How to recognise a Ponzi or pyramid scheme before you lose money

Every few months a new "investment" appears with big promises, a slick page and screenshots of happy members. Many of them follow the same old pattern, and knowing it can save you a lot of money and stress.

How the two schemes work

• Ponzi scheme: early members are paid with money from newer members, not from real profit. It works only while new people keep joining.
• Pyramid scheme: you earn mainly by recruiting others who also pay to join, instead of by selling a real product to real customers.

Both collapse when new money slows down, and the people at the bottom lose most.

Warning signs

1. Guaranteed or very high returns in a short time. Real investments carry risk and cannot promise a fixed profit.
2. Pressure to hurry. "Only 24 hours left" is designed to stop you from thinking.
3. Pay to join, then recruit. If recruiting pays better than the product, be careful.
4. No clear explanation of where the profit comes from.
5. Withdrawal problems. Excuses, new fees or "upgrade first" demands when someone tries to cash out.
6. Proof made of screenshots instead of registered company details and clear terms.

Questions to ask first

• Who runs it, and can I find them outside their own page?
• Where exactly does the money come from?
• What happens if I want my money back tomorrow?

If you cannot get calm, clear answers, stay out.

What to do if you are already in

Stop sending more money, even if you are told you will lose your earlier payment. Keep your receipts and chat records, and report to the relevant authorities or your bank. Do not recruit friends to "recover" your loss.

Written by the EarnNaija team at EarnNaija Digital Technologies. Tips are general guidance, not financial or legal advice.

This article is general information, not financial or legal advice. Earnings are never guaranteed. See our fees page for the exact costs.