Marketing Fraud: Pyramid Schemes in Eastern Europe
Marketing Fraud: Pyramid Schemes in Eastern Europe

Summary/Abstract: The paper argues that many pyramid schemes try to present themselves as legitimate multilevel marketing businesses. Many people confuse pyramid and Ponzi schemes with legitimate multilevel marketing. The main difference between these two is that multilevel marketing programs have a real product to sell. Pyramid schemes now come in so many forms that they may be difficult to recognize immediately. However, they all share one overriding characteristic. They promise consumers or investors large profits based primarily on recruiting other members to join the program. Pyramid schemes not only injure consumers, but they also affect the daily operations of banks and taint the banking industry’s overall reputation for safety and soundness, as Charles Ponzi proclaimed at the height of his popularity that he would form a new banking system. Recent history in Eastern Europe makes it only too clear that pyramid schemes exploit the absence of a fully-functioning market, adequate supervision and an effective legal infrastructure. Therefore is quite important to combat pyramid schemes by educating consumers and businesses about how to recognize and avoid this type of fraud, and try to review the laws concerning this matter

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