Everyone knows that if something sounds too good to be true, it probably is but that doesn’t stop people from trying their luck anyway. The opportunity to make big money with minimal effort is just too sweet of a deal to pass up. Unfortunately, most of the time it doesn’t work out and they actually end up losing money. Here are some ridiculous get rich quick schemes people still fall for.
The “Nigerian prince” scam
Last year Americans lost over $700,000 to Nigerian prince scams. How it works is you’ll receive an email from a “royalty member” claiming they urgently need your help transferring a portion of their fortune out of Nigeria. In return, they promise to give you a large sum of cash. Those who agree to help are asked to provide their bank account number or pay a fee to cover the taxes. Ladies and gentlemen, no wealthy person is going to trust you, a complete stranger to keep their money safe. They’ll leave that to the professionals. What will happen is either the crook will disappear with your money or they’ll drain your bank account. No matter how you slice it, they win and you lose.
When it comes to investing, stay away from anyone who promises to get you high returns with little to no risk. Chances are it’s a Ponzi scheme. None of the money you fork over will be invested, instead it will be used to pay earlier investors. To keep the cycle going Ponzi scheme organizers must always be on the hunt for new investors. When it gets hard to find fresh meat or too many people attempt to cash out, the scheme unravels, and you lose your money.
A pyramid scheme is a sketchy business model where participants make money by recruiting other people to join. They can either be naked or product based. In a naked scheme, there aren’t any products to sell. Commonly the recruiter just tells you about an amazing investment opportunity you need to be a part of. Product-based schemes are often disguised as a sales opportunity except the items are usually things nobody wants to buy. Hence, why the focus is on bringing in new people to make money.
In both cases it starts with a single person on top who recruits 10 people to work under him. Each person is required to invest a certain amount of money to join. To make their money back, each new recruit must bring in 10 more people to invest. All participants are required to give a portion of their profits to the person who recruited them. Eventually the scheme collapses because they can’t raise enough money from new investors.