Difference between Ponzi and Pyramid
| Differential aspect | Ponzi Scheme | Pyramid Scheme |
|
Structure and Operation |
A single person or entity (the "Ponzi operator") convinces investors to invest their money by promising high returns. | Participants are encouraged to recruit new members into the scheme. |
| Focus of Recruitment | The primary focus is on attracting new investors and convincing them to invest their money | The emphasis is on recruitment and expanding the participant base. |
| Returns on investment/ Revenue generation | It does not involve any legitimate revenue-generating activity. The funds collected from new investors are used to pay returns to earlier investors, creating the illusion of profits. | The funds collected from new participants are used to pay commissions & bonuses to existing participants. The products or services offered are often of little value or merely a front to legitimize the scheme. |