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Lucy, Esq.
Lucy, Esq., Lawyer
Category: Consumer Protection Law
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Experience:  Lawyer
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What is a pyramid scheme exactly and why is it that they

Customer Question

what is a pyramid scheme exactly and why is it that they have such a bad reputation? what makes them 'bad'?
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  Lucy, Esq. replied 1 year ago.

Hi,

I'm Lucy, and I'd be happy to answer your questions today.

A pyramid scheme is a form of investment in which each person pays an investment to join, then recruits others who pay to join (and recruits others), with the expectation of getting more money in the future. Mathematically, these schemes only work if everyone in the world joins, and even then, people on the bottom of the pyramid get nothing in return for what they put in. It's bad because most pyramid schemes trick people into giving money by lying about the nature of what they're getting, and because only the people who manage to make it to the top of the pyramid stand any hope at all of getting their original investment back. The vast majority of people who buy into pyramid schemes lose everything, while the people who started the scheme profit at their expense.

Also, pyramid schemes are illegal, which is probably another reason they are considered back. Even people who make money could get sued for engaging in fraudulent transactions and required to return everything.

If you have any questions or concerns about my response, please reply WITHOUT RATING. It's important that you are 100% satisfied with my courtesy and professionalism. Otherwise, please rate my service positively so I am paid for the time I spend answering questions. If you are on a mobile device, you may need to scroll to the right. There is no charge for follow-up questions. Thank you.

Customer: replied 1 year ago.
hi so are companies like Avon, Mary Kay, and Amway considered pyramid schemes?
Expert:  Lucy, Esq. replied 1 year ago.

I'm afraid I'm not familiar with how those companies operate. Do people make money from bringing in other people?

Expert:  Lucy, Esq. replied 1 year ago.

A referral fee isn't the same as a pyramid scheme.

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