Investment or pyramid scheme? How to tell them apart and what to do if you were a victim

Juan Antonio Matiz Monroy — Lawyer, Universidad de los Andes · Specialist in Criminal Law, Universidad Sergio Arboleda · Professional licence 294.746 (C.S.J.)

Bogotá D.C. · Published: July 2026 · Reading time: 20 min

Someone who loses money in a pyramid scheme takes two blows. The first is financial and obvious. The second is silent and often more paralysing: guilt. “I handed the money over of my own free will,” the victim says; “no one forced me, I trusted them, it was a bad decision of mine.” Out of that shame comes a mistaken conclusion that ends up protecting the fraudster: that because the money was handed over voluntarily there was no offence, only an unfortunate investment, and therefore nothing to be done.

It is a diagnostic error with serious consequences, because it prevents reporting and recovery. Colombian law clearly distinguishes two things that shame confuses: losing money on a legitimate investment that went wrong —where there is no offence— and handing it over under a deception or within an unlawful deposit-taking scheme —where there is, with criminal and recovery routes—. What someone deceived can do, and with what rights they enter the proceeding, is developed in the rights of the victim of a crime; and if your data was also used to run up debts in your name, in digital identity theft.

Let us fix from the outset the idea that orders everything that follows: the difference between a legitimate investment and unlawful deposit-taking does not depend on whether the business works at first, but on whether whoever takes the money is authorised and supervised; and because in these schemes the real prospect of recovering money depends on speed, the window to act closes while the person affected is still hesitating. These schemes usually pay punctually while new contributions keep coming in, and that initial punctuality establishes no soundness whatsoever.

This article explains how to tell a true investment from a pyramid, what offences these schemes amount to and what the victim’s route of action is, including applications to the Superintendences. And, above all, it sets out the most valuable protection: the one exercised before the money is handed over, through due diligence and timely advice.

1. Pyramid scheme in Colombia: the line between an investment and a fraud

The difference is not whether money was made or lost, but the structure of the business. A legitimate investment rests on three pillars: it is offered by an entity authorised and supervised by the Financial Superintendence —or its public offering of securities is authorised and registered—; there is a real asset or business generating the return; and that return is variable and tied to risk, with transparent information about where the money goes.

An unlawful deposit-taking scheme or a pyramid inverts that logic. The return does not come from a real business, but from the money contributed by new entrants; a high, fixed, “guaranteed” return is promised, out of all proportion to the market; there is no State authorisation; and recruiting more people is the real source of the payments. That is why the scheme collapses and disappears as soon as the flow of new contributions stops, even after months of paying without delay.

That asymmetry explains why the immediate result is no criterion of safety. What someone assessing an offer can do, before handing over money, is test it against a set of indicators that tend to appear together in fraudulent schemes and that are worth bearing in mind in any investment proposal:

• A fixed return far above the market.
• Pressure to “invite” others.
• No registration or authorisation with the Financial Superintendence.
• Ambiguous, verbal or non-existent contracts.
• Payments that depend on new people joining.
• Withdrawals that start to be delayed.
• No financial statements and no verifiable product.

None of these signs, on its own, proves a fraud; but their concurrence is reason enough to be suspicious and to verify before investing. The practical consequence is the one already anticipated: that the business works at first says nothing about its lawfulness, because what separates investment from unlawful deposit-taking is the State authorisation of whoever receives the money, not the punctuality of the first payments.

2. The two offences: fraud and unlawful deposit-taking

Behind these schemes two distinct offences usually concur. The first is the mass and habitual taking of deposits (article 316 of the Criminal Code): anyone who takes money from the public in a mass and habitual way without authorisation from the competent authority incurs 120 to 240 months’ imprisonment. It is a provision that refers to objective administrative criteria —such as the number of people and contracts involved and the proportion of what is taken against the recipient’s own assets—, and its core is not deception but taking without permission: no one may receive money from the public as if they were a bank without being authorised and supervised.

The second is fraud (article 246), which punishes with 32 to 144 months’ imprisonment anyone who obtains an unlawful benefit, to another’s loss, by inducing or maintaining another in error through artifice or deception. Where the amount is high, the penalty is aggravated (article 267). The two offences can concur: the scheme takes deposits without authorisation and also deceives as to the existence of a real business.

That double route is worth underlining because it disarms these schemes’ principal defence. Whoever promoted them usually argues that the project was serious and simply failed; but that argument, even if true, does not exonerate them, because taking money from the public in a mass and habitual way without authorisation from the competent authority is, by itself, an offence (article 316), deception or no deception. Receiving money from many people with a promise of returns, without being an authorised and supervised entity, is a reserved activity that the law punishes regardless of whether the promised business was real.

From that follows a consequence of direct interest to the person affected: for criminal liability there is no need to show that the business never worked, but to establish that whoever was receiving the money was not authorised or supervised to do so.

3. “I handed the money over willingly”: why it is still an offence

Here is the knot that paralyses so many victims, and it is worth undoing with legal precision. It is true that no one physically forced them to hand over the money. But criminal law does not require coercion: in fraud, the handing over is always voluntary in appearance. What vitiates it is that the will was formed on a deception. The victim disposed of their property because they were led into error —they believed in a business, a backing or a return that did not exist—. That is precisely the structure of fraud: the deception produces the error, and the error produces the handing over.

And as regards unlawful deposit-taking, the analysis is even clearer: the offence in article 316 requires no proof of deception at all. It is enough to establish that there was mass and habitual taking without authorisation. So the voluntary nature of the handing over, far from excluding the offence, is part of how these schemes work.

That difference translates into what has to be established in each case. In fraud, the five elements are not verified separately but in a chain: a deception or artifice capable of misleading generates error in the victim; that error prompts the disposal of property; and from that disposal arise at once the unlawful benefit for the perpetrator or a third party and the loss to another. The causal link is essential, because the deception must be the cause of the handing over, and if the chain breaks at any link the conduct no longer fits the offence. In deposit-taking (article 316), by contrast, the requirement is different and simpler to establish: mass and habitual taking of money from the public without State authorisation.

Identifying which of the two —or both— is made out is the first technical step of the complaint. And it is also why the affected person’s hesitation is so costly: while they wonder whether it was their own fault, the analysis that actually decides the case is objective and has nothing to do with that fault, because it consists in establishing whether whoever received the money was authorised and supervised, and in acting before the funds are dispersed.

4. The Superintendences and their powers

The response to these schemes is not only criminal. Two superintendences have powers of their own, and their intervention is usually the most effective route to stop the scheme and recover funds.

The Financial Superintendence of Colombia authorises and supervises those who lawfully take deposits from the public. Against anyone carrying out activities reserved to supervised entities without authorisation, it can order the immediate suspension of those operations —under threat of fines— and adopt measures for them to cease (Financial System Statute, article 108). It also warns the public through lists of unauthorised persons and entities.

The Superintendence of Companies is the intervention authority over those who take or collect money from the public on a mass scale without authorisation. Decreto 4334 de 2008 —whose constitutionality the Constitutional Court reviewed in Judgment C-145 of 2009— empowers it to take possession of the assets, holdings and business of the taker and to conduct a procedure for returning the funds to those affected. It is the typical route after the collapse of a pyramid.

As a practical rule, the affected person goes to the Financial Superintendence where the scheme presents itself as a financial or securities entity or product, and to the Superintendence of Companies where there is mass taking or collection by unsupervised persons or companies —the typical pyramid case—, this being the appropriate route for intervention and return of funds. It is worth bearing in mind that reporting to the Superintendence is administrative and does not replace the criminal complaint: the advisable course is to activate both.

The same underlying logic operates on both fronts. What enables these authorities to act is not that the business failed, but that money was taken without the required State authorisation; and because their measures aim at preserving funds the scheme tends to disperse, every week of hesitation narrows what can be achieved.

5. The victim’s route and the recovery of funds

An orderly reaction pursues two aims at once: the responsibility of the perpetrators and the recovery of the money. The route combines three fronts. The first is the criminal complaint to the Prosecution Service, for fraud and/or mass deposit-taking, accompanied by all available evidence. The second is the report to the competent Superintendence, so that it orders the activity to cease (Financial) or intervenes and manages the return (Companies).

The third is the recovery of funds, which can come by two complementary paths: the intervention procedure of the Superintendence of Companies (Decreto 4334 de 2008) and, in the criminal proceeding, the full-redress proceeding (articles 102 to 108 of Ley 906 de 2004), which lies once the conviction is final and lapses thirty (30) days thereafter.

None of those three fronts advances without documentary support. Even before deciding whether to report, the affected person does well to gather and keep everything establishing what was offered to them, how much they handed over and to whom, because that documentation is the backbone both of the complaint and of the claim for funds, and it usually becomes inaccessible as soon as the scheme starts closing its channels:

• The contracts, “promissory notes” or certificates issued.
• Proof of the handing over or transfer of the money (deposits, transfers, receipts).
• The advertising and the offers (leaflets, social media, messaging groups, presentations).
• Communications with the promoters.
• Identification of those who took the money and recruited.
• A record of the returns promised against those actually paid.

The urgency of that collection explains itself. In these schemes, the real prospect of recovering money depends on acting quickly: the faster the report and the intervention, the greater the probability of tracing and preserving the funds before they dissipate. To that is added the thirty-day limit on the redress proceeding once there is a conviction. Delay, often fed by shame, is the scheme’s chief ally, and that is why the window to act tends to close precisely while the affected person is still wondering whether what happened to them was a crime.

A recent change is worth adding. Ley 2477 de 2025 added article 78A to the Criminal Procedure Code, which allows the criminal action to be extinguished through full redress of the harm in offences against property —fraud among them—, with the exception of theft aggravated by violence and of extortion. It does not reach the mass and habitual taking of deposits, which protects a different interest: economic and social order. That asymmetry is not theoretical: in one and the same case the action may be extinguished for the fraud by returning what was handed over and nevertheless continue for the deposit-taking.

6. Before it happens: due diligence and advice on transactions

All of the above describes what to do once the harm has occurred. But the most valuable protection —and the cheapest— is the one exercised before the money is handed over, or at the first sign that something does not add up. Faced with an investment or business opportunity, a rigorous prior examination avoids most of the losses that are later so hard to recover.

That examination has a name: due diligence. It consists in verifying, methodically and before committing, what the scheme’s advertising conceals. It starts with what is decisive and immediately verifiable: whether the person or entity is authorised and supervised by the Financial Superintendence and does not appear on its lists of unauthorised persons and entities, and whether any securities offering is registered. From there one moves to what the commercial register shows about the company, its shareholders, its corporate purpose and its actual track record.

On that basis one examines the internal coherence of the business: whether there is a real asset or business behind the promised return, whether the contracts to be signed truly reflect what is being offered and how solid their clauses are, and what the promoters’ reputation and record show. Every check made before signing is a loss that will not have to be claimed later.

Due diligence is especially valuable where there is already suspicion: when withdrawals start to be delayed, when the pressure to “reinvest” or “invite” increases, or when information becomes evasive. Timely legal and financial analysis at that point —confirming or ruling out fraud— allows a decision in time on whether to get out, document and, where appropriate, report, before the scheme collapses.

This is where support and advice on transactions make the difference. It is not only about representing the victim afterwards, but about accompanying the investor beforehand: reviewing the structure of the business, verifying authorisations and contracts, and flagging the legal risks before they turn into losses. Prevention is almost always more effective than recovery, among other reasons because the question that really decides —whether whoever takes the money is authorised and supervised— can be answered calmly before the money is handed over, and becomes a race against time once it has gone.

7. From the consultation to representation: prevention and response

A consultation with the firm is not only for someone who has already lost money: it is also for someone assessing a business and wanting to check it before committing. Depending on the case, the strategy combines preventive verification or the criminal, administrative and recovery fronts. This is how the work is ordered:

Stage 1 — Diagnosis or due diligence. The initial consultation defines the approach: if preventive, due diligence on the business is carried out —authorisations, commercial register, contracts and the real basis of the return—; if the harm has already occurred, the structure of the scheme is analysed, it is determined whether there was fraud, unlawful deposit-taking or both, and the available evidence is put in order.

Stage 2 — Complaint and report. The criminal complaint is filed with the Prosecution Service and, in parallel, the report to the competent Superintendence for cessation or intervention.

Stage 3 — Follow-up and recovery. The criminal investigation and the intervention procedure are monitored, seeking to preserve and return the funds.

Stage 4 — Redress. Depending on the outcome, the full-redress proceeding is pursued within the statutory deadlines and coordinated with administrative recovery.

The order of those stages is not a formality. Recovering funds and preserving evidence depend on speed, and timely guidance allows the complaint, the report to the Superintendence and the recovery to be activated at once, before the scheme finishes dissipating the money. None of those steps guarantees an outcome by itself, but all of them lose effectiveness with the passage of time.

8. Conclusions

Handing over money voluntarily does not exclude an offence. What separates an investment from unlawful deposit-taking is not the punctuality of the first payments. It is the State authorisation and supervision of whoever receives the money. In fraud, the victim’s will was formed on a deception. In the mass and habitual taking of deposits under article 316, no deception even needs to be proved: unauthorised taking is enough.

The response combines three fronts: the criminal complaint, the report to the competent Superintendence and the recovery of funds. Recovery can come through intervention by the Superintendence of Companies. It can also come through the full-redress proceeding, which lapses thirty days after the conviction becomes final. Everything depends on speed and on the documentation gathered. The most valuable protection, however, is due diligence before the money is handed over.

Defining whether the task is prevention or response is the purpose of the initial consultation. In it we review the structure of the business, its authorisations and its contracts. If the harm has occurred, we analyse whether there was fraud, unlawful deposit-taking or both, and put the evidence in order. From that diagnosis, the firm can assist with filing the criminal complaint and take on victim representation in the proceeding.

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