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The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced…
Many of nowadays' computer-savvy crooks have taken their cue from an Italian immigrant named Charles Ponzi, a dapper, five-foot-two-inch rogue who in 1920 raked in an estimated $15 million in eight months by persuading tens of thousands of Bostonians that he had unlocked the secret to easy wealth. Ponzi's meteoric success at swindling was so remarkable that his name became attached to the method he employed, which was nothing more than the age-old game of borrowing from Peter to pay Paul.
Money taken from today's investors is used to pay off debts to yesterday's investors.
Typically, these investors are lured by promises of exorbitant profits—50, even 100 percent. Often, they are coached to recruit more investors to enrich themselves further. The problem is that there is no actual investment going on; the only activity is the shuffling of money from new investors to old ones. Everything is fine until the scheme runs out of new investors and the whole house of cards comes tumbling down.
Ponzi and pyramid schemes are self-sustaining as long as cash outflows can be matched by monetary inflows. The basic differences arise in the type of products that schemers offer their clients and the structure of the two ploys, but both can be devastating if broken down.
Ponzi Schemes
Ponzi schemes are based on fraudulent investment management services—basically, investors contribute money to the "portfolio manager" who promises them a high return, and then when those investors want their money back, they are paid out with the incoming funds contributed by later investors. The person organizing this type of fraud is in charge of controlling the entire operation; they merely transfer funds from one client to another and forgo any real investment activities.
Pyramid Schemes
A pyramid scheme, on the other hand, is structured so that the initial schemer must recruit other investors who will continue to recruit other investors, and those investors will then continue to recruit additional investors, and so on. Sometimes there will be an incentive that is presented as an investment opportunity, such as the right to sell a particular product. Each investor pays the person who recruited them for the chance to sell this item. The recipient must share the proceeds with those at the higher levels of the pyramid structure.
Snake Oil, Ponzi Schemes and Crypto Scams
Although the details may vary, all flimflam games rely on their basic ability to make a lie look like the truth. Even today, confidence artists continue to work their scams with great success. Time and again, people from every walk of life demonstrate their ability to abandon common sense and believe in something that is simply too good to be true by succumbing to the con man's call.
Yet when all is said and done, the Internet is merely a vehicle for swindlers to reach their victims. "What is new—and striking—is the size of the potential market and the relative ease, low cost and speed with which a scam can be perpetrated," FTC Chairman Robert Pitofsky told a Senate subcommittee during a February hearing on Internet fraud. But there is nothing new in the scams themselves: they are the same pyramid schemes, phony business opportunities and phantom storefronts that have been fooling the unwary and greedy for centuries.
With great computer-generated graphics and fancy websites, online companies would claim to be the most Trusted Digital/Crypto Currency and Forex Trading Platforms purporting to have most advanced proprietary Artificial Intelligence (AI) technology, systems capable of assisting their professional and crop of omni-directional expert traders to wisely use your money, invest and trade and make abnormal profits on your behalf.
Impostors masquerading as business gurus, they with their sweet talk, will lure and entice unsuspecting people into believing that those companies are able to generate and provide between 2 to 50% passive Return On Investments (ROI) along with an eye-catching affiliate program ranging between 5% to 25%. Online Referral materials, codes and referral links will be provided for Peer to Peer (P2P) and online marketing, advertisement and desirable social networking platforms. People are encouraged to “make a deposit and sit back while our experts do the work” and “let our professionals help you choose an investment plan that meets your needs”. The promise of passive income, profits, bonuses, equity and shares in companies is the order of the day.
In accounting terms, money paid to Ponzi investors, described as income, is actually a distribution of capital. Instead of returning profits, the Ponzi schemer is spending cash reserves, all to raise more funds. Where a basic investment scam raises money and disappears, the Ponzi scheme stays in business by circulating investor funds.
There are usually little, cryptocurrency, trading, IPO, FOREX trading or no legitimate investments are taking place. Promoters used most of the funds for expensive lifestyles and transferred into property or offshore accounts. Schemes typically run for at least a year, although some Ponzis have flourished for a decade or more.
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