Scammers often try to lure people into investment schemes with the promise of easy money at a high return. These include pyramid and ponzi schemes.<\/p>\n
A pyramid scheme is a form of investment scam that offers you quick and easy money in return for cash. It offers you an opportunity to buy into a scheme or market a particular product. You then make money by recruiting others into the scheme rather than selling the product itself.<\/p>\n
It is illegal to promote or take part in a pyramid scheme under Irish law. If convicted, you could face a fine of up to \u20ac150,000, or up to five years in prison, or both.<\/p>\n
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There would need to be an endless supply of new people for every participant to make money. In reality, the number of potential new investors is limited. This means it gets harder for new people joining the scheme to recruit others so their chances of losing money increase. Those at the bottom of the pyramid who are last in will lose all of their money when the scheme falls apart.
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Paul is asked to invest in a company by an old school friend along with nine other people. They each invest \u20ac1,000 to join the scheme. After handing out the money, they discover that the only way to get it back is by recruiting 10 more people to join. Paul and the other nine recruits would need to convince 100 more people to join, and those 100 people would need to convince 1,000 more and on it goes. It very quickly becomes impossible to achieve and fails.<\/p>\n
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If you are invited to join any kind of scheme you think is a Pyramid scheme, you should tell us about it<\/a> and contact your local Garda station<\/a>. If you have already invested, it is unlikely you will get your money back.<\/p>\n \t\t<\/div>\n\n\t\t\n\t\t\t\t\t A Ponzi scheme is form of investment scam. The money victims \u2018invest\u2019 is used to pay the returns to people who have already invested. Because of this, early investors sometimes make returns and, believing it is legitimate, are encouraged to keep investing. Money goes round and round without any real investment. This continues as new investors join, but once the scheme runs out of new investors, it collapses, and everyone loses their money.<\/p>\n Ponzi scheme promotors promise a high profit at little to no risk. Investors will often encourage their friends and family to invest. Ponzi schemes typically pretend to be financial service products like equities, bonds, shares or cryptocurrency.<\/p>\n The name Ponzi comes from Charles Ponzi. He ran a scheme buying postage stamps from Europe and selling them in the U.S. at a small profit. He convinced people he could make money for them and started paying old investors out of new investors money. The scheme collapsed when he ran out\u00a0 of new investors.<\/p>\n <\/div><\/p>\n There are some giveaway signs that it\u2019s a Ponzi scheme:<\/p>\n It\u2019s essential to know the exact details of what you\u2019re being asked to invest in. Don\u2019t just go by the word of a trusted friend or person known to you. Remember the golden rule, if it seems too good to be true, it probably is.<\/p>\n Always research the company yourself independently to verify that its legitimate. Remember that a professional looking website does not necessarily mean the company is legitimate.<\/p>\n If you are invited to join any kind of scheme you think is a Ponzi scheme, you should tell us about it<\/a> and contact your local Garda station<\/a>.<\/p>\n The Central Bank of Ireland also has further advice on avoiding scams and unauthorised activity<\/a>.<\/p>\n \t\t<\/div>\n\n\t\t\n\t\t\t\t\t In multi-level or network marketing, individuals sell products to the public. They do this usually by word of mouth or direct sales and earn commission. The commission made is not just on their own sales, but also on sales made by the people they recruit to the scheme.<\/p>\n A legitimate MLM scheme uses the profits from sales to pay bonuses to recruiters, but not all MLM schemes are legitimate. If the money made is based on your sales to your customers, it may be legitimate. If the money made is based on the number of people you recruit and what you sell to them, it\u2019s probably not. It could be a type of pyramid scheme and therefore illegal.<\/p>\n There are certain clues you need to be alert for:<\/p>\n Never join any scheme you\u2019re uneasy about. Take some time to do some research on the company or scheme. Get your own financial advice<\/a> if you\u2019re unsure what to do.<\/p>\n <\/div><\/p>\n \t\t<\/div>\n\n\t\t<\/div>\n The Central Bank of Ireland has more information on how to protect yourself from financial scams<\/a>.<\/p>\n\n\t\t\t\tPonzi schemes\t\t\t<\/h3>\n\t\t\n\t\t
Did you know?<\/h3>\n
Warning signs of a Ponzi scheme<\/h3>\n
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How to avoid a Ponzi scheme<\/h3>\n
What to do if you spot a Ponzi scheme<\/h3>\n
\n\t\t\t\tMulti-level marketing (MLM)\t\t\t<\/h3>\n\t\t\n\t\t
What to watch out for<\/h3>\n
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Top Tip<\/h3>\n
Further Information<\/h3>\n