A Pyramid Scheme is a plan by which a person gives a consideration (usually money) for the opportunity to receive money that is derived primarily from the introduction of other people to participate in the plan rather than from the sale of a product. The arrangement often operates as an investment and invariably leaves most participants poorer.
In the United States in mid-2001 authorities warned of a new pyramid scheme variation called a "dinner party". Dinner parties are described as a charity group or gifting program aimed to bring women together to find "financial support" and help them make a "positive impact on humanity." But it's actually an old trick reappearing in a new guise, leaving thousands of women feeling duped.
Each dinner party operates as if it were a four-course meal: appetiser, soup and salad, entrée and dessert. Eight "guests" put in $5,000 cash at the appetizer level; all of their money is "gifted" to one woman at the dessert level, who then leaves the pyramid with $40,000. The pyramid then splits into two, and everyone moves up a notch, creating eight new appetizer-level slots in each pyramid to be filled.
The process repeats itself, with the pyramids continuing to multiply in an endless rotation that's referred to as a "perpetual cycle of charitable giving". Warning signs to look out for include:
- You have to make an investment and then have to recruit others
- Attempts to conceal the identities of participants
- Promotion of the pyramid as "approved" or other citations of approval
- Success stories or testimonials of tremendous payouts