Pyramid Schemes in Armenia: What You Need to Know to Protect Yourself

Pyramid schemes, a type of unsustainable business model that rely on recruiting new members to generate profits, have gained notoriety in Armenia. These schemes have been accused of misappropriating funds and causing financial losses for many individuals. In this article, we explain what pyramid schemes are, how they operate, and how you can identify and avoid them.

What is a Pyramid Scheme?

A pyramid scheme is a business model in which members earn money by recruiting new participants instead of selling genuine products or services.Pyramid schemes, which are sometimes referred to as “multi-level marketing schemes” or “chain referral systems,” differ from legitimate multi-level marketing companies in that they primarily rely on recruitment and charge extensive fees for membership or joining a higher level.

Types of Pyramid Schemes

Pyramid schemes come in various forms, including:

1. Product-Based Schemes: These schemes involve selling goods or services but primarily focus on recruiting new members, using sales as a cover.
2. Chain Emails: In these schemes, individuals are solicited to send money to a list of recipients, often for a stated cause. Such schemes are illegal and often used for deceitful purposes.
3. Gift Clubs: These schemes utilize the premise of gift exchange to recruit new participants, with top-level members receiving substantial rewards from new members.
4. Naked Schemes: These schemes promise vast rewards for recruiting a specified number of new members. As the organization grows, a pyramid structure emerges, leaving lower-level members vulnerable to financial losses.

How Does a Pyramid Scheme Work?

Pyramid schemes target individuals through various means, such as seminars, home meetings, social media, or other channels, offering impressive rewards for joining. Individuals are encouraged to recruit others and pay fees or contributions to higher-level members or the scheme operator. As more people join, the scheme grows, with higher-level members earning substantial rewards. However, once recruitment slows or stops, the pyramid collapses, leaving many individuals with losses.

How to Identify a Pyramid Scheme

To protect yourself from pyramid schemes:

1. Be wary of promises of minimal effort or investment for promising returns.
2. Examine the organization’s emphasis on recruitment versus product sales or services.
3. Look for red flags, such as a lack of a clear business model or operating in secrecy.
4. Be cautious of organizations promising huge profits in a short time.

How to Avoid Pyramid Schemes

To avoid pyramid schemes:

1. Perform thorough research on the organization to verify its legitimacy.
2. Be cautious of excessive pressure to join quickly.
3. Seek transparency regarding the organization’s business model and operations.
4. Do not invest money you cannot afford to lose.

What to Do if You’re Targeted by a Pyramid Scheme

If you suspect you are being targeted by a pyramid scheme, contact Morgan Financial Recovery for assistance. Our experts can help you assess the situation and provide guidance on next steps. Remember, the sooner you seek help, the better your chances of minimizing losses.