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Ponzi Schemes Versus Pyramid Schemes


In the state of New York, there are people who seek to obtain money by setting up schemes. There are two major types of schemes: pyramid schemes and Ponzi schemes. While both types of schemes are illegal, they are set up and work in different ways.

For a pyramid scheme, a person may be drawn in by making a payment to the company in order to join. The person must then convince others to join in order to receive any profit. In many cases, the company does not sell any products or only provides products to those who have joined. Usually, the money from new members is used to pay the recruiting commissions owed to older members. These schemes often do not last long due to the sheer number of participants needed to keep bringing in funds.

In Ponzi schemes, a person hands over their money to someone else who promises that the investor will see high returns. However, these investments often do not exist, and funds provided by new investors are used to pay the “returns” owed to initial investors. This type of scheme does not involve recruiting, and the person directly involved in the scheme is usually involved with all of the participants. If the existing participants continue to pay into the scheme, the collapse may be very slow.

It can be devastating for someone to be accused of being involved in fraud schemes or other white collar crimes. A criminal law attorney may potentially assist the person with providing a strong defense against the accusations, seek to dismiss the charges or negotiate a plea bargain that could eliminate or reduce the severity of certain charges. Additionally, the attorney may assist with gathering evidence that could prove that the accused was not involved in fraud or other types of schemes.