Ponzi Scheme

Recognising and Avoiding Ponzi Schemes

A Ponzi scheme is a fraudulent investment scam that promises high returns with little risk. It generates returns for earlier investors using the funds of new investors rather than actual profits. These schemes collapse when there are no new investors or when too many investors attempt to withdraw funds.

Things to Be Careful About:

Guaranteed Returns: Promises of consistent, high returns with no risk are a major red flag.
Lack of Transparency: Ponzi schemes often provide vague or incomplete details about how investments generate returns.
Recruitment Pressure: Scammers may encourage you to recruit others to keep the scheme running.
Unregistered Investments: Verify that the investment is registered with appropriate financial authorities.
Difficulty Withdrawing Funds: Delays or excuses for not returning funds are common in Ponzi schemes.

Actions You Can Take:

Research the Investment: Verify the company’s registration, licenses, and legitimacy with financial regulators.
Consult Financial Experts: Seek advice from trusted financial advisors before investing in unfamiliar opportunities.
Be Skeptical of High Returns: Investments offering unrealistically high or guaranteed returns are likely fraudulent.
Check for Independent Audits: Ensure the investment has been reviewed by independent, reputable auditors.
Report Suspicious Schemes: Notify financial authorities or consumer protection agencies if you suspect a Ponzi scheme.

Ponzi schemes rely on deception and the trust of new investors to survive. By staying informed and cautious, you can protect yourself and others from falling victim to these fraudulent schemes.