Definition of Ponzi and Pyramid Schemes
Just a over a week ago I made a post about my first ever participation in a high-yield investment programs (HYIP) fully aware they are nothing more than thinly disguised ponzi schemes. I knew this going in and actually to earn something initially from Daily Profit Pond because it is new, but I honestly don’t hold high expectations for Megalido because it has been around for several months already.
Since that time, I’ve seen many discussions over at myLot from people getting paid, not getting paid and promoting HYIPs like Megalido and Daily Profit Pond as a means of making money. It’s the HYIP promotion discussions that make me feel uncomfortable because of the marketing newbies who aren’t familiar with ponzi and pyramid schemes or are aware of them but don’t fully understand the difference between the two.
A ponzi scheme is a system which investors are lured into investing money in a program with promises of very high returns on their investment. Investors who get in early are paid with the money from investors who buy in later. The scheme works on the “rob-Peter-to-pay-Paul” concept, as money from new investors is used to pay off earlier investors until the whole scheme collapses. Sooner or later, new people stop joining and the investors coming in late end up not earning anything.
In the classic “pyramid” scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same. A pyramid scheme is initiated by an individual or a company that starts recruiting investors with an offer of guaranteed high returns. As the scheme begins, the earliest investors do receive a high rate of return, but these gains are paid for by new recruits and are not a return on any real investment.
For both schemes, eventually there isn’t enough money to go around and the program fizzles out and eventually goes away to reappear under a new name. After reading this post, if you invest in one of these type programs too late, promote it to others and don’t earn anything on your investment, PLEASE don’t accuse the owners of scamming you.
“Caveat emptor” - “Let the buyer beware“.
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