Are you being promised very high, even daily returns? Are you being asked to recruit other investors in exchange for commissions, bonuses or better returns? Does the proposed investment seem rather complex?
It could be an attempt at a pyramid investment scam. This practice is illegal, and you could lose everything.
What are pyramid investment sales?
Pyramid investment sales promoters promise fast and attractive returns if you invest, and more if you recruit other investors. They don't usually ask you to sell goods or services, although they could say, for example, that the investments are going into precious metals.
You pay $20, $50, $100 or even $10,000 to enrol or acquire "coupons," "packs," or other packages to be part of the system. "Packs" and "coupons" may be time-sensitive, or expire when you achieve a return of 150%, which is impossible.
Promoters encourage you to sponsor other investors, who become your "sponsees," "affiliates," "recruits," etc. According to the promoters, by recruiting others, you earn money more quickly through higher returns, bonuses, commissions and so forth. Promoters promise that you will gain even more if your "recruits" in turn find other investors. They often use the terms "multi-level," "forced matrix," or "binary system."
Promoters often approach investors on social media. They make every effort to convince you their system is legitimate. They do not refer to "pyramid sales," but use terms like MLM or multi-level marketing. Their websites are often appealing and feature videos explaining the system, testimonials from "investors" who've become rich, etc. The jargon used can be technical and it is sometimes hard to understand what your money will be invested in. In addition to returns on your investment, you could be promised luxury cars, beachfront properties or use of a private jet.
In reality, it's just hot air. Your money does not get invested. It is used to pay other investors and mainly to line the pockets of the promoters. The pyramid will collapse as soon as recruitment dries up or if many investors insist on getting their money back. Promoters will try to spin out the scheme by convincing you to reinvest your so-called returns, or giving you all kinds of reasons to prevent you from taking your profits out. Unfortunately, there's a good chance you'll never get the promised earnings, or see your initial investment again. The people you recruited will also lose their money, and could hold you accountable. It is illegal to promote or participate in such a system.
Remember that pyramid investment sales are illegal.
How do you protect yourself from pyramid investment sales?
Don't believe ads that tout sure-fire get-rich-quick schemes.
Be especially prudent if you are being guaranteed high returns with no risk. There's no such thing.
Make sure you fully understand the features and risks of the investments being proposed.
Always check whether the person or firm that wants you to invest is registered with the AMF for the purpose of selling investments. To be sure, consult the AMF register on its website.
If you receive this type of offer, or are approached by a firm that isn't registered with the AMF, please report this to us by filling out the complaint or allegation reporting form.
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