Different Forms of Pyramids: MLM and Ponzi Schemes

Updated: 12/19/2004 01:26
Reprints/Permissions  Hyip Monitor
During a long time of developing the sphere of high yield investments, accessible in the Internet, there have been formed a large number of different "types" of the programs. Generally all the programs can be referred to "dangerous" ones. I.e., investing money to online projects, You should be ready morally to lose them. But, in fact, in turns out that experienced investors earn money in this ``dangerous`` field in particular! How?


With the help of our articles we want every beginner to become that kind of "experienced" investor, and to make possible for every "experienced" investor to find one's bearings in the constantly changing field of HYIP market demand and supply. In our today's issue we'd like to touch upon the investment topic of no small importance: using and participating in so called "bad-dangerous" projects.

The specific character of the investment business online formed the circumstances, when You are always tried to be cheated, by default. You don't have to put up with this, You have to make use of this. Participating in such programs like Ponzi, MLM is a perfect example, when being in online business, You can not only deposit small amounts "with fear" to some HYIP, hoping that You won't be swindled, but also EARN Your money, cause despite all the "dangers", this is an ordinary business, similar to any other, it gas its rules, we are going to talk now and talk in every issue of ours. So the introduction has been made, now let's start.

From the very beginning I should say that in any of investment schemes, we are going to talk about, the earning is possible during the first stage. Since they are going to fall down sooner or later, You'd better look closely, when they started to operate and deposit Your funds at the very beginning. If there is no official indicator on a site of a program, when it started to operate, You can learn of its duration on the forum, from the number of its clients, investment volume, i.e. funds turnover. Never forget to take note of these details. It works if the program is not an overt fraud, though, we'll talk about this in our further issues and our "informative materials".

It's also worth mentioning the opinions of some experienced investors about "investment cycles", opinion that can also be taken into account. We agree with it in a way. The thing is that there are certain stages in the "fraud" and honest programs on the investment market, the market of not quite honest projects, not depending on gold, oil market tendencies, and world markets on the whole. These stages depend on a program' movement. Everything begins with the truth of course.

Really working programs cultivate investors' confidence and work up to half a year before the total capital exceeds program's opportunity to "pay the bill". Then the collapse and total deceit start. The programs appear and disappear with other's money, different manipulations and other frauds take place. After that it' not so easy to refer new investors, and time for honest programs to come starts. And so on, in chain. From the messages, saying of a program's activity on the forums and monitoring sites, we can determine what time it is now. Investor should be attentive, like an animal in the jungles. If he is lack of vigilance, we'll help him.:)

Let's start with describing the general principle. Everything we are going to talk about today looks like a pyramid. There is a person (or some of them) on the top and lots of them beneath. Pyramid is built up top-down, i.e. starting from the "narrow" place, widens gradually and, unfortunately, closes. The pyramid age is about one or several months.

There are some long-term variants, living up to a year or even more, though it happens very rare. The difference is in different schemes of forming the pyramid, using and receiving funds (moving in accordance with hierarchy). The primary and original example of pyramid is "administrated" pyramid. The money from investors accumulates here and the percents are paid out. The source for the percents is not hard to define - money of the same investors.

Of course, first members can compensate their deposits though further ones - hardly! Another concept exists - matrix. It looks like an ordinary pyramid, but its growth is conditioned by summation of the funds deposited on different levels of a pyramid. As an example we can give so called Straight-Line Matrix or (Elevator Scheme), lying in purchasing of this or that product.

The first member pays 10% of the price for the product, the second - also 10% etc. As soon as the 10th member pays the money, the first one gets it. Just for 10%. As for me - it's rather interesting, though not for the rest 9, who have to wait their turn, referring new members. In the upshot, the vendor gets 100% of the product's price and some 9 members are to left with nothing. Other matrixes are built similarly.

Such a usual abbreviation as MLM keeps a kind of concealed sense for lots of investors. Due to the fact that almost all the investment systems online are designed on the pyramid principle, lots of them cannot be distinguished one from another. The thing is that Multi Level Marketing has one peculiarity. It lies in referring the sequent members by YOU. I.e. the first level here - is the author of the scheme. Next level - is You. There are two persons like You, for example. In case each of You should refer 60 people more to take money from, the number of members on the third level will be 122, in case each of them should also refer 60 people more, can You imagine how the system can grow.

Anything can be the background for that kind of business. You can buy stock, products, some space preparation - it all doesn't matter at all.

What matters is - investing money and referring new members, investing their money and referring new clients as well. Yes, sometimes it happens that You don't have to pay anything at all, but somebody pays.

The earning in the system like that is under the threat when You are, say, #10 in chain. The thing is that it's practically impossible, even from the economic point of view to pay the money to ALL he members. Though investing money on the first stage is quite real. But here there is a moral aspect, You take part in cheating those people who happen to be on the 10th level of the system, let's hope, there won't be any good friends of Yours or acquaintance there, reading Your mailing list. You will screw up with the relations once and for all. At the worst the losses will have to be covered.:)

The second popular and romantic one, keeping the original name is Ponzi. In medicine there are some diseases called at the names of doctors, who discovered them. The same thing in investment, it became possible to call the investment scheme at the name of its creator that is a fraud unfortunately. Charles K. Ponzi was an extremely clever person. In 1920 he built the elemental pyramid and earned millions on it.

The essence of his fraud lied in the following. Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. The main idea is that it doesn't matter what the author is speaking about. What is important is that on first stages he paid the profit to earlier members from the money of later members.

So Ponzi had two investors on his first stage, but when everyone could see that earnings were rather real, it was hard to get rid of them. As soon as he earned a million he disappeared (fantastic money at that time). The difference with MLM is that not every following member refers new members, the author of the scheme does it. Ponzi published his announcements in newspapers.

Today several authors write the autobiographies of Ponzi and, dear readers, we use them sometimes, though unfortunately are bring caught. In the scheme like this the main rule is - taking part at the beginning, You earn. Only Your attentiveness can help to tell the stages of program development from. If the scheme seems to be too old, You'd better not take a risk. This is our advice to You. There are lots of similar projects on the web, where You can earn.

Vague statement in the introduction to this article means not more than investors' participating in programs, going to collapse initially.
Yes, it's not a secret, more than a half of HYIP in the web - is a fraud in its own way. Since we want our readers to orientate themselves on the market, earn money, we take into account that they are going to see everything as it is. Being responsible to tell the truth we must admit that MLM, Ponzi and any kinds of pyramids - is a fraud. However, we wouldn't have devoted the whole article to them if it wouldn't think that it's possible to EARN on these frauds. Yes, to earn, without cheating people, just investing money. We work for this in our issues, hoping that this material has become an instructive manual for You.

Be watchful!


About the author

Brett Sherpan has been working for seven years writing and editing for online and print media. He has held various editing and copywriting positions and can quickly and competently write copy for sales, marketing and editorial content. Brett is a consistently dependable team player, who thrives in a high-pressure environment, enjoying the challenges of meeting deadlines and am comfortable researching, writing and editing on a wide range of topics
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