Too Good to Be True: A Phenomenological Study on the Victims of a Pyramid Scheme

Abigail Murcia, Divine Grace Abenir, Angel Kinilog, James Ryan Penales, Djom Bash Sitoy

Senior High School Department, University of Cebu - Banilad Campus

Introduction

Pyramid schemes continue to cause significant economic losses in many nations,

particularly China, despite the fact that they are rarely highlighted in mainstream media. Since

pyramid schemes are rarely discussed, especially in local news, many individuals remain

unaware of the risks involved, resulting in these individuals to participate and be victimized.

These unsuspecting victims are urged to recruit more people to participate in the business in

order to earn a high profit from their investments, but eventually the interest and principal owed

to them exceed the money put in by new investors, which causes the scheme to collapse. (Jarvis,

2000). According to Schoepfer and Piquero (2009), victims of fraud were 43 percent more likely

to report their victimization. The low probability of reporting can be a result of victims

contributing to the distribution of the schemes within tightly knit social networks, amplifying the

emotional and social consequences even further (Bosley & Knorr, 2018). Financial loss, physical

and mental health issues, embarrassment, and harm to their social reputation and self-esteem are

some of the similar undesirable effects that ‘nonviolent’ financial crime victims and violent street

crime victims experience (Schoepfer & Piquero, 2009).

The Federal Trade Commission (FTC) estimates that over two million Americans fall

prey to pyramid schemes and other bogus business opportunities all throughout the years.
Prevention and enforcement are even more crucial, as victims of pyramid schemes are the least

likely of all victim groups to report being scammed (Anderson, 2004).

The Securities and Exchange Commission of the Philippines conducted a study that

shows that various pyramid scammers in the Philippines earned nearly Php 20 billion in no more

than 20 years. According to recent research conducted by the Securities and Exchange

Commission of the Philippines, various pyramid scammers in the Philippines earned

approximately Php 20 billion in no more than 20 years. Back in 2012, people were encouraged

by Emmanuel Amalilio and his cohorts to invest in a pyramid scam called ‘Aman Futures’ in

Pagadian, Zamboanga del Sur, their operation was legitimized through business permit grants

granted by the SEC and DTI. In just one year, all the money spent by countless city residents

vanished, and Aman and his accomplices are no longer traceable (Ledesma, 2016).

Everyone is out to get the big fish. A pyramid scheme is not limited and rare under our

local criteria. This in turn concludes that pyramid schemes are rampant, both in our country, the

Philippines, and our state, Cebu City. Especially considering the number of sole proprietorship

businesses in the Philippines alone, there are undoubtedly enough reasons to believe that

pyramid schemes are present among them, and that is evident. In the bustling life inside Cebu

City, pyramid schemes are present and rampant. Sometimes, it is even difficult to distinguish

these scams from legitimate businesses.

The goal of this study is to understand and describe the lived experiences of the victims

of a pyramid scheme. We are conducting this study in hopes of giving a better understanding of

how a pyramid scheme affects its victims, identifying the mental and emotional hardships that

they went through.

 Our study also aims to raise awareness about the dangers of a pyramid scheme and

describe the victims’ approach upon learning that they fell victim to the fraud. Understanding the

tactics and strategies used by pyramid schemes can help victims recover from their losses as well

as identify the warning signs to help prevent other people from falling for the same scam.

References

Anderson, K. (2004). Consumer fraud in the United States: An FTC survey.

https://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states-ftc

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Bosley, S., & Knorr, M. (2018). Pyramids, Ponzis, and fraud prevention: Lessons from a case

study. Journal of Financial Crime, 25(1), 81- 94.

https://doi.org/10.1108/JFC-10-2016-0062

Jarvis, C. (2000). The rise and fall of Albania’s Pyramid Schemes. Finance and Development,

37(1). Retrieved from

http://www.simonemariotti.com/downloads/Papers%20finanziari/Jarvis.doc

Ledesma, J. (2016). Concrete jungle of broken dreams: The role of Filipino government

institutions in the persistence and prevention of pyramid scams.

http://dspace.cas.upm.edu.ph:8080/xmlui/handle/123456789/664

Schoepfer, A., & Piquero, N. (2009). Studying the correlates of fraud victimization and

reporting. Journal of Criminal Justice, 37(2), 209-215.

https://doi.org/10.1016/j.jcrimjus.2009.02.003