Nithin Kamath recalls falling for a pyramid scheme, warns retail investors against ‘easy money’ promises
In a post on X after watching the web series Pyramid Scheme, Kamath said the show brought back memories of the time when he spent nearly two years associated with a multi-level marketing (MLM) company that eventually turned out to be a pyramid scheme.
“When I started my career at around 18, I was trying to find ways to fund my trading account. For about two years, I got drawn into a multilevel marketing company that turned out to be a pyramid scheme,” Kamath wrote.
He said he did not believe the person who introduced him had intentionally misled him, but that the company itself had deceived participants. Kamath admitted that he had also introduced several people to the scheme before it collapsed.
Recalling the moment the fraud unravelled, he said the series accurately captured the desperation that follows the collapse of such schemes.
Kamath also expressed concern that pyramid schemes continue to thrive in India despite greater financial awareness. Citing industry estimates, he said around two new pyramid schemes are launched every day in the country. More than 5.5 crore Indians had lost their savings to over 5,300 such schemes, with estimated losses of Rs 10 lakh crore as of 2015, a figure he said is likely to be much higher today.
Using his own experience as a cautionary tale, Kamath said investors should be wary of anyone promising unusually high returns.”One truth my experience has taught me: there is no quick way to make a lot of money, be it trading or any other business. Anything promising returns higher than a bank FD comes with risk. The higher the claim, the greater the risk,” he said.
Kamath also linked the warning to the recent surge in retail participation in the stock market, saying many people are creating the impression that making money from equities is easy.
“This dynamic has also played a big part in the recent growth of retail markets, people spreading the word that it’s easy to make money in stocks. It isn’t, and the reckoning tends to come quietly, one account at a time,” he wrote.
He ended his post with a warning against referral-based money-making schemes.
“If someone tells you that you can make easy money just by introducing others, run. Almost every single one of those is a fraud,” Kamath said.
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