It’s a scam that almost seems as old as the ancient structures in which it was named after, but this time, it appears to be targeting a much younger demographic. Pyramid schemes have recently been showing up on social media feeds, like Facebook and Instagram. It’s also targeting Snapchat, where, according to Statista, 60% of users are between the ages of 13 and 24.
This new type of pyramid scheme uses the same concepts as the age-old trick. It involves someone buying into a company where their return on investment doesn’t depend on the sale of a product, but on bringing in new investors. It eventually becomes mathematically impossible for this investment to continue as it constantly needs new recruits to continue making money, and there are only a finite amount of people. Meanwhile, most of that money goes to the few investors at the top of the pyramid.
For this new scam, con artists attempt to lure social media users to send money via cash apps like PayPal or Venmo. The scam artists say recruits can make anywhere from $400 to $1,200 depending on how much money is put into the pyramid scheme.
To avoid the scheme altogether, the Better Business Bureau recommends taking the following steps:
- Be very wary of buzz words. Certain phrases should raise a red flag for an investment opportunity. Don’t believe anything that is “guaranteed” to do well, or that offers low or no risk with a high return. Pyramid schemes (even if they are not called that) require you to bring in other investors in order to recoup your initial investment.
- Be careful of shortened links. Scammers use link-shortening services to disguise malicious links.
- Don’t trust your friends’ taste online. It might not actually be them “liking” or sharing scam links to photos.
- Report suspicious links to the site. Whether on Facebook, Instagram or Twitter, report any suspicious posts or activity to the site by going to their help link.
It’s also important to know the difference between a pyramid scheme and multi-level marketing. While pyramid schemes are illegal and focus solely on recruiting new members, multi-level marketing companies make money through their own sales as well as the sales of people who they recruit to their sales teams. For those with any interest or concerns about joining a legal, multi-level marketing operation, advice on what to know before becoming a member can be found at bbb.org.