Ponzi and Pyramid Schemes Research Paper Example | Topics and Well Written Essays - 1000 words

Ponzi and Pyramid Schemes - Research Paper Example Though, some forms of these schemes can claim to sell a product, but that product is actually a camouflage to hide their Pyramid arrangement (Roberts et al., 2007; ScamWatch, 2012; Valentine, 1998; Roos, 2012). Basically, there are two tell-tale symbols that a business item or product is only being employed to cover a Pyramid scheme i.e. Stock loading and lack of corporate sales. In case of stock loading a business support program persuades workers to purchase more products than they could ever trade, frequently at inflated costs. In this scenario, the top management of an organization and Pyramid launcher generates considerable profits, even without bringing that product into the marketplace (Roberts et al., 2007; ScamWatch, 2012; Valentine, 1998; Roos, 2012). In addition, the people behind the scenes generate a lot of money for inventory that just accumulates in their basements. In this scenario, lack of retail sales is as well a red flag that ensures the life of a Pyramid. A lot o f Pyramid schemes claim that their product is selling like hot cakes. However, the fact is that the sales happen simply among people within the Pyramid system or to new recruits joining the Pyramid scheme and not to the general public (Roberts et al., 2007; ScamWatch, 2012; Valentine, 1998; Roos, 2012). A Ponzi scheme is closely related to a Pyramid for the reason that it rotates around endless recruiting. However, in a Ponzi scheme the promoter normally has no product to put up for sale and pays no charges to investors who employ new "associates†. Additionally, the advertiser generates income by attracting a stream of people, assuring them a very high rate of return on immediate deals. Normally, in Ponzi scheme, there is no actual investment chance, and the promoter immediately makes use of the cash from new recruits to disburse obligations payable for a longer-standing to the associates of the plan. In simple word, there is an appearance that satisfactorily reviews this plan : It is known as "stealing from Peter to pay Paul." A number of law enforcement officials describe a Ponzi system as a "Peter-Paul" scam (Roberts et al., 2007; Valentine, 1998; Roos, 2012). Moreover, Ponzi schemes are trapping a lot of investors who have large sums to spend and who are allegedly knowledgeable and money-wise sophisticated (Rowe, 2000). Applicable law regulating the shame The business and methodology behind a Ponzi scheme, definitely has a triangular arrangement. The traitor is at the top most position. He is the chief of repeatedly growing stairs of investors. Though, there is dissimilarity between how both traditional Pyramid and Ponzi systems are executed. The vital difference between a Pyramid and Ponzi system is that a Ponzi plotter will simply ask its victim to invest in a deal. They will not ask them to perform any other activity or job except to invest money. They will ask their victims to wait until their investment is refunded. The Ponzi schemer is the brain behind the entire scheme and is simply shuffling money from one place to another. Moreover, a Pyramid scheme launcher offers an opportunity to its victim to generate money himself. Hence, it requires additional work, for instance, they can ask him to buy a franchise or license and start employing more people like himself. The staff will frequently disburse the recruiter a part of his income. All the same, Pyramid schemes are illegal. Moreover, a number of legal businesses, such as Mary Kay and The Pampered Chef, have been