A Ponzi Scheme is definitely a fraudulent business. While it may pay some members, that doesn't make it legal or long-lasting. Eventually, they will stop paying, and most people will lose their money because their business model is completely unstainable. Let's dive into why this happens in more detail in our post.
Picture Credit: https://en.wikipedia.org/wiki/Ponzi_scheme#/media/File:Charles_Ponzi.jpg
You might be wondering who the person in the picture is and why it's in this post. His name is Charles Ponzi, and he's the one who started the Ponzi scheme. As you can guess, the scheme is named after him. Now, let’s learn what a Ponzi scheme is.
What is a Ponzi Scheme?
Ponzi Scheme is neither a legal nor a sustainable scheme. It is operated by routing the money between the users who participate in this program. They never have any real source of income to pay claimed profit to their members.
Ponzi schemes trick people by showing real payment proofs. At first, they pay a few members using money from new members. This makes it look like the scheme is working and encourages more people to join. However, it’s impossible to keep paying everyone this way. To pay one member, they have to use money from other members. But each time they do this, they create a debt equal to the amount of profit paid out, making the scheme unsustainable.
So, even Ponzi Schemes want to pay all members they can’t because day by day the debt will be kept on increasing, and they will not have enough fund to pay all members. That’s why these schemes are illegal schemes.
Legal authorities have already warned the public to stay out of the Ponzi scheme due to its unsustainable nature.
How to Identify a Ponzi Scheme and save yourself from it?
If any businesses, either online or offline, claim to pay you high profit within a short period of time, then you must be aware that is a Ponzi Scheme. You can think yourself, why anyone will pay you interest/profit rate more than a bank? If he/she thinks his/her business is very profitable, then he/she can take a loan via bank where he/she needs to pay very less profit and keep more profit for him/herself.
For example, these kinds of schemes claim to pay you 30% monthly profit on your investment amount. So, why are they asking for your investment by paying you such high amount of profit rate when they can take a loan from a bank where they only need to pay maximum 1% monthly (12% yearly)?
So, from their business claim, you can identify they are a Ponzi Scheme. In simple word, if something is too good to be true, then it is.
These days we have also found that lots of online sites with these kinds of schemes are trying to trick people by showing the company’s registration document registered from the United Kingdom, or Hong Kong. But, don’t fall for that trick. Lots of such kinds of sites in the past have already turned into scams which were registered from the United Kingdom, or Hong Kong.
Actually, it is very easy to register a company in the United Kingdom, or Hong Kong by providing the virtual address which anyone can rent from the virtual address provider services as well as by providing the third person identities. Even you can register a company in the United Kingdom, or Hong Kong without a big hassle. On top of that, such kind of registration is not the license to run an investment company like Ponzi Schemes, but just a registration for the tax purpose.
Examples:
To find the examples of Ponzi Scheme, you can click this tag >Ponzi Scheme<. Once you click it, you can find the list of businesses with this scheme and their detailed reviews.
Please feel free to comment below if you want to say something about this kind of scheme, or if you want to report some Ponzi Scams.
You can find other useful articles like this one within our Useful Information and General Knowledge category by clicking >HERE< or you can find the lots of interesting articles under different categories by navigating our website through our home page by clicking >HERE<.
If you want to share this post with your friends and families through your social media accounts, then please feel free to do so.
Good Luck!
References:
FYI: This article about Ponzi Scheme was first published on 20 October 2022, and updated at 6 Sep 2023 and again at 3 April 2025.
Leave a Reply