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Financial pyramids

Many people are afraid to start investing in the stock market or cryptocurrencies due to their complexity, yet they are willing to be deceived by scammers who promise profits of a few percent per day with just a few clicks. But this is not a unique characteristic of modern individuals; financial pyramids have existed for over 300 years.

The very first financial pyramid in history is considered to be the scheme of Scottish financier John Law, invented by him in 1717. Shares of the company he created were sold for 500 pounds and guaranteed buyers a monthly return of 25 pounds. This phenomenon became so widespread that the pyramid was supported by the French regent, and Law himself later became the Minister of Finance of France. However, the end was tragic for both the country and the financier, as he was forced to go into exile to save his life.

But the most famous case today is the scheme of Charles Ponzi, who in the early 20th century founded the company "The Securities Exchange," specializing in the sale and exchange of postage stamps. The company issued promissory notes, committing to pay $1500 for every $1000 received within three months. The financial pyramid lasted a little over a year until depositors began withdrawing funds en masse due to a lawsuit filed against the founder. As a result, Charles Ponzi was sentenced to 5 years in prison, and his scheme became synonymous with the majority of modern financial pyramids.

Financial pyramids have been around for so long that they now have their own classification. They can be classified as single-level, multi-level, matrix, "eight-ball model," and other subtypes. The main difference lies in how the payouts of new pyramid members are distributed among the people in the structure.

Today, pyramids usually have multi-level structures, and they are slightly disguised as investment funds or mutual aid funds, while the founders openly promote their pyramids.

The descriptions and proposals may vary, but they all boil down to one thing - promising customers enormous guaranteed profits if they invest their money in this enterprise right now. And often, they can actually receive the promised benefits through the contributions of new participants. Meanwhile, the organization may even engage in some investment activities as a cover, but the profits from it are incomparably lower than the inflows from new joiners.

A financial pyramid is a type of fraudulent scheme in which the founders cover their obligations to depositors using money from new depositors.

However, scammers are becoming more inventive and try to mask themselves much better behind obscure technical and economic terms and complex schemes. For example, here are some modern subtypes of pyramids:

HYIP (High Yield Investment Program)

In translation, it means "high-yield investment program." These are various types of mutual funds, "hourly programs," "matrices," "queues," and other services that masquerade under attractive covers like "investment service for trust management of funds on the stock exchange."

Believing in another "hype" just because it operates on the blockchain is similar to believing in an airline that claims their planes fly based on the laws of physics.

Typically, HYIPs operate with anonymous payment systems or cryptocurrencies to make it difficult to trace their founders and freeze stolen funds.

Examples of HYIPs could be a "new unique" cryptocurrency that is about to make 10 times its value, a bot with "artificial intelligence" that only trades in profit, or an automatic system for reselling anything. However, the real power of such projects lies not in their description but in the people who support and create fan teams around them.


Usually, these are financial pyramids that do not invent complex legends but build their marketing on exciting gambling and entertainment themes. These can be advertising "partnerships," "doublers," and "triplers," gambling games for money and betting.

For example, you hire gnomes who work in a mine and extract ore. Then you exchange virtual ore for real money. But to make the gnomes extract ore faster, you need to buy more expensive tools or so-called "boosters." Usually, these games require very small initial investments, as little as $1, which significantly expands their audience.

Cloud mining

It seems like everyone has heard about mining today, but not everyone can afford expensive equipment. Even the cheapest video card suitable for mining will cost at least $250, and it also requires round-the-clock operation and a stable internet connection, which is not always available to the average user or novice investor. The return on investment for a single video card will be extremely long. Scammers have decided to take advantage of people's desire to be involved in this industry.

According to their offers, you can mine cryptocurrencies without the expenses of expensive equipment and organizing crypto farms, and without the risks that these investments will not pay off. After all, other people have taken all of this upon themselves, and the investor only needs to buy a little computing power from them and receive passive income.

In practice, 99.9% of such websites are simply beautifully designed online games, as we discussed earlier.

But even if we imagine that you were lucky enough to find a "needle in a haystack" - a truly working service that sells computing power for mining, it is simply trying to protect itself from exchange rate fluctuations. In other words, they want to receive money from you in advance and then allow you to try to earn an amount from mining on their computing power that will cover (or not) your investments. Otherwise, why would they share with you if they can mine with those computing power themselves?

Is it possible to make money on a financial pyramid?

Yes, if you find yourself among the first investors and the founders do not turn out to be scammers. But such schemes work only as long as there is a constant influx of people willing to get rich. As long as new participants join the pyramid, investing their money into it, the scheme is alive.

Low financial literacy and a desire for easy money are the perfect combination to become a victim of scammers.

However, it's always worth understanding that any enrichment at the expense of participating in a pyramid is stealing someone else's money. And for actively persuading people to invest in the pyramid, you can be fined. In some cases, criminal cases for fraud can even be initiated against the "top" of the pyramid.

What to do if you become the victim?

If you have already given your money to scammers, it will be almost impossible to get it back. In this case, we can only advise you to protect others from repeating your mistakes. To do this, you should contact law enforcement agencies.

In your report, describe in as much detail as possible what happened. Check your browser history (Ctrl+H) for the exact website address from which you were redirected to the fraudulent resource. Also, provide the address of the resource itself, the search engine where the advertisement of this website was located, the date and time of the incident, the wallets to which the money was sent, and any additional data you can find.

We wish you only reliable and profitable exchanges. If you need further assistance, please write to us at, and our specialists will try to help you resolve your issue.

© – , updated 07/06/2023
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