Why do people join pyramid schemes?

• Published in: Journal of financial crime 2023-11, Vol.30 (5), p.1130-1139
• Main Authors: Hock, Branislav, Button, Mark
• Format: Article
• Language: English
• Subjects: Compensation; Consumer protection; Criminal statistics; Economic justification; Fraud; Investors; Marketing
• ISSN: 1359-0790; 1359-0790; 1758-7239
• DOI: 10.1108/JFC-09-2022-0225

Purpose Pyramid schemes create an unusual situation, where the victims might be effectively turned into offenders, as their role is to recruit more victims to the pyramid scheme. This paper aims to investigate the prevalence of pyramid schemes, their modern forms and why people join them. Design/methodology/approach This paper has developed from a structured literature review carried out as part of a wider study into policing pyramid schemes. Findings This paper identifies a range of reasons why people join pyramid schemes. Some of these reasons are “participant dominant”, including the vision of high reward for little work and the attraction to a better lifestyle. Other reasons are “organiser dominant”, including the exploitation of specific groups and high-pressure sales. These findings suggest significant differences in levels of culpability of pyramid schemes victims and perpetrators. This complexity is accompanied by conceptual, regulatory and institutional challenges. Originality/value Despite the profound and pervasive impact of pyramid schemes, researchers know very little about why some people participate in pyramid schemes. Limited research is largely American and specific to illegal multi-level marketing schemes. To the best of the authors’ knowledge, this paper is the first to provide an overview of a mix of strategies of participants of pyramid schemes to recruit new victims and reasons why people are joining pyramid schemes.