Are Pyramid Schemes Illegal?

Pyramid schemes claim to be in the business of selling products to consumers in order to look like a multi-level marketing company. ... Pyramid schemes are not only illegal; they are a waste of money and time.

Can you get in trouble for participating in a pyramid scheme?

Recruiting people to participate in a pyramid scheme is a felony crime in the United States, and is punishable by up to four years in prison, up to a $5,000 fine or both. Every person who recruits another participant into the pyramid scheme can be sued for twice the amount the recruit paid.

What makes pyramid scheme illegal?

Many pyramid schemes will claim that their product is selling like hot cakes. ... Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth's population.