A Ponzi scheme is a type of fraud that promises high financial returns in exchange for an initial investment and for recruiting more people to invest. Some schemes use the term "investment club" instead. The people who run these schemes are often charismatic and present the opportunity as an easy way to multiply your money by investing and bringing in new investors.
How a Ponzi scheme actually works
The "returns" paid to earlier participants come from the money that new participants invest, not from any real profit. Once new investors stop joining, the scheme collapses and most participants lose their money.
Warning signs to watch for
- A promise of high returns with little or no risk. Legitimate investments with higher returns always carry higher risk, so a "safe" high return is a red flag.
- Consistent gains regardless of market conditions. Real markets go up and down, so a scheme that claims to pay steady returns no matter what is suspicious.
- Trouble withdrawing your money. Ponzi schemes often make it difficult to cash out and pressure you to reinvest your earnings instead.
- No clear explanation of what happens to your money. If you can't find out where your investment actually goes, treat the opportunity with caution.
What to do if you suspect a scam
If someone tries to recruit you into a potential Ponzi scheme or pyramid scheme, contact Bitso right away.
- Create a support ticket.
- Open a chat with Bitso at bitso.com by selecting the chat icon in the bottom right corner of the page.