Pyramid scams are illegal in the UK, but they still pop up and — increasingly — target women. How do they work and what do you need to know?
Q. How are these scheme promoted?
A. Pyramid scams are often promoted by word of mouth. People are usually encouraged to recruit family and friends so they don’t ‘miss out’. With some pyramid scams, only women can join. One pyramid scam called ‘give and take’ was female only until the number of women joining began to dry up. After that men were able to join.
Organisers of pyramid scams may claim to have full legal backing and that their scheme complies with gambling laws. But that doesn’t mean they are legal.
Q. How much do people who sign up to these schemes lose?
A. It’s estimated that up to 90% of those who join a pyramid scheme lose their money. Those who sign up in the early days will — or should — get their payout. But as the number of pyramids grow, it becomes harder and harder to find more people to sign up.
Q. Are these schemes illegal?
A. Yes. Schemes where you don’t buy any product but you are asked to invest money that’s then paid out to other people, and where the payouts rely on others being recruited, were made illegal in 2008.
Q. What should I do if I’m asked to join a scheme like this?
A. Don’t join! I’m afraid I’ve seen rather a lot of these schemes come and go over the years and — even before they were illegal — they always resulted in most of those who signed up losing their money.
Q. Do these pyramid schemes target women?
A. Not all pyramid schemes target women but there have been a few over the last ten years or so that have been aimed at women or run ‘by women for women’. There was one scheme in 2001 called ‘Women empowering Women’, which was shut down. Another scheme called ‘Hearts’ (along with another version of ‘Women empowering Women’) emerged in 2008, shortly after they were made illegal.
SAVVY TIP: I’m afraid some scammers see women as a softer touch and others just think it’s a powerful marketing tool. I know you’re savvy women so won’t fall for these schemes — but plenty do.
Four banking frauds and scams to avoid – how to reduce the risks of being a fraud victim
What is vishing in banking and how can you protect yourself?
How not to fall for pension scams and to keep your pension safe
SavvyWoman email newsletters: If you found this information useful why not sign up now to receive free fortnightly email newsletters with money saving tips and help? You can sign up at the top of any page on the website and your details won’t be passed to any other company for marketing purposes.