By Doussou Komara Massandouno, lawyer specialized in Banking and Financial Law, CAMS certified.

One of the most well-known forms of scam is the pyramid scheme, also known as the "Ponzi Scheme". This is a fraudulent financial scheme, which borrowed its name from Charles Ponzi, a great con artist of Italian origin who emigrated to the United States in the early 1900s. Ponzi became infamous by implementing this type of scam on a large scale in the 1920s in Boston (USA), making thousands of victims. Later, in 2008, this same scheme of financial fraud made headlines again with the case of the investment fund Bernard Madoff, which caused its investors to lose nearly $ 65 billion, thus deserving its label "scam of the century". Among the many victims around the world were small investors, large US hedge funds, as well as many big names in international finance such as HSBC (UK), Santander (Spain), BNP Paribas and Natixis (France).

The system itself is very simple, not to say basic, and the image of the pyramid is perfect for understanding it. The promoter or initiator, is the top of the pyramid. He asks his "investors" to put their money in his project or his company, promising a very high guaranteed return, and very fast! Often the rates of return are above 20%, with guaranteed monthly or daily payments. He then asks each person already convinced, to talk about the investment to other people to convince them to invest in turn. Successive groups of investors represent the pyramid, which is widening downwards. In fact, no income-generating investment is made: to create and maintain the illusion of profitability, it is the money of the last entrants that is redistributed to the previous ones, after the promoter has taken his share. As you will have understood, the only and real activity of the pyramid scheme is to constantly find new "investors", to redistribute their money to the previous ones, and so on. Another simplistic image is to say that paul is undressed to dress Peter. As long as "investors" receive money, their confidence is strengthened, encouraging them not only to convince new investors, but also to pay even more money: a real vicious circle that gives an appearance of financial solidity to the entire structure. Where it spoils is when several investors decide to recover their down payment, or when there are no longer enough new investors to inject funds into the system: the pyramid weakens and collapses, making investors lose all their deposits, but especially the last entrants who have not had time to receive their "interest"! In the meantime, the initiator will have enriched himself spectacularly, as well as the first investors.

Unfortunately, pyramid scams are still relevant, and continue to claim many victims all over the world, and increasingly in Africa. Scammers take advantage of investors' lack of access to regulated markets, the absence of strict legislation prohibiting pyramid schemes, and traditions that blind trust is a normal attitude in the family or friendly circle. The "business models" evoked to defraud their victims are also adapted to local realities: investment in an agricultural plantation, import of food, export of precious stones, etc. In any case, the victim will be offered a business model that is unknown to him!

To quickly recognize a pyramid system and not fall into the trap, here are 5 signs that (almost) never deceive!

1. Very high rates of return, with guaranteed payment promises: Trust your instincts here. When it comes to investing, as with many other important decisions, when it's too good to be true, it's probably wrong! Too high returns should make you suspicious, at least on the veracity of the investment, at worst on its legitimacy. If someone promises to double your investment in a few months, then ask yourself why they would do this for you? Why does he need your money?
2. An investment presented as being without any risk! No investment is without any risk. And the rate of return is always proportional to the risk involved, it is a rule of thumb. This guarantee promise, coupled with point 1 above, are signs that should be enough to scare away any savvy investor. The only guarantee here is that your interlocutor is trying to fool you! Often, to convince you, you will be told about a business model that is secret and very little known to the general public, and you will be encouraged to act very quickly so as not to miss this opportunity that is offered to you. Know how to say NO in the face of so much pressure and mystery!
3. The obligation to pay an entry fee into the "system", with the obligation to convince new "investors" to join you... who must also pay the same amounts... and then also recruit other "investors". This is one of the main features of pyramid schemes that does not deceive. Each member actually becomes a driving force behind the system, not only by putting their money into it, but also by convincing others to do the same! Without it, the system cannot exist. This aspect is mainly used in pyramid schemes, in which "members" become "sponsors" who must sell products to their network, with the obligation to recruit "godchildren" who will have to fulfill the same obligations, in order to receive their remuneration. Some legislation formally prohibits this type of so-called "snowball" sales process, as is the case, for example, in France, the USA and Canada.
4. A complex business model, too vague or too vague! If you can't figure out how your money will be invested, then you shouldn't invest your money in this financial vehicle, no matter what kind of business it is. As they say so well, the devil is in the details, so learn about the business model, a history and verifiable official evidence... or keep your hard-earned savings away from this financial mystery! Another tip is to present yourself with an investment model that looks extremely simplistic, but that you have no way to verify. In reality, you are convinced not by the business model, but only by your trust, or credulity, in a person who intentionally abuses it (if it is the initiator) or not (if it is just one of the victims).
5. Finally, assuming that you are already in the system... The difficulties in recovering your initial bet after the first "interest" payments, often with incentives to always ask you to invest more, to get even juicier interest. The reason is simple: the system only works if more and more money comes in, because the "remuneration" of some is financed only by the down payments of new entrants. In reality, therefore, your initial bet no longer exists, because it was used to pay those who were deceived before you.

The above points are just examples that should make you more suspicious, to avoid falling into a scam that could cause you to lose a lot of money. These scams are also very numerous on the Internet, with many offers of pyramid sales of investments, often in products that are supposedly in development, or in new virtual currencies. Tell yourself that there is no shortcut to getting rich, it will allow you to be alert to avoid many pitfalls. When in doubt, it is often better to miss (perhaps) an opportunity than risk losing (too) big!