If a program primarily focuses on recruiting others to join for a fee, it’s likely a pyramid scheme. Pay attention to where the money is coming from; if it mostly pays through recruiting, rather than sales of a product, it’s probably illegitimate.
Pyramids schemes do not sell genuine products or services. Promises of high returns in the form of fast cash might imply that those returns are created by the people buying into the scheme rather than legitimate success. These schemes are frequently masquerading as multilevel marketing, or MLM. These are investments in which individual sales people sell real products. Before investing in an MLM, ask to see documents such as financial statements. These statements should be audited to be sure that the investment makes its money through legitimate means, rather than through a scheme.
The eight ball model is demonstrated when each person in the scheme is responsible for recruiting two people into the scheme. These people must pay an investment to enter the scheme called a “gift sum”. The person at the top receives the gift money from eight people before exiting the scheme. The remaining people move up the scheme and the pattern continues as more people are recruited.
In the matrix model, people are required to pay for a product beforehand and wait behind others to enter the scheme. After an investor recruits enough people, he or she gets a product such as a TV or a gaming system, but it’s not worth the value of the initial investment.
Pyramid schemes can go on for a long time. But eventually, nobody else will want to invest, and the people still in the pyramid will be left with nothing, and the scheme will collapse.
1 Check these documents to make sure the funds generated are real. (Two words)
2 In this type of scheme, a person receives a gift after recruiting enough people, but the gift’s value is far less than the amount paid.
- If a program primarily focuses on ____others to join the program for a fee, it is likely a pyramid scheme. Be skeptical if you will receive more compensation for recruiting others than for product sales.
- In this type of scheme, each person must recruit two people. Eventually, a person can receive the “gift sums” of eight other participants before exiting the scheme. (Three words)
- Promises of ____ _____ in the form of fast cash might imply that those returns are created by the people buying into the scheme rather than legitimate success. (Two words)
- Pyramids schemes make money off investors rather than by selling actual ________.
A _____, unlike a pyramid scheme, has actual salespeople selling products. (Two words)