The schemes are rife in the Goulburn Valley, South Gippsland and Geelong regions.
The Office of Fair Trading has urged people to avoid them and is investigating complaints, but so far has taken no action against the schemes.
One operator, who claims his scheme is legitimate, says more than $7million has been invested in the Goulburn Valley in the past month.
But concerned South Gippsland residents say the schemes are dividing communities and forcing people into debt.
The Office of Fair Trading's acting director, Jane Reynolds, this week declined to be interviewed, but issued a statement describing pyramid-style schemes as "a sure way of losing money".
She said participants invested $2000 in a scheme in the hope of a $16,000 return.
Ms Reynolds said one known as the Concorde Game involved people paying $2000 to buy one of eight seats on a make-believe flight.
"When all passenger seats are full, the captain departs with the $16,000 collected," she said.
"Once the captain departs it is unlikely that any of the eight remaining passengers will also receive $16,000.
"As is often the case with schemes such as this, if it sounds too good to be true it usually is."
Sen-Sgt Bob Cornelis, of Wonthaggi Police, said participants of one scheme were urging young people to become involved.
He said rumors suggested that at one meeting in the region $100,000 was invested.
"It's a huge concern because we know eventually a lot of people are going to lose $2000 they can't afford," he said.
"I would encourage anyone who knows about the scheme or is offered a place to keep their money in their pocket."
A Phillip Island businessman, who declined to be named, said the schemes were dividing the local community.
"People who have declared themselves opposed to the scheme are being shunned," he said.
"If the authorities were fair dinkum they would have nailed a dozen people already.
"There are heaps of people involved and I have heard of people using credit cards to participate."
The secretary of Korumburra Business Association, Shane McGrath, said the schemes held meetings in secret to avoid scrutiny by authorities.
"The authorities obviously know it is around, but people seem to think it's all above board," he said.
Barry Cassidy, organiser of the Concorde Game operating in Shepparton, Ballarat and Bendigo, said his scheme was legal.
Mr Cassidy said $45 million had been returned to participants Australia-wide in the past 15 months.
"In the last month in the Goulburn Valley, Bendigo, Ballarat and Shepparton, $7.4 million has gone into players' pockets."
Mr Cassidy, who declined to disclose how much money he had received as a participant, said people interested in the game were warned up-front they risked losing money.
"It's no different to going to the casino and putting $2000 on the roulette wheel," he said.