A pyramid scheme is a fraudulent and unsustainable investment pitch that relies on promising unrealistic returns from imaginary investments. The early investors actually get paid those big returns, which leads them to recommend the scheme to others. Investors' returns are paid out of the new money flowing in. Eventually, no new investors can be found and the pyramid collapses.

In a variation of the pyramid scheme, investors at each level charge initiation fees that are paid by the next layer of investors. A portion of those fees is paid on to those in the top layers of the pyramid. Eventually, no one is left to recruit. The pyramid collapses.

Often called pyramid scams, these operations are illegal in the U.S.