Pyramid Scheme


Pyramid Scheme
An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, given to the earlier investors/recruits above them.

A pyramid scheme is initiated by an individual or a company that starts recruiting investors with an offer of guaranteed high returns. As the scheme begins, the earliest investors do receive a high rate of return, but these gains are paid for by new recruits and are not a return on any real investment.

From the day the scam is initiated, a pyramid scheme’s liabilities exceed its assets. The only way it can generate wealth is by promising extraordinary returns to new recruits; the only way these returns can be paid is by getting additional investors. Invariably these schemes lose steam and the pyramid collapses.


Investment dictionary. . 2012.

Look at other dictionaries:

  • pyramid scheme — Pyramid Pyr a*mid, n. [L. pyramis, idis, fr. Gr. ?, ?, of Egyptian origin: cf. F. pyramide.] [1913 Webster] 1. A solid body standing on a triangular, square, or polygonal base, and terminating in a point at the top; especially, a structure or… …   The Collaborative International Dictionary of English

  • pyramid scheme — n. A sales scheme, often illegal, in which a buyer of goods is promised a commission for every additional buyer he or she finds and recruits to be a seller, and in which the people at the top of the pyramid collect payments from all the bottom… …   Law dictionary

  • pyramid scheme — pyramid .scheme also Pon|zi scheme [ˈpɔnzi ski:m US ˈpa:n ] n a dishonest and often illegal way of selling ↑investments, in which money from people who ↑invest later is used to pay people in the system who have already invested …   Dictionary of contemporary English

  • pyramid scheme — n. a moneymaking scheme in which revenues are derived chiefly by recruiting increasingly larger groups of new salespeople or investors, each of whom pays for the right to recruit others in turn …   English World dictionary

  • Pyramid scheme — The unsustainable exponential progression of a classic pyramid scheme A pyramid scheme is a non sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than …   Wikipedia

  • Pyramid scheme — An illegal, fraudulent scheme in which a con artist contrives victims to invest by promising an extraordinary return but simply uses newly invested funds to pay off any investors who insist on terminating their investment. The New York Times… …   Financial and business terms

  • pyramid scheme — An illegal, fraudulent scheme in which a con artist convinces victims to invest by promising an extraordinary return but instead simply uses newly invested funds to pay off any investors who insist on terminating their investment. Bloomberg… …   Financial and business terms

  • pyramid scheme — pyramid (def. 8). * * * …   Universalium

  • pyramid scheme — A high *risk investment system based on small, initial sums of *money Pyramid schemes are often *fraudulent. They function like chain letters, depending on ever increasing numbers of money paying participants to join the scheme: Investors are… …   Auditor's dictionary

  • pyramid scheme — noun An illicit money making investment scheme whereby early investors are paid primarily or wholly by later investors. Eventually all such schemes fail to the detriment of recent (later) investors. Syn: pyramid selling scheme …   Wiktionary


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