legal advice

Thousands of Americans have lost millions of dollars participating in pyramid schemes, simple or disguised. Simple pyramid schemes are similar to chain letters, while disguised pyramids are like wolves is sheep’s clothing, obscuring their true nature in order to fool potential investors and evade law enforcers.
Things you should know about pyramid schemes
1. Pyramid Schemes seek to profit from you, quickly,
2. Pyramid schemes are illegal frauds in which large numbers of people at the bottom of the pyramid pay money to at few people at the top. Each new participant pays the chance to increase to the top and profit from payments of others who might join later.
3. They are losers. Pyramiding is based on simple mathematics: many losers pay a few winners.
4. They are fraudulent. Participants in a pyramid scheme are, consciously or unconsciously, deceiving those they recruit. Few would pay to join, if the diminishing odds were explained to them.
5. They are illegal. There is a real risk that a pyramid operation will be closed down by law enforcement officials, and the participants would risk to get huge fines and potential arrest.
Why would anyone pay to join a pyramid scheme? Pyramid promoters are managing group psychology. They make their schemes to look like multilevel marketing methods. Multilevel marketing is a lawful and legitimate business method, which uses a network of independent representatives to sell consumer products.
To look like a multilevel marketing company, a pyramid scheme takes on a line of products and claims to be in the business of selling them to online consumers. However, little or no effort is made to actually market the products. Instead, money is made in representative pyramid fashion, from recruiting. New distributors are pushed to purchase large and costly amounts of inventory when they sign up.
Let me show you this example:
To join, you might have to pay anywhere from a small investment to thousands of dollars. In this example. You pay $1,000 and get a position in one of the boxes on the bottom level. $500 of your money goes to the person at the top of the pyramid, the promoter. If all the boxes on the chart are filled up with participants, the promoter will collect $16, 000, and you and the others on the bottom level will each be $1,000 poorer.
When the promoter has been paid off his box, or leg, he is removed and the second level becomes the top of the payoff level. Only then do the two people on the second level begin to profit. To pay off these two, 32 empty boxes are added at the bottom, and the research for new participants continues.
Each time a level rises to the top, a new level must be added to the bottom, each one twice as large as the one before. If enough new participants join, you and the other 15 players in your level may make it to the top. However, in order for you to collect you payoffs, 512 people would have to be recruited, half of them losing $1,000 each. Of course, the pyramid may collapse long before you reach the top. In order for everyone in a pyramid scheme to profit, there would have to be a never-ending supply of new participants. In reality, however, the supply of participants is limited, at each new level of participants has less change of recruiting others and a greater chance of losing money.