Pyramid scheme: Difference between revisions

Revision as of 06:21, 15 November 2024

Revision as of 04:29, 16 November 2024

Line 2:

{{Lead rewrite|date=July 2024}}

[[File:Pyramid scheme diagram.svg|thumb|upright=1.3|The unsustainable exponential progression of a classic pyramid scheme in which every member is required to recruit six new people. To sustain the scheme, the 2.2 billion people in the 12th layer would be required to recruit 13.1 billion more people for the 13th layer, even though there are not nearly enough [[World population|people in the world]] to achieve that.]]

A '''pyramid scheme''' is a [[business model]] which, rather than earning money (or providing [[Return on investment|returns on investments]]) by sale of legitimate [[product (business)|products]] to an end consumer, mainly earns money by recruiting new members with the promise of payments (or services).<ref>{{Britannica URL|topic/pyramid-scheme|pyramid scheme}}</ref><ref>{{cite web |url=https://consumer.sd.gov/fastfacts/marketing.aspx |url-access= |title=Multi-Level Marketing vs Pyramid Schemes |author=Website admin. |year=2024 |department=Consumer Protection |website=consumer.sd.gov |publisher=Office of the Attorney General of South Dakota |___location=|type= |access-date=February 18, 2024 |url-status= |archive-url= |archive-date= |quote=The difference between a pyramid scheme and a lawful MLM program is that there is no real product that is sold in a pyramid scheme. Participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same. }}</ref> As the number of members multiplies, recruiting quickly becomes increasingly difficult until it is impossible, and therefore most of the newer recruits do not make a profit. As such, pyramid schemes are unsustainable. The unsustainable nature of pyramid schemes has led to most countries outlawing them as a form of [[fraud]].

Pyramid schemes have existed since at least the mid-to-late 19th century in different guises. Some [[multi-level marketing]] plans have been classified as pyramid schemes.<ref name="Smith1984" />

Line 67:

== Legality ==

Pyramid schemes are illegal in many countries or regions including [[Albania]],<ref>{{Cite journal |last=Jarvis |first=Christopher |date=March 2000 |title=The Rise and Fall of Albania's Pyramid Schemes url=https://web.archive.org/web/20120406122435/http://www.scamwatch.gov.au/content/index.phtml/itemId/694266|archive-date=2012-04-06}}</ref><ref>{{cite web|url=http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html#_Toc320188009 |title=Competition and Consumer Act 2010 – Schedule 2, Division 3 – Pyramid schemes |publisher=Austlii.edu.au |access-date=2013-04-02}}</ref> [[Austria]], [[Belgium]],<ref>{{Cite web |url=http://economie.fgov.be/nl/geschillen/klachten/welke_klachten_terecht_ADCB/Verkopen/Piramideverkoop/ |title=Piramideverkoop - Geschillen en klachten - Home |access-date=2014-10-09 |archive-url=https://web.archive.org/web/20141015061007/http://economie.fgov.be/nl/geschillen/klachten/welke_klachten_terecht_ADCB/Verkopen/Piramideverkoop/ |archive-date=2014-10-15 }}</ref> [[Bahrain]], [[Bangladesh]],<ref>{{Cite web|date=2013-09-06|title=Govt bans pyramid marketing|url=https://www.thedailystar.net/news/govt-bans-pyramid-marketing|access-date=2020-06-14|website=[[The Daily Star (Bangladesh)|The Daily Star]]|language=en}}</ref> [[Brazil]], [[Canada]],<ref>{{Cite web|url=http://www.antifraudcentre-centreantifraude.ca/fraud-escroquerie/types/pyramid-pyramide/index-eng.htm|title=Pyramid scams|date=March 11, 2015|website=antifraudcentre-centreantifraude.ca|access-date=November 2, 2018|archive-date=November 13, 2018|archive-url=https://web.archive.org/web/20181113045155/http://www.antifraudcentre-centreantifraude.ca/fraud-escroquerie/types/pyramid-pyramide/index-eng.htm|url-status=dead}}</ref> [[People's Republic of China|China]],<ref name="Regulation on Prohibition of Pyramid Selling">{{cite web |url=http://www.fdi.gov.cn/1800000121_39_767_0_7.html |title=Regulation on Prohibition of Pyramid Selling |publisher=fdi.gov.cn |access-date=2019-01-23 |archive-date=2019-01-23 |archive-url=https://web.archive.org/web/20190123223635/http://www.fdi.gov.cn/1800000121_39_767_0_7.html }}</ref> [[Colombia]],<ref>{{cite news| url=http://news.bbc.co.uk/1/hi/world/americas/7736124.stm | work=BBC News | title=Colombia scam: 'I lost my money' | date=November 18, 2008 | access-date=2010-04-12}}</ref> [[Denmark]], the [[Dominican Republic]],<ref>{{cite web|url=http://www.camaradediputados.gov.do/masterlex/mlx/docs/24/106/1BA5/5FFE/6000.pdf|title=Proyecto De Ley Que Prohíbe La Venta Bajo El Esquema Piramidal|language=es|access-date=2011-02-23|archive-url=https://web.archive.org/web/20160429134532/http://www.camaradediputados.gov.do/masterlex/mlx/docs/24/106/1BA5/5FFE/6000.pdf|archive-date=2016-04-29}}</ref> [[Estonia]],<ref>{{cite web|url=https://www.riigiteataja.ee/ert/act.jsp?id=13328494|title=Tarbijakaitseseadus|language=et|trans-title=The Consumer Protection Law of Estonia|at=§12{{sup|3}}(8) #14|access-date=2010-10-11}}</ref> [[Finland]],<ref>[[Money Collection Act|Rahankeräyslaki 255/2006]] – {{Cite web|url=http://www.finlex.fi/fi/laki/ajantasa/2006/20060255|title=Rahankeräyslaki 255/2006 – Ajantasainen lainsäädäntö – FINLEX ®}}</ref> [[France]],<ref>{{Cite CiteSeerX |date=November 1999 |title=Door to Door Selling – Pyramid Selling – Multilevel Marketing |page=130|citeseerx=10.1.1.129.8742 }}</ref> [[Germany]], [[Hong Kong]],<ref>{{Cite Hong Kong ordinance|name=Pyramid Schemes Prohibition Ordinance|617|5}}</ref> [[Hungary]],<ref>{{cite web |title=Act C of 2012 on the Criminal Code – Section 412: Organising a pyramid scheme|url=https://njt.hu/translation/J2012T0100P_20210708_FIN.pdf |website=National Legislation Database |publisher=Ministry of Justice of Hungary |access-date=13 February 2022 |archive-url=https://web.archive.org/web/20211213061112/https://njt.hu/translation/J2012T0100P_20210708_FIN.pdf |archive-date=13 December 2021 |page=138 |url-status=live}}</ref> [[Iceland]], [[India]],<ref name="indiatimes">{{cite web|url=https://timesofindia.indiatimes.com/business/india-business/RBI-warns-against-pyramid-schemes/articleshow/45724589.cms|title=RBI warns against pyramid schemes|website=The Times of India|date=2015-01-02|access-date=2020-12-20}}</ref> [[Indonesia]],<ref>{{cite web |title=Skema Piramida Dilarang, Nasabah Terlindungi |url=https://www.finansialku.com/skema-piramida-dilarang-nasabah-terlindungi/ |website=Finansialku.com |date=15 February 2014 |access-date=2019-10-28}}</ref> [[Iran]],<ref>{{Cite web |last=IRB – Immigration and Refugee Board of Canada |date=24 March 2010 |title=IRB – Immigration and Refugee Board of Canada: The company Goldmine International; treatment of people affiliated with the company by Iranian authorities |url=http://www.irb-cisr.gc.ca:8080/RIR_RDI/RIR_RDI.aspx?id=452855&l=e |archive-url=https://wwwweb.ecoiarchive.netorg/enweb/document20100324000000/1098047http://www.htmlirb-cisr.gc.ca:8080/RIR_RDI/RIR_RDI.aspx?id=452855&l=e |archive-date=24 March 2010 |access-date=3 May 2022 |website=European Country of Origin Information Network}} [https://www.ecoi.net/en/document/1098047.html Alt URL]</ref> [[Republic of Ireland|Ireland]],<ref>{{cite web|url=http://www.consumerhelp.ie/pyramid-schemes |title=Pyramid Schemes |publisher=Competition and Consumer Protection Commission |access-date=2015-06-12}}</ref> [[Italy]],<ref>{{Cite web|url=http://www.parlamento.it/parlam/leggi/05173l.htm|title=L 173/2005|website=parlamento.it}}</ref> [[Japan]],<ref>[http://law.e-gov.go.jp/htmldata/S53/S53HO101.html 無限連鎖講の防止に関する法律] {{Webarchive|url=https://web.archive.org/web/20090627130247/http://law.e-gov.go.jp/htmldata/S53/S53HO101.html |date=2009-06-27 }} (in Japanese)</ref> [[Malaysia]],<ref>{{Cite web |last=The Commissioner of Law revision, Malaysia Under the Authority of the Revision of Laws Act 1968 |date=1 March 2013 |title=Direct Sales and Anti-Pyramid Scheme Act 1993 (Act 500) |url=https://www.kpdnhep.gov.my/images/dokumen/awam/perundangan/AktaBI/7-bi-Direct-Sales-and-Anti-Pyramid-Scheme-Act-1993-reprint-2013.pdf |archive-url=https://web.archive.org/web/20220715063453/https://www.kpdnhep.gov.my/images/dokumen/awam/perundangan/AktaBI/7-bi-Direct-Sales-and-Anti-Pyramid-Scheme-Act-1993-reprint-2013.pdf |archive-date=2022-07-15 |url-status=live}}</ref> the [[Maldives]], [[Mexico]], [[Nepal]], the [[Netherlands]],<ref name="Sentence by the High Council of the Netherlands regarding a pyramid scheme">{{cite web |url=http://zoeken.rechtspraak.nl/resultpage.aspx?snelzoeken=true&searchtype=ljn&ljn=AR8424&u_ljn=AR8424 |title=Sentence by the High Council of the Netherlands regarding a pyramid scheme |publisher=Zoeken.rechtspraak.nl |access-date=2013-04-02 |archive-date=2013-06-19 |archive-url=https://web.archive.org/web/20130619033742/http://zoeken.rechtspraak.nl/resultpage.aspx?snelzoeken=true&searchtype=ljn&ljn=AR8424&u_ljn=AR8424 }}</ref> [[New Zealand]],<ref>[https://comcom.govt.nz/consumers/dealing-with-typical-situations/pyramid-schemes Pyramid Schemes] ''Commerce Commission of New Zealand''</ref> [[Norway]],<ref>{{cite web|url=http://www.lovdata.no/all/tl-19950224-011-004.html#16 |title=Lovdata.no |publisher=Lovdata.no |access-date=2013-04-02}}</ref> [[Oman]],

[[Peru]], the [[Philippines]],<ref>[https://query.nytimes.com/gst/fullpage.html?res=9C05E4DA1539F933A05750C0A9659C8B63 NYtimes.com], "Investors in Philippine Pyramid Scheme Lose over $2 Billion"</ref> [[Poland]],<ref>{{Cite web |date=22 January 2021 |title=First penalty imposed for soliciting into so-called pyramid-type schemes |url=https://uokik.gov.pl/news.php?news_id=17179 |publisher=Office of Competition and Consumer Protection}}</ref> [[Portugal]], [[Romania]],<ref>[http://www.ziua.ro/display.php?data=2006-07-12&id=203369 Explozia piramidelor] {{Webarchive|url=https://web.archive.org/web/20160506094455/http://www.ziua.ro/display.php?data=2006-07-12&id=203369 |date=2016-05-06 }} ''Ziarul Ziua, 12.07.2006''</ref> [[Russia]], [[Serbia]],<ref name="paragraf">{{cite web|url=http://www.paragraf.rs/propisi/zakon_o_trgovini.html|title=Zakon o trgovini &#124; Republika SRBIJA|website=Paragraf|access-date=2020-12-20}}</ref> [[South Africa]],<ref>[http://www.whitecollarcrime.co.za/news.php?item.95 Whitecollarcrime.co.za] {{Webarchive|url=https://web.archive.org/web/20081201060359/http://www.whitecollarcrime.co.za/news.php?item.95 |date=2008-12-01 }}, Pyramid Schemes</ref> [[Singapore]],<ref>{{Singapore legislation|title=Multi-Level Marketing and Pyramid Selling (Prohibition) Act|cap=190|ed=2000}}, section 3</ref> [[Spain]], [[Ethiopia]], [[Sri Lanka]],<ref>[http://www.documents.gov.lk/files/act/2005/2/02-2005_E.pdf Pyramid Schemes Illegal Under Section 83c of the Banking Act of Sri Lanka] Department of Government Printing, Sri Lanka</ref> [[Sweden]],<ref>[http://lagen.nu/2008:487 lagen.nu] – Tillkännagivande (2008:487) med anledning av marknadsföringslagen (2008:486)</ref> [[Switzerland]], [[Taiwan]], [[Thailand]],<ref name="สมาคมการขายตรงไทย">[http://www.tdsa.org/download/piramid.pdf TDSA.gov] {{webarchive|url=https://web.archive.org/web/20090220075443/http://tdsa.org/download/piramid.pdf |archive-url=https://web.archive.org/web/20060506235813/http://tdsa.org/download/piramid.pdf |archive-date=2006-05-06 |url-status=live |date=2009-02-20 }}, ข้อมูลเพิ่มเติมในระบบธุรกิจขายตรงและธุรกิจพีระมิด by Thai Direct Selling Association (in Thai)</ref> [[Trinidad and Tobago]],<ref> {{cite web |url=https://tt.loopnews.com/content/government-outlaws-ponzi-pyramid-schemes|title=Government outlaws ponzi, pyramid schemes. |publisher=tt.loopnews.com |date=2022-11-16 |access-date=2023-10-03}}</ref> [[Turkey]],<ref>{{cite web|url=http://www.cnnturk.com/2010/turkiye/05/14/saadet.zinciri.operasyonu.60.gozalti/576283.0/index.html |title=Saadet zinciri operasyonu: 60 gözaltı |publisher=Cnnturk.com |date=2010-05-14 |access-date=2013-04-02}}</ref> [[Ukraine]],<ref>[http://en.interfax.com.ua/news/general/175882.html Rada at first reading passes bill on banning financial pyramid schemes in Ukraine], [[Interfax-Ukraine]] (20 November 2013)</ref> the [[United Kingdom]],<ref>{{cite web|title=Pyramid scheme fraud|url=http://www.actionfraud.police.uk/fraud_protection/pyramid_schemes|website=[[Action Fraud]]|publisher=[[City of London Police]]|access-date=2016-07-05}}</ref> and the [[United States]].<ref name="Valentine Speech"/>