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Pyramid schemes, Ponzi schemes and multi-level marketing


Global Economy of Truth as a Ponzi Scheme (Part #2)


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A degree of distinction between Ponzi schemes and pyramid schemes is provided by Wikipedia with relevant citations:

While often confused for each other, Pyramid schemes and Ponzi schemes are different from each other. They are related in the sense that both pyramid and Ponzi schemes are forms of financial fraud. However, Pyramid schemes are based on network marketing, where each part of the pyramid takes a piece of the pie / benefits, forwarding the money to the top of the pyramid. They fail simply because there aren't sufficient people, hence by the time one comes to the tenth level, the pyramid needs 10 billion people to sustain it. Ponzi schemes, on the other hand are based on the principle of "Robbing Peter to pay Paul" -- early investors are paid their returns through the proceeds of investments by later investors. In other words, one central person (or entity) in the middle taking money from one person, keeping part of it and giving the rest to others who had invested in the scheme earlier.... Some Ponzi schemes can depend on multi-level marketing for popularizing them, thus forming a combination of the two.

Various concerns have been expressed in the USA regarding such distinctions:


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