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Pyramid Scheme

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A pyramid scheme is an illegal "investment" in which vested members are paid from the membership dues of new members. Ultimately when the number of new members is unable to support the payments due to existing members, the pyramid scheme collapses. Often when a pyramid scheme falls apart, the majority of members lose all or most of their investment. In order to entice a constant stream of new members to join a pyramid scheme, such schemes offer a very attractive rate of return for joining. Generally there is no real product produced or service performed with a pyramid scheme. A pyramid scheme is also known as a Ponsi scheme. Many chain letters are also a form of a pyramid scheme.



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