Financial deception in the digital age: investigating online pyramid schemes and their socioeconomic impacts in Sri Lanka

Purpose This study aims to explore the operation of online pyramid schemes in Sri Lanka, focusing on the economic, social and psychological factors influencing individuals’ investment decisions in these fraudulent schemes. Design/methodology/approach An exploratory research design was used, involving semi-structured interviews with ten individuals who had invested in online pyramid schemes. Participants were selected from different regions and schemes to provide diverse perspectives. Findings Online pyramid schemes, often disguised as multi-level marketing or trading platforms, are non-product-based and rely solely on recruitment. Investors, despite being aware of risks, are motivated by high financial return promises, social influence and luxurious lifestyle aspirations. These schemes exploit digital platforms like WhatsApp, Telegram and YouTube, making them difficult to identify and regulate. Referral commissions, live chat engagement and tiered investment structures further incentivize participation. Research limitations/implications This study provides valuable insights, but further research should explore offline pyramid schemes, assess the role of social media in scam propagation and evaluate regulatory frameworks in different regions. Practical implications The findings highlight the need for stronger legal frameworks and public awareness campaigns to combat online pyramid schemes effectively. Social implications Regulatory reinforcement and awareness initiatives can help reduce financial exploitation, protecting individuals from fraudulent investments. Originality/value This research contributes to behavioral finance by analyzing investor motivations and the role of digital platforms in pyramid schemes, offering new insights into fraudulent investment behavior.