pyramid letter: meaning, definition, pronunciation and examples

They are very similar and often used interchangeably. A key technical distinction is that a classic Ponzi scheme claims to invest funds in a fake enterprise, while a classic pyramid letter scheme openly states that money comes from recruiting others. Both are illegal and collapse without a constant stream of new investors.

Yes, this is a common legal and reputational risk for multi-level marketing (MLM) companies. The legal test usually hinges on whether the company's revenue comes primarily from selling actual products/services to the public, or from recruiting new participants who must buy inventory. The latter is considered a pyramid scheme.

Historically, these schemes were often propagated through chain letters sent by post, instructing recipients to send money to the person at the top of the list, add their name to the bottom, and forward the letter. The term persists even though modern versions use email and social media.

Do not respond, send money, or recruit others. Report it to the relevant financial regulatory authority (e.g., the FCA in the UK, the FTC or SEC in the US) and your local law enforcement. Warn friends and family about the scam.

A fraudulent investment scheme disguised as a legitimate opportunity, often involving recruitment of new participants to pay earlier investors.

Pyramid letter is usually formal, business, legal in register.

Pyramid letter: in British English it is pronounced /ˈpɪr.ə.mɪd ˌlet.ər/, and in American English it is pronounced /ˈpɪr.ə.mɪd ˌlet.ɚ/. Tap the audio buttons above to hear it.