Ponzi Scheme

What Is a Ponzi Scheme?

A Ponzi scheme is a fraudulent program that attracts new investors to pay off dues to the old investors. Portfolio managers govern the flow of funds within the scheme. They further record new investments and monitor payments.

Ponzi is traditionally an age-old customary scheme that’s been dragged along for far too long. Its name was coined after Charles Ponzi, the father and originator of the racket. He was known for starting the era of embezzlement in the 1920s. Though the numbers don’t match the current Ponzi cases, it still stole a whopping $15 million from its investors. However, the catch isn’t the amount it picked, but the short period it used to trick investors.

Technically, 1920 wasn’t the first year of such mishappenings. Such similar incidents roots back to 1869 and 1880, wherein the Ponzi scam was evident. First initiated in Germany, Adele Spitzeder led the fraudulent acts from 1869 to 1872. In the 1880s, Sarah Howe was known to be the culprit behind the scam in the United States. Both the incidents ran investments with deposits from ladies.

Is a Ponzi scheme illegal?

The con business that Charles Ponzi carried on wasn’t considered illegal as it fell under arbitrage. That isn’t the case with Ponzi businesses run by other scammers. It is a full-blown unlawful practice. In most scenarios, the investments aren’t registered with the SEC (the Securities and Exchange Commission).

To be more precise, the funds gathered can’t even be concluded as investments. Further, a portion of the capital is redistributed among the former investors. They operate with unlicensed sellers and lack paperwork. The ultimate goal is to cheat the investors and stuff their own pockets.

How Does a Ponzi Scheme Work?

The Ponzi scam moves with a consistent flow of funds coming from every new investor. The depositors proceed with the thought that they’ve put their funds in a genuine business.

Instead, the con artist who initiates the scheme makes it look like a strategic sale of services or a product line. They pitch business models and plans that are sophisticated and hard to understand. It makes the investment more compelling. All the doubts arising in the process are ignored, and the scheme operators start pressurizing the target audience.

The investment scam follows a structure that pays off the old financers with the help of new funds. Their formula isn’t too complex. First, they steal money from Harry to pay off Louis.

Finally, their scheme gets busted when they run out of funds and have no sight of new investors. On the contrary, before the old investors seek their withdrawals, the con artist wraps up their business and disappears.

The sudden closure to a Ponzi racket could be a consequence of several circumstances. For instance, problems with withdrawal can cause panic among the investors. The lack of liquidity for funds could then turn into a primary reason behind the scheme’s retirement. Likewise, an economic drop or recession can also trigger similar results.

How To Protect Yourself Against Ponzi Schemes?

Ponzi scams can skillfully disguise themselves as potential business or investment firms. In order to see it coming and raise your guard, it’s crucial to know some aspects that you can emphasize.

Here are some measures that can safeguard you and your funds against a Ponzi racket.

• Avoid firms that offer high and steady returns that seem far from realistic.
• Skip the idea of investing with them if you see former investors express trouble in receiving payments.
• Be cautious of errors in account statements or other legal documents.
• Practice due diligence when it comes to investments, study the platform, analyze its returns and regulations.
• Confirm and verify your investment plan with a financial advisor. Ensure the expert is not connected to the broker and is an unbiased third-party service.
• Do not make any impulsive decisions if you’re handling an aggressive or pushy sales team.
• Never sign your checks in different names than the firm you’re dealing with, even if they ask for it with reasoning that seems logical and valid.
• Look out for investor criteria since investment firms prefer accredited financers. If there are no minimum qualifications required or the provisions laid out make no sense, then it’s best to prevent your association with them.

The measures indicated above are not exhaustive but sure lend a hand in spotting or being cautious of the Ponzi racket. However, if you still want to verify a firm’s authenticity or gain additional support, reach out to Cyber Intelligence Desk.

What To Do If You Have Been Scammed?

We’ve already learned that the Ponzi scheme is an illegitimate investment scam. It also implies that the funds rolling in and out of the racket are non-traceable. As a result, it makes it impossible to calculate and point where the money is situated or how it is put to use. So, in that case, what do you do if you’ve fallen for one of these illicit investments?

First of all, your money isn’t lost but is temporarily misplaced. With technological giants like Cyber Intelligence Desk, you can recover your funds without a second thought. As financial experts, we have recovered the money from Crypto, Forex, Binary, or other markets. Cyber Intelligence Desk is the best at its line of business.

Our financial advisory has a high win rate of 92%. Our clients are spread across several countries. The process we use is transparent and backed with modern advancements. If you want to recover your money with reliable, fast, and efficient solutions, Contact us for a free consultation now.