What Makes Many Pyramid Schemes Illegal?
An illegal pyramid scheme, by definition, is one that involves a geometric series of new members where “membership fees” do not pay for any product of value equal to the membership fee. So if one paid $1000 to join such a scheme yet received $1000 worth of goods or services, then the scheme would not be illegal The problem with providing goods or services actually worth $1000 is that the full $1000 can not be given back to the top level “sponsors”, but rather only a small percentage equal to the profit margin. To both satisfy legality requirements and keep the full margin, pyramid schemes will often deliver a product with inflated value that involves virtually no cost. An example of such a product would be ebooks. A scheme could “sell” the new member 60 ebooks, each “valued” at $40 and thus provide a total value of $2400 for a reduced price of $1000. Why Are Pyramid Schemes Such a Bad Thing? In short, pyramid schemes that do not provide new members with a product that is fully worth th
