What do pyramid scheme frauds offer?
A pyramid scheme is an unsustainable business
where people are rewarded for enrolling others into a business that
offers a non-existent or worthless
product.
How does a pyramid scheme fraud work?
A fraudster advertises a multi-level investment
scheme that offers extraordinary profits
for little or no risk. You are required to pay a
fee to enter the investment scheme.
You are then required to recruit friends or
family members to enter the scheme as
well. If you do this successfully, you are paid out of their
receipts. They are then told to recruit others to keep the chain
going.
Your money is not actually invested in any
product. Instead, it is simply passed up the chain of
investors. Because pyramid schemes are unauthorised and
make no profits, you are very unlikely to recover any lost
investment. While the fraudster at the top will collect
most of the profits, those who entered the scheme later end up
losing out.
How can I recognise a pyramid scheme fraud?
- If you’re considering any type of investment, always remember:
if it seems too good to be true, it probably is.
High returns can only be achieved with high risk
- Legitimate trading schemes rely on valuable
goods and services, while illegal pyramid
schemes focus simply on recruiting more and more investors
- Pyramid schemes often involve products that are overpriced and
have no real resale value. You should think about
the true value of your investment before convincing friends and
family to join the scheme
- Fraudsters often use strange investment jargon to
distract you from the true nature of the scheme. Famous
examples include the airplane game fraud, where investors were
labeled as captain, co-pilot, crew etc. Sometimes the schemes refer
to the investment process as gifting
- Using hard-sell techniques, fraudsters try to
pressure you into making rushed decisions, giving you no time to
consider the nature of the investment
- Fraudsters aim to build an air of legitimacy around their
business. This means they will often use technical jargon,
impressive job titles and mock websites to look credible.
Resolve any suspicions you might have about a scheme’s authenticity
by investigating the company’s status and contact details.
What should I do?
- If you believe you are actively participating in a pyramid
scheme, break off contact with the fraudsters
immediately and do not invest any more money
- If you have given the fraudsters your bank account details,
alert your bank immediately
- Keep any written communications you have
received from the pyramid scheme. They may help you give
evidence to the authorities
- If you have not reported the fraud to the National Fraud
Reporting Centre or are not able to do so, then report
it to Consumer
Direct on 08454 04 05 06
- Be aware that you are now likely to be a target for
other frauds. Fraudsters often share details about people
they have successfully targeted or approached, using different
identities to commit further frauds
- People who have already fallen victim to fraudsters are
particularly vulnerable to the fraud recovery
fraud. This is when fraudsters
contact people who have already lost money through fraud and claim
to be law enforcement officers or lawyers. They advise the victim
that they can help them recover their lost money - but
request a fee.