Anatomy of a Ponzi


Scammers have been around forever and their latest favourite seems to have a Cryptocurrency (Bitcoin, etc) or Forex (Foreign Exchange) flavour.

Sadly, so-called Ponzi schemes have been rampant in South Africa for years. These are schemes where early investors get paid from the deposits of new investors, creating the impression that the program is indeed profitable. After some time, when new investors inevitably become scarce, the scheme collapses as there is no more new money to keep it going. Most people simply don't know enough about crypto and easily believe that such incredible returns can be offered and even guaranteed.

So how do you identify a Ponzi?
Signs to look out for includes:

  1. The scam is often dressed up as an incredibly profitable trading program, either trading in Crypto or Forex – these markets are held up to be so gigantic and liquid, that it is possible to run “sophisticated AI algorithms”, robots, or “bots” that automatically trade day and night and magically makes money for the owner.
  2. Promotional material will either explicitly or implicitly state the profitability of the program - promises of weekly returns of up to 5% is not uncommon. The truth is that such high returns are simply not realistic and more importantly, can never be guaranteed. When any program claims to return more than 25% per year, alarm bells should go off.
  3. Oftentimes, the platform will show what appears to be real trades, made by the system and ‘confirming’ the profitability. Sadly this is no guarantee that the program actually made those trades – in almost all cases these trades are fake and in fact created retrospectively. Sometimes as recent as 5 minutes in the past, giving the appearance of real live trades.
  4. Typically, the platform will not be registered with the FSCA, and even though in some cases this is not a requirement, scammers will exploit such “grey area”, leaving their victims with little recourse. Furthermore, the team behind the program will either be fake, not identified, or worse: identifiable as having previous judgments, criminal records or past involvement in other dodgy schemes.

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Especially nowadays, South Africans are struggling financially and are often desperate.  Everyone wants to believe there’s a way to get rich quickly, or perhaps just get out of trouble and back on their feet. We so desperately want this to be true that we lose our objectivity and common sense when offered a chance to “make easy money.” Scammers understand this weakness very well and prey on it. They come disguised as “one of us” and have no moral scruples about who they steal from.

As bleak as it is, always keep this in mind: If it sounds too good to be true, it probably is.


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