A Case Study of Pyramid Scheme Finance Flow Network Based on Social Network Analysis

Abstract

(1) Background: The pyramid scheme has caused a large-scale plunder of finances due to the unsustainability of its operating model, which seriously jeopardizes economic development and seriously affects social stability. In various types of networks, the finance flow network plays an extremely important role in the pyramid scheme organization. Through the study of the finance network, the operational nature of pyramid scheme organizations can be effectively explored, and the understanding of pyramid scheme organizations can be deepened to provide a basis for dealing with them. (2) Methods: This paper uses the motifs analysis and exponential random graph model in social network analysis to study the micro-structure and the network construction process of the “5.03” pyramid scheme finance flow network in Hunan, China. (3) Results: The finance flow network is sparse, the microstructure shows a typical pyramid structure; finance flows within the community and eventually flows to the most critical personnel, there is no finance relationship between different communities, and there are few finance relationships between pyramid salesmen of the same level. The inductees are in a key position in the network, which may explain why they are transferred to prosecution.