Article2017

Pyramids, Ponzis and fraud prevention: lessons from a case study

51 citations0/0 files storedJournal of Financial Crime

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Securities Regulation and Market Practices Financial Literacy, Pension, Retirement Analysis Cybercrime and Law Enforcement Studies

Abstract

Purpose This paper aims to empirically identify factors that increase consumer vulnerability to pyramid scheme fraud and compares/contrasts dynamics and implications of pyramid and Ponzi fraud. Design/methodology/approach Statistical techniques, including multiple regression, are used to analyze participant data (with over half a million individuals) from a now-defunct US-based pyramid scheme, Fortune Hi-Tech Marketing. Findings Findings suggest that this pyramid scheme flourished in counties with identifiable affinity groups: religious communities, Hispanic populations and certain age cohorts (e.g. recently retired). Recruitment success varied significantly between geographic regions, with the highest levels of recruitment in the South. While prior research finds a possible positive relationship between education and Ponzi participation, this is not the case in the pyramid scheme studied. Furthermore, while Ponzi schemes might be pro-cyclical, collapsing during contractions when participants seek to extract their money, this pyramid scheme exhibited counter-cyclical behavior. Practical implications State and federal regulators, as well as consumer protection advocates, should learn from analysis of past pyramid scheme cases. Such analysis informs allocation of scarce resources and supports the case for targeted, active education. Clarifying differences between Ponzi and pyramid fraud helps to support clear and effective intervention. Originality/value This is the first research to analyze national participant-level data from a pyramid scheme to inform future action. While it confirms some past findings, such as the connection to affinity fraud, it adds to collective knowledge on pyramid schemes and the differences between pyramid and Ponzi fraud.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 51 citations exist upstream.

References

2003From Efficient Markets Theory to Behavioral Finance 2002Marketing Fraud: An Approach for Differentiating Multilevel Marketing from Pyramid Schemes 2001Ethical Issues Connected with Multi-Level Marketing Schemes 2014Multilevel marketing and pyramid schemes in the United States 2012New dogs, old tricks. Why do Ponzi schemes succeed?2013The Ponzi scheme puzzle: a history and analysis of con artists and victims

Cited by

2021Illicit Alcohol: Public Health Risk of Methanol Poisoning and Policy Mitigation Strategies 2024Review Based Research Topic Identification and Analysis on Multi-Level Marketing Business 2023A systematic literature review on network marketing: What do we know and where should we be heading?2023Non-Ideal Victims or Offenders? The Curious Case of Pyramid Scheme Participants 2019VOLUNTARY DISCLOSURE AND EARNINGS EXPECTATIONS IN MULTI‐LEVEL MARKETING 2022Why do people join pyramid schemes?2016An Economic Model of Multi-Level Marketing

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.