Pyramid schemes and Ponzi schemes are two types of investment fraud where people are persuaded to invest in an organization that pays out old investors with the funds contributed by new investors. In a pyramid scheme, a recruiter creates a fraudulent business and recruits investors by promising them high returns on their investments. The initial investors then recruit the next round of investors, and so forth, while early investors pocket the funds paid by later investors.
Ponzi schemes operate in a similar manner; however, the structure of the organization is a bit different. In a Ponzi scheme, a single con artist recruits all of the organizations new members himself. Both pyramid and Ponzi schemes collapse when the organization isn't able to attract enough new investors to support the scam.
New Hampshire's Pyramid Scheme Law
In New Hampshire, pyramid schemes are referred to as "chain distributor schemes" and are illegal. The table below outlines New Hampshire's main chain distributor scheme law.
| Code Section | New Hampshire Revised States section 385-B: Chain Distributor Schemes |
| What's Prohibited? | It is illegal for any person, partnership, corporation, trust, or association (or any agent or employee thereof) to promote, offer, or grant participation in a "chain distributor scheme." |
| What's a Chain Distributor Scheme? | A chain distributor scheme is a sales device where a person, after making an investment, is granted the right to solicit or recruit for economic gain additional people who are also granted the same right after making an investment and further perpetuating the chain of people who are granted such a right upon such condition. A limitation on the number of people who may join the scheme doesn't change the identity of the scheme as a chain distributor scheme. |
| Penalties | Violating this statute is a class B felony. Additionally, civil penalties will be award to the state for up to $10,000 for each violation. |
Federal Consumer Protections
There are several federal consumer protection laws that may also be available to you. To learn more about the federal consumer protection laws, contact the following agencies:
Additional Resources
State laws change frequently. For case specific information regarding New Hampshire's pyramid and Ponzi scheme laws contact a local consumer protection lawyer or criminal defense attorney.
