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Dubious Investments On The Internet: How To Recognize A Pyramid Scheme

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Dubious Investments On The Internet: How To Recognize A Pyramid Scheme. Great profit promises for small deposits: Pyramid schemes work by more and more people giving their money. But if the system stalls, the illegal business collapses.

The essentials in brief:

  • Pyramid schemes are illegal, but this kind of advertising is often used on the Internet with supposedly high profits.
  • Usually, they run out of breath quickly – and then only a few have made money.
  • We give clues on how you can recognize the forbidden mesh.

High yields and permanent “passive income”: so-called pyramid schemes are advertised with impressive profit margins – now mostly online. Questionable providers use terms such as “donation”, “retirement provision”, “marketing” or “crowdfunding” to advertise on social networks and the Internet.

ATTENTION, PYRAMID SCHEMES!

Speedball systems are not designed for a long time. Only those who have started the whole thing and cash in on investments can benefit. Everyone else will likely lose their stake.

The consumer centres have complained about various providers from eleven federal states. Because of these complaints, the market watchdog finances took a closer look at the websites of over 50 providers: the imprint was missing in more than half of the cases. More than two-thirds of the Internet domains examined are registered abroad, several of them with the same box address in Panama. This makes it incredibly difficult for those affected to enforce their rights here.

FOR EVERY NEW PARTICIPANT THERE IS A “BOUNTY”

The research by the market watchdog team also showed that alike under a post on Facebook is sufficient to be contacted directly by the provider. Cell phone numbers, for example, are exchanged via Facebook Messenger, which give access to WhatsApp groups. The market watchdog experts at the Hessen Consumer Advice Center, therefore warn against fraudulent offers that present themselves online as simple, reputable and high-yield investments.

TIP FOR YOU! Consumers are increasingly complaining about providers who lure them into dubious investments with deals in Bitcoins and other cryptocurrencies. The market watchdog experts at the Hessen Consumer Center are currently investigating complaints about almost 20 different providers and six currencies. Illegal pyramid schemes could also be hidden behind such offers.

WHAT IS A PYRAMID SCHEME?

A snowball system is a term used to describe business models that require a steadily growing number of participants in order to function, for whom you get a “bounty”, analogous to a snowball that rolls down the slope and expands steadily. Profits for attendees come almost exclusively from attracting new attendees who in turn, invest money without receiving any service or product. A rapid spread brings money into the system like a flash in the pan. But it is over just as quickly – the growth in new members cannot last long.

HOW TO RECOGNIZE PYRAMID SCHEMES

From the outside, pyramid schemes should look serious. The initiators are often veiled. In addition, it remains unclear at which stage the respective system is currently.

Since the number of participants would have to increase exponentially, the collapse is inevitable. So how do you know where not to invest money?

  • Do not trust supposedly brilliant business ideas that can be explained quickly. From the sofa, you cannot merely increase money on the computer by persuading other people to participate.
  • Usually, you should be able to start with relatively small amounts – a few hundred euros sound like a manageable risk.
  • Pyramid schemes are always designed to increase the number of participants sharply. You will be pushed to recruit many new members, for each of whom you will receive “bounties”.
  • Typical: A commission always goes to the initiator. In the end, he is the only real winner. Often it is not even clear what the money is being used for – then you should be particularly careful.
  • You should often be able to reach different levels or positions according to which your profit is based. Sole purpose: You should try to involve more and more people and their money.

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