Ponzi & Pyramid Schemes

Ponzi & Pyramid Schemes are probably the most common type of Investment Scam and have been going on for more than a century. Both are forms of fraudulent investment schemes that claim to generate profit through legitimate means. However, the only source of income for the company is the deposits from investors. Money paid by new investors is used to pay old investors and the cycle continues as long as more people continue to join. Such schemes are illegal and will inevitably collapse when the number of new joinees starts decreasing. A majority of investors in such schemes end up losing all their money. In a Ponzi scheme, there is no pressure to rope in more investors while in a Pyramid Scheme, investors are required to aggressively bring in more investors to earn commissions from their deposits.