Definition of Pyramid scheme:
Chain-recruiting scam in which the main objective is to continuously bring in new members (euphemistically called sales representatives, independent representatives, or even investors) than to sell anything of real value. In this scheme, A recruits B and C, who in turn recruit D and E and F and G, who in turn recruit ... and so on. Every new member pays an entrance fee (typically called investment or some other beguiling name) which is divided among his or her recruiter, recruiters recruiter, and ... right up to the originator of the scheme. This charade continues until the whole structure collapses from the ever growing need for more and more gullible recruits and everybody (except the promoters and the early recruiters) loses out. See also Ponzi scheme. Not to be confused with pyramiding.
A pyramid scheme is an illegal investment scam based on a hierarchical setup of network marketing. The most famous kind of pyramid scheme is, perhaps, the Ponzi scheme.
New recruits make up the base of the pyramid and provide the funding, or so-called returns, in the form of new money outlays to the earlier investors/recruits structured above them in the scheme. A pyramid scheme does not usually involve the selling of products. Rather, it relies on the constant inflow of money from additional investors that works its way to the top of the pyramid. This means that multilevel marketing schemes are not classified as pyramid schemes and are not necessarily fraudulent.
A form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones.
How to use Pyramid scheme in a sentence?
- Multi-level marketing businesses are not typically considered pyramid schemes because they involve selling products.
- The Ponzi scheme is a popular well-known type of pyramid scheme.
- Pyramid schemes are based on tiers where new members are at the bottom and the members at the top make the majority of the money.
Meaning of Pyramid scheme & Pyramid scheme Definition