What Was the First Pyramid Scheme?

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Updated: May 2026 Oleksandr Honcharov, CEO at FlawlessMLM The first widely-documented pyramid scheme is generally considered Charles Ponzi's 1920 investment fraud in Boston, although Ponzi's scheme was technically a Ponzi scheme rather than a pure pyramid. The first true pyramid scheme to attract large-scale regulatory action was Holiday Magic, a cosmetics MLM shut down by the FTC in the 1970s. What was the first pyramid scheme depends on whether you include Ponzi-style frauds or only strict recruitment-based pyramids. Notable early pyramid and Ponzi schemes Charles Ponzi (1920) — Boston-based investment fraud that gave its name to all Ponzi schemes. Promised 50% returns in 45 days. Holiday Magic (1968-1973) — cosmetics MLM, one of the first major schemes shut down by the FTC as a pyramid. Koscot Interplanetary (1970s) — cosmetics scheme. The 1975 FTC ruling on Koscot established the legal test for distinguishing pyramids from legitimate MLMs. Glenn W. Turner enterprises — founder of multiple 1960s-70s pyramid schemes including "Dare to Be Great" and Koscot. Earlier chain letters — postal chain letter scams date back to the late 1800s and used the same exponential recruitment math. Albanian pyramid schemes (1996-97) — caused a national economic crisis when multiple major schemes collapsed at once. Definition: The earliest widely-known pyramid-style scheme was Charles Ponzi's 1920 investment fraud in Boston, though it was technically a Ponzi scheme. The first pyramid scheme prosecuted under modern law was Koscot Interplanetary in 1975, which established the legal test still used by the FTC today. Pyramid schemes are as old as money itself. The Ponzi name dates from 1920, but the structure had existed in chain letters and informal money pools long before that. The technology changes; the math stays the same.

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