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Pyramid schemes create an unusual situation, where the victims might be effectively turned into offenders, as their role is to recruit more victims to the pyramid scheme. This paper aims to investigate the prevalence of pyramid schemes, their modern forms and why people join them.

This paper has developed from a structured literature review carried out as part of a wider study into policing pyramid schemes.

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 little work and the attraction to a better lifestyle. Other reasons are “organiser dominant”, including the exploitation of specific groups and high-pressure sales. These findings suggest significant differences in levels of culpability of pyramid schemes victims and perpetrators. This complexity is accompanied by conceptual, regulatory and institutional challenges.

Despite the profound and pervasive impact of pyramid schemes, researchers know very little about why some people participate in pyramid schemes. Limited research is largely American and specific to illegal multi-level marketing schemes. To the best of the authors’ knowledge, this paper is the first to provide an overview of a mix of strategies of participants of pyramid schemes to recruit new victims and reasons why people are joining pyramid schemes.

This paper aims to analyze the evolution of direct selling – a retail channel that successfully sold products ranging from cosmetics to radios to automobiles – to multilevel marketing (MLM), an industry now apparently heavily reliant on selling to itself. As the courts have found some MLM companies to be pyramid schemes, the analysis includes the overlap between the legal MLM model and an illegal pyramid scheme.

The development of direct selling in the USA was examined, followed by the factors contributing to the design and growth of the MLM model and its non-commission-based compensation structure. Then, the key legal decisions regarding illegal pyramid schemes operating under the guise of MLM, the relative stagnation of direct selling and the state of the MLM industry were examined.

As the MLM model operates on the dual premise of retailing through a network of distributors and recruiting new distributors to do the same, it was found that federal regulators and the courts consistently focus on the “retail question” – the existence and extent of sales to consumers external to the distributor network. The authors argue that without a significant external customer base, internal consumption by an ever-churning base of participants resembles neither employee purchases nor a buying club.

As the MLM model facilitated the growth of pyramid scheme fraud, creating victims rather than customers, this research highlights successful efforts to regulate this type of consumer fraud.

Few papers have been written on MLM and pyramids schemes, and none thus far has taken an historical perspective.

This paper aims to identify psychological factors that influence people to be involved in Ponzi and pyramid schemes.

A psychological approach to finance or behavioural finance is applied in this research because of the assumption that human beings are not always rational. The sample consisted of 98 investors in 11 cities in Indonesia who were or had invested in an investment program with a Ponzi or pyramid scheme. The snowball sampling technique was applied.

The conclusion is that optimism (emotional bias), confirmation bias, representativeness bias, framing bias and overconfidence (cognitive bias) positively influenced investment decisions related to Ponzi and pyramid schemes.

The novelty aspect of this research is the implementation of a behavioural finance perspective to answer and express the fascinating phenomenon of Ponzi and pyramid investment schemes.

The purpose of this paper is to analyse the regulation of the financial crime of Ponzi scheme in Mauritius. Contrary to money laundering which has a legal framework to combat it, for Ponzi scheme, there is no specific legal mechanism to combat this particular financial crime. Therefore, the aim of the paper is to provide for an analysis of Ponzi scheme which includes, inter alia, the definition of a Ponzi scheme, its modus operandi and how it should be tackled. Focus will be placed on devising a specific legal framework for it in Mauritius.

The research method used to conduct this research and write this paper is a black letter legal research method. An analysis of several laws and cases is carried out so as to provide for the legal background of the research.

The investigation conducted in this paper will lead to the conclusion that Mauritius has to devise a law which will specifically combat Ponzi schemes. This law shall provide for the ways to counter this financial crime as well as the duties of the various financial supervisory bodies.

The paper provides for an analysis of the operation of Ponzi scheme in the Mauritian context. The paper also examines the existing legal framework that combats this financial crime in Mauritius and highlights its strengths and weaknesses.

Most scientific research has focused on understanding Ponzi schemes from the point of view of the schemes and their operators, based on qualitative analysis. This paper aims to analyze Ponzi schemes from the perspective of their investors, emphasizing behavioral aspects, which have been little explored in the scientific literature, especially in quantitative research. In this way, the authors sought to understand the effects of heuristics and cognitive biases in understanding investor behavior.

A logistic regression was carried out with Brazilian investors, some of them participants in Ponzi schemes, who answered a structured questionnaire by means of a survey.

The authors found that social pressures, overconfidence and deliberate ignorance lead to credulity, generating little risk analysis and the desire to make a lot of money quickly.

Helping investors improve their levels of information through financial education and self-knowledge about their behavior. Contribute to the competent authorities in the search for improvements in the information displayed to investors.

Understanding the mechanisms used when making a financial decision from the point of view of investors in general, but especially those exposed to Ponzi schemes, has the mission of enlightening them about the importance of financial education and the weight of psychological factors so that they can reduce the effects of heuristics and analysis biases when faced with a financial decision.

The basis of this work will be the inclusion of psychological variables and financial education, adapting existing models in an attempt to demonstrate the effects they may or may not have on mental accounting in the specific case of investors

The purpose of this article is to expose the Miller‐Modigliani 1961 Ponzi scheme that has masqueraded as a dividend irrelevance proof, and show that it constituted a Ponzi scheme at the time of publication and ever since publication. This is important especially as Miller‐Modigliani 1961 stated in the first sentence of their article that their dividend irrelevance proof was targeted at corporate officials, investors and economists seeking to undertake and appraise the functioning of capital markets.

The equations and notation used by Miller‐Modigliani 1961 to prove dividend irrelevance were carefully considered and analysed in order to establish whether proof reliably, validly and unambiguously proved dividend irrelevance. In addition, statute on both sides of the Atlantic, UK and USA, was considered in order to ascertain the legal standing of their proof.

This article shows that the Miller‐Modigliani 1961 dividend irrelevance proof constituted a recipe for a Ponzi scheme in terms of statute at the time of publication and ever since publication. Since Miller‐Modigliani 1961 made extensive reference to the works of eminent finance researchers and academics of the 1930s, 1940s, and 1950s, as well as to their Modigliani‐Miller 1958 seminal article, and attentively present and discuss the intricacies of the arguments these researchers made to the progression of knowledge, it would be challenging to content that they were unaware or ignorant of important legislation that applied in 1961.

There is no evidence from a scrutiny of publicly available secondary sources to suggest that the Miller‐Modigliani 1961 Ponzi scheme, alias “dividend irrelevance” has previously been done or published. This is surprising because the Miller‐Modigliani 1961 dividend irrelevance proof has occupied a particularly prominent position in the finance literature and has been the subject of numerous studies and research projects.

News items like “A whopping 2 lakh gullible investors were cheated…….” amply illustrate the extent of problems and hardships caused by financial frauds related to Ponzi schemes, collective investment schemes (CIS), unregulated deposit schemes, etc. In India, over the years, many Ponzi and unregulated investment schemes have taken place, causing huge economic and financial loss to Indian economy. This paper aims to examine why investment such schemes like Ponzi schemes and CIS become popular, how such schemes got operated in different periods and what could be done to safeguard the interests of investors.

The analysis is done based on secondary data and research work of various researchers, organisation and institutions, which are available in the public domain.

This paper has tried to analyse various characteristics of such fraudulent schemes, like their modus operandi, promotional activity, background of promoters and legal process involved in recouping financial loss of millions of investors. This paper also examines the demand-side factors that are responsible for popularity of those schemes in India. Noting the regulatory changes and other initiative taken by regulatory authorities to control the supply of unregulated investment schemes, this paper indicates potential actions, which could be undertaken to make people aware about the risks and issues related with such fraudulent schemes.

This paper gives an overview about various aspects of unregulated investment schemes, which have duped numerous people at different point of time. To the best of the authors’ knowledge, this research work is original and has not been published in any other journal.