Pyramid Schemes

Pyramid Schemes


Farkas & Crowley’s experienced criminal defense attorneys are also experienced in the defense of people charged with white-collar crimes. One of those is a Pyramid Scheme, sometimes called a “Ponzi Scheme,” where more and more people are recruited to participate in an eventual alleged payoff or some other financial benefit.

In reality, a pyramid scheme is a fraudulent enterprise that does not offer anything to the investors and only benefits those at the top. By its very nature, it is unsustainable, even if the scheme continues for many months or years.

Building the Pyramid

Many pyramids are “investments” that promise big returns, and sometimes pay them to initial investors. The “pyramid” has one individual at the top, and others are brought into the group underneath. New “investors” are encouraged to recruit more investors—and money—with the same promises of “high returns.”

This growth continues as more people buy into the plan, sometimes paying an entrance fee to be a member. Some pyramids have additional fees like initiation fees. All fees go to the top person while the structure expands at the bottom with the increase in the number of investors, hence the “pyramid.”

“Dividends” are frequently paid to initial investors in the upper levels of the pyramid.

This money comes out of fees paid by new investors at lower levels, who also recruit additional investors who come in at the bottom. There are no “profits,” only new investor money flowing into the scheme.

Eventually, the scheme runs out of new investors and can no longer bring in more money to pay “dividends” to the investors. At this point, the pyramid simply collapses. The top-level people who invested at the beginning have collected money while the middle and lower-level investors generally get nothing.

Some pyramid schemes attempt to look legitimate by claiming to sell a product. In this case, new “recruits” are required to buy large quantities of the product that they will attempt to sell probably won’t. The money that the recruits pay for the product goes to the top person, and lower-level recruits attempt to recoup their money by selling the product to others, including other recruits. However, the schemes rely primarily on paid into the pyramid, not any associated products.

What About MLM? (Multi-Level Marketing)

Not all “pyramid” companies are illegal, especially if theft or fraud are not involved.

Most MLM companies make money on the sale of legitimate products to end-users by distributors and other participants. They do not continually recruit new “investors” into the company. Well-known companies like Avon, Mary Kay, and Herbalife, as well as lesser-known MLM companies like Team National, Futurenet, and Thirty-One Gifts all offer a unique (and legitimate) product or service to their customers and offer representatives an opportunity to make extra income.

The primary difference is when the MLM is based on the continual recruitment of new investors, not the sale of products or services. This is a fine line between a legitimate MLM and a pyramid scheme.

If you find yourself charged with operating a pyramid scheme, our criminal defense attorneys understand where to draw the line, and how to defend you against these charges.


If you are charged with running a pyramid scheme, you may face Florida state or federal charges, depending on the circumstances. Florida imposes both criminal and civil penalties under multiple statutes. In either case, you will need a strong defense.

Florida takes a firm stance against pyramid schemes through its Deceptive and Unfair Trade Practices Act.

This legislation provides a clear definition and outlines severe consequences for those involved in such practices.

Under Florida law, a pyramid sales scheme is characterized by using a chain referral sales technique to convince a consumer to purchase of a product or service exceeding $100, or promising money or commission for recruiting new members into the pyramid.

Florida considers pyramid schemes to be an illegal lottery and can be prosecuted as a felony. Becoming a member or soliciting someone to join a pyramid scheme is also illegal, and is punishable as a first-degree misdemeanor.

At the federal level, pyramid schemes are investigated by multiple agencies, including:

• FBI (Federal Bureau of Investigation

• SEC (Securities and Exchange Commission)

• FTC (Federal Trade Commission)

• DOJ (Department of Justice)

• Federal attorneys

These agencies have unlimited resources available. State-level agencies include state attorneys, along with local detectives and investigative agencies. Federal penalties are severe, and a conviction can lead to high fines and jail time as long as 25 years. Restitution and forfeiture of assets (also called disgorgement) that were acquired with the investor’s monies are also possible.

Pyramid scheme charges are also frequently accompanied by other charges like mail fraud, bank fraud, wire fraud, money laundering, tax fraud, securities fraud, financial fraud, and other white-collar financial crimes.

If you are accused of starting or running a pyramid scheme, you will need a criminal defense attorney with experience with federal charges.

Pyramid Scheme Defenses

Like most federal charges, prosecutors must demonstrate your intent to defraud customers or investors. Not all “pyramids” are illegal, and sometimes investments are unsuccessful. If your business is legitimate, you can show that your business offers goods or services for sale, and that there is no intent for theft or fraud.

Another defense is if you were unaware that the plan you were promulgating employed illegal practices. A complete review of all evidence and transaction records is essential to drafting a strong defense strategy.

If you’re being investigated or have been arrested for operating a pyramid scheme, contact Farkas & Crowley’s white collar crime attorneys today. The sooner you contact us, the better your chances of getting a more favorable outcome. We will act as a buffer between you and the government so that you have the opportunity to defend yourself without making a mistake that could land you in prison.


If you have been arrested for a federal offense like being involved with or conducting a Pyramid Scheme, contact the criminal defense attorneys at Farkas & Crowley today. We offer aggressive representation, and we will not rest until we get a favorable outcome for your federal case.

Our federal criminal attorneys in Florida have experience with federal court systems, and we are here to help you.

Call us now for a free consultation at 561-444-9529. We’re available 24/7 when you need us.


Looking for a criminal law firm? Farkas & Crowley, P.A. are the attorneys for you. They are extremely knowledgeable of the law and go the extra mile for their clients. Their expertise and impeccable work ethic are hard to beat. Available 24/7. Highly recommended.

-Marla Newman

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