A sort of pyramid scheme to defraud people. In this trick people promise higher interest rates in the beginning for a fixed term so that people do not ask for money back. They use first customer to get more eg his family or friends. Then they get more customers and each keeps getting promised interest till a time when original money is supposed to be returned.
However before that time people disappear and take away everyone's money and those through whom people invest become targets for those people who lose their money.
It is a mafia based scheme which could frighten people away when they ask for money back.
In both
Ponzi schemes and
pyramid schemes, existing investors are compensated by the contributions of new investors.
Ponzi scheme participants believe they are earning returns from their investment, while
pyramid scheme participants are aware that they are earning money by recruiting new participants.
Wouldn't this qualify as Ponzi scheme and not pyramid scheme? Were the investors actively recruiting new investors?
