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High promises of profits, low deposits: pyramid schemes work when many people contribute money. If it stalls, it collapses.
Almost no one can avoid them on social media – requests that promise big money with little investment. A pyramid scheme could be hiding behind them. How you can protect yourself from dangers.
What exactly is a pyramid scheme?
High returns and little effort: How to recognize a pyramid scheme. (Symbolic image) © Monkey Business Images/Imago
Business models that aim to attract new participants to ensure the success of the project are called pyramid schemes, informs the Consumer Center on their own website. Participants make profits by recruiting new people who also invest money without receiving a product or service, warns the Consumer CenterThe system spreads quickly, but can just as quickly fizzle out because the growth of new members ebbs away.
Die Police Hamburg added that pyramid schemes are illegal variants of so-called network marketing or multi-level marketing. Products are purchased in order to resell them, and members are recruited for whom a commission is paid. The more people are above you in the hierarchy, the more difficult it is to achieve success. The focus of pyramid schemes is on recruiting new partners. These are prohibited in Germany.
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You should also be careful with financial tips from influencers, as these are considered controversial.
How can you protect yourself against this?
Advertising on social media can easily become part of everyday life, and sometimes it is not easy to tell whether it is a real or fake campaign. You should be vigilant and ask questions carefully. ZDF.de recommends the following:
- Product: Is a real product evident or is the return on investment the main focus? If you don’t see what it’s about at first glance, you should stay away from it.
- Responsibility: Pay attention to the design – does the website have an imprint and are the responsible persons listed there? Is there a contact option? If you answer no to the questions, there could be a pyramid scheme behind it.
- Stay realistic: There is no such thing as quick and safe money with products or investments.
Further warnings are given by Police Hamburg on your own website:
- Harassment: If you are persistently pressured or pressured to become part of the system, it is better to keep your distance.
- Stories: If the success stories presented are similar, you should question this.
- Advance payment: If you are asked to pay a lot of money in advance or even take out a loan, this is a warning sign.
