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Ponzi Vs. Pyramid Schemes

Fraudulent investment schemes can result in serious, wide-ranging financial losses that deprive investors of their hard-earned money. Ponzi schemes and pyramid schemes are just two examples of activities that often target unwitting investors through fraudulent means.

If you or a loved one have lost money to suspected investment fraud, an attorney from Silver Law Group can help. Managing partner Scott Silver and our team of litigation attorneys regularly represent people across the nation in securities fraud claims involving companies, financial institutions, and other perpetrating entities.

Understanding Ponzi Vs. Pyramid Schemes

While there are some key differences between Ponzi schemes and pyramid schemes, it is important to understand what these activities can look like in practice, as well as how to avoid them. Ultimately, they both involve schemes using new investor money to pay earlier investors instead of paying out profits from a legitimate investment.

What Are Pyramid Schemes?

Pyramid schemes are frequently an illegal means of making money and are commonly associated with multi-level marketing companies (MLMs). While MLMs are legal, some companies masking as MLMs are nothing more than pyramid schemes, sometimes referred to as a chain referral scheme. Participants are promised the opportunity to make money by recruiting new participants.

The pyramid scheme and its most profitable participants make their money by recruitment or referral fees rather than selling a legitimate product or service. As new members are recruited, they too must enroll new members in the scheme in order to collect payment.

Once the membership pool gets too big, the venture may become unsustainable, and the bubble will burst. Even at its peak, usually only those at the top of the pyramid are making substantial money, while newer recruits are struggling as their compensation scheme revolves around generating new member leads.

What Are Ponzi Schemes?

On the other hand, a Ponzi scheme lures investors into a seemingly legitimate investment venture but is actually paying older investors with funds by more recent investors. While a pyramid scheme has a notable similarity to a Ponzi scheme in the sense that earlier investors are paid from money provided by subsequent investors (or members), these two forms of fraud have some key differences.

A Ponzi scheme often involves an upfront investment with the promise of unusually high or consistent returns at a later date. A pyramid scheme involves luring the victim into thinking they will make money through a valid business opportunity, when in fact they will just be recruiting more people into a scam.

Financial Recovery For Victims Of Ponzi Or Pyramid Schemes

If you have been victimized by a Ponzi scheme or pyramid scheme, you can get help from an attorney who understands the challenges of financial fraud. The attorneys at Silver Law Group leverage years of experience in investment fraud litigation and can work diligently to achieve the best results for your case.

If an investment scam has deceived you, we can stand up for your rights and work to recover your financial losses, often through a class action lawsuit involving other investors just like you.

To Learn More About Ponzi Schemes Compared To Pyramid Schemes, Call Silver Law Group

Silver Law Group has extensive experience working with SEC regulators and other government entities in bringing claims for victims of investment fraud. If you believe that your investment may actually be tied up in a Ponzi scheme or pyramid scheme, you need to speak with an attorney as soon as possible who can assess your legal options.

We can put your best interests at the forefront while pursuing every possible strategy to recover your losses. Contact Silver Law Group today to receive your free case consultation and find out how we can help you seek justice.

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