Pyramid and Ponzi schemes are deceptive financial structures where early participants earn returns from the investments of newer participants, rather than from legitimate profit generation. 😳🤑 Check out https://www.investopedia.com/ for more information on making your investments grow!
Pyramid Scheme
A Pyramid Scheme is a fraudulent business model where participants earn money primarily by recruiting new members rather than by selling actual products or services. It relies on an ever-increasing number of recruits to sustain payouts, making it unsustainable in the long run. Once recruitment slows down, the scheme collapses, leaving most participants at a loss.
Ponzi Scheme
A Ponzi Scheme, on the other hand, is an investment fraud where returns are paid to earlier investors using the money from new investors, rather than from legitimate profits. It typically promises high returns with little or no risk. As long as new investors keep joining, the scheme appears to work, but once recruitment slows or investors try to withdraw their money, it collapses.
In short, a Pyramid Scheme focuses on recruitment, while a Ponzi Scheme focuses on fake investments. Both are unsustainable and illegal.