Seven Strong Signs of Investing in a Ponzi Scheme

Most of us are easily enticed by Ponzi schemes or commonly known as get-rich-quick schemes, because why not? Earning huge amounts with fewer efforts is what most people often think as “passive income”.

You just invest, wait for your money to “work” for you, and reap the consequences of your investments later.

This is the very reason why some people are taking advantage of this golden promise mentality.

There are many types of frauds that will lure people into “investing” their money in return for high yields having little to no risks, and one of the most common deceptions is the Ponzi Scheme.

What is Ponzi Scheme?

A Ponzi Scheme is a type of fraudulent investing scam that guarantees high returns without emphasizing the risks of investment.

The investors are tricked to believe that they are earning through their “investments”, but they are actually generating profits by acquiring new investors.

The Man Behind Ponzi Scheme

Ponzi Scheme was named after Charles Ponzi when he promised returns of 50% in 45 days and 100% in 90 days in return for the people’s investments.

There were actually no real products. He just redistributed the profits of the new investors to the previous ones in order to attract more people. This only lasted from the year 1919 to 1920.

However, Charles Ponzi’s famous fraudulent scheme did not die in 1920. It still lives up to the present. In fact, there are still countless cases nowadays in which people are falling into this highly-enticing scam bait.

You might actually be investing in one of the modern Ponzi schemes right now without noticing it. So here are the seven strong signs that you are investing in a Ponzi scheme.

You can thank me later.

1. The “investment” has a guaranteed promise of high returns with little to no risk.

“Guaranteed 100% return on investment after three months.”

“Invest. Wait. Earn.”

You might have come across these lines already and perhaps, left a provoking “How” comment on a particular post since the returns are too good to be true and it might be the answer to your financial problems.

Know that in every investment, there’s always a certain amount of risk depending on the nature of the investment. The higher the returns, the higher the risks. There is no such thing as guaranteed ROI unless you are investing in fixed-return assets such as bonds.

2. You will receive a constant flow of returns regardless of the behavior of the market.

You must be very careful with this one. If you notice that the returns are not realistic enough considering the nature of the “business” being explained to you, then there’s a great chance that you are investing in a rip-off Ponzi scheme investment.

The returns should always be parallel to the supply and demand of the market. Again and again, if the returns are highly-enticing and are guaranteed, kabahan ka na.

3. It isn’t registered in security bodies.

This is one of the most important things to note. If you are eyeing on a particular investment, you must first look after its legitimacy. There are regulating bodies such as SEC (Security on Exchange Commission) that can attest whether a certain company, corporation or entity is allowed to solicit investments.

If you’re from the Philippines, you can check the registered companies through their website. CLICK HERE.

From time to time, SEC also releases advisories and memorandums on particular investment schemes which are unauthorized to receive any monetary solicitation in form of investments. You might want to check Philippines’ unapproved investment schemes HERE.

4. Investment strategies that are not explained well or described as too complex to the public.

Always do your own research because sometimes, the descendants of Charles Ponzi are using sophisticated alien languages to make their investment schemes more believable.

“Never invest in anything you know nothing about, no matter how profitable it is.”

5. Clients are not allowed to view official paperwork for their investment.

It is the right of every investor to ask for the legalities of a certain investment. If they can’t provide any proof that could validate their legitimacy, then you may be falling for a trap.

6. Clients are facing difficulties in pulling their investments.

“The website is undergoing a maintenance.”

“The bank froze the monetary assets because of the huge payouts being transacted daily.”

These are just some of the sugar-coated statements of running away. With. Your. Money. You will be convinced that they’re just undergoing a challenging phase of financial transactions at the moment and the next thing you knew, they’ll just vanish in a thin air.

7. You won’t earn unless you recruit someone since you are not endorsing any type of products or services.

This is possibly one of the strongest signs of getting yourself into a Ponzi scheme scam. Your upline is earning because of you and your fellow downlines, and you will be continuing to earn through the same strategy.

You will never profit from your investment unless you have a successful referral. Your referrals will neither earn unless they recruit somebody. Until a pyramid will grow bigger.

Lucky for you if you have established a good position at the top. The people at the bottom? They become the profit-making machine for their uplines.

As a Ponzi scheme creates a huge pyramid of investors, the greater the possibility for it to collapse. Of course, it will become harder for the new recruits to entice others since most of the “believers” have already joined the bandwagon.

Give it a month or two until a Ponzi scheme’s social media hype will become silent. That’s when you’ll know the pyramid has already collapsed.