Ponzi Scheme Examples – Named after Charles Ponzi, in this article, more than explaining Pyramid schemes,Bernie Madoff and other well known scammers,i want to focus on a few examples that have trapped thousands of gullible investors and have not been showcased far enough in the media.
I will not talk about Cryptocurrency and Bitcoin trading, which according to me is the biggest get rich quick scheme of 2017 , ill save that for a future post.According to my personal experience these four examples given below are the most recent in the last decade.A special mention as the last example of Online scamming not being a Ponzi scheme per se, but probably affects a vast majority of us.
What is a Ponzi Scheme ? – 10 Amazing Facts about a Ponzi Scheme
1.Its a money making scam that is initiated by a small company/individual that requires you to invest a certain sum of money in their “business plan” and earn a high return on your investment.
2.Ponzi schemes are run by extremely shrewd and experienced con men that use some medium( Newspapers/Internet) to propogate and advertise thier scheme.
3.After the company collects a large sum of investments from gullible public,it folds up overnight and the promoters are untraceable.
4.The scheme relies on “rotating returns”.Since the company doesn’t really run a profitable venture and shows fictitious figures to fool potential investors,it needs to pay back a high return as promised to the first few investors,to seem legitimate. This is done by effectively using others investors money to pay back the early investors.
5.One of the best sales promotions that are used to lure people is by offering much higher returns than traditional institutions.For example a program will be advertised in a newspaper that asks members of the general public to pay a relatively small amount of money,maybe $500 to fill “online medical transcripts” and in return they would earn $50 every month for their work.The more transcripts they work on,the higher their chance to earn more from the program.
6.Another important reason to keep the initial members happy by giving them the promised high returns is so that they in turn will get more members to join into the scheme.the entire scheme works on numbers.The greater the investment,the more worthwhile it is for the promoters,and the faster they can quit,without alerting the authorities or before someone can suspect whats going on.
7.These schemes are also similar to MLM schemes that require you to sell products and get extra earnings if you refer and get other people into the scheme.Its a chain reaction,and is designed in such a way that everyone loses,except the people who started it.
8.After some time,when the promoters have enough investment collected,and there arent many new members joining in,it becomes difficult for the promoters to continue paying the investors.This is when some members don’t receive their monthly returns and suspect they have been had.
9.Work from home,medical transcripts,earn money fast,online brochures etc are labels to spot a fraudulent scheme.Avoid these advertisements that are printed on paper bills ad pasted in public transport or media.
10.One of the latest Ponzi schemes took shape was in Asia.A company by the name of Speakasia lured people to fill up online survey forms.Each member had t pay $400 to get into the program.Soon the payments to many members stopped and the COO and CEO of Speakasia were arrested.However just few months after that,a similar scheme appeared in Brazil,possibly perpetrated by the same group of people
Ponzi Scheme Examples
EXAMPLE 1 – The alleged Monavie scam and MLM
Like all other white collar scams and schemes that have surfaced over the last few years, some of them legitimate companies, that uses a pyramid marketing structure to propagate and promote their product.Some may have been branded fraudulent for a number of reasons.One of the latest to hit the limelight is a health and wellness company that sells a product called Monavie.
*Please note that this website/nor any of the authors on this website endorses Monavie nor labels it in a derogatory manner.This is only an unbiased collection of snippets that we have researched through consumers and industry insiders about the product and do not support any claims of being true or false.
1.The parent company that produces Monavie claims that it uses the juices of the Acai berry as one of the main ingredients in its juice.The acai berry has a high composition of antioxidants that are good for health and general well being.
2.Contradicting reports suggest that the actual volume of the acai berry in the juice is less than 2%.Other claims by distributors that Monavie is an energizer and rejuvenating juice and it reduces cholesterol are met with a lot of skepticism with users and distributors alike.
3.Pro supporters claim that the reason behind the negative publicity and scam related accustions stems from the fact that certain groups of distributors that havent had much success with the product and are just sour about not generating enough leads and raking in a sizeable comission.These distributors hit back with the claim that over 99% of all distributors do not make a profit at all.
4.It works on a similar principle of MLM marketing used by other companies in the past like Amway.It is marketed through a pyramid sturcture of distributors where besides selling the product,the distributor also earns comissions through referrals by getting other distributors into the scheme.
5.Is endorsed by a range of celebrities,sportspeople,prominent business columnists and has been featured in print publications and tv network shows.
6.One of the biggest accusations that Monavie has faced is its apparent show of revenue since its inception.It recently showed figures touching $1 billion in sales of its main juice product.Many trade gurus and business experts,as well as consumers and distributors rubbish claims of huge sales,saying its only a marketing tool to lure more distributors to sign up.
EXAMPLE 2 – IS INSURANCE THE BIGGEST SCAM OF THE CENTURY?
Is insurance the biggest scam of the century ? – According to me it is a well crafted,paper wrapped,government backed Ponzi Scheme.Everyone has heard of insurance fraud.Its when the insuring company is the good guy and when the policy holders are the bad guys.
Cases of fraud are common in medical ,auto and property insurance,but what about the other way around.Has anyone ever stopped to think that, Insurance could in fact be the largest racket in the history of global finance.
Thousands of agents all over are employed to sell policies to gullible customers.On the face of it,the offer seems real and worthwhile.When you buy your new car,you get insurance with it,about $1500 coverage as an example.You continue paying the annual premium of a few hundred bucks every year.Your car is scratch-less,thankfully its in good shape all these years after you bought it.
If someone bangs your car on a busy street 5 years after you bought it, you can claim coverage.You get reimbursed for the damages which was say, $500.If your’e paying a premium of $100 every year and after 5 years you get the coverage,that is already $500 of premium spent.
This seems senseless because if you didnt take insurance and just invested that $500 somewhere else,even at a meager APR of 5% compounded, that would be worth over $650 today,and if you spent $500 to get your car fixed,you’d still be on top with $150.
This is only a simple example,but medical premiums can be much more costlier,and that would be paid for the rest of your life,god forbid until you actually land up in hospital and avail of it.The savings of medical insurance over a 25 year period can be staggering!
The only thing that an cover can give you is some sense of security,its that feeling in your mind and you say to yourself “ok, im covered”, and that will give you good sleep at night,whereas not having cover can make you feel insecure and you would always think of times, if you need to admit yourself in the hospital, the medical bills would kill you.but also remember that, the larger the coverage,the higher the premium too.
Keep that in mind and do the numbers, and if you want to get creative,make a bank account,
and every year deposit a sum of money equal to your premium that you would have paid into that account.Use this money as your personal coverage.
Watch it appreciate,and liquidate it whenever you want,you cannot get back all those premiums you paid all those years ever,and if you decide to cancel your policy after a few years,you wont get a cent back.Food for thought- is insurance the biggest scam or what?
EXAMPLE 3 – THE SPEAKASIA STORY
This well organized Ponzi scheme of 2012 affecting thousands of investors in Asia. So what has made the Speakasia issue different from other MLM companies that have folded up in the past?Apart from amassing over a million members into the scheme it has collected 2000 crores of public money that is in the process of being recovered by the Economic Offences Wing – EOW. The umber of users that have been affected by this is staggering and unbelievable.
What is particularly interesting for most of the 1 million panelists of the speakasia community. is that on November 7th late evening, the Speakasia website had gone live again, that had made Speakasia users rejoice. Many users have also logged in successfully, whereas some have had issues with login unsuccessful attempts.
Some users are complaining about not being able to access their Reward Points section and other account info.A source representing Speakasia suggested that the EOW has gone live with the website for a few hours and the Speakasia Management is not in control of operations since the last 4 months.
Just last week, an American friend was telling me about how he thought that indians were the smartest people people in the world when it came to money and thinking that people could invest between 6000-11000 and get 4 times that money back in a year, by filling some online forms is shocking.
How can people be so naïve? These aren’t children who signed up for schemes, so how can they be so gullible, because many of these users are retired people and have seen life, how could they not have seen this coming?
5 years back, i was introduced to someone who told me about this scheme of online brochures and transcripts that he had, and how I could make at-least 10,000 a month, but to get into the scheme I needed to pay 10,000 as joining fees. I was in college at that time as the man spoke good English and gave me his fancy business card with corporate office address and all written on it. I asked my father if I could join the scheme by paying 10K. That night I was explained by my father who was a good businessman that these schemes were dicey, and I should never opt for any of them, ever. He asked me ,if I went for a job, would your employers ask you to pay money to them to get you into their company?
EXAMPLE 4 – ONLINE WEBSITE SCAMS
With millions of dollars changing hands every few minutes,it is imperative that everyone be more than aware of whom they are giving access to their banking and credit card information.The ways how to detect a scam i’m talking about particularly refer to those harvested on smaller b2b portals and Chinese goods web bazaars .Local online superstores like Bestbuy and Target are not what i plan on discussing here.These are single entity merchants,they do not sub host other traders and manufacturers under their brand umbrella. In the past year i have spent close to $12,000 meticulously over Taiwanese bulk second grade computer memory modules.
Reading the B2B discussion forums of how many unsuspecting Americans have lost money to scams,made me scrounge around for the most trustworthy merchants to trade with.It took me 4 months before i even spent a single dollar on an online transaction.Remember that i spend much more than the average online shopper,with purchases of at least $5000 every few months.
The million dollar question now, is why do Americans take the risk and buy products from Chinese/Taiwanese wholesale “bargain bazaars” as i call it, when quality and concern are questionable?If Apple,HP,Dell and a slew of giants mega-corps can source goods and services from China,i think little guys like you and me definitely can.
Most traders here, represent wholesale factories that offer a huge variety of goods of every kind at the best possible rates that no local online store can match.This can be extremely profitable for bulk buyers.These Chinese markets can also have an abundance of fraudsters,here are a few sure-shot ways how to detect a scam trader and save yourself a huge loss.
Any trader,manufacturer or merchant will have,or should have a self hosted website,and if they piggy back on a free host,that should give you an indication how small that trading company is.For someone that makes a living and does business over the internet,you would think the least they can have is their own website.Some of these free hosted websites also have an inbuilt template,with the same identical pages and script.I once came across 5 different websites with the same map and location!!An additional safety check would be if you retrieved the whois information of the website to check location details.
Remember the Chinese are the shrewdest people in business.They didn’t just become the biggest economy by farming rice,so when pretty chinese salesgirls decide to shower you with freebies and price cuts that put target to shame,that should grab your attention immediately.A practice that i always follow is to get quotations from as many traders as i can for a particular product.Some of the unbelievable offers that are included in the quotation list are – buy 1000 pieces and get 2 laptops free or buy 500 pieces and get a 25% discount.
These may seem genuine,since the its a bulk buy,but when you look at the rest of the quotations with similar pricing and not even a hairpin free,it makes you wonder.The most common type of scams are the quotations with ridiculously low prices.
One look at the list makes you jump in joy.Its so attractive and luring,some gullible folks fall for it.When the rest of China is selling product A for $4.25 (MOQ 500 pieces) and then you come across fay hang offering it to you for $2.25.While shopping online, if its too good to be true,run far away.
HOW to DETECT an AN ONLINE SCAM
Detect online scammers -The Chinese web markets have brought an immense change to the overall shopping experience.As of this moment,the largest online escrow as well as the largest online stores are all Chinese. Shopping at these portals are fun but come at a small risk.Thousands of shoppers have complained about scam operators and traders.There are several websites and forums dedicated to helping people who have been victims of online fraud,and these sites help them to deal with the problem.
The fraudulent trading companies are blacklisted on these forums so that in future,others may not fall prey.But these Chinese scammers are smarter,after doing a con job,they change their contact details,website address and other information and resurface in another avatar to claim their next prize.They are virtually untraceable and untraceable. The local law force admits that too.
So better than getting cheated by online scamsters,lets look at some dead giveaways.Better safe than sorry.
Points to Detect online scammers
1.A starting point would be to check the landline phone number.Its important that they have one,and not only a cellphone number.The landline number prefix can be cross checked with the address of the office or factory.It should of course be the same province and city.If there isn’t any landline,there one hint.
2.Many tech company salesgirls’ will offer you almsot unbeleivable offers and discounts.Some throw in deals like”buy 1000 pieces and get 2 laptops free” or 25 % off on stocks.Its tempting when all the other traders are offering you the same product for say $5 and then this one company offers it to you for $3.50, it should make you weary,not tempted.Be on your guard for such out of the box offers.Remeber,if its too good to be true,it isnt.
3.A legitimate trader/manufacturer will always have a self hosted website.If the website is on a free hosted server,or the design seems too “templated” its something to think about.I once noticed about 5 different company websites with the same map of thier office!Additionally,a whois lookup would put any doubts to rest.
4.Checking the background of the trading company on the shopping website is a good indicator of how genuine it is.Things like customer reviews and comments are important.If a company is newly listed on the website,it wouldn’t be a good idea to trade with them,until someone else has,and has posted a positive report about it.
5. Something that might seem unimportant but that been a dead giveaway is the company price brochure.Most traders give a price list in the form of .xls. There had been a time when two companies gave me the Exact same file,but different prices,there was only one way to figure out who was fake and who was real.The cheaper offer was fake,and it was so easy to understand that because he tried to sell me a grand piano for $2000. Thats ridiculous by any standards!