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What is the Pyramid scheme?


A pyramid scheme, often referred to as a pyramid scam, is a business model that recruits members via a promise of payments or services for enrolling others into the scheme.

It does not involve the supply of investments or sale of products or services as a conventional business would.

In a pyramid scheme, an individual or organization sits at the top, with subsequent layers of members beneath them. The top individual recruits new members, who pay a fee or "investment" to join. The promise is that the new members can recoup their initial investments by recruiting additional members beneath them. The bulk of the profit goes to the top of the pyramid, while those at the bottom struggle to recoup their initial investments.

As recruiting multiplies, recruiting becomes quickly impossible due to the exponential growth required to sustain the scheme. This leads to a rapid saturation of the market, and most members are unable to profit as there are simply not enough new recruits.

Furthermore, since the pyramid scheme revolves around recruitment rather than the sale of a legitimate product or service, it is unsustainable. The scheme relies on the continuous recruitment of new members to pay the existing ones, and it inevitably collapses when recruitment slows down or stops.

Due to their deceptive and exploitative nature, pyramid schemes are often considered illegal in many jurisdictions. They harm unsuspecting individuals who invest their money in the hope of high returns, but end up losing most, if not all, of their investment.

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