How not to suffer from a financial pyramid

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Do not get fooled by aggressive advertising and check how the company makes money. If the main income is money of depositors, it is better not to risk it.

What is a pyramid scheme

A pyramid scheme is an organization in which some participants benefit from the contributions of others. Those who are closer to its top, to the organizers, can really increase their fortune, but only at the expense of deceived investors from the step below.

Successful members of such organizations literally steal from others. It just doesn't happen in a dark alley.

We have been familiar with one of the types of financial pyramid since childhood. And it's not about "MMM". In Nikolai Nosov's book "Dunno on the Moon", the short men Miga and Julio found the joint-stock "Society of Giant Plants". They issue "securities", the money from the sale of which should go to a good cause: a rocket will be built that will deliver the seeds of giant plants from the surface of the Moon to its core. The latter remained on the spacecraft on which Dunno flew.

Subsequently, the shares were promised to be exchanged for these very seeds. But in the end, Miga and Julio escaped with the shorty's money, and with the "Society of Giant Plants" it turned out what one of the honest participants in the events predicted.

And then, it happens, some gang of swindlers will gather, - said Kozlik. - They will issue shares, sell them, and they themselves will run away with the money. That's when they also say that society has burst.

Nikolay Nosov "Dunno on the Moon"

Such pyramids with the simplest scheme are now a rarity. They were replaced by multi-level systems, thanks to which the organization lasts longer, and its creators earn more.

How does the pyramid scheme work?

Consider the most common version of the pyramid, cleaned of all husks, which acts only as a cover.

Clients with high profitability under some pretext are promised big profits if they invest their money in this venture. And at first they really benefit from the contributions of other participants. In this case, the organization can conduct investment activities for cover. But the profit from it is a penny. The main income is cash injections from new members.

If the number of participants in the pyramid increases, the income of previous investors grows. This motivates those to invite new members and confidently say that the work is right and leads to enrichment. All this happens exactly until the moment when expenses start to exceed income. And this is possible, since the growth of clients does not occur at the same pace. As a result, the depositors of the last stage simply lose all their money. And usually this is already a lot of people who were chasing easy profits and lost everything.

In the worst case, remuneration for old members is paid irregularly, and accumulates on some internal accounts. In this case, the pioneers of the fraudulent enterprise will also lose money. But not the organizers, of course.

Why people invest in pyramid schemes

Because they want to get rich quickly and easily. At the same time, they know little not only about financial instruments, but even about personal accounting.

Moreover, pyramid schemes are not that simple. Such organizations do not put a pyramid on the logo and do not reflect the essence in the name. On the contrary, they are skillfully disguised. Common screens include investment companies, network marketing, cooperatives, and so on. It is easy to fall for this bait if you do not really understand the issue.

Low financial literacy and a thirst for easy money is a combination that literally paves the way into the clutches of fraudsters.

The state is not yet able to effectively protect citizens from financial pyramids. The corresponding law appeared in 2016 and applies only to pyramids in their pure form: if their only income is the money of depositors.

How to recognize a financial pyramid

To begin with, use the criteria set by the Central Bank to identify financial pyramids. They do not guarantee that the organization is a scam, but they give a reason to be wary.

1. The promise of very high returns

When investing, the rule applies: the higher the estimated percentage of earnings, the higher the risk. So your funds are in danger one way or another, even if it is not a pyramid scheme. There is reason to think three times before investing.

2. Guaranteed profitability

This is not an alarm bell, but an alarm bell. It is forbidden to guarantee profitability, so the organization is already playing unfairly.

3. Lack of a license to raise funds

The company must have a permit from the Federal Commission for the Securities Market (existed until March 2004), the Federal Service for Financial Markets (March 2004 - August 2013) or the Central Bank (from September 2013) to carry out activities to raise funds. If there is no paper, this is a reason to be wary.

4. A lot of advertising

A large number of videos and banners not only infuriate, but also signal danger.

5. Lack of any information about the financial position of the organization

Transparency is a good sign; its absence is the opposite.

6. Payments to one participant from contributions of other participants

There is no need to talk about income if money is simply distributed within the company, and does not increase.

7. No own fixed assets

If a company does not have expensive assets, if it goes bankrupt, depositors will definitely be left with nothing.

8. There is no precise definition of the organization's activities

Here again, there is a lack of transparency. If you can't figure out what the company is doing, it probably isn't a matter of your mental capacity.

You can also check:

• Who runs the company. How past projects ended.
• Does the organization have a charter.
• Where are the deposits.
• Where investor money goes.

Why you should never invest in a pyramid scheme

A scam usually results in a huge number of depositors losing all their money. With this we figured out. But surely some have a cunning plan in their heads, according to which they intend to be closer to the top of the pyramid and make money on less efficient fellow citizens. You don't need to do that either.

The idea that any enrichment due to participation in the pyramid is the theft of other people's money was already in this text. Let's fix it.

By the way, if you are actively campaigning for people to invest in the pyramid, you can be fined from 5 to 50 thousand rubles.

What to do if you have already got involved in a pyramid scheme

There is practically no good news here. If you saw the light before the company was recognized as a financial pyramid and it ceased to exist, withdraw your money from it as quickly as possible. If you are late or the company refuses to return the money on the basis of the clauses of the agreement, then you most likely will not see the savings anymore. But it's worth trying to change the situation.

1. Submit a written claim to the company asking for a refund. If your requirements are not met, contact the prosecutor's office, write to the Central Bank.
2. Find other victims of the pyramid and file a class action suit. Gather proof of money transfer in advance, prepare documents.

The Fund for the Protection of the Rights of Investors and Shareholders is ready to pay compensation to the investors of some companies. True, we are talking only about organizations from. And the amount of compensation is small - no more than 25 thousand rubles. Veterans and disabled veterans of the Second World War can claim up to 250 thousand.