Pyramid Schemes hit the Internet

I received a frightening email last week.  The author promised that, if I did exactly as instructed, I could make over $50,000 in 90 days with only a $20 investment.  Of course, as the old saying goes, if something sounds too good to be true, it probably is.

The message went on for several pages, describing the "program" for making all this money.  I did not have to get past the first paragraph to realize that it is a pyramid scheme.

A pyramid scheme works like this: you get recruited in by someone else and pay an amount of money to that person.  You then recruit a number of people, who pay you the same sum of money, which you pass along up the pyramid.  Those people recruit more people etc. When you get to the top of the pyramid, you no longer have to pass the money higher and you keep the money that is passed up from a specified number of levels below.

Typical pyramid schemes involve four layers.  Eight people pass the money up to four, who then pass it up to two more people, who then pass the entire amount up to the top person.  You may recall that there was an extensive crackdown on pyramid schemes in Durham Region in the last couple years.

Being involved in a pyramid scheme is a criminal offence. They are illegal for good reason.  In the end, every dollar of profit made by one person is result of a dollar lost by a person at the bottom. The market eventually becomes saturated and whoever is not at the top loses their investment.  In a four-tier scheme, every winner creates seven losers.  The scheme only works if a lot of people lose money.

This email contained all the typical warning signs of a pyramid scheme.  The first paragraph assures you that the scheme is ethical and perfectly legal.  Why would they need to assure you of this if it wasn't illegal? 

The letter even assures you that saturation is not a problem with this particular scheme.  Saturation is only a problem with pyramid schemes.

The letter then requests that you send cash in the mail.  Personal cheques will not be accepted.  SAY WHAT?  How many times have we been told not to send cash in the mail?

The letter also gives you various phone numbers and addresses of important agencies or people who can also assure you that the program is legal.  Need I say more?

The scary thing about this pyramid scheme is that it promises over $50,000 with such a small investment.  There will be a large number of desperate and hopeful people that will send that relatively small sum of money away.  Kiss it goodbye: you'll never see it again.