Pyramid Scheme Alert: Unraveling the Deceptive Business Model in Seychelles

A pyramid scheme is a complex and deceitful business model that relying on continual recruitment of new members to generate revenue. Let’s examine the essence of pyramid schemes, their variations, and how they operate in Seychelles.

What is a Pyramid Scheme?

A pyramid scheme is a fraudulent, multifaceted business disguised as a legitimate opportunity. New members are recruited through various channels, such as seminars, home meetings, or social media. To participate, new members are required to pay a joining fee, which is then circulated through the hierarchical structure to top-level members. With a lack of emphasis on sales and an infinite demand for new members, the pyramid eventually collapses when the recruitment pool runs dry.

Types of Pyramid Schemes

Multi-Level Marketing (MLM): While some MLMs are legal, others operate as pyramid schemes by disguising illegal recruitment fees as sales commissions.
Chain Emails: These schemes rely solely on donations from victims who believe they are contributing to a worthy cause, often perpetuated by numerous email forwards.
Gifting Clubs: Incentives are offered to new members as rewards for enrolling more people. These gifting clubs may sometimes be used as cover for pyramid schemes.
Naked Schemes: Members are required to recruit a specific number of individuals and pay joining fees in exchange for little to no intrinsic value.

How Pyramid Schemes Operate

Pyramid scheme operators create intricate webs of recruitment through various channels, luring individuals with the promise of impressive returns. This cycle begins with a small number of top-level members who profit from the recruitment efforts of those they brought into the scheme. They often mask their true intentions by offering seemingly valuable products or services, which, in reality, serve as a cover for the real revenue source: recruitment fees. New members are added to the pyramid hierarchy, and the cycle continues, leading to the eventual collapse when the pool of new members is exhausted.

Signs of a Pyramid Scheme

Strong focus on recruitment with little emphasis on product or service sales
High pressure sales tactics and unrealistic promises of returns
Absence of legal paperwork or proper documentation
Lack of transparency regarding the business model, company structure, or revenue streams
No verifiable information about the company, products, or services

Protecting Yourself from Pyramid Schemes

Conduct thorough research on any opportunity before investing
Be cautious of pressure tactics and unrealistic promises
Verify the company’s legitimacy by checking their registration with regulatory bodies
Understand the business model and the source of income for the company

In the next installment, we will discuss how to identify pyramid schemes and the steps to take if you become a target. Stay tuned!