[ESP-ENG] SEC - S17W3 | "Let's talk about Ponzi scheme"

As a marketing professional, I have studied all marketing strategies, including multi-level marketing (MLM) and also this so-called Ponzi scheme. A Ponzi scheme is a completely fraudulent investment scheme. In this, money is taken from new investors and given to old investors for a limited time or as long as new investment keeps coming.

  
Having said that I would like to invite @kouba01 @simonnwigwe and @heriadi to discuss this topic in the general interest of Steemians.

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Have you ever heard about Ponzi schemes?

In simple words, it is a kind of “game” that continues as long as new people keep investing money in this scheme. These schemes entrap investors by luring them with extremely high, in fact, abnormally high, returns. On the other hand, money laundering means making money earned illegally look legitimate. In this, criminals try to hide black money by doing complex financial transactions.

What is the Ponzi scheme? These are schemes in which investors are lured into making huge profits without any risk. As people see no risk they easily join such schemes. In many cases, the scheme is publicized by giving some returns to the initial investors so that more and more people join it.

Seeing their returns, new investors join them. But when the number of investors starts decreasing and money stops being invested, questions are raised about the scheme, and the scheme is exposed. When the company doing this starts running out of funds, the scheme is stopped. If we try to understand it in simple language, such schemes work to defraud investors.

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Initially, these schemes act like legitimate businesses and lure people by promising attractive returns. To build confidence, they also give good profits to some investors in the beginning, which attracts more investment. But the real problem comes to light later. When they stop getting new investors, these plans start faltering. After this, they resort to fraud.

The company manipulates its accounts to hide its real profits and somehow manages to pay investors. But this fraud cannot continue for long. Ultimately, the scheme collapses, and all the investors' money is lost. Through this scheme, many companies run their businesses or find a way to survive in bad financial situations.

Have you been offered to invest in any of these schemes?

We keep hearing about the Ponzi scheme every day, so people in India know that Subrata Roy of Sahara India had used the Ponzi scheme and had defrauded hundreds of thousands of people. The basis of the Shardha scam was also a Ponzi scheme. Such Ponzi schemes defrauded a large number of people, and they suffered such huge losses that they even committed suicide.

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This type of fraud was unique in itself and started long ago. I feel like it was the beginning of a startup that later became popular in the world of scams. This was an innovative idea of a scam, which became so popular that even today, fraudsters are copying it and carrying out fraud with a few innovative ideas.

In India, a jeweler has been accused of promising his customers good returns by investing in gold. In this way, in the name of giving more profits, they collected over INR 1000 million from their investors but investors never got their money returned. The investigation report revealed that this company used to collect money from people and divert it to questionable shell companies. These shell companies use illegal funds for money laundering.

Most of these companies are involved in short-term and often complex investments. Returns are paid to the initial investors from the funds of subsequent investors and not from any actual profit earned. The continuation of the scheme depends on the continuous receipt of money from new investors.

Do you know how to detect Ponzi schemes?

A Ponzi scheme is a fraudulent investment scam in which investors are promised high rates of returns with low risk. A Ponzi scheme generates returns for earlier investors with money taken from later investors. This is a type of pyramid scheme based on using funds from new investors to pay off earlier investors. Both Ponzi schemes and pyramid schemes gradually come to an end when the flood of new investors ends and they no longer have money to pay.

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Like pyramid schemes, Ponzi schemes generate returns for old investors by attracting new investors who have been promised higher profits without any risk.

Both fraudulent arrangements are based on the diversion of funds from new investors to earlier investors.

Companies that engage in Ponzi schemes focus all their energy on attracting new customers to invest.

A Ponzi scheme is an investment fund that promises customers large profits without any risk. This investment is used to pay the original investors as their returns, which are marked as profits from legitimate transactions. Ponzi schemes rely on a constant flow of new investments to continue providing returns to old investors.

But how long? The day comes when they fail to pay and run away with investors' money.

Regardless of the technique used in Ponzi schemes, most have similar characteristics. The financial authorities and exchange regulatory authorities have strict rules and monitor the following traits to look out for:

Guaranteed promise of high returns with low risk
The continuous flow of returns, regardless of market conditions
Investments are not registered with the registrars and exchange authorities.
Sellers do not have a license to sell investment products.
Investment strategies that are "secret" or described as so complex that they are difficult to explain
Failure to provide customers with their investment documents
problems in withdrawing money

You can identify the symptoms that often indicate a fraudulent financial scheme. If an investment opportunity guarantees a specific high rate of return, guarantees that return for a certain period, and is not registered with the authorities, advise caution, for example.

A promises a 15% return on a loan of 2,000 Steem to his friend B. B gives 2,000 Steem to A with the expectation that he will be paid 2300 Steem in one year. Next, A promised his friend C a return of 15%. C gives 2,000 Steem to A.

Now having 4,000 steams in hand, A pays B his 2300 Steems. If A can persuade B and C to continue investing their money, he will only have to pay them the promised periodic interest. He can spend the remaining amount with confidence that new investors will supply enough to keep the scam going.

Beware of false claims that promise guaranteed investments with higher returns than practical ones.
You must make sure you get detailed written information covering the details of the investment so you can understand it completely.

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Contact the promoter of the investment. And check their background. Check to see if they are licensed to sell securities. If they claim they have, check it with the local regulator.

If you have already invested and are under pressure to reinvest your returns, or there is a disruption in services by the promoter, contact the local regulator.

Before investing, seek advice from a third party, such as a broker or licensed financial advisor.
Always work only with registered or authorized intermediaries.

Although many investment transactions are conducted over the phone or online, be careful of investment companies without an office.

Do not respond to any unknown email requesting investment, a job offer, or personal information.
If you feel an investment is too lucrative, then ignore it.

Be careful of offers like get-rich-quick or hot tips. There will be a risk of losing more than you earn.

Do you think Steemit is a Ponzi scheme?

There is no way we can compare Steemit to a Ponzi scheme. However, there is no denying that in 2017, when Bitcoin prices were rising, several scams happened for example “Gain Bitcoin” started playing out its game. It trapped many investors by luring them with high profits.

Actually, it was a kind of Ponzi scheme, where early investors were paid with the money of new people. Its promoters, including Amit Bhardwaj, falsely promised people attractive returns of up to 10% every month on their Bitcoin investments.

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But this fraud could not last long. As soon as the number of new investors decreased, payments started stopping. Investors soon realized that they had been cheated and started filing complaints.

In that period, Bitcoin was taking the cryptocurrency world by storm. It was attracting thousands of investors by luring huge profits. Taking advantage of this opportunity, three people in India together formed a company by the name of “Variable Tech Pte Ltd”. They started a Ponzi scheme in the name and style of “Gain Bitcoin." INR 66,000 million was allegedly defrauded in this scheme.

How did they trap people? They lured investors with high returns through Bitcoin mining. Also, they falsely promised a 10% profit every month on Bitcoin investments. This plan worked initially, but later it failed to fulfill its promise and subsequently failed. Investors neither received the promised profits nor could their money ever return. This proved to be a huge scam.

However, to conclude this topic, I can tell you with full confidence that my experience of 23 months on this site says Steemit is a clean website based on blockchain technology where everything is crystal clear as you can withdraw your funds as and when you want without any problem or help from a mediator.