Pyramid scheme fraud

A fraudster advertises a multi-level investment scheme that offers extraordinary profits for little or no risk.

You’re required to pay a fee to enter the investment scheme.

You’re then required to recruit friends or family members to enter the scheme. If you do this successfully, you’re paid out of their receipts. They are then told to recruit others to keep the chain going.

Your money is not actually invested in any product. Instead, it’s simply passed up the chain of investors. Because pyramid schemes are unauthorised and make no profits, you’re very unlikely to recover any lost investment. While the fraudster at the top will collect most of the profits, those who entered the scheme later end up losing out.

Legitimate trading schemes rely on valuable goods and services, while illegal pyramid schemes focus simply on recruiting more and more investors.

Using hard-sell techniques, fraudsters try to pressure you into making rushed decisions, giving you no time to consider the nature of the investment.

Fraudsters aim to make their business seem legitimate. This means they will often use technical jargon, impressive job titles and mock websites to look credible. If you have any suspicions about a scheme’s authenticity, you should investigate the company’s status and contact details.

Are you a victim of pyramid scheme fraud?

• You’ve been approached about a multi-level investment scheme that offers great-sounding profits with little or no risk.
• You’ve paid a fee to join the scheme.
• You’ve enrolled others on the scheme and already earned money from your efforts.

Investment opportunities: Don’t be rushed into making an investment. Remember, legitimate organisations will never pressure you into investing on the spot.

You should treat investment opportunities with extreme caution if there’s:

• pressure to invest (eg time-limited offers)
• downplayed risk of losing your money
• promised returns that sound too good to be true

Seek advice first: Before making significant financial decisions, speak with trusted friends or family members, or seek professional independent advice.

FCA register: Use the Financial Conduct Authority’s (FCA) register to check if the company is regulated by the FCA. If you deal with a firm (or individual) that isn’t regulated, you may not be covered by the Financial Ombudsman Service (FOS) if things go wrong and you lose your money. For more information about how to invest safely, please see this guidance from the FCA.

If you have made a payment: Inform your bank as soon as possible, they can help you prevent any further losses. Monitor your bank statements regularly for any unusual activity.

Identity theft: If you have shared personal or financial information, and suspect your identity may have been stolen, you can check your credit file quickly and easily online. You should do this every few months anyway, using a reputable service provider and follow up on any unexpected or suspicious results. You can also sign up for Cifas services which can help to protect you against fraud.

You could be targeted again: Fraudsters sometimes re-establish contact with previous victims claiming that they can help them recover lost money, this is just a secondary scam. Hang up on any callers that claim they can get your money back for you.