The category of product fronts is subdivided into the following categories:

• Financial Instruments
• Multi-Level Marketing (MLMs)
• Speculations.

Financial instruments—such as stocks, borrower’s certificates, foreign currency exchanges, loan scams, and investment pools—are perfect tools for the budding Ponzi artist.

Charles Ponzi probably wasn’t the first to commit fraud using an investment scheme, but his surname will forever be linked to describe the investment scheme he designed.

Victims of Ponzi’s scheme in 1920 thought they were investing in Postal Reply Coupons that, Ponzi assured everyone, yielded whopping profits by playing off the exchange rates of international currency.

FX Ponzi Schemes are still prevalent because currencies around the world fluctuate. It is this fluctuation and the potential to profit from it that makes currency exchange the ideal Ponzi front.

A stock market that gains 25–30% a year (and individual stocks quadrupling, sometimes in a matter of months) encourages the impression that all anyone has to do to rake in serious cash is put down their money and wait.

Unscrupulous promoters like to tout new items like Internet stocks and biotechnology start-ups, but the reality is that any new product can be used as a Ponzi Front.

Even in this highly technological age, commodities futures—from soybeans to pork bellies—are still numbered among the most common bait for Ponzi schemes. In recent times Carbon Credits (which in fact have a limited market to trade in) have been added to this list.

Financial instruments are especially effective fronts because most people don’t understand how legitimate financial markets and transactions take place. This makes them unsophisticated investors. It also makes them the ideal ‘mark’ for unscrupulous promoters.

When most people hear about a pyramid scheme, they probably think Multi-Level Marketing (MLM).

Under MLM schemes organizations market nutrition supplements, household goods, cosmetics, insurance, training materials, the provision of long-distance phone services, and products that can be as diverse as antiques to the chemical zinc.

Basic mathematics remains the enemy, as well as the primary tool, of MLMs.

Promoters draw matrices (never pyramids) on a chalkboard and compute what twenty people mailing money to a distributor’s house every month would amount to in a year’s time.

This approach conceals the physical and mathematical problems with this approach.

First, the market for any product outside those owned by large national brands is usually small both geographically and by number of potential customers.

Developing a submarket requires hard work, business acumen, finance, and a heavy dose of luck. Unfortunately, most participants in the scheme lack many of these requirements.

Then there is pyramidal mathematics—after a couple of levels, you run out of people willing to hear your speech and buy your product.

The term speculation describes any investment proposition not covered as financial instruments or MLMs.

This would include franchise offerings and business opportunities in general, work-at-home promotions, and investments in areas like real estate or mineral rights.

All of these are traditional investments types, but the investor will encounter numerous difficulties when they are rolled into a Ponzi Scheme.

Franchise scams use investment opportunities such as internet terminals or vending machines.

By their nature, such businesses are spread out geographically and require limited direct contact between the “promoter” and the “franchise holder”.

Work-at-home promotions are also a favourite tool of the franchise scammer.

The person working at home is often enticed by a few early payments, per the Ponzi and those payments are often enough to trigger a more sizeable investment. At some point the promoters then takes the money and runs often setting up a similar business in a different location.

Almost everyone knows what a pyramid scheme is. Facebook is currently littered with them.

One question remains. Why are people susceptible to them?

• They do pay off. Unlike a simple con game in which the fraudster throws the ruse, grabs the cash, and exits, pyramiding builds up the take by paying initial investors. This makes for excellent testimonials. Early players circulate the word and bring in new targets. Initial payoffs also keep early players coming back and potentially making larger investments. Payoffs make the enterprise look legitimate and fuel the expansion process.
• They operate mainly through pre-existing affiliations. Community groups, Facebook groups, religious organizations, and social clubs all make enticing targets for Pyramid Operators. Any pyramid requires a healthy pool of participants, so a large group already gathered together is collectively an ideal “mark”. Often those that operate Pyramid Schemes are highly skilled at manipulating people.
• They use ingenuity and false logic in their pitches. The product fronts available for pyramiding are myriad, from bath soap to electronics. Fronts in financial instruments and real estate are especially effective because most people don’t understand how financial instruments work. As we have seen above, investors can be enticed by simple games using simple metaphors—like a conceptual airplane or business executives’ hierarchy—to make themselves attractive.