Get-rich-quick, Ponzi and pyramid schemes

Find out how get-rich-quick schemes like Ponzi and pyramid schemes work, how to avoid scams and what to do if you are scammed.

Get-rich-quick schemes promise investors high returns or dividends not usually available through traditional investments.

While early investors may make money from the scheme, people who invest later usually lose their money.

We are aware that scammers are targeting consumers searching for investments online, in particular through search engines like Google and Bing. Although some scammers offer high returns to tempt you into investing, they may also offer realistic returns to make their offer appear more legitimate. Those offering or promoting products or investment opportunities found through search engines are not necessarily authorised or regulated by the FCA. You can check the FCA Warning List for firms to avoid.

How get-rich-quick schemes work

The two 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. Much 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 much the same 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 get-rich-quick scheme collapse when the supply of new investors and money dries up. Investors usually find most or all of their money is gone, and that the fraudsters who set up the scheme took much of it for themselves.

Get-rich-quick schemes often target community, religious, ethnic, elderly 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.

How to protect yourself

You should only use financial services firms and individuals authorised by us – check the Register to ensure they are.

Beware of schemes or investment opportunities offering unrealistic returns or requiring you to recruit other people.

Even if you initially receive a high return on your investment, the money will eventually dry up and later investors can lose everything.

You should seriously consider seeking financial advice or guidance before investing. You should make sure that any firm you deal with is regulated by us and never take investment advice from the company that contacted you, as this may be part of the scam.

MoneyHelper has information on investing and about how to find a financial adviser. Alternatively, you could get further information from a group that represents advisers such as PIMFA.

Read more about how to find an adviser.  

If you have been scammed

You can report the firm or scam to us by contacting our Consumer Helpline on 0800 111 6768 or using our reporting form.

If you have already invested in a scam, fraudsters are likely to 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. 

If you have any concerns at all about a potential scam, contact us immediately.

Page updates

11/08/2021: Information changed Money Advice Service to MoneyHelper