#estafas - scams&michriches Ponzi and pyramid schemes are fraudulent investment schemes designed to deceive participants. While they share similarities, they operate differently. Here's an overview of each: Ponzi Scheme Definition: A scam where returns for earlier investors are paid using the funds of newer investors, rather than from legitimate profits. Structure: It typically has a single operator or a small group managing the scheme. How It Works: 1. Promises high returns with little or no risk. 2. Initial investors receive returns, creating trust and attracting new participants. 3. Eventually collapses when new investments dry up or too many investors demand withdrawals. Example: Bernie Madoff's scheme, which defrauded billions by paying older investors with new participants' money. Pyramid Scheme Definition: A business model requiring participants to recruit others to earn money, often with no real product or service. Structure: Operates in tiers or levels, with new recruits paying those above them. How It Works: 1. Participants pay an entry fee and are promised payouts for recruiting others. 2. Each level of recruits supports the level above. 3. Collapses when recruitment slows, as the structure becomes unsustainable. Example: Multi-level marketing companies that rely heavily on recruitment rather than product sales. Key Differences Legal Status Both schemes are illegal in most countries, as they exploit participants and are unsustainable. Governments and financial watchdogs actively investigate and shut down such operations. If you're ever in doubt about an opportunity, be cautious of: Promises of guaranteed high returns. Emphasis on recruiting others. Lack of a legitimate product or service.