PYRAMIDING

PYRAMIDING

SUBJECT: SECURITY ANALYSIS

PRESENTED BY:

HIRA SHAHID KHANSAHAR KHANSAMREEN LODHISHAHZADI NEELOFAR

PRESENTED TO:

MS. SOBIA SHEIKH

SHAHZADI NEELOFAR

DEFINITION

 Pyramiding  is a method of increasing margin by using unrealized returns from successful trades. In other words , it is a business terminology of PONZI TECHNIQUE.

SHAHZADI NEELOFAR

WHAT IS PONZI TECHNIQUE?

IPR (International Postal Reply) are the coupons that are used for small international transactions.

The recipients of such coupons could exchange them at their local post office for stamps.

In August 1919, Charles Ponzi found that buying such coupons in Spain and selling them in USA is profitable due to large difference in exchange

rates.

SHAHZADI NEELOFAR

WHAT PONZI DID?Established a

company named ‘SEC’

Collected funds in DOLLARS

in USA

Bought IPR from SPAIN in

PESETA

Extra money

was invested

in MUTUAL SAVINGS

BANK

Exchange IPR in USA to US stamps and sold them to local people

Proceeds were

distributed to

investors as a profit and their capital

SAMREEN LODHI

WHAT DID PONZI GET?

Existing investors

brought new investors

Profit from bank and

the remaining

amount from sale of stamps

PROFIT

Profit used to buy bank’s shares

Eventually became a

major shareholder

Elected himself as a

PRESIDENT of that mutual fund bank

SAMREEN LODHI

ULTIMATE ENDING OF PONZI SCHEME

IPR prices rises. Interest from the bank was the only profit he was

getting, Published an article in newspaper that company

can not pay any profit any more. Many investors took their money out of his

company. And Attorney of Boston ordered to stop working

and to audit his company. Audit report his scheme an illegal and he was

arrested.

SAMREEN LODHI

LINKING PONZI SCHEME WITH PYRAMIDING

Studying ponzi’s case , many companies adopted this scheme and in studies it is known as PYRAMIDING i.e promising participants payment for enrolling other people into the scheme.

 Pyramid schemes are a form of fraud.

HIRA SHAHID KHAN

HOW PYRAMIDING WORKS?

it revolves around continuous recruiting, the promoter collects payments from a stream of

people, promising them all the same high rate of return on

a short-term investment. In the typical Pyramiding scheme, there is no real

investment opportunity, and the promoter just uses the money from new recruits to pay obligations owed to longer-standing members of the program.

In English, there is an expression that nicely summarizes this scheme: It's called "stealing from Peter to pay Paul."

HIRA SHAHID KHAN

HERO PAKISTANI IN PAKISTAN

They offer Rs 30 key chain and Rs 10 sports card, that will be used for promoting sports activities, and buyer will win trips to foreign, cars, mobile

phones and jewellery through lucky draw. However, it was banned on the ground that “Earning millions of rupees in this head by selling

Hero Cards is useless and this should be stopped immediately until they are able to produce players of international quality to compete such mega events.”

HIRA SHAHID KHAN

TAJ COMPANY IN 1980s

Similarly TAJ Co. that prints HOLY QURAN issued their shares for opening of new printing houses.

Many people invested their thousands of rupees to buy the shares.

Later the offices were closed , and the shares worth zero.

SAHAR KHAN

PYRAMIDING AND INTERNET

In 2003, the United States Federal Trade Commission (FTC) disclosed what it called an internet-based "pyramid scam.“

Its complaint states that customers would pay a registration fee to join a program that called itself an "internet mall" and purchase a package of goods and services such as internet mail, and that the company offered "significant commissions" to consumers who purchased and resold the package.

The FTC alleged that the company's program was instead and in reality a pyramid scheme that did not disclose that most consumers' money would be kept, and that it gave affiliates material that allowed them

to scam others.SAHAR KHAN

CONCLUSION

Pyramiding is an illegal activity and to avoid to be a prey of such trick, follow these 8 steps:

Find — and study — the company’s track record. Learn about the product Ask questions Understand any restrictions Talk to other distributors Consider using a friend or adviser as a neutral

sounding board or for a gut check. Take your time. Think about whether this plan suits your talents

and goals

SAHAR KHAN

THANKYOU