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Pyramid Schemes

A Pyramid or "PONZI" Scheme is an illegal way of making money using an endless stream of recruits or investors. Some Pyramid Schemes involve a product while others do not. In Arizona, a program is considered a Pyramid Scheme when participants earn more money from bringing others into the program than from the sale of goods, services or intangible property. Pyramid Schemes are successful because potential recruits are told they can make quick, easy money. In reality, it is almost mathematically impossible to make any money at all.

This is how pyramid schemes work:

  • New recruits typically pay a sum of money to enter the program. This individual is then urged to bring in additional recruits or investors, who in turn bring in more money.
  • In theory, each recruit's name eventually moves up to the top of the pyramid as new recruits are added to the bottom.
  • Once a recruit reaches the top, he or she gets all or most of the money paid by newest recruits at the bottom.
  • The only people who make money through these schemes are the ones who get in at the very beginning. The remainder or newest recruits will lose most or all they invested.

Be extremely wary of any type of investment opportunity that sounds like a Pyramid Scheme. Anyone who starts, operates, advertises or promotes a Pyramid Scheme can be charged, either civilly or criminally, whether or not they actually earn monies from the program. 

For more information, or if you believe you have been a victim of fraud, please contact the Attorney General's Office in Phoenix at (602) 542-5763; in Tucson at (520) 628-6504; or outside the Phoenix and Tucson metro areas at (800) 352-8431. Consumers can also file complaints online by visiting the Attorney General's Web site at www.azag.gov.