You invested in a "business opportunity" that promised high returns? You were asked to recruit other people to make money? The system collapsed and you lost your investment? You're probably a victim of a pyramid scheme, a form of fraud that's illegal in Canada.
What is a Pyramid Scheme?
A pyramid scheme is a fraudulent business model where revenue comes primarily from recruiting new participants rather than selling real products or services. It's illegal in Canada under section 206 of the Criminal Code.
How It Works
- You pay to "join" or buy a "starter kit"
- You're promised income if you recruit other people
- Early arrivals are paid with money from newcomers
- When recruitment slows, the system collapses
- Only founders and early participants make money
Types of Pyramid Schemes
1. Classic Pyramid
No real product. You pay for the right to recruit other people.
2. Ponzi Scheme
Presented as an "investment". Returns to old investors are paid with money from new ones. Famous example: Bernie Madoff ($65 billion).
3. Fraudulent MLM (Network Marketing)
Legitimate MLMs exist, but many are disguised pyramids. Key sign: If income comes mainly from recruitment rather than sales to external customers, it's probably a pyramid.
4. Gifting Circles
Presented as "mutual aid circles". You give money and are supposed to receive more when you "move up" in the circle. Illegal.
Real Examples Reported in Quebec
Case 1: "A friend invited me to an 'opportunity evening'. I was told I could earn $10,000/month selling supplements. I paid $2,500 for the kit. After 6 months, I had recruited 3 people and earned $200. I lost $2,300."
Case 2: "A colleague told me about a 'crypto investment' with 15% guaranteed monthly return. I put in $5,000. For 3 months, I received my 'returns'. Then the site disappeared with all the money."
Case 3: "I joined a 'women's circle' where you gave $1,000 to receive $8,000 when you reached the center. I gave my money but the circle collapsed before I got to the center."
How to Recognize a Pyramid Scheme
Red Flags
- Emphasis on recruitment rather than product sales
- Promises of high income with little effort
- Obligation to buy expensive inventory or kit
- Guaranteed returns (no legitimate investment guarantees returns)
- Pressure to recruit family and friends
- Complex commission structure difficult to understand
- Overpriced products no one would buy at regular price
- Success testimonials but no verifiable proof
- Urgency — "The opportunity won't last"
What to Do If You're a Victim?
Step 1: Stop Immediately
- Don't recruit anyone else
- Don't invest more money
- Don't let yourself be convinced to "hold on a little longer"
Step 2: Document Everything
- Contracts and signed documents
- Proof of payment
- Communications (emails, messages)
- Promotional material received
- Names of people who recruited you
Step 3: Report
- AMF (Autorite des marches financiers) — For investment-related schemes
- Competition Bureau — For pyramid schemes
- Canadian Anti-Fraud Centre — 1-888-495-8501
- Police — If you lost significant amounts
How Report Quebec Can Help You
- Complete documentation of your case
- Guidance to appropriate authorities
- Official record of the fraud
- Help identifying warning signs for the future
Victim of a Pyramid Scheme?
Document your case with us. Free and confidential service.
File a Report