Find out how get-rich-quick schemes like Ponzi and pyramid schemes work, how to avoid scams and what to do if you’re scammed.First published: 09/08/2017 Last updated: 20/03/2023 See all updates
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Get-rich-quick schemes promise investors high returns not usually available through traditional investments.
While early investors may make money from the scheme, people who invest later usually lose their money.
How get-rich-quick schemes work
The 2 most common get-rich-quick schemes are Ponzi and pyramid schemes.
Ponzi schemes are named after Charles Ponzi, who guaranteed a 50% return to investors in the US in the 1920s. Most of the money he received was used to pay dividends to early investors, and the scheme collapsed when he couldn’t attract more money to pay later investors.
Pyramid schemes work in a similar way, although investors are encouraged to recruit more people and are paid commission when they do. These scams are also called franchise fraud, multi-level marketing or a chain referral scheme.
These schemes seem genuine and profitable to the early investors, which encourages them to attract more people and money.
But these types of schemes collapse when the supply of new investors and money ends. Investors usually find most or all of their money is gone, and that those who set up the scheme took most of it for themselves.
These schemes often target community, religious, ethnic, older or professional groups. Leaders within a group might be targeted first, receive a high return on their investment, and promote the scheme to others before it collapses.
Scammers also target people searching for investments online through search engines like Google and Bing. They may offer high returns to tempt you into investing, but some may also offer more realistic offers to appear more legitimate.
If you are offered an investment opportunity through a search engine, they may not be regulated or authorised by us. You can check the FCA Warning List for firms to avoid.
How to protect yourself
Always be wary if you’re contacted out of the blue, pressured to invest quickly or promised returns that sound too good to be true.
If you're contacted unexpectedly by a financial business or individual, make sure you reply using the contact details on the FS Register.
Find out more on how to protect yourself from scams.
If you've been scammed
If you’re worried about a potential scam or you think you may have been contacted by a fraudster, report it to us. Call us on 0800 111 6768 or use our contact form.
If you’ve already invested in a scam, fraudsters may try and target you again or sell your details to other criminals.
The follow-up scam may be completely separate or related to the previous fraud, such as an offer to get your money back or to buy back the investment after you pay a fee.