What separates a pyramid scheme from a Ponzi scheme?
AYou must invest in property only
BYou must be paid in cash alone
CYou must be over thirty years old
DYou must recruit others to sell
Answer & Solution
Correct answer: D. You must recruit others to sell
1. Both schemes promise unusually high returns and both are illegal in South Africa.
2. In a Ponzi scheme you are only asked to hand over money for some supposed investment.
3. In a pyramid scheme you pay a joining fee and then have to recruit and sell to earn.
4. Recruiting is the distinguishing feature of the pyramid scheme.
5. Both collapse for the same reason, that the supply of new members is finite.
_Source: Siyavula Mathematics Grade 12 (Everything Maths, CC BY 4.0), Chapter 3: Finance_