is obliged to involve two or more members in the pyramid, whose finances will go to him and those who connected to him before. It is impossible to ensure the levels of the structure of the financial pyramid. About 80% of the depositors fail to involve anyone, which leads to the destruction of the pyramid.
Ponzi Pyramid
This kind of pyramid was invented in the 1920s by Charles Ponzi. The income of the first members is paid by the founder of the pyramid, which is a kind of PR. Rumors are spreading about the profitability and decency of this project. More and more clients begin to connect to the pyramid, money to which other participants pay. The pyramid collapses when its founder stops.
Investment financial pyramid
Here they offer long-term financial investments with their investment in the acquisition of shares or securities, guaranteeing a quick profit from the growth of their value in a short period. Income from the action can not be obtained immediately, it takes time, which is in the hands of the founders. Over time, the creators of the pyramid collect a substantial amount and disappear without a trace.
Funds and mutual aid funds
It is this type of pyramid that has all the existing characteristic features , it can be masked in different ways. The principle of operation is that only the founders can redistribute the funds of high-interest depositors. The action is presented as an approach aimed at ensuring that there is enough for everyone and there are funds for charity.
Credit
They are presented as an alternative to mortgage and consumer lending. Borrowers who have problems with legitimate financial institutions, where they have been denied credit, fall into the trap.
Forex trading
False – professional participants in the financial market offer ways to get rich through trading in the Forex currency market.
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When creating financial pyramids, the founders rely on the ease and speed of obtaining money. A serious person, before investing in suspicious projects, will think about what this is fraught with and whether the proposed cooperation is a scam.
Signs of a financial pyramid on the Internet
What is an online financial pyramid for and what is it : what parts it consists of, how earnings are formed, what examples and varieties are found.
Project structure:
– the administrator creates a website, registers payment systems, creates a partnership agreement;
– an advertising campaign is carried out to attract investors;
– investors provide an inflow funds into the project and begin to make a profit so far from their own money;
– after “their” funds run out, investors who entered the project earlier begin to receive funds from those who entered the project later;
– at this time, the administrator constantly takes a percentage from each investor who enters;
– sooner or later, investors stop investing in the project, the flow of funds stops, the administrator declares bankruptcy and closes the project.
Such projects are also called “HYIPs”. This term has recently been increasingly used to refer to pyramid schemes on the Internet. HYIPs have a controversial reputation, as certain investors make a profit while others lose their investments. And those who lose are the majority. The thing is that you need to know how to use HYIPs.
One of the most common types of HYIPs is economic games with withdrawal of funds. They belong to low-yield (5–15% per month) and medium-yield (16–50% per month) investments and work on the same principle as indicated above.
Examples of financial pyramids
The economic game Taxi Driver is being created. The goal of the game is to create your own taxi fleet and hire drivers. Taxi drivers ride around the city, deliver customers and bring profit to the owner of the taxi fleet – the investor.
For example, one first-level taxi costs 10 rubles and brings a profit of 25% per month, that is, 2.5 rubles.
Consequently, if an investor invests 100 rubles, he will be able to buy 10 taxis and receive 25 rubles a month. As a result, his investments will pay off in 4 months, and if the project is not closed, the investor will begin to receive a profit in the form of 25 percent per month. For those who invest large amounts, it makes sense to buy taxis not of the first level, but of the second, third, and so on.
For example, a taxi of the third level costs 500 rubles and his income is 40% per month. That is, his investment will pay off in 2.5 months.
The game usually has a referral system, according to which an investor can invite other people and receive interest from their investments, thereby speeding up the process of getting a profit.
Also, administrators often make a certain bonus when registering, which allows you to earn even without investments, but, as a rule, such earnings will hardly exceed a few rubles.
The second type of HYIPs are investment projects.
Their profitability varies from 5% to 60% and even higher, and they are supposedly a “serious company” to attract large investments.
Outwardly, they represent a solid site design, the presence of various financial quotes is possible, the calculation is usually carried out in dollars.
In fact, project administrators can really be related to forex and trading, use the received funds for trading purposes. But for this, there are PAMM platforms with special brokers, so, unfortunately, such projects still have the risk of suddenly closing down, taking all the money from investors.
Investment projects do not have “gamification“, that is, you do not need to hire “taxi drivers” or collect “eggs”: all you need to do is top up your balance, select a tariff plan and withdraw funds when it ends.
Distinguishing a Ponzi scheme from other Pyramid projects (such as network marketing) is quite difficult.
But still, the main difference can be identified. Pyramid income is taken from the investments of other investors, while network marketing provides income to its partners through the sale of goods or services.
It should be noted that offline pyramid schemes are prohibited in many countries and are prosecuted by law. However, this bill does not apply to the Internet, and one should be extremely careful not to fall into the hands of scammers.
When trying to make money on HYIPs, several recommendations should be taken into account:
1. Use independent monitoring sites that collect information about HYIPs and monitor its solvency.
2. Conduct a thorough analysis of the project, make sure that technical support is available and working, check the “Statistics” section and pay attention to the project reserve (balance of funds): the more money in the reserve, the higher the chance that the project will work for some more time.
3. Try to enter the project as early as possible (from 1 to 7 days after launch), because there is an opportunity to earn only from the first investors;
4. Never invest all your savings in one project. It is necessary to divide the capital and invest in 8–12 different projects (diversification).
Conclusion
funds to the project. This system is initially doomed to failure and does not live long, as sooner or later the inflow of funds stops, and the project administrator takes all the money for himself.
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