FINANCIAL PYRAMIDS – ALL TRUTH HERE!

 

To maximise the potential earnings, investors have to work with tools where the risk of losing money may significantly exceed the risks in the traditional ways of investing. Often, such projects have signs of financial pyramids, and it is possible not only create a financial loss but also to lose the invested capital altogether.

In this article, we will not discuss whether it is good or bad to work with financial pyramids. But rather let everyone make their individual decision. Now let’s talk about what it is and how the financial pyramids work, how to discern and earn on similar projects.

“We always advice our investors to choose a traditional investment instruments with a lower risk and avoid the “quick gain” high risk programs. (Opinion of InvestLike.Pro team)”

THE FINANCIAL PYRAMID – WHAT IS IT?

A financial pyramid – is a financial structure that provides an income to its existing participants by charging funds from the other (newer) participants joining the program. In other words, the investments of subsequent investors are used to pay out the income of previous investors. The scheme is profitable as long as you can attract new investors. The purpose of the financial pyramid is to create an ever-growing inflow of money, as it must ensure the return not only of earlier investments, but also the payment of interest.

Financial pyramids can be divided into two parts:

Simple pyramids

Work according to the scheme of Charles Ponzi (Italian, who in 1919 founded one of the largest pyramids in history). The essence is simple: the founder collects money from new investors, paying out bonuses to the old ones. Once the flow of customers, and with it the opportunity to pay interest, runs low, the founder of the pyramid disappears with the money.

Multi-level pyramids

The bottom line is to create a several levels structure, allow people to attract new participants and getting a percentage for their effort in building the pyramid further. At the top of the pyramid is the founder, who attracts, for example, 5 depositors. 5 investors, in turn, attract another 5 depositors, receiving 10% of their deposit, etc. As lower the level, the less the remuneration and the more investors a member needs to attract in order to earn precisely.

Financial pyramids began to appear in the 1800s, but their essence has not fundamentally changed. Here are examples of the most famous of them:

Charles Ponzi in 1919 offered earnings on arbitration, that is reselling goods in different countries. To depositors in his company, he promised 150% of the deposit each 1.5 months. Investors were not particularly interested from where this income comes. In fact, the money of new investors was redistributed among the old ones. After the disclosure of the scheme, its founder received 5 years in prison.

The Double Shah. The scheme, founded by a Pakistani resident in 2005, could attract more than 3,000 investors and brought the founder about $ 880 million. The fact is unchanged – the collection of money under the mask of exchange earnings, and in fact it was a redistribution of funds.

Lou Perlman, the creator of such popular boybands of the 90’s as Backstreet Boys and ‘N Sync, is also known for being able to abuse more than 200 people and 10 financial companies, which in total brought him $ 300 million. His companies existed only on paper, which did not prevent him from selling shares in them. Result: 25 years in prison.
The European Royal Club (founded in 1992) existed for 2 years and attracted about $1 bln . The organisation pursued the goal of helping small entrepreneurs, but the fact was to buy a “letter”, giving the right to double the increase of the contribution within a year.

Verdict: Founder Damara Berthes – 7 years in prison.

“Ants Farm”, founded by Van Feng (1999 year). The cleverness of the Chinese businessman had no limits. He was able for 14 months to become a nominee for a prize from the state as one of the best entrepreneurs of the year. Everyone could pay $1500 in order to buy a box with ants, grow them, feed them, after which the businessman bought them back 90 days later at a cost corresponding to 32% per annum. According to legend, ants were processed for medicines. Reaching a turnover of $ 2 bln. the company went bankrupt. In China, with scammers, the conversation is short, the verdict is the death penalty.
Bernard Madoff was able to attract investments worth $ 64.8 billion. USA, which makes the financial pyramid the largest in the history of their existence. According to legend, Maydoff had access to insider information and influential connections, which allowed him to profitably place money. The structure of the pyramid was so complicated that even wealthy investors trusted it. When in 2008 some of investors decided to withdraw about $ 7 bln. it turned out that they do not exist. The verdict is 150 years in prison.
«MMM». The pyramid was founded by mathematician Sergei Mavrodi in Russia back in 1989 and existed until 1994. Even now it’s hard to say how many investors were involved in the pyramid (according to various estimates, from 2 to 15 million people). After the collapse of MMM, about 50 people сommitted suicide. After serving the term, Mavrodi continued to create pyramids, not only in Russia. In autumn 2015, the growth of bitcoin in China was written off specifically for the activities of Mavrodi.

“We always advice our investors to choose a traditional investment instruments with a lower risk and avoid the “quick gain” high risk programs. (Opinion of InvestLike.Pro team)”

HOW TO RECOGNIZE FINANCIAL PYRAMID

The promise of a fixed monthly (weekly) income without explaining its source. Moreover, the larger the amount of promised interest, the faster the pyramid will go to the bottom (close down);

Intrusive adware. “You Can Earn So Much!”, “Make Money Now!” And other luring slogans. SMS sending, imposition in social networks, phone calls, offers to earn on attracting new customers – all this shows the actual goals of the organisers;

Absence of information on the company’s registration and data on its management, lack of contacts;

Various promotions with inadequate prize sizes, such as “invest now and get an opportunity to win a car!” .

Getting profit by attracting new participants (often covered by partner programs).

If the site of the organiser (pyramid) directly informs that its activity is a pyramid, it possible that you encounter a legal pyramid service. However, If on the web-site this fact it is a pyramid is not announced clearly, and you notice the signs indicated above which means you clearly believe it is a pyramid by its structure, be aware – this business is not a legal one. However, there are certain doubts related to the illegality level of such businesses, since there are few actual levers for the financial pyramids and its governing bodies.

CAN I MAKE MONEY WITH FINANCIAL PYRAMIDS?

The fact that the pyramids appear with enviable constancy indicates about the existing interest in this field. The fact is that there are still “investors” who invest money in the pyramids: some of this investors doing so for the purpose of earning, while others, doing so for their pure excitement. Many of the pyramids may appear again after they declare a bankruptcy, there is a so-called “restart” when a closed pyramid company owners, opening a new company with a new name in order to attract new investors again. For example, on Sergey Mavrodi’s site it is written: the investor risks losing money, but the pyramid will be restarted and those investors, ready to risk (invest) again, will be one of the first to get paid back for thier previous loss.

And in conclusion a few rules for investing in the financial pyramids:

Invest only the capital you are ready to lose.

Withdraw your profits as often as possible.

If you already made a decent profit, consider to stop and do not re-invest again.

If you choose to invest with a pyramid program, invest at the very beginning of the work of that particular pyramid;

Do not freeze your money on various stocks and long tariff plans, so that when you have the first problems, you have time to withdraw money.

CONCLUSION

Financial pyramids will exist as long as people have the excitement and thirst for easy money. Despite the fact that many consider the pyramid fraud, it is rather a lottery – with a great probability of losing your investment, but in the case of winning, the income can exceed all the expectations. The main thing in investing is the understanding that money may never return to your end, cold-bloodedness and competent analysis.

“We always advice our investors to choose a traditional investment instruments with a lower risk and avoid the “quick gain” high risk programs. (Opinion of InvestLike.Pro team)”

The InvestLike.Pro team wishes you success in investment decisions!

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