Pyramid scheme

An illegal and non sustainable scheme in which money from later participants is used to pay off earlier participant. Each new recruit must pay a certain amount to join the scheme and then find more recruits who each pay the same amount to join. The money passes up the chain with each middleman taking a small cut. This creates a pyramid structure in which the base must keep growing in order for the money to keep flowing to the top. However, as there are a finite number of recruits, the pyramid scheme gradually loses momentum and collapses leaving the vast majority of people with nothing. Such schemes promise to generate very high returns but in reality it is only the founders who get rich.

This definition is for general information purposes only