How Not To Suffer From The Financial Pyramid

Do not be fooled by aggressive advertising and check what the company earns. If the main income is the money of depositors, it is better not to take risks.
Last Updated
May 25, 2020



What is the financial pyramid

The Financial Pyramid is an organization in which some participants benefit from the contributions of others. Those who are closer to its top, to the organizers, can really increase their fortune, but only at the expense of deceived depositors from the steps below.

Successful members of such organizations are literally robbing others. It's just not going to be in the dark gateway.

We have known one of the types of the financial pyramid since childhood. And this is not about MMM. In Nikolai Nosov's book "Stranger on the Moon," shorty Mig and Julio establish the company "Society of Giant Plants." They produce "securities" that should be used to sell them for a good cause: a rocket will be built to deliver the seeds of giant plants from the surface of the moon to its nucleus. The latter remained on the spaceship on which the Stranger arrived.

Subsequently, the shares promised to exchange for these same seeds. But in the end, Miga and Julio made off with the money shorty, and with the "Society of Giant Plants" came up what predicted one of the honest participants of the events.

And then, it happens, some gang of crooks will gather," Kozlik said. "They will release shares, sell them, and run away with the money themselves. That's when they say that society has burst.

Such pyramids with the simplest scheme - now a rarity. They have been replaced by multi-level systems that keep the organization longer and its creators earn more.



How the financial pyramid works

Consider the most common version of the pyramid, cleared of all husks, which acts only as a cover.

Customers with high returns under some pretext promise a large profit if they invest their money in this enterprise. And they do benefit from the contributions of other participants at first. At the same time, the organization can conduct investment activities for cover. But the profit from it is a penny. The main income is cash injections of new members.

If the number of participants in the pyramid increases, the incomes of previous depositors grow. This motivates those to call out new members and confidently say that the case is right and leads to enrichment. All this happens exactly to the point when the expenses begin to exceed income. And this is possible, because the growth of customers is not at the same pace. As a result, depositors of the last stage simply lose all their money. And usually it's a lot of people who have been snasked for easy profit and lost everything.

In the worst case, remuneration and old members are paid irregularly, and accumulated on some internal accounts. In this case, the pioneers of the fraudulent enterprise will lose money. But not the organizers, of course.



Why people are investing in financial pyramids

Because they want to get rich quickly and easily. At the same time, little knows not only about financial instruments, and even about the management of personal accounting.

In addition, financial pyramids are not so simple. Such organizations do not put a pyramid on the logo and do not reflect the essence of the name. On the contrary, they are skillfully disguised. Among the common screens are investment companies, network marketing, cooperatives and so on. This fishing rod is easy to get caught, if you do not know much about the issue.

Low financial literacy and thirst for easy profit - a combination that literally paves the way into the clutches of fraudsters.

The state is not yet able to effectively protect citizens from financial pyramids. Relevant law



How to recognize the financial pyramid

To begin with, use the criteria set by the Central Bank to identify financial pyramids. They do not guarantee that the organization - scammers, but give reason to be wary.

The promise of very high returns

When investing, there is a rule: the higher the estimated percentage of earnings, the higher the risk. So your funds are in danger anyway, even if it's not a pyramid. There are reasons to think three times before investing money.

Return guarantee

It's not a wake-up call, it's a bat. Guarantee of profitability is prohibited

Lack of a license to raise money

The company must have a permit from the Federal Securities Market Commission (until March 2004), the Federal Financial Market Service (March 2004-August 2013) or the Central Bank (from September 2013) to raise funds. If there's no paper, it's a reason to be wary.

A lot of advertising

A large number of videos and banners not only infuriates, but also signals the danger.

Lack of any information on the financial situation of the organization

Transparency is a good sign, its absence - on the contrary.

Payments by one participant from other participants' contributions

There is no need to talk about income if the money is simply distributed within the company, not multiplied.

No fixed assets of their own

If the company does not have expensive assets, in case of its bankruptcy depositors will definitely be left with nothing.

There is no precise definition of the organization's activities

Here again the lack of transparency. If you can't understand what the company is doing, it's probably not about your mental abilities.


You can also check:

Who runs the company. How the past projects ended. Does the organization have a charter? Where are the deposits. Where investors' money goes.

So, "Cashberry" - it promises high profitability, active advertising with the participation of stars, a system of motivation to attract new members, incomprehensible terms of the contract, and other signs of the financial pyramid. There is no evidence that depositors' funds are being invested. At the same time, the latter transfer funds to the card of the individual or through paid services. Everything here is shouting that the company is a financial pyramid, from which you need to stay away.



Why you should never invest in a financial pyramid

A scam usually results in a huge number of savers losing all their money. That's what we've dealt with. But surely some in the head builds a cunning plan, according to which they intend to be closer to the top of the pyramid and earn on less hasty fellow citizens. You don't have to do that either.

The idea that any enrichment through participation in the pyramid - the theft of other people's money, was already in this text. Let's fix it.

By the way, if you actively agitate people to invest in the pyramid, you can be fined.



What to do if you've already got into a financial pyramid

There is almost no good news here. If you see before the company is recognized as a financial pyramid and it ceases to exist, withdraw your money from it as quickly as possible. If you are late or the company refuses to return the money on the basis of the points of the contract, you will most likely not see any savings. But it is worth trying to change the situation.

Investors of some companies are ready to pay compensation to the Fund for the Protection of the Rights of Depositors and Shareholders. However, we are talking only about organizations from the registry. And the amount of compensation is small - no more than 25 thousand rubles. Veterans and disabled WWII can claim up to 250,000.

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