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Investment Fraud – Pyramid Schemes

What are Pyramid Schemes and Ponzi Schemes?

Pyramid and Ponzi schemes fall under the ’Get Rich Quick’ school of scams. Unlike a traditional business model, these schemes profit from the gathering of more investors.

Both systems rely on hard-sell practices in order to pressure investors into make rash decisions, with no time to consider the pros and cons.

They exist only by the recruitment of more and more investors. These investors put money into the system and are promised extraordinary returns. The cycle goes on and on until the recruitment pond dries up.

What is the difference between a Pyramid Scheme and a Ponzi Scheme?

A Ponzi scheme structure normally leads the participant to think that they are investing in something secure and solid. However, investors do not believe they are in a Ponzi scheme.

Pyramid schemes differ slightly, as participants are aware that there is a chain, and they are responsible for the recruitment of new members in order to get a return on their investment.

So the main difference is the level of knowledge about where investors are putting their money – Ponzi investors are tricked into investing in something that actually doesn’t exist, while pyramid investors are more aware of the structure they are entering. However with both schemes, investors have no idea how close to failure the systems actually are.

The illegalities of Ponzi and Pyramid Schemes

Running a Ponzi or pyramid scheme is illegal. The success of both models are limited and therefore they are seen as scams, as their basis – to recruit new members – cannot be sustained.

Many pyramid schemes are disguised as multi-level marketing opportunities. This is how they identify as ‘legal’ entities, as they have assets that are traded and therefore in the strictest sense, have a legitimate business model.

How DPP Business & Tax can help

DPP Business & Tax Solicitors has extensive knowledge of get rich quick schemes based on the Ponzi and Pyramid scheme model. If you have found yourself caught in such a scheme, either as an investor or an operator, good legal help will go a long way.

Contact DPP Business & Tax Solicitors today to ensure help, advice and support from highly trained solicitors straightaway. Contact us here and we will get back to you as soon as possible.

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