Ponzi Scheme
| Ponzi schemes are fraudulent financial operations that offer investors enormous rates of return with low risk. The scheme is named after Charles Ponzi, who became notorious for using the technique in the early 1920s. Ponzi schemes typically involve promising investors extraordinarily high returns—often 1% per day or more—over a very short period of time. For example, a scheme might promise investors that they will double their money in just 90 days. To keep up the appearance that everything is going according to plan, the operator will pay “dividends” to early investors from the money paid by later investors. This creates the illusion that the scheme is profitable and sustainable, when in reality it is not. Eventually, the scheme will collapse when there are not enough new investors to keep up with the payments. When this happens, the people who invested money in the scheme will lose everything. Ponzi schemes are often perpetuated by word of mouth, social media, or even mass marketing campaigns. They can be very difficult to spot, because they often look like legitimate investment opportunities. For this reason, it is important to be aware of the warning signs of a Ponzi scheme, which include: • Promises of guaranteed or extremely high returns with little or no risk • Pressure to invest quickly • Complex or secretive investment strategies • Promises of exclusive access to a limited investment opportunity • Requests for cash only, or the use of wire transfers or untraceable forms of payment • Unregistered investments • Lack of transparency about where the money is being invested • difficulty withdrawing money or getting answers to questions If you spot any of these warning signs, it is important to do your own research before investing any money. Remember: if an investment sounds too good to be true, it probably is. |
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