Nitin Kamath recalls falling into pyramid scheme, warns retail investors against ‘easy money’ promises

Zerodha co-founder Nitin Kamath has revealed that he was once drawn into a pyramid scheme while trying to raise money for his trading account as a late teenager, saying the experience taught him that there are no shortcuts to building wealth.

In a post on X after watching the web series Pyramid Scheme, Kamath said the show brought back memories of the time he spent nearly two years associated with a multi-level marketing (MLM) company that eventually became a pyramid scheme.

“When I started my career at about 18, I was trying to find ways to fund my trading account. For about two years, I joined a multilevel marketing company that turned out to be a pyramid scheme,” Kamath wrote.

He said that he did not believe that the person who introduced him had deliberately misled him, but that the company itself had deceived the participants. Kamath admitted that he introduced many people to the scheme before it fell apart.

Recalling the moment the fraud was exposed, he said the series accurately captured the desperation that followed the collapse of such schemes.

Kamath also expressed concern that pyramid schemes are thriving in India despite greater financial awareness. Citing industry estimates, he said that about two new pyramid schemes are launched every day in the country. More than 5.5 crore Indians lost their savings in more than 5,300 such schemes, with an estimated Rs. 10 lakh crore was lost, a figure that 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.

“My experience has taught me one truth: there is no quick way to make money, be it trading or any other business. Anything that promises higher returns than a bank FD comes with risk. The higher the claim, the higher the risk,” he said.

Kamath also linked the warning to the recent surge in retail participation in the stock market, saying that many people are under the impression that it is easy to make money from equities.

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“This dynamic has also played a large part in the recent boom in retail markets, people spreading the word that making money in stocks is easy. It’s not, and accounts come in quietly, one account at a time,” he wrote.

He ends his post with a warning against referral-based money-making schemes.

“If someone tells you that you can make easy money by introducing others, run. Almost every one of them is a scam,” Kamath said.

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