Four Ways To Identify A Ponzi Scheme

Recently, the number of Ponzi schemes have skyrocketed and there have been reports about people being defrauded of their finances.
Hence, why we are taking out time to enlighten you on how too recognise one when you see it.

A ponzi scheme is an investment fraud in which money obtained from new investors is used to pay out old investors. Ponzi scheme operators frequently make the claim that they will invest your money and produce large returns with little or no risk.

However, the scammers rarely invest the money in Ponzi schemes. Instead, they pay individuals who made earlier investments while also possibly keeping part for themselves.

Ponzi schemes need steady inflow of new money to survive because they have little or no actual earnings.


These schemes frequently fail when it becomes difficult to find new investors or when many existing investors withdraw their money.
Charles Ponzi, who defrauded investors in the 1920s with a postage stamp speculation scheme, is the inspiration for the name of the Ponzi scheme.

The scheme is alluring, catchy, and quick to earn money on, but there are some technical features that would be important in the construction of all Ponzi schemes. Here are some suggestions and points that would make you immediately recognize a Ponzi scheme when you encounter one or get involved in one.

Features of a Ponzi scheme;

  1. High returns with little or no risk:
    A Ponzi scheme provides assurance and trust in your return. Every investment has a basic repayment or investment return, such as Treasury Bills and fixed deposits, which provide a percentage income with a time frame for returns. Ponzi would give you an increase on a weekly investment with no explanation of how it is structured.
  2. Unlicensed Sellers:
    These Schemes assign the task of marketing their investments and returns to untrained and unlicensed individuals in order to ensure that they receive a profit from investing in their scheme; their strength is a large amount of investment in the scheme to pay people. They allow unlicensed individuals such as market women and students to be ambassadors for the scheme and advertise in order to attract more investors.
  3. Overly Consistent Returns:
    Any program that assures you that your investment will increase daily, monthly, or that you will receive 200% of your initial investment is unquestionably a Ponzi scheme. For an actual percentage return and also ranging for a specific time, a very reasonable Returns on Investment (ROI) is indicated. Depending on the investment plan that has been authorized by the central bank, the majority of returns on investments are estimated with a number of days or years.
  4. Secretive and Complex services:
    These schemes present a very covert business plan; in response to inquiries from investors, they would not provide a clear and definitive response, instead claiming to be involved in real estate, foreign exchange, treasury bills, agriculture, capital investments, automobiles, and other sectors. This will persuade people to forego making large investments in order to get a good return on their money. They typically lack written records, legal testimony, and physical testimonials concerning the kind of business they conduct.

These salient points are helpful in the case of double checking what a Ponzi scheme is and what they do. Savings and investment are totally different from this.
Check out our article on Savings vs. Investment.

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