Since the history of time and money came into existence. People have managed to come up with Different Strategies (Fraudulent Schemes) to defraud others without the knowledge or other gullible persons.
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Then came the revolution of money into virtual currencies, such as Bitcoin, which has recently become popular. These currencies are meant to bridge the gap and other short comings such as high transaction fees etc synonymous with traditional financial institutions.
The rising use of virtual currencies in the global marketplace has enticed fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply dubious investments or transactions.
Fraudsters may also be attracted to using virtual currencies to perpetrate their frauds because transactions in virtual currencies supposedly have greater privacy benefits and less regulatory oversight than transactions in conventional currencies.
- Key points
A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk.
In many Ponzi schemes, rather than engaging in any legitimate investment activity, the fraudulent actors focus on attracting new money to make promised payments to earlier investors as well as to divert some of these “invested” funds for personal use.
As with many frauds, Ponzi scheme organizers often use the latest innovation, technology, product or growth industry to entice investors and give their scheme the promise of high returns.
Common Red Flags of Fraud, Many Ponzi schemes share common characteristics
- High investment returns with little or no risk.
Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. “Guaranteed” investment returns or promises of high returns for little risk should be viewed skeptically.
- Overly Consistent Returns.
Investments tend to go up and down overtime,Beware of an investment that generates consistent returns regardless of overall market conditions.
- Unregistered investments.
Ponzi schemes typically involve investments that have NOT been registered with the SEC or state securities regulators.
- Unlicensed sellers.
Federal and state securities laws require certain investment professionals and their firms to be licensed or registered. Many Ponzi schemes involve unlicensed individuals or unregistered firms.
- No minimum investor qualifications.
Most legitimate private investment opportunities require you to be an accredited investor. You should be highly skeptical of investment opportunities that do not ask about your salary or net worth.
- Issues with paperwork.
Be skeptical of excuses regarding why you can’t review information about the investment in writing. Always read and carefully consider an investment’s prospectus or disclosure statement before investing.
- Difficulty receiving payments.
Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Ponzi scheme organizers sometimes encourage participants to “roll over” promised payments by offering higher investment returns.
- It comes through someone with a shared affinity.
Fraudsters often exploit the trust derived from being a respected member of a national, ethnic or religious affiliation. Sometimes, even celebrities.
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