There is often a cover for a pyramid scheme that makes it appear the compensation will come from something other than recruitment. Some might offer a work-at-home job opportunity for the the fee. But the work is simple and and entirely secondary to earning compensation. Sometimes they are dressed up as multilevel marketing (MLM) organizations, selling a product through direct sales. But in a true MLM, reps earn more through their own product sales than by recruiting others.
Pyramid schemes are illegal in the U.S. and many other countries including Canada, Philippines, China and the U. K. As the name implies, a small number of people at the very top can make large amounts of money in a pyramid scheme, while the last ones in at the bottom will lose money. This type of business model is not sustainable because there is no product of value powering the earnings. And when the market is saturated and people begin exiting the organization, it will collapse. This can happen very quickly.
Some covers for pyramid schemes include:
- Work at home jobs with initial fees and bonuses for recruitment
- Multilevel marketing business opportunities
- Chain letters
- Gift circles
- Investment clubs