Pyramid Schemes, and Why They Are Illegal

Pyramid schemes do seem very attractive, because, let's face it, they can make you very rich in a very short time and with very little work as well. There is a fly in the ointment right away, unfortunately. What is even worse is that most people don't even think about it before investing.

Before I get to that, I think I should first elaborate on what a pyramid scheme actually is. I will use the most common example that will probably touch the most peoples lives sooner or later. The infamous chain letter.

These are especially harmful because they can reach so many people in such a short time, and with email, it is now even worse. They will usually start with some guys story about how he was on hard times, and how this letter saved his life, and then subsequently made him millions. Then there will be the the usual ranking system. This will be the banking details of three individuals to whom you must each pay a small amount. Probably $5 or to some effect of that. Then you must put your own details on the first line, and move the other two down a position and then deleting the 3rd name. Now you must send it out to as many people as you can, and hope to replicate the cycle. This will surely make a lot of money, but if 1 person splits down to 5 and each person thereafter splits down to five, it can only be done 16 times before the amount of people needing to send the letter is more than the earths population. Do the math, you will loose your money if you don't get on the bandwagon quickly. This is why this type of letter is illegal in the US and most other countries. It is also considered a form of illegal gambling and subject to the penalties on that.

So, it all comes down to that old chestnut..... If it seems to good to be true, it probably is.