Ireland’s Consumer Watchdog Cracks Down on Pyramid Schemes

The Competition and Consumer Protection Commission (CCPC) has launched a crackdown on suspected pyramid schemes in Ireland. The move follows a warning issued earlier this year about a potential pyramid scheme targeting young people and students.

What are Pyramid Schemes?

Pyramid schemes are fraudulent marketing arrangements that promise investors a return through the recruitment of others, rather than selling a legitimate product or service. They are often promoted through social media and word of mouth, with victims being convinced to invest money in the hope of making a profit down the line.

How Pyramid Schemes Work

In theory, pyramid schemes work by offering individuals the opportunity to buy in, with their money going to those above them in the hierarchy. However, as more people join the scheme, it becomes mathematically impossible for everyone to make a return on their investment, leading to a collapse and widespread financial losses.

Here’s an example of how a pyramid scheme typically works:

• Darren is recruited into a pyramid scheme by an old school friend, along with nine other people.
• They each invest €1,000 to join and find out after they have handed the money over that the only way to get it back is for each of them to recruit 10 more people.

The Dangers of Pyramid Schemes

Despite regular public awareness campaigns warning against them, pyramid schemes remain a persistent problem in Ireland. The CCPC has issued a stern warning about the dangers of pyramid schemes, stating that anyone who knowingly participates in such a scheme can face fines of up to €150,000 or five years in prison.

The Liberty Chart System and Speedball schemes, which swept Cork, Kerry, and Clare in 2006, are a prime example of how pyramid schemes can have devastating consequences. Gardaí estimated that those at the bottom of the pyramid lost around €20 million in total.

Multi-Level Marketing (MLM) Schemes

The CCPC has also highlighted the dangers of MLM schemes, which are often confused with legitimate businesses but can be just as damaging to victims. In an MLM scheme, individuals sell products to the public and earn commissions not only on their own sales but also on sales made by those they recruit to the scheme.

Protecting Yourself from Pyramid Schemes

The CCPC advises anyone who is approached to join a pyramid promotional scheme to contact them immediately through their helpline or website. With vigilance and awareness, consumers can protect themselves from these types of scams and avoid financial losses.