Crime du Jour: 31 Days of Malfeasance, Misconduct, and Immorality

One crime story per day, all the way through October. Ebook to be published Nov 1. This will be under my mystery/crime pen name, Diane R. Thompson!


Crime du Jour #24: Pyramid Scheme


All a good pyramid scheme requires is shares in something, and a smooth talker to sell them. Or not so much a smooth talker as someone short-sighted enough to think the con will last forever.

“Here’s how it works,” I say. And I explain. You pick something that people can imagine they want, and can imagine buying low and selling high. The classic scams involve silver mines and stock shares. Futures are always good, like corn futures or pork futures. But I’ve heard of expeditions to dive for Spanish gold off the coast of Florida, or, one time, I kid you not, it was tulips. Shares in Dutch tulips. It has to be something risky but essentially legal. This all happens out in public. It’s so public that nobody can believe it’s a scam. That’s important. You want public opinion to sway your direction, to make it seem—among the core group of investors that make up your marks—like you’d have to be a fool not to get involved. There’s also something called a “Ponzi” scheme where each investor doesn’t have to actively recruit the next investor after them. But the lines get blurred, so let’s not quibble the difference. The government is supposed to protect investors against this kind of thing, but it always takes them longer than it should. What you want to do is throw as many delays in the way as you can, and run out the clock.

Once you have your material for shares, you get some word moving. Not a gale force wind of press releases and advertising, but a sly little breeze, the kind that blows right through a good mark. You have to think like a gossip. “Did you hear about so-and-so? I can’t believe it, but what I heard was—” Like that. And then you flash some cash while acting like you’re getting away with something. People will come sniffing around like bloodhounds.

When they do, you send them over to someone else. Never try to play all the roles in a pyramid scheme. Don’t short yourself on running the store. Don’t tell yourself you can get by without. The great schemes are time-tested. A mark should get completely screwed by one set of operators, yet still be hungry for more when the next con comes through. Don’t think of it as money lost in the split. Think of it as seeding the soil for future investments. When you get the right people backing you, you can more than offset the cost of splitting the profits with them, and shuffling around marks and investigators takes longer with five people than it does with two. See what I said above, about running out the clock.

So you send the mark to the second operator, who doesn’t want to sell. In fact they refuse to sell.

The first operator apologizes, and talks to the second operator. The second operator has to be convinced. Now, if you were running a simpler con, here’s where you get off the main track. The second operator can’t be persuaded to let the mark in on the big con. The first operator feels bad about it. “Sorry about that silver mine. How about I let you in on this smaller project instead…?” Many a good mark has been milked by such a bait and switch.

But for an actual pyramid scheme, you stay on track.

After some negotiation, the second operator reluctantly agrees to sell. Numbers get thrown around at this stage. The mark invests X, minus a cut off the top (percentage Y), as a transaction fee. The mark gets back returns Z as profit. The mark can either collect their Z profits and get their investment X back, or keep their investment X in the scheme and get their Z profits back, or take their investment X and roll their Z profits into their investment. Usually what happens is the mark invests X, collects profits Z, can’t believe their good luck, then comes back with profits Z to reinvest. A lot of them come back with more capital to add to X as well.  You pay your outgoing profits Z out of your incoming X investments. The exact math is tricky. You have to balance startup costs against giving the marks a deal that’s too good to be true.

Never let the mark negotiate the numbers. Use the same rates for everybody. That way, the marks will screw each other. Investor A will recruit investor B, and take a little cut under the table for the privilege. Just ignore it. It helps muddy the water, and it keeps investor A from going to the authorities. Investor A effectively becomes an operator for you, not a trusted one, but one who risks prison time if things fall apart.

Make it exclusive, too. Literally refuse to sell to people. Don’t always let yourself get “talked in” to letting someone join.  The more exclusive you are, the longer you can take to run out that clock.

But, eventually, that clock will run out. It might take thirty years, but it will run out. The danger of this business is that a successful operator always half-believes what they tell the marks. But your scheme will have always been a con, and it was never going to work out the way you told the marks it would.  Even the most perfect system collapses.  There’s just too much chaos in the world, and you can’t control it.

But you can control who you pick as your smooth talker.  My advice here is to pick one of the world’s non-violent psychopaths.  If you know where to look, you can find a lot of them. No soul, no morals, no emotions other than a craving for “winning” at something, no awareness that they were always going to have taken the fall.  They’re the asshole in the limelight.

You’re just the accountant.



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You can find 2018’s story-a-day project, Tales of the Normal, here, and 2017’s story-a-day project, October Nights, here.