Pyramid Schemes are Illegal
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INFORMATION:

A pyramid scheme or multi-level marketing (MLM) scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme. Usually there are no products for sale, but the money generated is based on entry fees from the new pyramid members. They are generally illegal in most countries. An example of a typical pyramid scheme is the “8-Ball” pyramid.

Some alternative pyramid-like schemes exist which include products to sale and are the basis for companies like the infamous Amway. These pyramids are not technically illegal because they provide an actual service or product for the money. They are still highly risky to enter. They use a pyramid like model to distribute the income from sales, in which most of the money goes to the highest members in the pyramid. In the “Aussie 2 Up” sales pyramid, most of the earnings are in the top 2 or 3 levels of the pyramid, in which only a small percentage of the total members reside. In a more generic “sales” pyramid, such as Amway, the money is a bit better distributed, but still skewed towards the top of the pyramid. Like illegal pyramid schemes, they often founder as the market they are targeting is saturated at a geometric rate.

If you would like to see exact percentages and statistics of some of the more common pyramid schemes, you should use the Calculation page. A better description of the three types discussed here can be found at the top of that page.

This website is mostly for simulation and calculation of pyramids but if you are interested in learning more about illegal pyramid schemes in general, you are encouraged to read the sources linked below:

Wikipedia entry which presents a good overview of the subject:
http://en.wikipedia.org/wiki/Pyramid_scheme

The mathematics of pyramid schemes, how many members lose and the math behind it:
http://www.mathmotivation.com/money/pyramid-scheme.html

Pyramid Scheme Alerts, this site maintains an up to date list of known pyramid schemes:
http://www.pyramidschemealert.org/PSAMain/home.html

Fair Trade Commission, this article details the government's view of illegal pyramid schemes:
http://www.ftc.gov/speeches/other/dvimf16.shtm

If you have more questions, you may find help in our forums. If you have suggestions, corrections or bug reports you are encouraged to contact us using the Contact button above.