Unfortunately, the later investors lose all or most of their money to the con artist. If you are promised high, guaranteed profits and given no written explanation concerning the investment vehicle, the promoter's background or the risks involved, be careful. A Ponzi scheme may be at work. Steer Clear Of Pyramid Schemes Pyramid schemes are a variation of the Ponzi scam. Think of a pyramid.
Money is collected from people on the bottom to pay off other individuals farther up the pyramid.
As more people invest, new pyramid levels are created, and your position in the pyramid rises. In theory, you would be entitled to more money. Many times, you must also buy a product to join. However, unlike a true multi-level marketing plan, selling the product is less important than recruiting others to join the network. Ultimately, there comes a time when no new money flows in.