Pyramid Scam
Pyramid Scheme
A business model that recruits members via a promise of payments or services for enrolling others into the same scheme (rather than supplying investments or sale of products or services). As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit — making them ultimately unsustainable (and often illegal).
Origin
The structure predates the name by decades — similar frauds were documented in Germany in 1869 and the United States in the 1880s. The modern terminology traces to Charles Ponzi, whose high-profile Boston fraud of 1919–1920 gave its name to the Ponzi scheme variant. "Pyramid scheme" emerged as a distinct legal and regulatory term for structures that make the recruiting mechanic explicit: each tier recruits the next, growth is geometric, and collapse is mathematically inevitable. Regulators developed the distinction through the mid-20th century to separate such schemes from legitimate multi-level marketing.