Pyramid scheme

A pyramid scheme is an illegal venture relying on a continual recruiting of new investors to pay returns to investors who got in earlier.

Expanded Definition

The people at or near the top of a pyramid scheme make money, while those lower down could end up getting nothing (after losing their initial investment), as it eventually becomes impossible to recruit more people willing to ante up.

The U.S. Federal Trade Commission provides information on how to spot a pyramid scheme. This FTC Web page provides useful information

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Related Terms

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