Financial Pyramids

The topic of financial pyramids has long been known in our country, widely recognized since the late 1990s. Such schemes were advertised on television, and people, in search of easy money, became victims of financial pyramids, with many ready to invest in suspicious projects.

Financial Pyramids

A financial pyramid is a structured fraudulent scheme involving many people with the attraction of new and more participants. By contributing money and inviting new members to join the pyramid, this phenomenon grows, and its founders profit.

No matter how fraudulent schemes are disguised, a financial pyramid always operates by attracting new members, where there is no visible income, and payouts are made from the investments of new subsequent victims. It may be possible to earn a small income initially, but such schemes are short-lived. Once they have amassed money, the fraudsters disappear, the pyramid collapses, and all participants at the lower levels of the pyramid lose their money entirely.

Ponzi Schemes

In the early 20th century, there was an American named Charles Ponzi, who created a company engaged in arbitrage but failed in this task and began to attract more clients. He paid out returns from their investments to previous investors; this scheme turned out to be a fraud, hence the name Ponzi scheme.

It can be said that Ponzi schemes are foundational to financial pyramids. A person who is easily convinced can become a victim of such a scam. To prevent this, one should use:

• critical thinking,
• exercise vigilance and attention to detail,
• ask questions,
• be interested in the product you are investing in.

If this is lacking and the source of profit is unknown, it will clearly be a Ponzi scheme.

How to Recognize a Financial Pyramid

When presented with an enticing investment offer, it's important to secure your funds and take the time to research and verify the company offering the investment, for example:

• consult the registry where legal organizations are registered, and look for it there;
• also refer to the state registry of legal entities, where data about such companies is stored;
• do not hesitate to visit the tax service website where information about the organization's taxes is available;
• search for reviews about the company online;
• carefully study the company's documentation and credentials.

If even one point raises doubts, it's better not to rush into investments or even refuse tempting offers. Fraudsters will always apply psychological pressure, promising sky-high profits.

Signs of Pyramid Schemes

The signs of pyramid schemes look like this:

• large monetary investments are required,
• high returns with the possibility of quick repayment are offered;
• the project is presented as innovative;
• the need to attract acquaintances, relatives to invest in the project;
• recent registration of the company in which investments are required;
• aggressive and intrusive advertising appearing online, sent to phones with enticing offers of raffles, gifts, and prizes;
• upon reviewing the contract, no responsible person is found, if financial risks arise the fake company will lack a license to operate in the financial market;
• the company is not averse to receiving cash, requiring internet payments.

Investing in Pyramids

Investing in pyramids is a risky and financially dangerous endeavor. To protect people from financial pyramids, it may be necessary to educate them on financial literacy. This means understanding what a financial cushion is, how taxes are paid, their intended purpose, understanding pension systems, and more.

Having such knowledge about finance and investments may reduce the number of people deceived into financial pyramids. Realizing that investments cannot suddenly and quickly yield high returns will help protect against rash decisions, quick investments, and expectations of inflated dividend payouts.

Investment Scams

The goal of a fraudster is to make money without caring about the feelings of the person they have deceived. One should not perceive seemingly profitable financial offers as magic, where by waving a magic wand and making a wish, dreams come true.

To avoid becoming a victim of scammers, it's important to understand that existing schemes are designed for a trusting victim, their desire to get rich quickly, and dreams of exorbitant income in the shortest possible time.