A Report On The Pyramid Scheme Essay

A Report On The Pyramid Scheme Essay

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Couple of years ago my brother told me about this good samaritan in his class that inroduced him to a job that can yeild millions in no time. Thos class mate “good samaritan” explain this job as a program rather than an everyday job. He claims you are enrolled by investing a small amount in the program then you become a recruiting agent for the program, the new investors also invest in this great program and whoever recruited the new recruiter gets a share of the investment. As a fresh graduate this sounded great but as an Accounting Major it rang too many illegalities and fraud, I just couldn’t phantom it. I ask my brother I will give it a try and attend their upcoming meeting. They tried very hard to explain why this program is not the pyramid scheme after I asked but I made a decision not to return after the first meeting. Aftermy experience with my brother’s “good samaritan” I decided to dig deep into these illegal schemes where I discovered ponzi scheme. Eventhough both are illegal, there are slight difference the two. While the funds from new recruiters are used to pay the recruiters in the pyramid scheme as explained earlier, with the ponzi scheme funds from the new members are used to pay earlier members.
Ponzi scheme memebers unlike the pyramid scheme members are believed not to be aware there are in an illegal program, this is true because the meeting I went with the good samaritan proved that it is not a pyramid scheme when I raised the issue and they were rightly so but I later found out their program (ponzi scheme) is equally illegal. What makes Ponzi illegal is that, it tricks new members that their funds are being invested in a real security. Members do not need to be involved in running the program ...


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...stors. Another reason why these ponzi schemes are have been drastically reduced is because also eventually catches the organizers but dissolve the scheme.
To conclude, credit to the SEC for curbing the practice but as talked about earlier the SEC need to practice what they preach. SEC could have saved many investors and over $69 million if they had tackled Bernie Madoff’s scandal with more importance and professional skepticism, following up an assigning a higher risk factor on their whitleblower tips about the scandal and as Mark William suggested have a mentality of “there is no smoke without fire. More companies are still being accused of running ponzi schemes and are undergoing investigation. By using the suggestions above the SEC could do a better job by protecting and serving the interest of the investing public as their mission statement states.

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