Difference between revisions of "Pyramid schemes (Global)"

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Pyramid schemes are a global phenomenon and have been observed for at least several decades. Though they are illegal in most countries, pyramid schemes keep appearing in political economies as diverse as those of the United States, China, Colombia and Lesotho. New technologies such as the Internet appear to have facilitated and accelerated the recent worldwide proliferation of pyramid schemes (Valentine 1998<ref>Valentine, D. 1998. ‘Pyramid Schemes,’ Federal Trade Commission, 13 May https://www.ftc.gov/public-statements/1998/05/pyramid-schemes</ref>).

Pyramid schemes are a global phenomenon and have been observed for at least several decades. Though they are illegal in most countries, pyramid schemes keep appearing in political economies as diverse as those of the United States, China, Colombia and Lesotho. New technologies such as the Internet appear to have facilitated and accelerated the recent worldwide proliferation of pyramid schemes (Valentine 1998<ref>Valentine, D. 1998. ‘Pyramid Schemes,’ Federal Trade Commission, 13 May https://www.ftc.gov/public-statements/1998/05/pyramid-schemes</ref>).

Pyramid schemes are sometimes confused with Ponzi schemes, which share the same underlying logic. The term Ponzi scheme goes back to Charles Ponzi, an Italian immigrant to the United States who in 1919 initiated a fraudulent scheme by promising investors that they make massive profits by purchasing international reply coupons and redeeming them in the US for postage stamps. Ponzi’s scheme was not sustainable over the long term, but for a while he managed to deceive his investors by paying early ones with the money he collected from later ones, while pocketing millions of dollars himself. Eventually, the fraud was detected and the scheme collapsed. In 1920, Ponzi was arrested, charged with fraud and imprisoned.

Pyramid schemes are sometimes confused with Ponzi schemes, which share the same underlying logic. The term Ponzi scheme goes back to Charles Ponzi, an Italian immigrant to the United States who in 1919 initiated a fraudulent scheme by promising investors that they make massive profits by purchasing international reply coupons and redeeming them in the US for postage stamps. Ponzi’s scheme was not sustainable over the long term, but for a while he managed to deceive his investors by paying early ones with the money he collected from later ones, while pocketing millions of dollars himself. Eventually, the fraud was detected and the scheme collapsed. In 1920, Ponzi was arrested, charged with fraud and imprisoned.