How to spot pyramid schemes

RED FLAGS: SUCH VENTURES ARE ILLEGAL AND CAN CAUSE SIGNIFICANT FINANCIAL HARM

- Devon Card

To evade identification as pyramid schemes, many new variations adopt alternative representations such as circles, flower looms, or mandalas.

Instead of calling the entrance fee an initial payment, they refer to it as a "gift" that supposedly benefits everyone within the "sacred space".

These pyramid schemes, often labelled as gifting circles, sou-sou, or blessing looms, are illegal and can lead to significant financial harm for unsuspecting participants.

Such schemes often employ circular or floral imagery in their marketing to obscure their true nature. However, the characteristics of a pyramid scheme remain evident, and potential victims must look beyond the attractive visuals to recognise the hidden dangers they present.

The mechanics of a pyramid scheme

The mechanics of a pyramid scheme hinge on two primary elements: (a) an upfront entry fee or initial payment promising substantial returns in a short time frame, and (b) the necessity to recruit new members.

Participants typically ascend through various levels until they reach the top, where they receive their promised "returns".

To sustain these payouts, members must continuously recruit others beneath them, as the entrance fees from new recruits fund the returns for those at higher levels.