Ponzi Scheme

A Ponzi scheme is a form of fraud that tricks victims into believing that products are instead generated from product sales or other means.

This scam ultimately pays profits to earlier investors with funds from more later investors.

In doing so, most investors are completely oblivious to the actual origin of incoming funds, ensuring this fraud can persist.

Ponzi schemes are ultimately dependent on a steady flow of new contributions and funds, which can abruptly lead to these scams collapsing.

If investors request or demand repayment or lose faith in whatever assets they are supposed to own, the Ponzi scheme will collapse.

Identifying Ponzi Schemes

A Ponzi scheme is similar to any other scam and thus follows a few basic trends that investors should watch out for.

First and foremost, common sense should be adopted whenever investing in any opportunity.

This includes some level of skepticism when approaching language offering guaranteed returns on investment and other forms of marketing.

Scams such as this also purposely use vague or arbitrary terminology to help confuse or dupe more novice investors.

Always be mindful and cautious of such phrases as "high-yield investment programs", "offshore investment", or “guaranteed returns”.

Thankfully, many regulatory authorities have taken a central aim in policing against such scams.

As a result, there are now many tools that are available to help identify scams or fraudulent operations.

Regulators in most jurisdictions are constantly serving as watchdogs against these forms of market abuse.

Make sure to check these registers on any regulatory site before actually investing in opportunities you may be worried are dubious.