"Ponzi" Scheme

A ponzi scheme is one which returns investor’s funds not from earnings but from the principal contributed by subsequent investors. No legitimate investment exists and the money from later investors is used to pay off earlier obligations providing an appearance of legitimacy.

Tips

• Beware of "loading" plans that ask you to buy costly inventory.
• Beware of claims that you will make money by recruiting new members rather than by sales you make yourself.
• Beware of promises about high profits or claims about "miracle" products.
• Beware of "shills"- people paid by the operator to make grandiose claims about the success of the plan.
• Refuse to make a financial commitment or sign a contract in a high-pressure situation. Take time to review and re-evaluate the plan.
• Seek legal advice or consult relevant statutes (55.1) if you are unsure what constitutes a pyramid scheme.