[Glossary](https://pecuvo.eu/en/glossary/) · Fraud and security # Pyramid scheme ("guaranteed high returns") **In short:** a pyramid scheme is a scheme in which members earn not from a real product or activity but from the fees of new members they recruit; it always collapses when new people run out. **Simply put:** Everyone pays to join and gets money when they bring in others. The founders and early members at the top profit. Everyone below loses — because the number of people in the world is finite. If you earn by recruiting people, you are not an investor but a recruiter, and you may carry legal responsibility. **Example:** If everyone recruits 6 people, level 10 needs 6¹⁰ = 60,466,176 people, and level 13 needs 6¹³ = 13,060,694,016 — more than the population of the Earth. **Watch out:** "everyone is doing it" and "I'll get in early and out in time" are the most dangerous thoughts. Nobody inside knows when the end will come. **How to spot it:** guaranteed high returns, pressure to bring in friends, no clear idea of what is being sold. Check the company with the financial supervisor and do not pay an "entry fee". **Source:** U.S. SEC, Investor.gov — "Ponzi Scheme" and "Pyramid Scheme": https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme · Example: Bulgaria — Financial Supervision Commission (FSC): https://www.fsc.bg ## In depth in the modules - [Module 17](https://pecuvo.eu/en/modules/fraud-pyramids-and-getting-rich-quick/) - [Module 6](https://pecuvo.eu/en/modules/alternatives-to-money/) - [Module 15](https://pecuvo.eu/en/modules/life-strategies-by-stage/) ## Related terms - [Ponzi scheme](https://pecuvo.eu/en/glossary/ponzi-scheme/) - [Investment scam](https://pecuvo.eu/en/glossary/investment-scam/) - [Crypto scam](https://pecuvo.eu/en/glossary/crypto-scam/) - [Reporting fraud](https://pecuvo.eu/en/glossary/reporting-fraud/) - [Checking a licence](https://pecuvo.eu/en/glossary/licence-check/)