What are the main indicators used to detect a Ponzi scheme or pyramid scheme?

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Ponzi schemes or pyramid schemes are a type of fraud that promises significant financial returns in exchange for an initial investment and the recruitment of more clients or "investors." Sometimes, the term "investment club" is used. Organizers are often charismatic individuals who present you with a scheme where, in exchange for your investment and the recruitment of other "investors," you can multiply your money without much effort.

In reality, the "return" or profit comes from the money of people who join the system, which is used to pay those who entered the scheme earlier. The main characteristics of a Ponzi scheme are as follows:

  1. As a general rule within the world of investments, the safer an investment is, the lower the profit return. Any investment promising a high return implies risk. A proposal projecting the possibility of a high, secure, and guaranteed return is at least suspicious.
  2. Consistent profits: No market remains linear. Investments can rise and fall based on various variables. Therefore, if an investment promises profits at all times, regardless of market conditions, paying attention is essential, as this could be a significant indicator of a Ponzi scheme or some form of fraud.
  3. No direct way to receive payments: Ponzi schemes often present numerous obstacles to withdrawing the "earned" money, which is why they frequently insist on having you "reinvest" it within their investment programs or "partner investment programs." Any legitimate gain should be accessible to you whenever you request it.
  4. Lack of transparency about what is done with the invested money: if we don't know where the money is coming from or the supposed "investments," caution is necessary. We shouldn't be swayed by supposed innovative ideas that don't show us the reality and only aim to deceive us with grandiose names and complicated investment concepts.

If you suspect someone is attempting a scam or recruiting you for a potential Ponzi scheme, contact Bitso immediately.

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