Pyramid scams promise that you can get rich very quickly.

Here is how the pyramid scam or pyramid scheme works:-

- Person A joins the scam with the first payment. It generally start off with only one person

- Person A recruits many other who has to make the payment to A

- Person A gets paid by the others. The others, that person A recruited has to find new people and make them pay as well.

- All the other who join also pay a commission to person A

- If more people are recruited, the more money the people on the top level make

- There is a limited number of people who can join, it cannot go on and on

- People at the bottom level basically end up with nothing as the system collapses after some time

Money is actually moved about instead of it being invested, therefore people stand to loose their money.

The pyramid scheme looks very realistic yet complicated and it's easy to trick people and to tell them that they can make lots of money fast. The scammers go to great length to make the pyramid scheme look realistic.

The Pyramid scam is illegal in most countries, such as Australia, USA, United Kingdom and certain Middle Eastern countries.

In order to spot a pyramid scam you need to check the following,

- You have to keep selling certain products constantly. This is a sure sign of a pyramid scam.

- Friends who are of course not aware of the whole thing try to tempt you as well. The pyramid scam is usually promoted by people you know and make it more unbelievable to detect at first.

- Don't try for any appealing 'business opportunities'

- They promote the pyramid scheme as a home based businesses

- Don't get caught up in the 'gold rush' or the 'hype', usually there is a lot of social gathering that are organized just to promote the pyramid scheme as a legitimate way to make money.

- Checkout how profits are generated, if there is no legitimate explanation then it could be a scam

- Unnecessary pressure for you to join the scheme

- The offer of getting so much of money is too good to be true

- If the company name is given, research the name of the company first before you invest

If you think you have got caught up in a pyramid scam. The first thing you can do is to report it to your States Fair Trading Act or any other authority.