Why pyramid scams are on the rise

By Richard Davies

On the face of it these seem like tough times for financial scammers. The crash of 2008 burned investors, exposed fraudsters and has forced regulators to toughen up. Yet dodgy “pyramid” investment schemes that promise huge returns before inevitably collapsing are going strong, especially those targeting women. In late 2015 British regulators jailed the leaders of a plot that had duped over 10,000 women. In June 2016 authorities in Belize warned of a scam sweeping the country. America, India, Mexico and Indonesia have seen similar stories.

The structure is always the same. First, new members pledge a joining fee: $5,000 in the case of Canada’s “Women’s Wisdom Circle”, £3,000 for Britain’s “Give and Take” scam. Then they are asked to recruit two new members, who must also pay and commit to finding two investors. After a couple more rounds of this, one member sits at the top of a pyramid with eight newbies at its base. At this stage a party is held at which the person at the top is crowned the “birthday girl” or “bride” and given the cash from the joiners at the base of the pyramid. The promised return – $40,000 in the Canadian scheme, £24,000 in the British one – is 700%. The actual return tends to be zero.