At different times different people tried to get income, not doing anything specific, but attracting more and more investors to their project. Initially, the term "financial pyramid" had a different meaning and only in the 70 years began to designate a scam.
How does the financial pyramid work?
The organizers of such a commercial institution position their company as an investment project, promising their investors revenues that are certainly higher than those of the borrowing market. Those who are interested in how the financial pyramid is structured, it is worth replying that such a company does not acquire anything and does not sell: it pays money to participants at the expense of new arrivals' deposits. The greatest profit for this is given to the organizers of the project and the more it is, the more people "get hooked".
Signs of the financial pyramid
There are many criteria by which you can find out such an "exclusive" investment project:
- High interest payments, reaching 50-100%.
- The financial pyramid is characterized by competent advertising, appealing with specific terms that ordinary people do not understand.
- The lack of specific information, which could be confirmed, based on independent sources.
- A feature of the financial pyramid is the movement of money abroad.
- Absence of data on organizers and coordinators.
- Non-existent office and charter. Absence of documents confirming official registration.
- Insurance of company transactions in another state.
How to distinguish an investment company from a pyramid?
Often, a legitimate investment project is taken for a pyramid, especially if it is burned out and most of the funds received go to payments to early investors. However, there are significant differences between them. Those who ask what is not a sign of the financial pyramid, it is worth saying that the investment company does not hide its activities. If you want, you can always find out who is its founder and leader, and what types of business this company invests in.
Before you join such an organization, you can read about it on the Internet, talk with investors, find out whether they receive regular payments and in what size. The financial pyramid works by attracting an increasing number of people, whereas in an honest company the investor will receive his money no matter how many more people are interested in this project.
What is the difference between network marketing and the financial pyramid?
Here, the differences are more blurred, because even in legitimate companies, distributors are not notified about how much revenue they will receive as a result of their activities, although in advertising it is promising. The difference between network marketing and the financial pyramid is that the former is engaged in marketing certain products and services. Although in many companies, distributors can receive income not from the sale of goods, but charge fees from employees involved in the company.
Types of financial pyramids
In the modern world, two types of pyramids are more common:
- Multilevel pyramid. An example is the "Organization of Indies" by John Law. The organizer attracted investors to develop the Mississippi River. In fact, most of the invested funds went to purchase government bonds. The increase in shares in the price was caused by the rising rush and when the cash flows became huge, and the price jumped to unprecedented proportions, the pyramid collapsed.
- Financial pyramid scheme Ponzi . An example is "SXC", which worked by selling its own bills. Investors attracted the organizer, promising them a profit from the exchange of coupons, although in fact he was not going to buy coupons, because they could not be exchanged for cash. When the magazine "Post Magazine" estimated that to cover all investment in circulation there should be 160 million coupons, the scam was exposed, since the number of their holders was only 27 thousand people.
How to make an uncontrolled financial pyramid?
Variants, how to create a financial pyramid, there are many in the network, and real. In the World Wide Web, the "7 wallets" system is very popular. The organizer lays a small sum for 7 electronic wallets, then adds his account number to this list and sends ads on social networks , groups and forums, inviting to enter the project. However, wishing to know how to build a financial pyramid, you need to remember that any project of this kind is doomed to failure. Even if all the inhabitants of the planet join it, it will collapse after the last member entered.
How to make money on financial pyramids?
Not too greedy inhabitants can easily get income by joining such an organization. The main thing is not to consider earnings on the financial pyramids as the sole and permanent source of income. Join the organization should be at the peak of its development, and not when many friends and friends have already earned it, because the principle of the financial pyramid is that it does not live long. Once the conclusion becomes available, the cash along with the interest must be withdrawn and no longer risk.
Consequences of financial pyramids
Many tragic stories are associated with their work. At the end of the 20th century in Albania, a whole network of such companies with a turnover of cash in 30% of the country's annual GDP caused such damage to the government that after the collapse of the system, the army had to restore order and pacify the angry depositors. As a result, people died, and the government was forced to resign. The investment pyramid hits the most vulnerable layers of the population, because most of them suffer from simple, illiterate people.
Psychology of victims of financial pyramids
Victims of such an investment project are not only poorly literate poor, but also quite savvy in legal matters and wealthy people. They are not embarrassed by deception, and they are ready to be deceived, just to be able to deceive yourself. Such people with a certain mental makeup are referred to as an asteroid type. Their temperament is characterized by credulity, emotionality, easy suggestibility, not to mention hypnosis.
They want to know how to make money on the financial pyramid, and the organizers are ready to answer all their questions, describing everything in iridescent colors, ridiculing and dismissing all reasonable arguments and creating an atmosphere of crazy enthusiasm, playing on human recklessness, greed and fear of missing your chance. And when the first payments begin, a person can not stop. It's like playing roulette, where the excitement drowns out all the arguments of the mind.
The most famous financial pyramids
The world knows a lot of fraudulent projects that have affected thousands and millions of people. Among them:
- AOOT "MMM" S. Mavrodi . Initially, his company carried out financial and trading activities, and in 1994 began selling its own shares, introducing a certain margin for the purchase and sale of these securities, which have constantly grown. The bankrupt company was recognized only in 1997 and during this time Mavrodi even managed to be a deputy, and when his fraud was already disclosed. According to various estimates, 2-15 million depositors became victims.
- Famous financial pyramids include the company Bernard L. Madoff Investment Securities LLC B. Meidoff . He organized his firm in 1960, and in 2009 was accused of fraud and sentenced to 150 years in prison.
- "The Vlastilina" VI. Solovyovoy . Her company became famous for getting the first investors of cars, but two years after the organization collapsed in 1994, leaving more than 16 thousand people without their blood.