Bitcoin Forum

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Disclaimer: The information's contained in this explanation is the result of my understanding of Ponzi Schemes and may contain some errors. Search and confirm about it.

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Table of contents

      1. Introduction (#post_point1)
      2. What is a Ponzi scheme? (#post_point2)
      3. How Does a Ponzi Scheme Work? (#post_point3)
      4. How to Recognize crypto Ponzi Schemes? (#post_point4)
      5. How to protect yourself? (#post_point5)


Introduction

Most individuals who invest in cryptocurrencies want make some profits so the return on investment (ROI) is supposed to be one of the things to study before thinking about investing.
With the increase in projects and methods of investing in cryptocurrencies, the risks increased, and therefore risks must be redefined, the difference between them and Ponzi schemes.

What is a Ponzi scheme?


The name goes back to Charles Ponzi who became famous for his fraudulent system of earning money, as he managed to defraud hundreds of victims.
Ponzi schemes work by paying profits to former investors with funds from newer investors and therefore the belief comes that profits come from product sales and thus continue to invest and the promise of generating high-value returns with little or even no risk.
In the end, other investors discover that they are the source of the funds and therefore they will not receive returns and they may lose their money.



How Does a Ponzi Scheme Work?


The main point is that scammers never invest money that they redistribute investor money to believe that they are making profits, and therefore you need a steady flow of money to survive, otherwise they will run away with the money.

What makes this type of fraud appropriate in cryptocurrencies is the fact that scammers are more difficult to track and there is not enough regulatory framework to protect investors and thus may escape all investments without paying any returns.


How to Recognize crypto Ponzi Schemes?

It is not an easy task, but there are some indicators and red Flags which make more likely the project is to be Ponzi Scheme than as an investment:

• Promises of high profits with zero risk: “The higher the risk, the higher the reward” When you hear that there are no risks, something is wrong.
• Consistent returns, regardless of the market condition: The yield from investing varies according to the nature of the market, but when a project talks about double profits in a short period, regardless of the market.
• Lack of transparency: how to get profits, the nature of the investment, who the investors are, information about them. They try to sell you dreams without providing detail about them.
• Don’t offer real products or services: Often the investment is a dream, but there are no real services.
• Increasing minimum investment: These projects need to grow rapidly, and therefore they need to increase their capital, which is higher than the minimum withdrawal amount.
• It comes through someone with a shared affinity: Often these projects come from a well-known personality or someone you trust and thus reduce caution and search for them, sometimes they lie to developers or give false information.

How to protect yourself?

• Be skeptical: Ask a lot, understand how you benefit from the investment, how the project works, read about them and ask people in this forum or who you trust.
• Do not trust. Verify: Do not trust the opinions of experts, and do not listen to all details without checking them.Ask for registration information, legal papers and verify that they are correct.
• Check out the seller, white paper, developers, their road map, and all the details: Scammers are always lazy so you will find some errors or misinformation.
• Understand the investment: Do not invest in things you know nothing about.

People can be so ignorant to what ponzi and pyramidal scheme are all about, about the high return, people are just greedy and like high return investment within a short term. It can be very hard at times to know a business is using investors money to pay investors because they scam in a way they sell fake products which makes it hard to know a business can be a ponzi, the best approach that I have noticed and best in order not to invest on ponzi scheme is the high yield return promised but not real. No legit business on earth that can offer too good to be real profits.

We have a similar thread, Ponzi Scheme 101. (https://bitcointalk.org/index.php?topic=5035428.0) It's an old thread but they are still applicable, in my opinion. And there is also history of Ponzi's in crypto sphere, maybe it just needed to be updated to include the likes of Richard Heart's HEX coin ponzi's.

These a wide fire around the Westside am from. And I'm confuse about this. Is there's no authoritative organization that  can look into this?  Or maybe  Certified such platform and even Announce the life spam of such platform?  Please if there is any authorities please kindly share with us

As far as I know there is none, crypto is open and a free market and there's no single authority to look as this Ponzi schemes that's why you really need to be careful and do your research before investing on any projects or platforms out there.

Thanks for this wonderful post.

The two most common Ponzi scheme that I have seen is investment based pyramid scheme and MLM based cryptocurrency scheme. Both these will offer higher returns on amount invested.

It is better to stay away from such scheme if you want to protect your investment.
 

There are many ponzi schemes which are fooling the newbies and i like your attempt to write a detailed description about them.
Another ponzi scheme is the matrix like zarfund which was very popular few years back. That was sort of MLM and it only gave benefits to the owner or who joined on top the the matrix level.

When it comes to Ponzi scheme, my dear I don't even regard it as something I should be hearing or even talk about. Am glad this topic will help lots of dummies to understand how it works.

Scammers now use Ponzi scheme as a means of making money, some one will just seat by the corner and bring up some useless ideas. Anything that got to do with invest this little amount of money and get 100% of it within the next day. Just take to your heels.

Ponzi Schemes are worth nothing but why they have still existed around us?
People are usually blind enough to see the real intention of a certain project because of very attractive and high offerings. No wonder why it gives curiosity and then asking "HOW".  That is actually what we have to see on social media...

Ponzi scheme has no way to stop because people are very accomodating to this and they allow it to scam their own.

Once there are always naive, greedy, and lazy people this Ponzi scheme activity was always there. A trap like this will always good from the start and when their prize pool will become bigger and bigger and ready to run away, that is the time they will exit and totally shutdown together with investor's money.

You can easily determine this by an HYIP (High-Yield Investment Program) through their process of earning or how they can generate profit without actual product and OP stated above was right. In addition to OP must read, How to Spot a Ponzi Scheme (https://www.fool.com/retirement/2017/01/30/how-to-spot-a-ponzi-scheme.aspx).

There are some people who will never listen if someone warns them about impending losses. Because they are very greedy, they have to face huge losses due to this greed. Using this greed of people, the owners of ponzi scheme websites are still continuing their scams.

If they didn't get investors, they wouldn't spend so much to build a website, they do marketing with Google ads. Then it means how big their market is, they getting big number of investors. Look at this post of yours, if those people are careful, who dream of getting rich quick. 

Ethereum rose and a friend of mine said he has got ethereum, I thought it was good that my friend did so I asked -knowing he doesn't know much- which exchange did you buy your ethereum and he said the only way possible which to him was FORSAGE.
This is not a scam/Ponzi alone it's bad knowledge,

Lack of education why they keep on existing. There are a lot of people lacks of education on determining what ponzi's are. And that's why they keep coming and targeting people who lacks of education about them.

As for the people who looks for opportunity, they think that it's an actual way of making money. No sweat but easy money but they are not aware that those schemes will scam their money lately. And there are people even though they've became a victim already, they don't stop investing in scams, they don't want to learn a lesson from their own experience.

That is the SAD reality. People had never learn from the past but instead, they let these things to happen with them again and again. People who have the kind of mindest is hardly to changed. Thinking about easy money, instant rich, well, that how it drag them to keep these Ponzi scheme alive and kicking.

We have this awareness but how sad that many people are still believing these attractive giveaways. I don't how we could help them to stop and open up their mind from blindness. Scammers have their guts because there are still a lot of people are willing to listen with them.

Guys, you don't need to quote all the body of the threads. Why don't just quote what you want to comment on or kindly reply without a quote?

Not only for greedy ones, it is also for people who never learned from various cases of Ponzi/scams in the previous time. And it is for a newcomers and careless people as well. Yep, there are many reasons why someone can be trapped on Ponzi but at least we need to be carefull on anything that we want to do, so we can minimize the chance to join on Ponzi schemes.

Oh so it's because of Charles ponzi, I always wondered from where 'ponzi scheme' came from.

Ponzi scheme promises high profits in return, promises users to get rich quickly while there are series of investors that got rich within a pave of years. Ponzi schemes can never end unless dummies kills the habit of getting rich quick from their DNA and start undergoing gradual process of reaching their respective goals.

What the hell does that even mean? Habit of getting rich quick? That is non-existent in my opinion.

Let's consider another side of the coin here shall we? First is the fact that people are blinded not by the scheme itself but by the people who are trying to recruit them into the scam, we can blame the victims but the if we teach them ways to identify these red flags about people that are trying to recruit them then I think that it will get us to a good start, try to find the other problems that could help solve the biggest problem. Another problem is that these schemes are legal in the eyes of the law because they are registered businesses, one indicator mentioned by the OP is the constant return of profits despite market problems.

Despite the fact that these Ponzi schemes have been described many times, the number of newcomers who have lost their money is not decreasing. This can only be explained by the fact that most people only learn from their mistakes, and do not read the thread dedicated to this type of scam here.

UP :)

There are a lot of people right now are still victim with the use of the Ponzi scheme and most of them are invested a huge amount of money and OP gives a good thread about this but how about the people does not read those still there are few they are still making an investment regarding with the Ponzi and some of them already learned they mistake.

Most of the tag I usually see in terms of Ponzi are:

• 1. We can double or triple your investment and earn up to 10 BTC.
• 2. This is safe and secured.
• 3. You can get your profit in just a week.
• 4. Invite more friends and double your funds.

Until now, too much greed has happened to the ponzi scheme that they invest and in the end they have to accept the risk that there is certainly for stubborn people to be advised to avoid the ponzi scheme.

Look at this board Scam Accusations a lot of catches that occur with the incipient ponzi scheme site for newbies to always pay attention to these threads to find out about the ponzi scheme catches that should be avoided.

Those are pyramid schemes, and not ponzi schemes.

Ponzi schemes and pyramid schemes are different, though they are similar in that current victims benefit from newer victims.

A ponzi scheme is an investment fraud in which the operator claims to invest the victims' money, but keeps it instead. The operator generally uses some of the investment money to convince victims that the investment is making a profit. Many ponzi schemes also incorporate a pyramid scheme by paying for referrals.

In a pyramid scheme, a victim generally pays current members of the pyramid scheme to join the pyramid scheme, and then makes money by convincing others to pay him to join. There are variations, or course. For example, often a victim doesn't buy membership outright, but instead pays for some product in order to join and then sells products to new victims who buy in order to join.

The fact is that most people do not take it seriously unless they become victim themselves. There is no point learning after you lose your money in ponzi schemes. Its better to learn before because you will come across many ponzi schemes on daily basis advertised on social media. It's difficult to stay away from them because they have so much attraction in them.

Not just that as from my observations, I have come to understand they target the gullible users, those wanting to make quick and easy money. I'm from a country this type of practice is seen as a normal thing, that's almost everyone is aware of this scams called Ponzi yet they still give patronage as far it can make them rich not minding if others get affected on the process. You'll see a well educated individual seriously promotion a Ponzi, deceiving others that look up to them for their own selfish reasons.

The recent trend is, they hide under the cover of them doing multi level marketing, convincing you into believing what you're enrolling yourself into isn't Ponzi but multi level marketing. This Ponzi scams comes in different forms but the cryptocurrency related ones are becoming a trend off recent which just sadden me because many won't recover from the fact cryptocurrency isn't a scam when they all crash.

To learn there is always a sense) And the experience that comes after the loss of money, should lead to the fact that in the future this will not happen again. But there are some participants who even after losing money continue to participate in Ponzi schemes, hoping that this time they will be able to get out of this Scam in time and they will be able to get a profit.

At some point a lot of people tend to join this pyramiding scheme, first, they just don't know it is really a scam investment or not, 2nd is I think they want to become part of the scam to earn a profit.

When you already know how it works you could easily identify scams or pyramiding projects. And at some point, you could actually ear in this investment that is why a lot of people are encouraged to join because they see other people earning in it. Affiliate or referral is actually a big part of it since you could earn when you invite someone that also invested in the program.