Frequently Asked Questions

• How do pyramid schemes work?

  A pyramid scheme is a fraudulent business model premised on recruiting an ever-increasing number of investors whose fees and commissions are passed up the pyramid to earlier investors. Founders will recruit a few early investors whose return on investment depends on their ability to recruit more investors. This cycle of recruitment to profit repeats until eventually there’s no one left willing to join the “business” and t♉he scheme implodes. “Investments” often include membership fees and the money new recruits pay for products they expect to resell.

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• What exactly did Bernie Madoff do?

  The ponzi scheme run by Bernie 🌜Madoff for nearly two decades was pretty simple. Madoff convinced clients that he could manage their wealth and net them reliable annual returns that were good but not miraculous. Once he had their money, he would deposit it in a bank account rather than invest it. And when a client asked to cash out, he simply withdrew their initial investment plus 15% or so. All the while, Madoff used his reputation as a respected Wall Street insider and sensible wealth manger to recruit new clients whose investments were passed off as profit.

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• What’s the diff𝔉erence between bribery and lob༒bying?

  Bribery involves an explicit agreement between two parties, usual✤ly individuals, that one will help the other circumvent standard processes or laws in exchange for some form of compensation (usually money). Lobbying, on the other hand, does not involve an explicit agreement or conditions; instead, lobbyists liaise with politicians to advocate for policies on behalf of their clients and donate to political campaigns to help industry-friendly leaders win increasingly expensive elections.

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• What is the Dodd-Frank Act?

  The ♊Dodd-Frank Wall Street Reform and Consumer Protection Act is a piece of legislation passed by Congress in 2010 in response to the 2008 financial crisis. The act created multiple new regulatory bodies, including the Consumer Financial Protection Bureau (CFPB) and the Financial Stability Oversight Committee. It also enacted the Volcker Rule, which limits the speculative investments that banks are allowed to make. Parts of Dodd-Frank were repealed by the Economic Growth, Regulatory Relief and Consumer Protection Act signed by President Donald Trump in 201ꩲ8.

  Learn More: Dodd-Frank Wall Street Reform and Consumer Protection Act 🐻Definition