There are many new threats on the Internet, but that doesn’t mean criminals don’t try the tried and true methods as well. Enter the pyramid scheme, stage left. A pyramid scheme is much like the old chain letters people received when the post office was the en vogue form of communication.
The way this scheme works is simple and very identifiable. One person begins at the top of the pyramid and recruits a few other people to “invest” some amount of money, say $100, into the initial investor. These new recruits go out and recruit more people, who recruit more people thus promulgating the scam further. The fraud comes in when people close to the bottom of the pyramid cannot recruit enough people to pay off those who are a level above them, thus losing money.
Pyramid schemes do not have to be about money either. One neighborhood friend sent us a letter asking us to send out letters to six friends who would all send her child books, then those six would send out letters to their friends to send our child a book so that we would get 36 books but only send out one to the person who sent the letter to her. We, of course, did not participate.
There are many types of pyramid schemes that have similar motives and results: invest in order to see a profit, but there is nothing tangible to invest in. Other similar schemes are called, Ponzi schemes, chain letters, and multilevel marketing.
Beware of offers that seem too good to be true or those that require you to earn your money from those you recruit. Eventually, those at the top will run off with everyone else’s money and leave you holding an empty bag.