How to Identify a Ponzi

[nrd525]

I'm interested in developing a list of questions/variables that are associated with Ponzis.

Here is my short list.  Please add items to this list and I'll edit the post.

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

2.  Provides no evidence of business activity
They refuse to show what they are investing their capital, what products(s) or services they are selling, and who the customers are.  By contrast a mining corporation will be able to provide pictures of hardware and statistics of how many BTC generated per month.

3. Business activity is "speculation"
Speculation doesn't make steady rates of return. In fact the return rate should often be negative.

4. Steady rates of return
When combined with a high rate of return that is greater than the market rate of return this is suspicious.

5. Increasing demand for capital
Unlike a regular business which has its largest demand for capital at the start, the ponzi starts off with a very small amount of capital ("refuses" deposits), and then grows rapidly.  An increasing demand for capital makes sense only if the business can show what the money is being used for.  A ponzi will need to have its capital grow at a standard rate that exceeds the withdrawals, whereas a legitimate business will have a varying rate of investment (and this rate will often hit zero).

6. Operator hides their identity
If the name and identity of the person who runs this project is publicly known, and they live in a jurisdiction where it would be easy to prosecute them then they are less likely to run away with the money.  Though there are exceptions to this (perhaps too many for this to be a good indicator?).

7. A Super Majority of Non-Investors view it as a Ponzi
If a business is only defended as legitimate by those who are invested in it, while the overwhelming majority of individuals who have no money to gain from taking a position see it as a ponzi -- it is likely that the non-investors are more trustworthy in their assessment.

8. They advertise a "Limited Availability"
They have a low demand for funds.  Especially in the early phase.  Ideally they've got people chomping at the bit to be included in the scheme.

9. They have "Pass-Throughs".
Tentatively this seems like a good indicator. I don't think pass-throughs are typically used in regular project funding.  It increases the distance between the investor and the fund-owner and acts as a shield/distraction.  It is more indicative of money laundering.


First-Hand Ponzi Accounts
Chasing Maddoff - movie
The Man Who Would Be Polka King - movie account of a polka performer / ponzi that stole $5-$10 million.

EVE Ponzi First Hand Account
http://web.archive.org/web/20091026234156/http://geocities.com/currintrading/
http://web.archive.org/web/20091021193732/http://geocities.com/currintrading/bank.html

Books  
(I haven't read them but the Amazon reviews look good)
http://www.amazon.com/Robbing-You-Keyboard-Instead-Gun/dp/1453895299/
http://www.amazon.com/The-Vigilant-Investor-Fraud-Proof-Investments/dp/0814417507



Vladmir's Resources
Thread: https://bitcointalk.org/index.php?topic=91643.0

There are many resources dedicated to helping people to recognize and avoid scams:
http://www.sec.gov/answers/ponzi.htm
http://www.fsa.gov.uk/consumerinformation/scamsandswindles
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02597.html
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Little-Black-Book-Scams-e.pdf
http://www.kpmg.com/ca/en/whatwedo/specialinterests/at-risk-magazine/pages/ponzischemes%E2%80%93howtorecognizethem.aspx
http://www.fbi.gov/scams-safety/fraud/


There is some action that can be taken by people to protect themselves and others:
http://www.fsa.gov.uk/consumerinformation/if_things_go_wrong
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02801.html


Reports on Ponzis
http://www.marquetinternational.com/pdf/marquet_report_on_ponzi_schemes.pdf

[ErebusBat]

9. occams razor

[Shadow383]

First-Hand Ponzi Accounts
Chasing Maddoff - movie

EVE Ponzi First Hand Account
http://web.archive.org/web/20091026234156/http://geocities.com/currintrading/
http://web.archive.org/web/20091021193732/http://geocities.com/currintrading/bank.html

"Chasing Madoff" was really very interesting, here's an interview with the guy who first proposed Bernie as a ponzi op:
http://youtu.be/cfwJ06hc0_8?t=4m48s (the whole thing's very interesting and relevant)
http://www.youtube.com/watch?v=s68FR1MXT8Q

But yes, I would've thought that due diligence requires any sensible investor to go over the steps outlined in here before handing someone any considerable amount of cash. It is almost certain that some of the deposit schemes on offer here are illegitimate.

[elux]

Anyone got recommendations for good, technical, analytical books on ponzi schemes? 

(This is interesting, this is not.)

[koin]

Anyone got recommendations for good, technical, analytical books on ponzi schemes? 

http://www.amazon.com/The-Vigilant-Investor-Fraud-Proof-Investments/dp/0814417507

[Valalvax]

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

So basically what you're saying is nearly every single Bitcoin investment/loan/offer is a ponzi, because I don't think there are many at all that offer less than 50% a year

[dust]

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

So basically what you're saying is nearly every single Bitcoin investment/loan/offer is a ponzi, because I don't think there are many at all that offer less than 50% a year

These indicators are just things to look out for when investing.  Investments that fit multiple indicators have an increased risk of being a ponzi.

[fabrizziop]

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

So basically what you're saying is nearly every single Bitcoin investment/loan/offer is a ponzi, because I don't think there are many at all that offer less than 50% a year

These indicators are just things to look out for when investing.  Investments that fit multiple indicators have an increased risk of being a ponzi.

Exactly. You see Starfish BCB. They offer about 70% APR, but you see the full report on lending status/defaults/earnings, making it to me a safe investment.

[John (John K.)]

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

So basically what you're saying is nearly every single Bitcoin investment/loan/offer is a ponzi, because I don't think there are many at all that offer less than 50% a year

These indicators are just things to look out for when investing.  Investments that fit multiple indicators have an increased risk of being a ponzi.

Exactly. You see Starfish BCB. They offer about 70% APR, but you see the full report on lending status/defaults/earnings, making it to me a safe investment.

This +1.
The lack of transparency should be added to the list too.

[hgmichna]

I'm interested in developing a list of questions/variables that are associated with Ponzis.

Here is my short list.  Please add items to this list and I'll edit the post.

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common. ...

I would add that quoting interest rates weekly or monthly, rather than the proper annual rate, is a sure sign of an illicit scheme. It aims at very inexperienced investors.

[PatrickHarnett]

I'm interested in developing a list of questions/variables that are associated with Ponzis.

Here is my short list.  Please add items to this list and I'll edit the post.

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common. ...

I would add that quoting interest rates weekly or monthly, rather than the proper annual rate, is a sure sign of an illicit scheme. It aims at very inexperienced investors.

I'll disagree with that for two reasons.

1: Most of the loans are denominated in weekly or monthly rates and the way bitcoin works, an annual rate is less meaningful.  People don't look for 12-month instruments, 4 or 10 weeks is heaps (months are still like years).
2: The APR system used in the USA is a very poor indicator that is quite confusing and misleading for non-US people - took me ages to work it out, and it is terrible.

In the WPW I settled on a one month equivalent rate to rank the interest or return being paid.  Over one year, the difference between compounders and weekly payers would be huge.

[ErebusBat]

I'm interested in developing a list of questions/variables that are associated with Ponzis.

Here is my short list.  Please add items to this list and I'll edit the post.

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common. ...

I would add that quoting interest rates weekly or monthly, rather than the proper annual rate, is a sure sign of an illicit scheme. It aims at very inexperienced investors.

I'll disagree with that for two reasons.

1: Most of the loans are denominated in weekly or monthly rates and the way bitcoin works, an annual rate is less meaningful.  People don't look for 12-month instruments, 4 or 10 weeks is heaps (months are still like years).
2: The APR system used in the USA is a very poor indicator that is quite confusing and misleading for non-US people - took me ages to work it out, and it is terrible.

In the WPW I settled on a one month equivalent rate to rank the interest or return being paid.  Over one year, the difference between compounders and weekly payers would be huge.

^^^ That.... bitcoin is not (currently) like mainstream financial markets.

[hgmichna]

I'll disagree with that for two reasons. …

My remark was written for the person who asked, not for crooks that are part of an ongoing Ponzi scheme, which, notably, quotes its interest by the week.

[PatrickHarnett]

I'll disagree with that for two reasons. …

My remark was written for the person who asked, not for crooks that are part of an ongoing Ponzi scheme, which, notably, quotes its interest by the week.

I was actually referring to the rates often quoted for loans to members, a practice established before deposit taking was the norm.

I would also like to clarify if you comment is an accusation that I am a criminal?

[Vladimir]

2: The APR system used in the USA is a very poor indicator that is quite confusing and misleading for non-US people - took me ages to work it out, and it is terrible.

True.

US version of APR is simply ridiculous. UK version of APR is much more reasonable as it takes in account compound interest. In case of pirate it could be the difference between ~300 and ~3000 APR between US and UK version. Less confusing would be using AER. See this http://en.wikipedia.org/wiki/Annual_percentage_rate for details.

[ripper234]

I would add that quoting interest rates weekly or monthly, rather than the proper annual rate, is a sure sign of an illicit scheme. It aims at very inexperienced investors.

It is not, at least not in this case.

Bitcoin is super volatile, and so are business models built upon it.
Nobody can guarantee a yearly interest rate in Bitcoin loans, a weekly rate makes much more sense in this case, since the rates change frequently.

[ripper234]

I'll disagree with that for two reasons. …

My remark was written for the person who asked, not for crooks that are part of an ongoing Ponzi scheme, which, notably, quotes its interest by the week.

To the best of my judgement, Patrick Harnett is not operating a ponzi scheme (and I have some BTC riding on that conjecture).

Here is my reasoning.

[ripper234]

P.S.

I think having this thread as a sticky is a good thing.

People should think very carefully before investing with some of the lenders advertised here. But I will not make the leap of calling them Ponzis.

 - Bitcoin Saving & Trust may be a Ponzi (I wouldn't care to name the odds for this, I have too little information).

 - Pass-through schemes are not ponzis ... they are very upfront about what they do. (That is, unless their issuer has a separate intention of disappearing/defaulting ... but if Pirate defaults, they are not Ponzis).

 - Insured accounts are most likely not ponzis (some are less likely than others).

[Vladimir]

https://bitcointalk.org/index.php?topic=91643.0

[totaleclipseofthebank]

What I think of BTC HYIPs:



Maybe mythology can teach us a lesson here!

[Vladimir]

- Pass-through schemes are not ponzis ... they are very upfront about what they do. (That is, unless their issuer has a separate intention of disappearing/defaulting ... but if Pirate defaults, they are not Ponzis).

 - Insured accounts are most likely not ponzis (some are less likely than others).

If BullShit & Trust, is a ponzi: PPT's are effectively all ponzies as well. They are all then proxies for a fraud (participants of a criminal enterprise, co-conspirators) with some lipstick put on the pig. Those people who operate effectively investment funds and "savings account", ought to know better and recognize  where they are funneling other people's funds into. They are as guilty as the ponzi operator himself. Some of such PPT operators even pretend that they are acting ethically. The question is more like whether they are acting criminally. People who allow such ponzi promotion on their websites are to some degree complicit in fraud, marketplaces that allow trading of such instruments are to some significant degree complicit as well. People who have any kind of income derived from a fraud and who promote such fraud are complicit in perpetuation of the fraud.

Even if the above is not true from point of view of  some specific law in some specific jurisdiction, the above is certainly the case from point of view of anyone with even some modicum of Ethics.

[ripper234]

- Pass-through schemes are not ponzis ... they are very upfront about what they do. (That is, unless their issuer has a separate intention of disappearing/defaulting ... but if Pirate defaults, they are not Ponzis).

 - Insured accounts are most likely not ponzis (some are less likely than others).

If BullShit & Trust, is a ponzi: PPT's are effectively all ponzies as well.

Wrong.


The definition of Ponzi include lying to your cusotmers. PPTs (I assume) don't lie.
Rather, they're being very open about their default conditions.

Proxy or no proxy, they are not Ponzis. If I invested with one of them and Pirate defaulted, I would be angry (+ press charges) at Pirate, not at the one selling me the PPT.

[Vladimir]

- Pass-through schemes are not ponzis ... they are very upfront about what they do. (That is, unless their issuer has a separate intention of disappearing/defaulting ... but if Pirate defaults, they are not Ponzis).

 - Insured accounts are most likely not ponzis (some are less likely than others).

If BullShit & Trust, is a ponzi: PPT's are effectively all ponzies as well.

Wrong.


The definition of Ponzi include lying to your cusotmers. PPTs (I assume) don't lie.
Rather, they're being very open about their default conditions.

Proxy or no proxy, they are not Ponzis. If I invested with one of them and Pirate defaulted, I would be angry (+ press chargers) at Pirate, not at the one selling me the PPT.

Have you learned this little trick from Mavrodi?

[ripper234]

No.

[nrd525]

I added the book recommendations.

I added Vladimir's resources (sorry I missed your thread when I posted mine!)

I didn't add the time period for calculating interest.  Calculating interest on a monthly or weekly basis might just be the same root cause as having high interest rates and not its own cause.  Most legitimate business is done using Annual Percentage Rate (APR).  Payday loans are an exception.

[ninjarobot]

I liked this recent NPR article on how to identify ponzi's:

http://www.npr.org/blogs/money/2012/07/30/157606305/four-signs-your-awesome-investment-may-actually-be-a-ponzi-scheme

1. High return! Low risk!
2. Where does the money come from? It's complicated.
3. It's illegal, but it's safe.
4. They don't even want your money.

Snippet:

Ponzi schemers often feign reluctance to take an investor's money, which can defuse any suspicions. They also invoke safe-sounding words, like "bank," "securities exchange," "voucher, "guarantee," or "full faith and credit," and call their investments "trusts" or "trust units." Many foster friendships and even romantic relationships with their marks, and market their investments through the houses of worship they attend themselves.

In the end, Frankel writes, "con artists remind us of honest people. They are similar to entrepreneurs, eternally and unshakably optimistic, and they act like (and are) gifted salespeople."

[zyk]

oh my   is this all breathtaking....decision time is near....9 days pirate said....still...Vladimir and Vandroi disappeared from the scenery

Is everything still dissolvable without destroying OTC Ratings.....pirate still stands up to his word...is this even possible?

@Vandroi, Vladimir-----where are you? right now shouting i told you so would be so much appreciated as a further drawing

of the disolution scenario could make you the oracle heros!

Cheers Zyk

[Vladimir]

I am just waiting for the culmination and climax. I, personally, hope that I was wrong all along, but know that chances of that are slim to none, unfortunately.

Whatever the pirate said means nothing but that we will know better soon.

[Vandroiy]

zyk: I'm here, but just reading because there's nothing to do at this point. Lock is down, clock is ticking for days already.

If you ask me for a guess for the most likely case, we'll just see "delays" until the end of the month, then it's marked as defaulted and the story is over. So unless something strange happens, there won't be much of a show from here on.

I might not be online much when it's concluded, I'm going to be travelling at the time. I'll show up early September to settle the bets, and maybe occasionally in between.

[zyk]

Come on, don´t dive down in your modestity ----you went so far out on a limp that it would amaze me if you felt comfortable when pirate is proven

a hero who only has been hindered in establishing a new world reserve currency by FUD and Bitlane ( do you know what he tackled?)

If you don´t, i´ll come up with a gravedigger:-)

Nor has he clarified from what kind of buiseness he made a profit of about 3300 % just as he got to nearly a year now, neither did he come up with a story to explain why its reasonable for the

community and the puplic as a whole to transfer  bitcoins and with them a good junk of power into his hands.

Given that, its unbelievable that all lenders will be made whole.

Still i find the man and his words very straightforward and in any discussion with Vandroi the one who took the crown and so he was rightfully the captain of bitcoinworld for this time.

Taking that into account, i don´t think he backs all up by himself with his famous actor abilities,  there is a ploy involved ,where some of the fat cats

nearer to him as the crowd are conspiring to unequally divide the loot.  All will be enveloped in some kind of force majeure.....
  
There seem to be heros who can´t await being gang raped i see

If there is some community spirit  left, as it always should be, can´t we just work together and make at least a 3 % weekly growth of bitcoin usage possible......?

Which in my view is easily possible when promoting the bitcoin not as a ponzi scheme ( unluckily all interest bearing currencies are ponzi schemes ), a speculation realm,

a drug buying commodity or a mean to buy Butterflies in puppiestadium.....but as the one and only solution to take the power out of the hands of the Rothschild Federal Reserve -crony-

cartel - anarchy.....make them stop  extorting the working poeple the whole world over.

"The banks all gonna close if you don´t give us another billion to suck out of your children"

Bitcoin is free from all those schenanigans, can be transfered from cameroon ,to chile, to Afghanistan, to hollywood and to Somalia...without being taxed, comissioned, corrupted or diluted..

That is a worthwhile ponzi scheme to grow and where 3 % weekly profit is deserved for the poeple who put exchanges in place in all those places.......


to be continued:-)

Cheers Zyk

[zyk]

Come on.......was ment as response to Vladimir of course 

@Vandroi   are you german as well?  not anxious that pirate really earned a 8 % weekly profit on his borrowed capital?

if i work as whatever buying and selling stuff ( veterinarien medicaments in my case) which at the time always appreciated , of course markups of 30 % for a transaction are possible...don´t you think so?

suspicion of course is that he was so involved in BCST and vegas trips that i don´t know in what time he should  have earned the 8 % ROI


that you can go travelling with this bet in the back amzing as i can barely leave my comp. and bitcoin quotations:-)

Have a nice trip...

If you win the bet you should just form a new BCST ...this time run without Bitlane and as an at least 100 years enduring proper ponzi

Have a nice trip

Cheers Zyk

[nrd525]

I'd appreciate it if people stayed on topic and didn't get into speculation about Pirate on this thread. 

Referring to Pirate's operation is on-topic if you are using it to identify common variables shared with other ponzis or non-ponzis.

Thanks!

[Herodes]

[... snip ...]

A few rules to live by:

- If it sounds too good to be true, it usually is.
- Also, no serious business would hesitate giving you information you need while doing some serious dd.
- Don't invest more than you can stand to lose.

[nibor]

- Pass-through schemes are not ponzis ... they are very upfront about what they do. (That is, unless their issuer has a separate intention of disappearing/defaulting ... but if Pirate defaults, they are not Ponzis).

 - Insured accounts are most likely not ponzis (some are less likely than others).

If BullShit & Trust, is a ponzi: PPT's are effectively all ponzies as well.

Wrong.


The definition of Ponzi include lying to your cusotmers. PPTs (I assume) don't lie.
Rather, they're being very open about their default conditions.

Proxy or no proxy, they are not Ponzis. If I invested with one of them and Pirate defaulted, I would be angry (+ press charges) at Pirate, not at the one selling me the PPT.

I expect that some of the PPT's never had an account with Pirate. They were just paying the dividends out of the investors cash. So will now claim not have received any cash from him and pocket the remaining BTC's.

[gene]

This may be of interest. Please repost where appropriate:

http://dealbook.nytimes.com/2012/08/20/examining-the-ponzi-scheme-through-the-mind-of-the-con-artist/?pagewanted=print

August 20, 2012, 5:13 pm
Examining the Ponzi Scheme Through the Mind of the Con Artist
By DIANA B. HENRIQUES

Maybe "Ponzi scheme" should have its own spot in the Dewey Decimal System. Along with biographies of the schemers, a growing stack of scholarly references, legal tomes and articles aims to collect knowledge about this age-old crime.

But the latest entry in the category, "The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims" by Tamar Frankel, takes a different approach. While Professor Frankel is a legal scholar who has been on the faculty of the Boston University Law School since 1968, her book explores the psychology of the financial criminals and what makes them tick. She was inspired by a colleague who referred to them as "those mimics of trustworthiness: con artists."

She spent more than a decade researching the book, analyzing more than a hundred Ponzi schemes. Among them: the Caritas scandal in Romania, an early 1990s fraud whose victims saw the mastermind as a saint in Robin Hood guise; the currency fraud run by J. David Dominelli, which collapsed in the mid-1980s and stung a host of San Diego's elite; and the Madoff scandal, history's largest Ponzi scheme, with paper losses of $64.8 billion and thousands of victims around the world.

Professor Frankel talked about the mind-set of the con artist, as well as the role that victims and society play. Her conclusions will not comfort Ponzi victims; she faults them for their gullibility and failing to "do their homework." She finds, too, that society has a profound ambivalence toward con artists despite the vicious nature of their crimes - which, she notes, on rare occasions have even included murder.

Q. Do you now feel that you better understand Ponzi schemes and the "mimics" of honesty who run them?

A. Yes. Especially, I understand better the impact of culture - a culture of risk-taking, the hope of making money, an insatiable appetite for more. These are all part of the culture in which Ponzi schemes arise and flourish.

Q. And yet, as you know, those traits are also part of the culture in which capitalism thrives and economies flourish. If no one trusted anyone, modern commerce - indeed, modern life - would be impossible. So where should we draw the line between trust and suspicion?

A. It's not so much a continuum as it is the proverbial slippery slope. It's very easy to slip down a slippery slope - and very hard to climb back up again. When people start doing one little wrong, it gets a little easier to do one more wrong.

Q. Will people buy that? That one step off the straight and narrow leads to corruption?

A. If you look at the history of successful human societies, two things are clear. One, you must have trust. Without it, society cannot succeed. At the same time, you must also be trustworthy.

Q. But it's not so simple, is it? Some victims of Mr. Madoff feel they justifiably placed their trust in a respected market veteran who knew far more about markets than they did. If I'm asked to vet a Madoff story, I know what to look for. But if my car mechanic tells me I need a new frambulator, I don't know enough about cars to assess his honesty; I'll have to trust him. So where is the line between justified trust and unreasonable gullibility? And won't it be different for different people?

A. Gullibility is the tendency to believe without reasonable evidence. Every culture draws a line between trust and gullibility. And in the financial arena, the line between trust and gullibility may have to be more tightly drawn. For example, as I note in my book, many con artists make it seem that they are limiting access to their investments, making them available only to a select few. Now, rationally, why would a money manager do that? Look around you and you see hedge funds, mutual funds, private equity funds and advisers all salivating for more clients. Yet, there are those who believe that the more unique and hard to get an investment is, the more valuable it is. That's gullibility - because it is not rational to believe that.

Q. Of course, Madoff had a seemingly plausible explanation for that: He managed money only as a sideline and he didn't want word to get around because he'd have to turn people away and that would cause hard feelings.

A. And Madoff was a well-known broker - in other words, it was his business. He was an expert trader. He said, "I have a secret way of doing something," and it may have seemed plausible that he did. You're quite right that he's different.

Q. Nor did Madoff promise sky-high returns - he just offered steady consistency. A fraud analyst named Pat Huddleston says of successful Ponzi schemers: "If it sounds too good to be true, you're dealing with an amateur." Don't you think future Ponzi schemers will take a page from Madoff's playbook and keep their returns relatively modest to avoid raising red flags?

A. I doubt it. People certainly are more concerned about risk than they were before the financial crisis. But con artists do not adjust their stories to the current culture and public feeling but rather focus on their potential targeted audiences. For example, a con artist who operated a charitable organization appealed to similar organizations with a story that an anonymous donor would match their investments. This story was convincing because the managers of charitable institutions have donors who seek to remain anonymous.

Q. Some critics may argue that your analysis of people who fall prey to Ponzi schemes skirts pretty close to "blaming the victim." Do you think Ponzi victims are responsible for their own fate?

A. That's a very difficult issue. "Blame" means an "assignment of responsibility for a fault or a wrong or an error." I think we would agree that a person who suffers from heart disease after years of overeating and smoking may bear some responsibility for his or her illness. I empathize with victims and I feel for them, even as I assign some responsibility to them.

Diana B. Henriques is author of "The Wizard of Lies: Bernie Madoff and the Death of Trust."

[Gavin Andresen]

From this very relevant article:
  "Megan McArdle on Arbitrage and Why We Love Being Conned"

We are most vulnerable to Ponzi schemes and other confidence tricks when we start to believe that we can cheat the universe—that we can get something for nothing. The best con men succeed mostly because we are so desperate to believe them.

[Micon]

https://bitcointalk.org/index.php?topic=105285.0

My list of current Ponzi's

[AndrewBUD]

I just noticed this at the top of each thread....

[JoelKatz]

The definition of Ponzi include lying to your cusotmers.

Correct.

PPTs (I assume) don't lie.

It doesn't matter who does the lying, so long as the people whose money is used to make the interest payments have been lied to.

Rather, they're being very open about their default conditions.

That's not the point. If someone hires me to find a hitman to kill their wife, and I do so, I'm still just as responsible for the murder as the hitman is. This is true even if I find the best and most reliable hitman and fully keep my agreement with the person who hired me.

Proxy or no proxy, they are not Ponzis. If I invested with one of them and Pirate defaulted, I would be angry (+ press charges) at Pirate, not at the one selling me the PPT.

They are Ponzis. The "interest payments" they make are actually the result of fraudulent transfers from other investors. If you invested in a PPT, you hired the PPT operator to make you the recipient of fraudulent transfers of money Pirate collected from "investors", just as people who invested directly in Pirate did.

[nrd525]

Ponzis do not have to lie, though most of them mislead. The MMM (Russian) ponzi was honest about its ponzi identity.

[Mosrite]

Easy. If a thread in "lending" or "long-term offers," contains a business proposal, it's a ponzi.

[bitcoinbear]

9. They have "Pass-Throughs".
Tentatively this seems like a good indicator. I don't think pass-throughs are typically used in regular project funding.  It increases the distance between the investor and the fund-owner and acts as a shield/distraction.  It is more indicative of money laundering.

I don't think this is generally applicable. Do you have any examples other than Pirate? An example of a legitimate pass-through is the GSDPT (Gamma satoshiDice pass through), which allows people using one exchange to invest in an asset listed on another exchange.

[tiberiandusk]

http://www.tumblr.com/blog/nessieneedstrefity

[JoelKatz]

I don't think this is generally applicable. Do you have any examples other than Pirate? An example of a legitimate pass-through is the GSDPT (Gamma satoshiDice pass through), which allows people using one exchange to invest in an asset listed on another exchange.

Madoff would be an example.

http://money.cnn.com/2010/12/09/news/companies/madoff_feeder_funds/index.htm?iid=EL

[nrd525]

MMM used a decentralized system of offices in various towns in Russia - at least according to the website.  Similar to a pass-through.

[WifeOfStarfish]

Easy. If a thread in "lending" or "long-term offers," contains a business proposal, it's a ponzi.

Duh - what apart from ''business proposals'' would BE in lending?!

[guruvan]

Easy. If a thread in "lending" or "long-term offers," contains a business proposal, it's a ponzi.

Duh - what apart from ''business proposals'' would BE in lending?!

LOL. No shit. The "How to identify a ponzi" thread talks about the lack of a business proposal as a potential sign of a ponzi scheme.

Now, a business proposal confirms one. 

The average IQ continues to decrease on this forum. Currently the odds are 1:3 the avg IQ will reach 70 or below before the block reward halves.

[Nefario]

Here is an exercise, look at this thread and try to list the ways in which it is likely to be a scam.

[nrd525]

A variable interest rate is an interesting factor. It lets a ponzi slow down payments if they are not getting enough new investment.  On the other hand, a reduction in the interest rate is also a sign of a poorly run ponzi or one that is about to collapse - so most operators won't do it unless they are nervous to desperate.  Pirate didn't lower interest rates until the dire end. A variable interest rate can boost confidence if you are always hitting the highest part of the range (artificially outperforming expectations), but if your interest rate actually does vary a lot it will reduce investor confidence.

The other reason for a variable interest rate is to make your project look more legitimate.  This is useful if your intended investors have experience with ponzis.

...

There are some  interesting investor videos about Zeek Rewards (failed US ponzi scheme valued at $600 million) on Youtube.  The level of denial is very similar to that experienced by BTCST investors.  When someone writes up the Zeek Rewards story it should be a good case study.

[nrd525]

I added this movie:
The Man Who Would Be Polka King - movie account of a Polish Pennsylvanian Polka Performer Ponzi (say that five times) that stole $5-$10 million.

I recently watched it on Netflix (Instant Watch) and enjoyed it.  A good example of how to build a great relationship in a niche community and use that trust to make money.  Though what is really interesting is that it looks like he wasn't in it for the money - he wanted to use the money to build a polka empire and be famous.  So he was using the ponzi to fund his other activities that were running at a loss.

[hgmichna]

[…] but if your interest rate actually does vary a lot it will reduce investor confidence.

The other reason for a variable interest rate is to make your project look more legitimate.  This is useful if your intended investors have experience with ponzis.

…

You cannot easily have it both ways. Fact is that honest high-risk investments always have varying interest rates, so a fixed high interest rate is a Ponzi indicator. Citation from the movie "Chasing Madoff": "There are no straight lines in finance."

Thanks for the other movie hint! Will try to get and watch that one too.

[Stephen Gornick]

On a related note:

Ponzi Scheme Victims May Owe Triple Damages For Usury In Clawback Lawsuits
http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/

Isn't it the ponzi operator who is the victim of "usury" though?  (i.e., having to pay "investors" excessive interest rates?  ha! )

[JoelKatz]

On a related note:

Ponzi Scheme Victims May Owe Triple Damages For Usury In Clawback Lawsuits
http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/

Isn't it the ponzi operator who is the victim of "usury" though?  (i.e., having to pay "investors" excessive interest rates?  ha! )

It's the Ponzi's victims who are the victims of the usury because it's their money that's used to pay the usurious interest rates. The Ponzi operator normally doesn't have any of his own money invested that gets paid to anyone.

[gabbergabe]

I added this movie:
The Man Who Would Be Polka King - movie account of a Polish Pennsylvanian Polka Performer Ponzi (say that five times) that stole $5-$10 million.

I recently watched it on Netflix (Instant Watch) and enjoyed it.  A good example of how to build a great relationship in a niche community and use that trust to make money.  Though what is really interesting is that it looks like he wasn't in it for the money - he wanted to use the money to build a polka empire and be famous.  So he was using the ponzi to fund his other activities that were running at a loss.

watching now...

[nrd525]

Latest candidate:
http://makebtc.org/

Unlike other ponzis which often offer a steady rate of return, this scam has a very weird system of "levels".  With their default values it looks like it takes 14 "rounds" to get your money back (if you withdraw 50% / invest 50% in "levels").  After 14 rounds of this, you could get a return of 17%/round with 100% withdrawal.

Definitely meets the "high interest" rate of return.

Lacks a business model. Looks like a type of ponzi scheme that also uses a pyramid structure.  I don't understand the "level" nonsense.

Innovative in that it appears to transparent about payments and account levels. This will probably help it gain the trust of users, making it easier to scam people.

The domain registration information is fake. There is no person or address connected to it.

[oztusk]

Latest candidate:
http://makebtc.org/

Unlike other ponzis which often offer a steady rate of return, this scam has a very weird system of "levels".  With their default values it looks like it takes 14 "rounds" to get your money back (if you withdraw 50% / invest 50% in "levels").  After 14 rounds of this, you could get a return of 17%/round with 100% withdrawal.

Definitely meets the "high interest" rate of return.

Lacks a business model. Looks like a type of ponzi scheme that also uses a pyramid structure.  I don't understand the "level" nonsense.

Innovative in that it appears to transparent about payments and account levels. This will probably help it gain the trust of users, making it easier to scam people.

The domain registration information is fake. There is no person or address connected to it.

"ponzi" is a word often carelessly used out of place.

This thing might more correctly be reffered to as a "pyramid scheme." Similar but different.

"scam" though,... that's one of those words that covers a lot. A quick look at makebtc.org is good for a short lol.

[nrd525]

How would you differ a ponzi from a pyramid scheme?

A lot of what people commonly refer to as pyramid schemes in the US actually have real business models (see Avon company or Herbal Life).

I guess MakeBtc could be described as a pyramid scheme because the website needs to reach a certain level of investment before paying out (if I understand the scam correctly).  By contrast, a ponzi typically has a more standard rate of return.

http://en.wikipedia.org/wiki/Pyramid_scheme
Did Makebtc directly reward people for enrolling other people in the scheme?  That seems to be the standard definition for pyramid scheme.

[Muhammed Zakir]

https://bitcointalk.org/index.php?topic=91643.0

Thanks for the link. I was wondering what is Ponzi? When I looked the link and the wiki link from that post I understood it.
Kindly,
       Muhammed Zakhir

[JoelKatz]

How would you differ a ponzi from a pyramid scheme?

Typically, the fraud in a ponzi scheme consists of secretly using funds from later investors to pay off earlier investors. Generally, there will be some supposed business model (arbitrage, resale, whatever) that doesn't actually exist.

In a pyramid scheme, the use of funds from later investors to pay off earlier investors is typically disclosed. The key difference between a pyramid scheme and legitimate multi-level marketing is that a pyramid scheme has no real product sales. In a pyramid scheme, by design, the vast majority of the profit made by early investors comes from the fees paid by later investors and any products sold are, typically, a sham.

The line between MLM and pyramid schemes is not always a bright one. One giveaway is that pyramid schemes typically promise you a cut of the membership fees charged to your downline while MLM schemes focus on sharing the proceeds from your downline's sales. If you're getting a cut of your downline's membership fees, that means that part of your membership fees went to whoever brought you in. What *legitimate* purpose does that serve?

[Muhammed Zakir]

I'm interested in developing a list of questions/variables that are associated with Ponzis.

Here is my short list.  Please add items to this list and I'll edit the post.

Ponzi Indicators
1. High rate of return
Explanation: ponzi schemes typically offer very high rates of return that are not possible.  Anything that is > 50%/year APR is suspicious.  Anything > 500% APR is very suspicious.  Ponzis can offer lower rates as well (see Maddoff - 10% APR), but these are less common.

2.  Provides no evidence of business activity
They refuse to show what they are investing their capital, what products(s) or services they are selling, and who the customers are.  By contrast a mining corporation will be able to provide pictures of hardware and statistics of how many BTC generated per month.

3. Business activity is "speculation"
Speculation doesn't make steady rates of return. In fact the return rate should often be negative.

4. Steady rates of return
When combined with a high rate of return that is greater than the market rate of return this is suspicious.

5. Increasing demand for capital
Unlike a regular business which has its largest demand for capital at the start, the ponzi starts off with a very small amount of capital ("refuses" deposits), and then grows rapidly.  An increasing demand for capital makes sense only if the business can show what the money is being used for.  A ponzi will need to have its capital grow at a standard rate that exceeds the withdrawals, whereas a legitimate business will have a varying rate of investment (and this rate will often hit zero).

6. Operator hides their identity
If the name and identity of the person who runs this project is publicly known, and they live in a jurisdiction where it would be easy to prosecute them then they are less likely to run away with the money.  Though there are exceptions to this (perhaps too many for this to be a good indicator?).

7. A Super Majority of Non-Investors view it as a Ponzi
If a business is only defended as legitimate by those who are invested in it, while the overwhelming majority of individuals who have no money to gain from taking a position see it as a ponzi -- it is likely that the non-investors are more trustworthy in their assessment.

8. They advertise a "Limited Availability"
They have a low demand for funds.  Especially in the early phase.  Ideally they've got people chomping at the bit to be included in the scheme.

9. They have "Pass-Throughs".
Tentatively this seems like a good indicator. I don't think pass-throughs are typically used in regular project funding.  It increases the distance between the investor and the fund-owner and acts as a shield/distraction.  It is more indicative of money laundering.


First-Hand Ponzi Accounts
Chasing Maddoff - movie
The Man Who Would Be Polka King - movie account of a polka performer / ponzi that stole $5-$10 million.

EVE Ponzi First Hand Account
http://web.archive.org/web/20091026234156/http://geocities.com/currintrading/
http://web.archive.org/web/20091021193732/http://geocities.com/currintrading/bank.html

Books  
(I haven't read them but the Amazon reviews look good)
http://www.amazon.com/Robbing-You-Keyboard-Instead-Gun/dp/1453895299/
http://www.amazon.com/The-Vigilant-Investor-Fraud-Proof-Investments/dp/0814417507



Vladmir's Resources
Thread: https://bitcointalk.org/index.php?topic=91643.0

There are many resources dedicated to helping people to recognize and avoid scams:
http://www.sec.gov/answers/ponzi.htm
http://www.fsa.gov.uk/consumerinformation/scamsandswindles
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02597.html
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/Little-Black-Book-Scams-e.pdf
http://www.kpmg.com/ca/en/whatwedo/specialinterests/at-risk-magazine/pages/ponzischemes%E2%80%93howtorecognizethem.aspx
http://www.fbi.gov/scams-safety/fraud/


There is some action that can be taken by people to protect themselves and others:
http://www.fsa.gov.uk/consumerinformation/if_things_go_wrong
http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02801.html

Thanks for posting this!
I have a doubt, Is pbmining.com a Ponzi scheme?
Kindly,
        Muhammed Zakhir

[nrd525]

Mining isn't a ponzi scheme and pbmining looks like a mining rental site.  That said you must take into account future difficulty increase. So if you rent any hash power - it's value past six to twelve months or so is essentially zero.  Your hardware is  losing 20% in value every time the difficulty increases by 20%.

[Muhammed Zakir]

Mining isn't a ponzi scheme and pbmining looks like a mining rental site.  That said you must take into account future difficulty increase. So if you rent any hash power - it's value past six to twelve months or so is essentially zero.  Your hardware is  losing 20% in value every time the difficulty increases by 20%.

I know that mining isn't a ponzi scheme but I saw many posts saying pbmining is a ponzi scheme. I bought some GHs from it and I am getting some BTC ...
Pbmining isn't giving a photo of their mining place or hardware, it seem suspicious. Anyway it is better than others if it is a legit mining group as there is no fee and cheap price for GHs.  .
Kindly,
       Muhammed Zakhir

[nrd525]

I wouldn't be surprised if someone organized a fake-mining ponzi scheme. 

If they do have 845 Th/s - I'm guessing (don't take this as an expert opinion) they should be able to prove it with a payout address from the pool that they use.

What would be especially suspicious is if they are providing higher rates of return than owning an ASIC miner does.  Are they doing this?

[Muhammed Zakir]

What would be especially suspicious is if they are providing higher rates of return than owning an ASIC miner does.  Are they doing this?

They are not giving higher rates of return, they are giving the same BTC you get from your miner. Check it in a mining profitability calculator! They are paying out, you can check the proof.
If it is a legit mining group, then it is the best one so far!

[nrd525]

They are giving you the same BTC that you'd get for the hash rate that they CLAIM they are providing you.  However they are selling this hash rate at 1/2 (or less?) of the CEX.io rate.  And it seems like they are selling it at or slightly below the cost of buying your own ASIC miner - not giving them any room to pay for electricity and other hosting and staff costs.

There is no evidence that they actually are mining.

At a minimum, they will break their 5 year guarantee. The fact that they provide one is very suspicious and there is no way they'll be able to keep it and be profitable (unless BTC prices go up a lot in the future - but you cannot build a longterm business strategy on assuming that there will be a bubble).  A one year guarantee is more realistic.

"If it is a legit mining group, then it is the best one so far!"
This statement makes me think they are a ponzi.

[JoelKatz]

An implausible business model, implausibly high promised rates of return, and implausible claims of low risk are hallmarks of a ponzi scheme. If it sounds too good to be true ... well, you know the rest. If the most logical explanation is that it's a ponzi scheme, it's probably a ponzi scheme.

[nrd525]

List of projects that have refused to drop Bitcoin Trader sponsorship after being informed (by me) that it was a ponzi:
-Bitcoin Second North American Conference 2014, Chicago
-Bitcoin 2014 Amsterdam

Pending Request
-North American Bitcoin Car Giveaway Tour 2014 - run by Bitpages and Kryptos Media

Either my emails aren't getting through, people are stupid, or people are very greedy.

[Sydboy]

these days ponzi identify you.
no really, they say "ponzi" in the title or name. can't get any simpler than that!

[Muhammed Zakir]

these days ponzi identify you.
no really, they say "ponzi" in the title or name. can't get any simpler than that!

Not all ponzi schemes. Some of the ponzi schemes are hideous which will be a little hard to find. Say for example pbmining. Is it a real mining group? How can they offer less than 1/2 of the real price and for a mining period of 5 years. I am really confused about them.

Kindly,
        MZ

[nrd525]

What do people think about Bitcoins Reserve?

http://bitcoinsreserve.com/services/arbitrage/fund

Checkout their monthly returns. They seem very high and always positive (though not guaranteed). And they claim to be making all their money on arbitrage.  And they have a long list of other services.

Do they have a bitcointalk thread?

[JoelKatz]

What do people think about Bitcoins Reserve?

http://bitcoinsreserve.com/services/arbitrage/fund

Checkout their monthly returns. They seem very high and always positive (though not guaranteed). And they claim to be making all their money on arbitrage.  And they have a long list of other services.

Do they have a bitcointalk thread?

This looks a lot like a Stock Generation style scam.
http://en.wikipedia.org/wiki/Stock_Generation

Ponzis commonly explain their revenue source as due to "arbitrage" or "investments", but they never describe their actual operations in any kind of detail. They commonly explain that doing so would let others steal their secret sauce. Which is more likely -- that someone with such a great secret sauce (who needs no help from you) would let you in on it, or that someone would claim to have a secret sauce to separate you from your money?

[TimonPeng]

Anyone got recommendations for good, technical, analytical books on ponzi schemes? 

http://www.amazon.com/The-Vigilant-Investor-Fraud-Proof-Investments/dp/0814417507

wow!It look good!Thanks!

[nrd525]

Bitcoin Trader stopped paying out.
https://bitcointalk.org/index.php?topic=393570.2020;topicseen

Esoteric Invesments also stopped paying out.
https://bitcointalk.org/index.php?topic=829885.0

Madoff investors are getting back some of their money (from the people who profited off the scheme)
http://news.yahoo.com/madoff-trustee-recoups-nearly-500-million-more-customers-193438295--sector.html

[memai]

Keep away from Ponzi site or you'll lose all your coins

[nrd525]

Any new major Bitcoin ponzis?  I haven't been following the forums that much recently, so I've been missing out!

10 year German bonds - probably not a ponzi.  The 0.08% interest rate is a dead give away =)

[nrd525]

I found this website dedicated to ponzi tracking:
http://www.ponzitracker.com

Also - the LTC price increase from $1.40 to almost $9 was possibly related to a major LTC ponzi:
http://shitco.in/2015/07/14/the-ltc-pump-dump-and-a-post-mortem-for-both-bulls-and-bears/
and
https://bitcoinmagazine.com/21199/chinese-bitcoin-exchanges-litecoin-price-volatility-driving-bitcoin-gains-not-chinese-stock-market/

[DuckDuckBlues]

I found this website dedicated to ponzi tracking:
http://www.ponzitracker.com

Also - the LTC price increase from $1.40 to almost $9 was possibly related to a major LTC ponzi:
http://shitco.in/2015/07/14/the-ltc-pump-dump-and-a-post-mortem-for-both-bulls-and-bears/
and
https://bitcoinmagazine.com/21199/chinese-bitcoin-exchanges-litecoin-price-volatility-driving-bitcoin-gains-not-chinese-stock-market/

That website isn't directly related to Bitcoin, but I guess it gives an insight into how ponzi-schemes are run in the million-dollar industries (Here's a hint, about just the same way as you think).

[nrd525]

Pirate pleads guilty!
http://www.newsbtc.com/2015/09/22/pirateat40-pleads-guilty-to-4-6-million-bitcoin-ponzi-scheme-charge/

[Stephen Gornick]

If your "investment" solicitation makes claims like

"1,000 times bigger than the birth of the Internet"

or

"gemcoin has millions of users around the world today"


then you might be running a ponzi.


https://www.youtube.com/watch?v=NkpFpXmnBwc

http://arstechnica.com/tech-policy/2015/10/feds-raid-cryptocurrency-startup-accused-of-scamming-32m-from-investors/

[nrd525]

The MMM (2.0) ponzi has been getting more news recently.  They might be using Bitcoin to help fund it.  Is there more detailed information on the Bitcoin connection?

https://www.reddit.com/r/Bitcoin/comments/3p4kuf/mmm_global_republic_of_bitcoin/

[nrd525]

http://www.coindesk.com/digital-currency-pyramid-scheme-operators-jailed-in-spain/

[Christyfrazier]

http://www.coindesk.com/digital-currency-pyramid-scheme-operators-jailed-in-spain/

Good to see some of the ponzi owners and getting some legal action taken against them
at least some people might think twice before they do these kinds of scams.

[nrd525]

Madoff victims are getting some of their money back:
http://www.bloomberg.com/news/articles/2015-12-04/madoff-victims-get-holiday-treat-with-1-1-million-checks

[nrd525]

SEC seeks $10 million judgment against GAW Miners
http://www.coindesk.com/sec-seeks-10-million-default-judgment-against-gaw-miners/

[choppork]

It very easy to identify which websites are a ponzi that will run away after a short period of time.

1. The website's template is similar to other ponzi websites. I know you guys have experienced this. An investment site that has a very similar look to another investment site is very obvious that it is a ponzi.

2. They use paypal. Paypal's buyer protection does not cover digital goods. In this way, there will be no way for you to dispute your payment if you choose the digital goods as the type of thing that you bought. The ponzi admins can easily run away this way.

3. They pay high. One thing about ponzi scams are they always pay high, this will surely attract investors especially the newbies.

4. The have high referral awards. Another way to attract investors. Some people just spam the referral and don't invest at all. They keep on pushing in social medias to make people register under their account. This promotion will make the website more popular. Thus, ponzi can easily finish their job and runaway.

5. Payment status: Pending. Pretty sure all the people out there that has invested in a ponzi scam has experienced this. Before ponzi run away, they will keep your pay-out as pending. And of course, they will not pay you.

6. "There's a technical problem." They always say there is a technical problem that leads to not paying your pay-out requests. But they do not provide any proof or any screenshot. You should know that the admins are now packing up and are starting to leave when this happens to you.

Always keep in mind what I mentioned above. People should be aware of the ponzi scams out there. Some websites might pay at first, but of course they will run away after a period of time. They are just waiting for big investors to come. Goodluck on investing!

[coupable]

after all what i read i still can't identify a Ponzy !!!!
Ponzy is a deceptive person using BTC. Is this the Ponzy??

[nrd525]

Trendon Shavers gets 18 months:
http://www.coindesk.com/bitcoin-ponzi-scheme-18-months-prison-bitcoin-savings-trust/

[mammabitcoin2u]

after all what i read i still can't identify a Ponzy !!!!
Ponzy is a deceptive person using BTC. Is this the Ponzy??

One would think you wouldn't know what a Ponzi is, being a "newbie" with a few posts

Then ya look a little further and say.........why play stupid?  

edit to not hi-jack:

Ponzi's are spotted with a "too good to be true" promise.  The old saying, if it's too good to be true, it probably is.  Or change it up to: If it's too good to be true.  It's a SCAM/PONZI.

On this board, I've noticed bought accounts (like yours) or new accounts is always a great start for smelling shit's coming 

And a few other's I'll save for a later time.

[nrd525]

Long interview of Trendon Shavers, Bitcoin Savings and Trust:

https://www.reddit.com/r/Bitcoin/comments/4yl7do/mt_gox_might_have_been_insolvent_as_early_as_july/

I'm skeptical about everything he says and the hosts are extremely gullible.

[nrd525]

So the hosts general view was that Trendon Shavers was just a regular Bitcoin enthusiast who ran a business that accidently turned into a ponzi scheme.  What do people think?  I'd love to see some fact checking on what he said.

Trendon claims that he was lending out money to people who needed it at a mean rate of 10.4%/week (and then he paid 7% interest to his "investors").  For one thing, I know that the top rate for lending out money on Bitcoinica was fixed at 20% APR (by contrast at BFX the first year the APR was over 100% -- this was both long after the ponzi ended and not anywhere near enough to pay 7%/week). So he couldn't have made significant money doing that. 

I'd be very surprised that anyone would want to borrow at those rates and there is no way that arbitrage (or selling locally) was that profitable.  The current bitcoin and USD P2P lending services have much lower rates (20-50% APR for BTC and 10-20% APR for USD).

One possibility is that people were borrowing BTC from Trendon with the intention of building trust, borrowing more, and then running off with it.  And this is what he says happens - though he refuses to name these people.  The story would only be credible if he has names.  I think the SEC (or a class action lawsuit) would want to go after them to get the money back for the ponzi scheme investors.

[nrd525]

Possible miner ponzi scheme in India.  I haven't checked it out, but if they are really promising a 10% return per month you all know what that indicates...
http://coinjournal.net/founder-india-based-bitcoin-mining-pool-gbminers-running-ponzi-scheme/

Now you could get very rich doing bitcoin mining (or more accurately employing cheap labor and you focus on supervising), but the best way is you get lucky with your timing.  You ideally want declining BTC prices for a year or so - so miners are in decline, and then you start up your mining business and the BTC prices take off.  So you make a killing because your costs are flat and your revenue just tripled.  If this happened you could earn 10%/month, but it wouldn't be predictable.  You could also lose 30% month or gain 30%/month.

[nrd525]

Paper on ETH based ponzi schemes.  Found over 100 of them, but only involving 40k ETH and seems to have declined since the DAO hack.  I wonder if some of the larger schemes are more smartly disguised (ex. mining)?

https://arxiv.org/pdf/1703.03779.pdf

[nrd525]

SEC rules against GAW Miners and Zen Miner
http://www.coindesk.com/sec-wins-11-million-default-judgment-gaw-miners/

[nrd525]

Stellar Lumens isn't a pure ponzi but has some questionable practices. They give away coins to BTC holders, and then profit by holding on to a large number of them.  The victims of the ponzi are the people who buy the (probably) worthless coins.

https://www.stellar.org/blog/bitcoin-claim-lumens-2/

[nrd525]

Bitcoin Connect is a likely ponzi.  Offering 1%/day interest (variable) for a "trading bot" which is very similar to the story that Bitcoin Savings and Trust used.  While the official offer is 0.1 - 0.25% minimum, the actual returns they are giving people are closer to 1%/day.

They are also behind BitConnect coin which somehow has the 14th top market cap on CoinMarketCap.com.

I'm contacting CoinMarketCap.com to have them delisted and urge you to do the same.

[nrd525]

BitConnect is an above average professional ponzi.  So it fools more people than average.  Other major new ponzis are Aurum Bank and Control Finance.

Some of these ponzis have large referral fees, and a lot of the Youtubers that are promoting them are making their money on the referrals.  There might also be some people running ad-campaigns to make money on referral fees (I've seen rumors, but no direct evidence).

[nrd525]

Regal Coin is the latest big ponzi.  Apparently a spin off of Control Finance.

Does anyone have suggestions on how to shut down ponzi ads on Google?  (Control Finance used to have them)
And how can we shut down Youtubers who are promoting ponzis?

Looks like Control Finance is shut down for good.  They are trying to spin off a new site and shut down the old ponzi. Very ambitious!

[nrd525]

I started reporting some Bitconnect ponzi Youtubers.  I think I'm getting timed out by YouTube after only reporting 5 (I hit Submit and get a spinning cursor that doesn't acknowledge my report).  So if other people would like to join this campaign and report a couple people (until you also get timed out), that would be appreciated!

I'm using Firefox.  It is very easy to report a video as promoting a Scam.

It looks like there might be as many as 100 people promoting Bitconnect on YouTube.

[nrd525]

First time I heard of this one!  I can only imagine how many medium sized ponzi schemes are using Bitcoin...
https://www.coindesk.com/cftc-sues-new-york-man-over-alleged-600k-bitcoin-ponzi-scheme/

[nrd525]

In the US you can report ponzis to the SEC. I just reported BitConnect (not entirely sure it submitted properly - so if a couple other people would like to do this as well, that would be great).

https://denebleo.sec.gov/TCRExternal/questionaire.xhtml

[nrd525]

This account is mostly focused on exposing BitConnect.
https://twitter.com/bccponzi

[nrd525]

USI Tech looks like a ponzi.
https://www.coindesk.com/texas-slaps-bitcoin-investment-firm-cease-desist/

[nrd525]

I reported the BitConnect reddit to the reddit admin(s) and encourage you to do the same.

[nrd525]

Texas regulator rules against BitConnect.

https://cointelegraph.com/news/texas-regulator-orders-bitconnect-to-cease-and-desist-marketing-securities

Their end might be near!

I also reported them to Cloudflare which is going to forward it on the web hosting provider.  Cloudflare should ban their website completely.

[nrd525]

BitConnect is down for the past two days.  Also, did Cloudflare drop them?  They claim to be under DDOS attack.  And a second state ruled that they were selling illegal securities.

[nrd525]

List of ponzis and ponzi ICOs.
https://www.cryptolendingprograms.com

[nrd525]

BitConnect was so successful in stealing users money that it has inspired multiple copy cats like EthConnect and Bitstrades (the latter has done paid ads on both CoinMarketCap and ccn.com).

[nrd525]

Davor Coin has ended their ponzi. 

Looks like USI Tech is ending too.

[cryptonandi]

Anyone has any info about Davor? The website still works but nothing happens. Even I invested there. Does anyone have any info about them, are they planning to come back, what to do with their coins? I have been trying to withdraw coins but they have blocked withdrawal. Any info would be appreciated.

[nrd525]

Is there a specific Lending Program that you are asking about?  Lots of places have "lending" and many (or probably most) are scams.  Bitfinex and Poloniex are two exchanges that you can lend without being scammed.  Though you still risk getting hacked.

[nrd525]

Steemit - isn't a ponzi.  I think it is more of a pyramid.  The danger is that probably most people (other than the founders who are probably rich) have "invested" more money in buying Steem Power than they have got out of the website. It's a classic MLM deal where you have to invest money in the product / token that you are unlikely to get back -- and in this case the more you "invest" the greater your return.

Now it is possible that Steemit rides the next crypto bubble and makes everyone rich. But it is more likely to slowly fade away as people realize they are losing money on the site.

[nrd525]

South Korean "bitcoin trading" pyramid scheme fined $20 million:

https://www.coindesk.com/bitcoin-pyramid-scheme-amassed-20-million-in-south-korea/

I wouldn't be surprised if there were a large number of these associated with the 2017 bull market that we haven't heard of.  It can be hard to distinguish them from companies/projects that are actually investing/holding bitcoin - until the bull market breaks and the guaranteed return stops.

[nrd525]

Class action suits against YouTube and BitConnect promoters.

https://www.youtube.com/watch?v=c7B7aVjoHOI

[nrd525]

Josh Garza is going to jail.
https://www.coindesk.com/landmark-crypto-crime-case-ends-with-jail-sentence-for-gaw-ceo/

[nrd525]

Bitconnect Carlos Matos EDM mix.  1.3 million views.  "We are coming in WAVES"
https://www.youtube.com/watch?v=e5nyQmaq4k4

[nrd525]

Pyramid Scheme busted:
https://www.coindesk.com/a-multibillion-dollar-cryptocurrency-based-on-lies-us-arrests-alleged-onecoin-leader

[nrd525]

As bitcoin prices rise from $3k bottom to $8k. What are the new up and coming ponzis or pyramid scams?

[nrd525]

https://www.coindesk.com/sec-sues-alleged-26-million-crypto-ponzi-scheme-operator

[nrd525]

So they admit that they need a BTC price of $8000 to be profitable, but are currently providing a monthly return of 7.5%? And they've been providing a 7.5% monthly return during the time since August when they weren't doing any mining? They are either in the top 1% of traders or...

Normally Tone Vays is good at spotting scams, but he isn't asking the hard hitting questions on this Bulgarian mining organization.  They even want to issue security tokens!

https://www.youtube.com/watch?v=Zlq4ejbGkmY

[nrd525]

How to report a youtube channel (I just reported one):
https://www.youtube.com/reportabuse

[nrd525]

https://www.coindesk.com/cftc-lawsuit-alleges-147-million-in-bitcoin-defrauded-from-trading-scheme-investors

[nrd525]

Coinexx ponzi...
https://www.coindesk.com/scammer-taunts-couple-who-lost-thousands-in-bitcoin-fraud

[nrd525]

Tron related ponzi.  Not sure about this article though. They say "billion dollar" and the "at least 20 million" which are very different figures!  Maybe due to the problem where ponzis can have a large difference between the amount invested and the amount that that ponzi stated the investment was worth. We should be using the amount invested as the amount lost (or control it for inflaation or a modest rate of return like a treasury bill), but some people claim the inflated amount.

But still a ratio of 50 is hard to believe.

https://decrypt.co/7752/tron-china-ponzi-justin-sun

Are there any crytpo ponzis from 2017 that have survived the bear market? 

[nrd525]

https://www.coindesk.com/crypto-ponzi-scheme-says-it-has-no-cash-to-pay-out-to-upset-investors

Has anyone done a research study that estimates the amout of investments and/or investors in Bitcoin ponzis by year?  It'd be fascinating to see whether/how the ponzis follow the cycles of the bitcoin price.

[nrd525]

"Ukyo" loan scheme from 2013 finally goes down in the courts!  That took a while!
https://www.coindesk.com/ceo-of-bitfunder-exchange-gets-14-months-in-prison-for-fraud-obstruction

[nrd525]

Plus Token scams 70k btc.

https://www.youtube.com/watch?v=-OLUbYEk_Q8

https://cointelegraph.com/news/3b-ponzi-scheme-is-now-allegedly-dumping-bitcoin-by-the-hundreds

[nrd525]

No idea who is behind this website, but lots of ponzis and other scams are profiled.
https://behindmlm.com

[nrd525]

A ponzi scheme that made a charitable contribution to increase its reputation, wow.

"BitClub has long been an active player in the crypto space too. The pool claimed to receive $136,000 as part of an errant bitcoin transaction fee, of which it donated half to the Bitcoin Foundation in 2016. "
https://www.coindesk.com/us-arrests-3-in-alleged-crypto-mining-pool-fraud-scheme

[tmfp]

A ponzi scheme that made a charitable contribution to increase its reputation, wow.

"BitClub has long been an active player in the crypto space too. The pool claimed to receive $136,000 as part of an errant bitcoin transaction fee, of which it donated half to the Bitcoin Foundation in 2016. "
https://www.coindesk.com/us-arrests-3-in-alleged-crypto-mining-pool-fraud-scheme

For five years I've been waiting to read that.....

https://bitcointalk.org/index.php?topic=1152263.0
https://www.justice.gov/usao-nj/press-release/file/1224926/download

[nrd525]

Do the Ontario securities regulators not understand what ponzis are?  Or is someone terribly misquoted?  A ponzi is not any ripoff scam, it has to pretend to be an investment that also delivers a return from the incoming funds.   Quadriga was a scam exchange, not an investment vehicle with a promised rate of return.

https://www.coindesk.com/quadriga-was-a-ponzi-scheme-ontario-securities-regulator-says

[nrd525]

I've been neglecting this thread. Please post all the latest and greatest ponzis!

Friendly reminder that Hex is a SCAM, but not all scams are ponzis (and Hex doesn't appear to be a ponzi).

$6.9 million ponzi
https://www.coindesk.com/sec-enforcement-action-alleged-ponzi-scheme

[nrd525]

https://www.coindesk.com/crypto-options-ponzi-scheme-operator-firm-ordered-to-pay-32m

[nrd525]

SafeMoon is a scam not a ponzi.


Do most yield farms require a deposit fee? I was watching a video where they had a 4% deposit fee and promised an extremely high APR (like 1000%) but in a token which had a price that was going to fall to zero.  The presenter explained that it was essentially a ponzi scheme where the latecomers are paying the early birds with the deposit fee - and everyone is trying to sell the token before it is worthless.

If so, a lot of yield farms are ponzis.

[nrd525]

https://www.coindesk.com/sec-secures-judgments-against-3-in-bitconnect-scam

[nrd525]

Olympus DAO (aka Ohm) and its clones are ponzis.  They use an artificial lock up period to have new users pay off old users.  It's also only backed by a small fraction (I read that only 5% of Ohm was covered at one point) of hard assets - the rest of the backing is in Ohm which can, and likely eventually win, go to zero.

If someone knows of a good write-up that explains how the Ohm ponzis work, please post a link!

A lot of people are promoting these ponzis on Youtube and probably elsewhere on social media.  Which is illegal if you are in the US and many other countries.

[nrd525]

https://www.youtube.com/watch?v=gARBeNaN-fk

[nrd525]

UST and Luna.
Not a traditional ponzi, but it has ponzi elements.  Notably a promised stable return that was in excess of what it was earning.  A claim that it relied upon an algorithm - in fact it was more an appeal to authority (smart/rich people like it) and ultimately it's backed by assets that can go to zero.
https://coinmarketcap.com/currencies/terrausd/

Admittedly I liked it enough to almost invest (it seems like they have a valid use case and some adoption in South Korea?).  But fortunately I didn't.

[nrd525]

Celsius Network ended up being the most advanced ponzi we've seen so far!  Super slick CEO, US presence, institutional backers and lower interest rates made me believe that they had a valid business model!  They probably had a partially valid business model, especially when they could profit from the GBTC premium trade.

I ended up losing money to this (though less than I made on interest on Blockfi + Celsius). Though fortunately I had most of my funds on other sites, and they are now on my hardware wallet.

Capitalism is based on legalized theft (and legalized state violence).

[Bitcoin_Arena]

Celsius Network ended up being the most advanced ponzi we've seen so far!  Super slick CEO, US presence, institutional backers and lower interest rates made me believe that they had a valid business model!  They probably had a partially valid business model, especially when they could profit from the GBTC premium trade.

I ended up losing money to this (though less than I made on interest on Blockfi + Celsius). Though fortunately I had most of my funds on other sites, and they are now on my hardware wallet.

Capitalism is based on legalized theft (and legalized state violence).

I wonder why most people didn't see it coming. All those so-called DeFis and yield farms are not sustainable in the long run. Someone has to lose money even when they have been promised a certain APY right before locking up their funds.

My General rule is any platform or token that locks up your funds with the promise of a certain percentage profit daily, weekly, monthly or yearly is a Ponzi.

[nrd525]

I think people didn't see it coming because the APYs were so low. Also there were legitimate use cases that could make a low-risk APY - notably lending your money to people going short or long (which I did from 2013-2017 on Bitfinex for > 10%/APR for USD (Bitcoin rates were far lower)).

It's possible that long term rates could be fixed (and not a ponzi) by arbitraging spot vs futures (short futures, buy spot).  During the bull market this was very profitable.

[nrd525]

OneCoin...
https://www.coindesk.com/markets/2022/12/16/crypto-markets-today-co-founder-of-onecoin-pyramid-scheme-pleads-guilty-coindesk-market-index-drops/

[nrd525]

Are there any big/famous NFT ponzis?  Eg. NFTs that say they will give a yield without having a business method other than printing more NFTs?

[nrd525]

https://www.coindesk.com/policy/2023/01/06/two-more-promoters-of-forcount-crypto-ponzi-scheme-arrested-charged-with-fraud/
It's hard/impossible to keep track of all the ponzis!  I'd expect more ponzis to unroll as we enter deep bear market.

[nrd525]

https://www.coindesk.com/policy/2023/02/16/cftc-charges-california-firm-and-ceo-with-fraud-misappropriation-of-digital-assets/

[nrd525]

https://www.coindesk.com/policy/2023/02/08/eminifx-ceo-eddy-alexandre-set-to-plead-guilty-to-role-in-alleged-59m-ponzi-scheme/

[nrd525]

https://www.coindesk.com/policy/2023/04/28/south-african-mirror-tradings-ceo-fined-34b-by-us-in-bitcoin-forex-fraud-case/
I think this was a ponzi?  That's a huge fine!