E-Creator took Zimbabwe by storm for several months. Roughly around June it became even more talked about. I recall hearing lots of people talking about either joining or recruiting others. I was also hit with recruitment attempts but turned them all down. Interestingly, I sounded prophetic when I cited my concerns about E-Creator possibly shutting down suddenly. About 3 days after expressing my concerns, E-Creator did shut down and vanished. On the 13th of July 2023, the Zimbabwe Republic Police (ZRP) confirmed the arrest of Zhao Jiaotong, founder and owner of E-Creator. This is not the first time Zimbabweans have been scammed like this. That is why it is necessary to revisit what a pyramid scheme is.
ZRP Press Statement On Arrest Of Chinese National For Duping The Public Through E-Creator
First off, it is useful to briefly touch on this latest development; for the benefit of those who were duped through E-Creator. The ZRP’s press statement dated 13 July 2023, read as follows:
“The Zimbabwe Republic Police confirms the arrest of Zhao Jiaotong (39) in connection with a case of fraud in which unsuspecting members of the public were duped through E-Creator Ponzi scheme. The Zimbabwe Republic Police in inviting members of the public who might have been duped through E-Creator to report to any nearest police station. We continue to implore members of the public to exercise due diligence before making any payments to Ponzi or pyramid schemes purportedly offering quick investment returns.”
What Is A Pyramid Scheme?
There are many ways to define a pyramid scheme. There is one particular definition I find most informative. It is:
A pyramid scheme is a chain-recruiting scam in which the main objective is to continuously bring in new members (euphemistically referred to as sales representatives, independent representatives, or even investors) than to sell anything tangible or of real value.
Chain recruiting – this means recruitment is perpetual. Recruiting more people is directly proportional to the income (e.g. commissions) that you can make.
Euphemistically Referred To – something euphemistic is meant to deceive or delude. For instance, if you are referred to as an investor you will feel good and unsuspecting too.
Sell Anything Tangible – there will typically be no tangible product or service being sold. The income that is promised will chiefly come from the monies paid by new members joining the scheme.
Why Is It Called A Pyramid Scheme?
The number or distribution of people who join resembles the shape of a pyramid. One person joins right. Then they recruit others to join. Those recruited then in turn recruit others and so on. The structure shows you that at first there will just be a few people. Then as recruitment picks up momentum, more people join in. Some weeks or months down the line, there will be more people joining and increasingly fewer new recruits. That is depicted by the wider base of a pyramid. That is often the point at which the pyramid crumbles.
How Does It Work
There obviously are variations when you consider the different pyramid schemes you may see. Regardless, the operating framework is more or less the same. It is grounded in the same DNA. Here is how it typically works:
You join as a new member by paying something. Often times that payment is given the label of investment. It can be a different label but the aim is to deceive or delude you. Bear in mind that you are a recruit initially oftentimes. This means you would have joined via your recruiter. The joining payment you make thus gets split amongst your recruiter, other recruiters up the hierarchy, and the owners of the scheme. The splitting typically follows certain set percentages.
This is why once you have joined you will have to recruit others for you to earn commissions. All in all, you will get a portion of whatever your recruits initially contribute and earn onwards. In some cases, there may be rewards attainable from other things e.g. completing some tasks or getting so-called bonuses. In fact, that is the core aspect of pyramid schemes. As in, income comes from more than just recruiting.
6 Classic Signs Of A Pyramid Scheme
Once you see the following signs then know that you are looking at a pyramid scheme:
High Short-Term Returns On Investment
There are promises of very high short-term returns on investment. For instance, you may be promised to realize returns as soon as you join and on a daily or weekly basis.
No Actual Products Or Services Sold
There are no tangible, real, or genuine products or services being sold.
Recruit Recruit Recruit
The core emphasis is on perpetually recruiting more people to join. This is often premised on or coupled with the value proposition of realizing passive income.
Making Money Too Easily
Sure enough, we all want to make money easily. However, with a pyramid scheme, it is suspiciously way too easy. No wonder at first many people even feel it is too good to be true.
Unclear Revenue Model
There is no clear or demonstrable revenue model. This is simply because the so-called revenue you will make is coming from other members; not actual sales of some product or service.
The Innumeracy Aspect
There will be sophisticated hierarchical commission structures that are often difficult to understand or calculate.
Now you know that E-Creator was a pyramid scheme; a sophisticated one. This information should be enough to give you an understanding of what a pyramid scheme is. It would be noble to share the article with others so that they know. It is important to appreciate that there are also what are called Ponzi schemes. Often times many people conflate the two. Truth is a pyramid scheme is not necessarily the same as a Ponzi scheme. That is why you can expect another article where I will lay out what a Ponzi scheme is. Always remember the classic adage – if it is too good to be true, it probably or usually is.