The Enterprise

The Official Student Publication of the School of Business and Accountancy
Stay Connected
September 21, 2020
STATE OF INFECTION: The Saga Unfortunately Continues
September 22, 2020

Pyramid Schemes and You

“Gusto mo bang yumaman nang walang ginagawa?” “Risk-taker ka ba?” ” Gusto mo bang makakuha ng pera galing sa Diyos?” These are some of the questions an individual would ask you if he or she were to invite you into the “easy money” life of becoming a pyramid investor. Instead of working hard, you’ve been given an easy way out of poverty…but is it really the easy way out? Here are some facts that you should know to protect yourself from pyramid scams.


Before diving into pyramid scam hunting, you must first know how the scam works. A pyramid scam is basically an investment bubble where those on top get rich while those on the bottom do the hard work of recruiting more and more members. This scheme thrives on the number of people within the group and gains profits through recruiting. Those who recruit more members are incentivized with better investment outputs. 


For example, Benly decides to invest P1,000 into Noscambro Co. with the agreement that if he could recruit 5 people, his P1,000 would turn into P2,000. To do this, Ben must find five new “risk-takers” who would invest P1,000 as well and tell these five people that their P1,000 would be doubled too if they find five people each. This cycle goes on and on until either Noscambro Co. officers are caught and arrested or the company officers simply hide in another country. For Noscambro Co. to succeed, it simply must find a way to not get caught.


For this type of scam to work and be hidden from the law, scammers find imaginative ways in disguising their sinister practices. One simple way of hiding it is to inject a tangible product during the recruitment phase. The reason for this is to make the scam appear as if it was a legal business that uses a Multi-level Marketing (MLM) plan. MLM uses the same recruiting practices in pyramid scams, but the difference between the two is that MLM earns profit from the sale of its products while Pyramids earn profit from recruiting people and the promise of “easy money”. 


Although it would be near impossible for an average person to differentiate an MLM from a pyramid scheme, one way of knowing the difference is that MLMs have multiple safeguards for their investors. These safeguards can be in the form of a buy-back system where the company buys back what you can’t sell; a commission-centered way of profiting instead of being recruitment-centered; and many more measures ensuring that the business using MLM guarantees that fraud is out of the question. You have to be careful, though, as pyramid schemes may also use these kinds of securities as another level of disguising their strategy.


Another vile way for pyramid scammers to hide is to use religion as a motivating factor in recruiting people. The Philippines is an extremely conservative and religious country, with the population mostly comprised of Christians. The name of God is so revered that to use His name in vain could turn you deaf over all the “Masusunog ka sa Impyerno” remarks. This is why people who do use God’s name are under the assumption of the public that they are good or have good intentions in what they do. This is where the pyramid scheme enters. 


For pyramid scammers, the narrowmindedness of the average Filipino when it comes to their religion is God-sent. Simply say that what you are doing is for God, and everyone will love you instantly. For example, Benly, after losing P1,000 from a scam, began to look for God. In his journey, he found Noscam Ministries, a religious non-profit organization whose mission is to make poor people rich. He then decided to “donate” P1,000 to the mission with the agreement that by doing so, he could be rewarded with a motorcycle, a small house, a salary of P200 a week, and the everlasting reward of being with God. All he needs to do is to spread the good news. With great zeal, Benly began spreading his new belief to everyone he met. Weeks later, the minister was caught embezzling “donations” and the ministry was shut down.


Pyramid schemes come in all shapes and sizes. It is a disease in a country’s economy, as well as in the pockets of the masses. However, we have to realize that where there is a disease, there is always a way to prevent it. To prevent the spread of this ageless disease, one must be equipped with the mindset of being skeptical. Never believe in an easy way out. Research on what you are investing in. If it is too good to be true, especially when you’ve got nothing else to lose, then it is a scam. In terms of religion, it is all on you whether you believe that what you are doing is a scheme or not; but if it does turn out to be a scam, never say that we didn’t warn you. For those who have time, reading the Consumer Act of the Philippines is one of the best ways of protecting yourself from fraud. Always remember, only you can prevent yourself from being swindled.


LAYOUT BY: Chester P. Cortez

PHOTO SOURCE(S): Steffen Gundermann

Leave a Reply

Your email address will not be published. Required fields are marked *