Why do people join pyramid schemes?
| Date | 11 November 2022 |
| Pages | 1130-1139 |
| DOI | https://doi.org/10.1108/JFC-09-2022-0225 |
| Published date | 11 November 2022 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Branislav Hock,Mark Button |
Why do people join
pyramid schemes?
Branislav Hock
School of Criminology and Criminal Justice, University of Portsmouth,
Portsmouth, UK, and
Mark Button
Centre for Counter Fraud Studies, University of Portsmouth, Portsmouth, UK
Abstract
Purpose –Pyramid schemescreate an unusual situation, where the victims might be effectivelyturned into
offenders, as their role is to recruit morevictims to the pyramid scheme. This paper aims to investigate the
prevalenceof pyramid schemes, their modern forms and why peoplejoin them.
Design/methodology/approach –This paper has developedfrom a structured literaturereview carried
out as part of a widerstudy into policing pyramid schemes.
Findings –This paper identifies a range of reasons why people join pyramid schemes. Some of these
reasons are “participant dominant”,including the vision of high reward for littlework and the attraction to a
better lifestyle. Other reasons are “organiser dominant”, including the exploitation of specificgroupsand
high-pressuresales. These findings suggest significant differencesin levels of culpability of pyramid schemes
victims and perpetrators. This complexity is accompanied by conceptual, regulatory and institutional
challenges.
Originality/value –Despite the profound and pervasive impact of pyramid schemes, researchers know
very little about why somepeople participate in pyramid schemes. Limited researchis largely American and
specific to illegal multi-levelmarketing schemes. To the best of the authors’knowledge, this paper is thefirst
to provide an overview of a mix of strategies of participantsof pyramid schemes to recruit new victims and
reasons why peopleare joining pyramid schemes.
Keywords Economic crime, Victims, Offenders, Deception, Dishonesty, Pyramid schemes, Policing
Paper type Research paper
Introduction
Some forms of economic crime such as chain letters and pyramid scams have become so
notorious that one might wonder why people still fall for them. Thereare many factors that
reinforce and enable traditional forms of economic crime, some of which are linked to
societal and economic crises (Levi and Smith, 2022). Because of rapid changes in the
economic climate –such as unemployment, loss of income and inflationary pressures –the
evolution of technology and growing societal strain, even well-known forms of deception
and dishonesty might thrive(Hanoch and Wood, 2021).
The problem of pyramidschemes, including their variousforms such as gift schemes and
illegal forms of directmarketing, illustrates the success of traditional formsof deception and
dishonesty. What is special about pyramid schemes is that they are enabled by an active
participation of victims. Although many participants in pyramid schemes lose cash and/or
suffer other harms, the vast majority of participants also facilitate illegal pyramids by
actively recruiting new victims in an attemptto turn even more people into active recruiters
(Msosa, 2022).Some participants know what they aredoing might be a pyramid scheme, but
think they are in a position to recruit a large number of other victims to join the scheme
JFC
30,5
1130
Journalof Financial Crime
Vol.30 No. 5, 2023
pp. 1130-1139
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-09-2022-0225
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
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