Claims that a promoter makes concerning the investment opportunity often are exaggerated and misleading. Since few products are sold, most of the money generated is through recruitment of members. When recruitment slows, the marketing system collapses, leaving most participants with losses. The chain letter, a common type of pyramid operation, involves sending letters to individuals, sometimes requesting a small sum of money. A promise is made to persons responding that they will receive many times their investment by following the same procedure.
Penalties Recruiting people to participate in a pyramid scheme is a felony in many states.
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