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Ponzi schemes ;How to spot and avoid online

Ponzi schemes and pyramid schemes have been around for a long time. The Ponzi scheme is named after Charles Ponzi, who scammed people out of a lot of money in a fraudulent investment scheme in the 1920’s. In Ghana there have been alot of ponzi and pyramid schemes from Pyram,DKM,God is love,UStilapia and others ,Pyramid schemes and Ponzi schemes are often thought to be the same thing, although there are differences that will be explained in this article.

Almost everyone will be exposed to Ponzi and pyramid schemes at some point. Often, the people that participate do not realize they are engaging in illegal activity, as some scams are presented as innocent games or gift exchanges. At the high end of town, these scams have cost investors millions of dollars. In other situations, people with very little have been fooled into investing grocery money as promises of big returns are made.

This guide will explain what the differences are between online Ponzi schemes and online pyramid schemes, and how you can protect yourself against falling for them. We’ll let you know what to do if you spot a Ponzi scheme online and how to report it if you think you’ve been defrauded.

What is a Ponzi scheme?

Ponzi schemes and pyramid schemes are often thought to be different names for the same type of scam, but that isn’t so. Ponzi schemes focus specifically on creating false investment opportunities that offer high returns with low risk profiles. As the investments do not exist, returns are funded by new investor payments. In reality, the scammer pockets most of the money.

The success of schemes like these rely on two strategies. The first is the continuing deception of honest investors, including petitions for further capital investments, using fraudulent documentation that indicate the success of the investment. The second strategy requires the continuous sourcing of new investors to fund any requests to liquidate (in order to present an authentic front, payout requests are often met, although they are strongly discouraged).A recent case is the Menzgold saga. Ponzi schemes made headlines in the early 2000’s when Bernie Madoff was famously jailed for 150 years after defrauding investors of over $65 billion.

What is a pyramid scheme?

Pyramid schemes are often referred to as Ponzi schemes, but they are slightly different. Both types of scam rely on victims investing money with the expectation of receiving large sums in return. Pyramid schemes operate by offering victims the chance to invest a fixed amount of money, and in return receive a much larger sum. Instead of the promised riches being made through passive investment, the victim must find other people to invite into the scheme, so the larger sum can be earned. The scam earns its name thanks to the ever-increasing layers of people who are recruited into the scam, so that the money is funneled upward to a few people at the top of the pyramid.

Why pyramid schemes are scams

Some of these pyramid schemes can sound tempting in the first instance. Social media schemes are often disguised as ‘women supporting women’ or book exchanges, they seem innocuous or a bit of fun. They are illegal because there is no possible way every person who participates can access the promised reward. Ultimately the earth’s population is finite, and the last layers of people who participate cannot recruit anyone else. The amount of people that lose money on these schemes are always far greater than those who make money, which is why they are illegal.

Cryptocurrency Ponzi schemes

Cryptocurrency trading is a highly unregulated industry, making it an easy area for scammers to operate in. The alternative currencies are being used to transact Ponzi schemes, with unsuspecting victims being encouraged to buy in with promises of unrealistic returns and rewards for recruiting others. One recent case Global Coin Community Help (GCCH) which saw GHS135million swindled from victims. Cryptocurrencies have been used to manipulate victims in other, related schemes, too.

Multi-level marketing

Multi-level marketing plans are sometimes referred to as pyramid schemes, although they are technically not considered to be so. MLMs, also known as party plans, rely on recruiting new members to sell products on behalf of the parent company. Commissions are paid up the chain in an identical fashion to traditional pyramid schemes, but as the income is generated from product sales rather than nebulous investments, they are legal.This scheme can continue as long as recruitment goes on but it is the latter day recruits that tend to suffer whilst the early birds enjoy.

How to identify a Ponzi scheme online

Some scammers take elements of both Ponzi schemes and pyramid schemes, blurring the lines between investment opportunities and recruitment plans. There are some key behaviors and phrases you should watch out for. There are also questions you can ask and things you can do to protect yourself from falling for a Ponzi scheme.

Scammers create a high-pressure environment by making victims feel like they’ll miss out on a huge opportunity if they don’t act right away. This rushes victims into handing over money before they can think it through and see that it’s a scam. Take your time to consider any investment offer made and refuse to be pressured to act.

Ponzi scheme investment scammers often succeed because they create a false sense of exclusivity. They pretend to offer the investment to limited, specially selected people. The secrecy and illusion of elitism also discourages victims from speaking about it to others, which further protects the scammers.

Ask yourself if the offer is too good to be true. There is no such thing as a low risk investment with above average returns. Be wary if a person offers an investment plan that is out of step with general market behavior.

Scammers use paid actors to offer false testimony of success with large-scale investment scams. Be watchful for any people who seem encouraging and supportive but are too pushy and forceful. Be aware that scammers may select actors that match your gender, religious affiliation or ethnicity in order to instill a sense of credibility.

If the success of the ‘investment’ relies on you recruiting other people into the scheme, it’s probably an illegal pyramid scheme. This also stands if you are offered rewards for bringing others into the scheme.

Honest investors will be up front about the details of the investment plan, including their compliance and legal requirements. If you’re asked to invest money with no information about financial management of investments, and they won’t disclose ‘proprietary trading information’, financial plan, or statements, it’s probably a scam.

Pyramid schemes often ask you to send money online to a to a person you’ve never met. This is risky and almost always unrecoverable. This is especially true if a victim sends money by untraceable means like gift cards or wire transfers. Don’t do it.

Scammers will discourage victims from seeking third party advice. If you are considering making an investment, you should conduct research to ensure it’s legitimate. Use independent sources not supplied by the people offering the investment.

Be skeptical of every offer you receive. Emails, website addresses, caller ID displays – everything can be faked, imitated and ripped off. Be very wary of any offer that comes out of the blue. If your friend suddenly contacts you to offer an investment opportunity, their account may have been hacked by scammers. Verify by contacting them using a different channel.

If you are considering investing significant amounts, conduct due diligence to investigate the trustworthiness of the company. The SEC  may be helpful.

Is the investment insured or insurable? Before investing in anything, ask yourself if you can afford to lose the amount without suffering follow-on consequences.


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