Pyramid Scheme is a fraudulent business model. In this participants make money primarily by recruiting new members who pay an initial fee or purchase a product kit, rather than by selling a genuine product or service to actual customers.

The scheme gets its name because, at each level, the number of people needed to support the payouts to the levels above grows exponentially, creating a large, unstable pyramid structure.

How a Pyramid Scheme Works?

• The Buy-In: The scheme requires new participants to pay an initial fee, buy an expensive inventory of products, or purchase a ‘starter kit’ to join.
• The Recruitment Focus: The scheme places heavy emphasis on recruiting others to join and pay the fee, which serves as the main source of income. The recruiter gets a cut of the new recruit’s money.
• The Promise: Participants are promised massive, fast, passive income simply by building a large team (“downline“) of recruits beneath them.
• The Collapse: The scheme is mathematically unsustainable because, to keep growing, it needs an impossible number of new participants to join. When the pool of potential recruits dries up, the scheme collapses, and everyone in the lower levels (the vast majority of participants) loses their money.

If you make money mainly by recruiting people and not by selling products to the public, it is likely an illegal Pyramid Scheme. Learn more about it with this informative video.