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What Is A Pyramid Scheme

What Is A Pyramid Scheme

When people think about a felony crime, they may think only about violent crimes. However, people should note that not all felonies involve violence. Others involve theft or crimes against property. When a crime is purely financial, it is sometimes referred to as a white collar crime. Many types of fraud, embezzlement and Ponzi schemes are considered white collar crimes. Despite this distinction, these crimes are treated as serious felonies and carry stiff penalties.

One such crime is a pyramid scheme. A pyramid scheme can be classified as a theft by fraud or deception crime. Although there is no specific federal statute that prevents these arrangements, federal prosecutors often prosecute these crimes as fraud or deceptive trade practices. However, specific state laws may exist to outlaw the practice.

What is a pyramid scheme? A pyramid scheme is generally created when marketing a business in a particular way. In this case, a central recruiter gets people to join a business after paying a fee. These people then recruit others to join the business, again for a fee. The fees are funneled to the recruiter and used for that person’s own purposes. Investment returns are generally paid as long as new people are recruited into the business — which may not make money on its own, or even exist. If new people are not recruited, the pyramid can no longer pay people who have joined and people inside the pyramid lose their investment.

These are serious criminal charges. If convicted of running a pyramid scheme, people can be sentenced to long prison sentences, to large fines and to other penalties. However, people should know that people will have the opportunity to prove that the business was legitimate through the use of a proper criminal defense. People should speak with an attorney for specific legal advice, which this blog post cannot provide.

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