Pyramid Schemes
A pyramid scheme is an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new members. Pyramid scheme organizers may pitch the scheme as a business opportunity such as a multi-level marketing (MLM) program. Fraudsters frequently use social media, Internet advertising, company websites, group presentations, conference calls, and YouTube videos to promote a pyramid scheme.
Concept at a glance
Definition and explanation
A pyramid scheme is an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new members. Pyramid scheme organizers may pitch the scheme as a business opportunity such as a multi-level marketing (MLM) program. Fraudsters frequently use social media, Internet advertising, company websites, group presentations, conference calls, and YouTube videos to promote a pyramid scheme. [1]
All pyramid schemes eventually collapse, and most investors lose their money. Hallmarks of a pyramid scheme include: [1]
Frequently asked questions
What does Pyramid Schemes mean in the cited reference?
A pyramid scheme is an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new members. Pyramid scheme organizers may pitch the scheme as a business opportunity such as a multi-level marketing (MLM) program. Fraudsters frequently use social media, Internet advertising, company websites, group presentations, conference calls, and YouTube videos to promote a pyramid scheme. [1]
Sources and review dates
Reviewed 23 October 2026. Historical dates and award-time affiliations retain their original context. A review date is not an event date. Background sources are identified separately from official records.