How pyramid schemes scam you out of your money
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Pyramid schemes are just another scam to steal your money. Quite a few scammers who used this method to steal money were arrested recently, prompting consumers to ask how to spot one.
According to a consumer alert from the National Consumer Commission (NCC), a pyramid scheme is a deceptive practice where participants earn money primarily by recruiting others into the scheme, rather than through the sale of goods or services.
These schemes often pretend to be legitimate businesses or investment opportunities, targeting individuals seeking financial security and quick wealth. Most of the people targeted recently retired and received substantial amounts of money or have other substantial amounts in their bank accounts.
According to the Consumer Protection Act an arrangement, agreement, practice or scheme is a pyramid scheme if the participants receive compensation for recruiting other people rather than from the sale of any goods or services and the emphasis is to get more members.
Pyramid schemes, unlike Ponzi schemes, usually offer a victim the opportunity to ‘make’ money by recruiting more people into the scam.
The NCC says marketers or recruiters for pyramid schemes can be anyone, even people you trust or admire. They prey on your financial aspirations and present enticing narratives of success to lure you into their schemes.
The initial promoters recruit members who then recruit more members, with returns for older members funded by contributions from recruits. As the scheme grows, only a few benefit while the majority, especially those who join later, suffer losses. This fraudulent structure is an indication that it is a pyramid scheme.
Content retrieved from: https://www.citizen.co.za/business/personal-finance/pyramid-schemes-another-scam-to-steal/.
