Why are pyramid schemes illegal?
A) Firms engage in the online sale of products and services.
B) Firms receive customer payments without selling products.
C) Individuals are actively recruited to fill direct sales positions.
D) Salespeople are overly persistent when trying to gain big sales.
E) Sales recruits lack the business knowledge and skills to be ethical.

Question

Quizplus · Accepted Answer

Pyramid schemes are illegal because they involve receiving payment from participants without delivering any actual products or services. Instead, participants are encouraged to recruit more members to the scheme in order to earn more money, creating a pyramid structure where those at the top profit while those at the bottom typically lose their investment. This makes them a fraudulent business model that preys on individuals and ultimately collapses.

Why Are Pyramid Schemes Illegal