Can an honest pyramid scheme be legal?

[markemark]

Obviously pyramid (or Ponzi) schemes are quite rightly illegal as they are fraudulent in taking money from investors.

But, what if you were open and honest about it being a pyramid scheme. And you suggest those that sign up early are liable to make good money. Nothing is hidden, the intentions, the current number of investors, the number of pyramid levels there currently are etc. Would that still be illegal?

Just out of curiosity.

 

[Baldy]

No. Quite simply pyramid schemes are designed for one purpose only, to take your money off you.

 

[markemark]

No. Quite simply pyramid schemes are designed for one purpose only, to take your money off you.

Same with gambling but it’s legal, if regulated. Gambling machines are legally allowed to be programmed to pay out less than is put in.

 

[Once a Wheeler]

If there is a law making it illegal then any act becomes illegal. With financial ruses, such as crypto-currency schemes, legislators often lag way behind the scheme operators when it comes to providing for honest dealing. Most of the illegality in those cases revolves around fraud, exploitation of the ignorant, misrepresentation and so on which are all difficult and costly things to prove in court. In general, if you don't understand it, don't get involved in it; and if it just feels fishy or too good to be true it probably is, so steer well clear.

 

[markemark]

It’s more of a thought experiment as to what the illegal part is. What if it is open and honest to all who get involved? Those higher up could make lots of money. It’s a gamble as to when someone would join if they’re above or below the line but all the info as to how many investors there etc is freely available.

 

[All uphill]

It’s more of a thought experiment as to what the illegal part is. What if it is open and honest to all who get involved? Those higher up could make lots of money. It’s a gamble as to when someone would join if they’re above or below the line but all the info as to how many investors there etc is freely available.

I think it's a good question; I suspect it's the fraudulent element that breaches law and advertising standards.

An honest Ponzi scheme? They only work for the early participants if there are others queuing up behind them.

Maybe crypto currencies are an honest Ponzi scheme?

 

[BrumJim]

If I was writing the law, I would make sure that any loophole along the lines of "they knew what they were letting themselves in for. See, they ticked the box on page 143" was eliminated by making ALL pyramid schemes illegal. After all, as noted, they are there to con money out of people lower down the pyramid. The numbers required to keep the scheme running start to get very silly, very quickly.

 

[markemark]

If I was writing the law, I would make sure that any loophole along the lines of "they knew what they were letting themselves in for. See, they ticked the box on page 143" was eliminated by making ALL pyramid schemes illegal. After all, as noted, they are there to con money out of people lower down the pyramid. The numbers required to keep the scheme running start to get very silly, very quickly.

No loop hold involved. Page 1 in big bold letters for all to see, this is a pyramid scheme.

 

[Beebo]

No loop hold involved. Page 1 in big bold letters for all to see, this is a pyramid scheme.

But who is going to follow after the first wave? Unless you lie about how many are ahead of you.

 

[Ming the Merciless]

Why would people put money into a scheme that will not give a return?

 

[markemark]

But who is going to follow after the first wave? Unless you lie about how many are ahead of you.

Depends on how many join up. Many layers can make money depending on how may sign up.

 

[Profpointy]

Why would people put money into a scheme that will not give a return?

Same (lack of) reason people put money into fruit machines, the national lottery, and gamble in casinos presumably

 

[Ming the Merciless]

Same (lack of) reason people put money into fruit machines, the national lottery, and gamble in casinos presumably

Ah but the latter there’s all a possibility however small. In this case, there’s no possibility.

 

[markemark]

Why would people put money into a scheme that will not give a return?

Lots do make money. That's how pyramid schemes become so popular. Some people make hige amunt of money, more make lots of money but as it trickles down, more and more lose money. But those that can get in early can get a massive return. Where it flips to losing depends on when it runs out of steam

 

[Paulus]

Why would people put money into a scheme that will not give a return?

In the vain belief that they are going to make money. It's happened for decades. There are always gullible people about.