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Why do pyramid schemes attract so many investors?

Amid allegations that Allen Stanford was involved in a $7 billion pyramid scheme many people are now looking and wondering how so many investors have become involved in pyramid schemes throughout the years. These are basically investment schemes which use new money rolling into the scheme to pay income and capital to existing investors with the middlemen in between taking a slice of the income. So why are these particular schemes so attractive?

The success of many pyramid schemes in the past is basically down to the sale techniques of the people involved, their ability to keep their finances secret and ultimately giving investors what they want and more. As we've seen in the alleged Allen Stanford pyramid scheme, many experienced and wealthy investors appear to have taken everything thrown at them on face value and neglected to do any significant background checks. Investment returns well above the market average obviously caught the eye but many people did not stop to think how these particular returns were being created on a regular basis.

Fear and greed are two particular emotions which weigh heavily on the minds of those investing into these fraudulent schemes with many seeming to "lose their heads" and go with their hearts. Pyramid schemes have been around for many years and despite the fact they are illegal they continue to prosper behind closed doors, especially in times of economic distress.

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