For the less-informed people, a Ponzi scheme seems like a dream come true to swim in a ton of cash. If you’re not aware of what a Ponzi scheme (often referred to as a pyramid scheme,) is, it is a fraudulent enterprise that promises high returns on investment. They operate by paying early investors by using the money they collect from recent investors. They call it a pyramid scheme because the recruiters and their “Passengers” will form a hierarchy that looks like a pyramid.
As you can see, the main aim of a Ponzi scheme is to recruit more people so they can suck them out clean at the end. Although Ponzi schemes are illegal, individuals responsible for it still manage to set them through loopholes in the system. The scheme will operate until it reaches a point where the number of new recruits slows down. Then, in most cases when it happens, the perpetrators will be on the run before authorities start to investigate them. Hence, we need to be extremely cautious to not get caught in these schemes.
It’s apparent that even the well-informed among us are susceptible to these schemes, let alone people who are not. What makes them as lethal as they are? They offer a combination of a false fallacy that they can get rich quick and often their targets are people who are desperate for money. Often times, people who want to recruit people will flex their earnings by showing off money, their cars, and their houses. They often hold conferences and in them, they will outright tell you that they made X amount of money in a quick duration. They often call themselves “entrepreneurs” for some reason.
Technological advancements made it really easy for individuals to set up the right resources to disguise their schemes to mock a legitimate business. Their website, their customer support and their branding are often designed to give false reassurance that the business is legal and has been operating for a long time. It can get really tricky to identify them but there are some universal signs that can help us to do so.
Have you ever had a “ friend” that calls you out of the blue to talk about a “new business opportunity”? How to tell if they got lured into a Ponzi scheme? Just ask about what are they selling. If they can’t explain it to you, or they are not clear how the company makes its revenue, that’s a major red flag. You should be running by now, but if you truly care about the person, please let them know. They won’t accept it at first and might even get angry at you for pointing it out. In that case, thank them for their time, pay for his/her coffee and leave.