Type of Scam

Pyramid Scheme

Definition

A business model that recruits members via a promise of payments for enrolling others into the scheme, rather than supplying investments or sales of products. The structure resembles a pyramid because at the top there are few people who recruit more people below them.

Real Examples
  • 1Herbalife was accused of operating as a pyramid scheme
  • 2Vemma was shut down by the FTC as a pyramid scheme
  • 3Many crypto 'investment clubs' operate as pyramid schemes
Related Terms
Ponzi SchemeMulti-Level Marketing (MLM)

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