Pyramid scheme
Definition
A recruitment-based structure in which participants earn fees or commissions primarily by recruiting new participants rather than from genuine product or service sales. The geometric expansion required to sustain the model makes collapse mathematically inevitable.
Related terms
- Affinity fraud
- A variant of Ponzi or investment fraud targeting members of a defined community (religious, ethnic, professional). The operator exploits existing trust networks...
- Clawback
- A receivership or bankruptcy action to recover payments made to investors (including fictitious profits and sometimes principal) before the scheme collapsed. Clawback...
- Net winner / net loser
- Classification of investors based on whether they withdrew more (net winner) or less (net loser) than their original principal. In Ponzi receiverships,...
- Ponzi scheme
- A fraudulent investment operation in which a central operator pays returns to existing investors using capital from new investors, creating the false...
- Receiver / trustee
- A court-appointed officer who takes control of the scheme operator's assets after collapse, marshals remaining funds, investigates the fraud, pursues clawback claims,...
Explained in
- Ponzi and Pyramid SchemesA recruitment-based structure in which participants earn fees or commissions primarily by recruiting new participants rather than from genuine product or servi...