Cryptocurrency Pyramid Schemes

A cryptocurrency pyramid scheme is a fraudulent model that rewards participants primarily for recruiting new members rather than any legitimate investment or business activity. Each new recruit pays to join, and their funds flow upward to earlier participants — creating the illusion of returns.

The structure is mathematically unsustainable. Every level requires significantly more recruits than the one above it to keep paying out. Eventually recruitment slows, the scheme collapses, and the majority of participants — typically those who joined latest — lose everything they put in.

In crypto, pyramid schemes are especially convincing because they often wrap themselves in legitimate-sounding technology, tokens, or investment strategies to obscure how they actually work. (For the distinction between pyramid schemes and Ponzi schemes, see Article 4.)

Recruitment-Based Token Schemes — You're sold tokens and earn more by recruiting others to buy in. The token has no real utility outside the scheme.

MLM Crypto Platforms — Platforms with tiered reward structures where earnings depend heavily on the size of your recruitment network rather than investment returns.

Cloud Mining Pyramid Schemes — You pay to lease mining power and are incentivised to recruit others. Returns come from recruitment fees, not actual mining activity.

DeFi Pyramid Schemes — Fraudulent DeFi platforms promise high staking or yield rewards funded entirely by new depositors rather than real protocol revenue.

Affiliate Chain Scams — Escalating commissions for recruiting investors, with each level funding the commissions of those above.

• Your earnings depend primarily on how many people you recruit rather than investment performance
• You must pay an entry fee or purchase tokens to participate
• The compensation structure has multiple tiers based on recruitment
• There's little or no explanation of returns outside of bringing in new members
• Promoters emphasise lifestyle and community over any actual product or technology
• The platform discourages questions about its business model or legal status
• Withdrawals are difficult or require reaching a recruitment milestone first

Example: You're invited by a friend to join a crypto platform that pays daily returns. To join, you must purchase a starter pack of tokens. You're then encouraged to invite others and earn a percentage of their purchases. Your dashboard shows growing returns, but when you try to withdraw, you're told you need to hit a recruitment milestone first. The platform eventually stops paying and disappears.

• How are returns generated? If the answer involves recruitment more than actual investment activity, walk away.
• Is the platform registered? Check with the CSA or your provincial regulator.
• Is there a real product or service? Legitimate businesses generate revenue from something other than new member fees.
• Can you withdraw freely? Any withdrawal restriction tied to recruitment is a serious red flag.
• Who is behind it? Verify the founders independently.
   

• Be sceptical of any opportunity that emphasises recruitment as a primary earning method
• Never pay an entry fee to join an investment platform without independent research
• Research the compensation structure carefully — be wary of multiple earning tiers based on referrals
• Only use registered and regulated platforms
• Be cautious about promoting schemes to friends and family — you may inadvertently become part of the problem

Don't join or send funds. Research the platform independently and report the opportunity. Contact Ndax support if the offer appeared to be associated with Ndax at ndax.io.

Stop recruiting immediately. Stop sending further funds and do not encourage friends, family, or others to participate. Attempt to withdraw any remaining balance only through the platform’s official channels, but do not pay additional fees to unlock or recover funds.

Document everything: transactions, wallet addresses, communications, promotional materials, compensation plans, platform URLs, social media posts, and the names or profiles of anyone involved.

If you transferred crypto from your Ndax account, contact [email protected] right away. Cryptocurrency transfers are generally irreversible, but your report may help us review the activity and protect other users.

If fiat funds, bank transfers, credit cards, debit cards, or payment services were used, notify the financial institution where the funds originated.
 

• Report to Ndax at [email protected] if your Ndax account was involved or crypto was transferred from your Ndax account
• Report to the CAFC at antifraudcentre.ca
• Report to the RCMP at reportcyberandfraud.canada.ca
• Notify the financial institution where the funds originated, such as your bank, card provider, or payment service provider
• Report fake profiles directly through the relevant social media, messaging, or dating platform