Can pyramid schemes be lucrative?

Dubious investments on the internet: How to recognize a pyramid scheme

High returns and permanent "passive income": so-called pyramid schemes are advertised with impressive profit margins - now mostly online. Questionable providers use terms such as "donation", "retirement provision", "marketing" or "crowdfunding" to advertise on social networks and on the Internet.

Attention, pyramid schemes!

Speedball systems are not designed for a long time. Only those who have started the whole thing and cashed in on investments can really benefit. Everyone else is likely to lose their stake.

The consumer advice centers have received complaints from eleven federal states about a wide variety of providers. Because of these complaints, the market watchdog finances took a closer look at the websites of over 50 providers: the imprint was missing in more than half of the cases. More than two thirds of the Internet domains examined are registered abroad, several of them with the same post office box address in Panama. This makes it particularly difficult for those affected to enforce their rights here.

For every new participant there is a "bounty"

The research by the market watchdog team also showed that a like under a post on Facebook is sufficient to be contacted directly by the provider. Mobile phone numbers, for example, are exchanged via Facebook Messenger, which give access to WhatsApp groups. The market watchdog experts at the Hessen Consumer Center therefore warn against fraudulent offers that present themselves online as simple, reputable and high-yield investments.

Consumers are increasingly complaining about providers who lure them into dubious investments with deals in Bitcoins and other cryptocurrencies. The market watchdog experts at the Hessen Consumer Center are currently investigating complaints about almost 20 different providers and six currencies. Prohibited pyramid schemes could also be hidden behind such offers.

What is a pyramid scheme?

A snowball system is the term used to describe business models that require a steadily growing number of participants in order to function, for whom you get a "bounty", analogous to a snowball rolling down the slope and growing steadily at the same time. Profits for attendees come almost entirely from recruiting new attendees who in turn invest money without receiving any service or product.

A rapid spread brings money into the system like a flash in the pan. But it is over just as quickly - the growth in new members cannot last long.

Pyramid schemes are illegal

Establishing and operating a pyramid scheme is prohibited in Germany (Section 16 (2) UWG). However, that does not mean that you can easily get back the money you have invested. If those responsible are abroad or if the operating company is insolvent, it can be very difficult to get the damage reimbursed.

How to recognize pyramid schemes

From the outside, pyramid schemes should look serious. The initiators are often veiled. In addition, it remains unclear at which stage the respective system is currently. Since the number of participants would have to increase exponentially, the collapse is inevitable. So how do you know where not to invest money?

  • Distrust you supposedly brilliant business ideasthat can be explained quickly. From the sofa, you cannot simply increase money on the computer by persuading other people to participate.
  • Most of the time you should start with relatively small amounts can - a few hundred euros sound like a manageable risk.
  • Pyramid schemes are always designed to keep the number of participants should rise sharply. You will be pushed to recruit many new members, for each of whom you will receive a "bounty".
  • Typical: one Commission always goes to the initiator. That makes him the only real winner in the end. Often it is not even clear what the money is being used for - then you should be particularly careful.
  • They are often said to be different Reaching levels or positions according to which your profit is based. Sole purpose: You should try to involve more and more people and their money.