Are pyramid schemes legal in the UK?

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Pyramid schemes are an old-fashioned scam, and different versions have existed for decades. But, as the UK’s fraud reporting centre Action Fraud has noticed, we’re seeing more and more new ones surfacing on social media, designed to target younger people.

Pyramid schemes are often disguised as a quick way to make money, with zero risk. They usually rely on you paying to join, then persuading other people to sign up and pay too. They’re asked to do the same thing, and the chain keeps going. 

But chemes like this are unsustainable and often illegal, and you could end up losing hundreds of pounds. The only people that usually profit from a pyramid selling scheme are the ones who create them in the first place.

Pyramid schemes are illegal, and people who are involved in them, create, run or promote them can be prosecuted under government legislation called the Consumer Protection from Unfair Trading Regulations 2008.

Pyramid schemes are illegal and unsustainable

Pyramid schemes are often disguised as a quick way to make money. They usually rely on you paying to join, then persuading other people to sign up and pay too. Those people are asked to do the same thing, and the chain keeps going. People make money or get commission when other people pay into the scheme (rather than by selling a product or service). And the only people who usually profit from a pyramid scheme are the ones who create them in the first place.

Schemes like this are unsustainable and illegal. If you join one, you could end up losing hundreds of pounds and this could put you at risk. And if you create, run or you're involved in one, you could go to prison.

Joining a pyramid scheme could put you at risk

  • Most people who join pyramid schemes end up having lost money. Bank transfers move money out of your account instantly, meaning they’re almost impossible to cancel.

  • Your friends and family could lose out too. If you think you’ve found a good opportunity to make some extra money, and persuade your friends or family to sign up too, they’ll probably also lose their money when the scheme collapses, putting them at risk too.

  • Your bank account could be frozen. If you recruit people to join a pyramid scheme, you’re at risk of your bank freezing or even closing your account.

  • If you run or promote a pyramid scheme, you could go to prison. Starting, operating or promoting a pyramid scheme is illegal, which means you could end up in prison.

How to spot a pyramid scheme

You can spot a pyramid scheme by looking for these signs:

  • Before you can join, they ask you to pay an upfront ‘gift’, ‘fee’ or ‘investment’ by bank transfer

  • They ask you to recruit more and more people to join as well, and encourage you to sign up your friends and family

  • They say you could make lots of money, really quickly

If you’ve paid into a pyramid scheme

If you’ve unwittingly paid into a pyramid scheme, don't feel bad! This kind of fraud is very common, and fraudsters can be clever.

Once you realise you’ve been scammed, you should take steps to report the scheme and see if you can get your money back.

  • Tell your bank immediately. If you use Monzo, you can do this by contacting us through in-app chat or by ringing 0800 8021 281. We can try contacting the bank where you sent your money to see if we can get it back.

  • Report it. You can report what happened to Action Fraud or call Police Scotland on 101 if you live in Scotland.

What are Ponzi schemes?

Ponzi schemes are another type of pyramid scheme and are also run by scammers. Like pyramid schemes, investors in Ponzo schemes are promised high returns on the money they put in. This can then attract more people to get involved. The money from new investors is then used to pay the original investors involved off. And the cycle continues.

Most people lose money from this type of scam and the only person who actually makes money is the person at the top of the scheme.

What to look out for:

  • Promised high rates of return but with minimal or no risk

  • If you're forced into making quick decisions, with not much time to think about it

  • Technical jargon which could be confusing

Make sure to check the Financial Conduct Authority to see if the company contacting you is regulated. And if you've been contacted by someone you think might be involved with a Ponzi scheme, make sure to contact Action Fraud immediately to report them. Find out more about Ponzi schemes here.

What’s the difference between a multi-level marketing scheme and a pyramid scheme?

Multi-level marketing schemes (also known as ‘MLM’ businesses) use people to sell products or services to friends, family and acquaintances. The people selling these products or services are representatives of the MLM business and they earn commission from any retail sales they make. They also earn commission from the retail sales made by anyone they recruit too.

It can be difficult to tell the difference between an MLM business and a pyramid scheme.

MLM businesses are legitimate and are legal. Even though pyramid schemes might sometimes look like an MLM business, they don’t actually sell a product or service and and they're illegal.

Money is made through a pyramid scheme by you paying to join and then persuading other people to sign-up and pay to join. Those people are asked to do the same thing and so on. The only people who profit from pyramid schemes are the people at the top.


Pyramid schemes aren't the only way criminals can take your money. Learn how to protect your data to avoid identity theft and fraud.

At Monzo we work hard to protect you from fraud and help you keep your money safe.