How to Spot Pyramid Scams

A pyramid scam is an arrangement in which a large number of people at the bottom of the pyramid pay money to a small amount of people at the top. Every year, thousands of Americans sink their hard-earned money into pyramid scams, believing that they are investing in a legitimate business opportunity.

Instructions

1. Think twice about claims that you will sell miracle products for enormous financial gain.

2. Pay close attention to where the profit comes from. Be sure there is a real product and real sales rather than only various fees for membership, recruitment and training.

3. Beware of the hard sell and immediate demands for your financial information and money. Take your time and don't believe claims that the opportunity will be lost if you don't invest immediately. Sign no contracts until you've taken time to carefully consider the offer.

4. Investigate the business. Ask for written copies of all company literature. Inquire about the products, the source, the fees and the guarantees. Assess the company's history and performance record with the Better Business Bureau (See Resources).

5. Talk to other people who have had experience with the company, particularly people who are no longer involved.

6. Be wary of claims that you will make money based on the number of other participants that you recruit.

Tips & Warnings

• Don't believe the hype and the promises of fast, easy money with no sweat equity.

• Beware of phony references and "shills" that lie about how much much they made by participating in the pyramid.