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A pyramid scheme is a scheme where participants receive compensation derived primarily from recruiting other people as participants into the scheme rather than from a sale of goods or services. In a pyramid scheme, participants attempt to make money by recruiting new participants. These schemes are often disguised as business / investment opportunities aimed at selling legitimate financial products or services, even stokvels. Pyramid schemes are not investments vehicles or genuine business opportunities.
Money is raised through recruiting other people into the scheme rather than from buying / selling any product. This means the more people each person recruits into the scheme the more money is made by everyone who joined the scheme earlier. The problems start when "recruitment" dries up and investors start losing their money. Unfortunately, in most cases, this will be the first time that authorities hear about the scheme and it is unlikely that the authorities will be able to recover investors' money because the scammers would have disappeared.