Why do Pyramid Schemes Fail?
Pyramid schemes are inherently injurious to consumers because as a mathematical certainty, they are doomed to collapse. As in the case of chain letters that require a payment, only the people at the very top make any money.
The only way anybody can make money through a pyramid scheme or chain letter is if participants in levels below them are defrauded into giving money based upon a rapidly diminishing promise of eventually getting something in return.
Eventually they must break down because the pool of possible recruits becomes exhausted and recruitment stops. Those at the bottom of the pyramid, the vast majority of the participants, lose money because there is no one below them.
They won’t get their money back or earn their promised fortune because no one is beneath them in the pyramid adding new money to the pot. All pyramid schemes will begin to die when later recruits don’t sign on in numbers large enough to pay off the earlier recruits.
An infinite number of people is the weak link in the required “endless chain” of new participants. In order for a pyramid scheme to profit, there would have to be a never-ending supply of potential, and willing, participants. In reality, however, the supply of participants is limited, and each new level of participants has less chance of recruiting others and a greater chance of losing money.
The diminishing odds of making money with a pyramid scheme make it a losing proposition because each time a new level rises to the top, a new level must be added to the bottom, each one at least twice as large as the one before.
Pyramid schemes are based on simple mathematics: many losers pay a few winners. A nine-level pyramid, which is built when each participant gets six “friends” to join, would involve over ten million people!
6
36
216
1,296
7,776
46,656
279,936
1,679,616
10,077,696
Who are the Victims of Pyramid Scemes?
Most pyramid schemes seem intent on exploiting people with limited means and limited knowledge of business such as 
individuals who have little experience in direct sales, distributorships, or franchise enterprises or who have limited money or credit with which to establish their own businesses.
They rely on widespread ignorance of basic mathematics. Participants are promised large rewards for putting up a certain amount of money and then recruiting the next level of members. But the schemes always collapse because the supply of potential recruits quickly runs out, making many participants both victims and perpetrators.
Many victims of these scams sell first to their friends. When the supposed money-making opportunity goes belly up, most lose not only their money —but also their friends. The Pentagono promotions have apparently targeted deaf people in some states while the main focus appears to be on senior citizens in others.
