Named after an Italian businessman Charles Ponzi, the Ponzi Scheme is a fraudulent investment scheme that persuades people to invest money by assuring them a high rate of return with low or zero risk. This maneuver is fostered by the investors’ belief that their money is being invested in legitimate business activity to harness profit. Still, in reality, it pays profits to the earlier investors by exploiting the funds of more recent investors.

How to avoid investing money in this fraudulent scheme?

Independent research effectively prevents them from fooling the investors as it helps us figure out the nature of the scheme. Furthermore, knowledge about the persuasion techniques of the perpetrators decreases the possibility of ingenious scams. Some of these techniques are discussed here.

Easy money is a myth: 

Companies offering their investors substantially more returns at low or no risk are likely illegitimate and need to be avoided. Behind the claims of incredible gains linger a corrupt, unethical part of organizations unseen by most people.

Sense of urgency: 

A legitimate organization is less likely to rush investors to invest money in them. Pitches delivered with a sense of urgency while convincing the investors, unreasonable deadlines suggest the possibility of the company being fictitious.

Lack of information: 

A lack of contact information on the organization’s websites, emails, and letters implies a lack of accountability. When the information is not easy to access, the chances of your money getting compromised are high. A legitimate company ensures investors’ convenience and avoids making it hard for their investors to get in touch.

Hard to comprehend: 

Fraudulent schemes thrive on investors’ gullibility, and to achieve that, they make their procedures hard to understand. They often mention foreign or offshore investments as it is hard to locate the money abroad. The scheme of any organization that borrows public funds should not be too complex to understand.

Patience is the key: 

Taking time before investing is an antidote for ingenious scams as it lends us hours for independent research on the scheme and eventually helps to disclose the nature of the organization’s commitment. 

Reviews of early investors: 

Reviews of other investors should not be the only basis of your investment decision, as the Ponzi scheme ensures early investors’ profit to persuade new investors’ trust. It is advisable to rely on independent sources rather than the reviews of early investors.

Online platforms: 

In the era of digital modernization, the advancement of online communication has provided scammers with a platform to be more prevalent. Hence, it is advisable to be aware of online scammers as they use the platform to perpetrate mischief. 

Skeptical approach: 

A skeptical approach towards these companies is a robust countermeasure to maintain the deception of providing above-average returns with low or no risk; these companies send statements showing how much profit the investors have made. They also come with exciting plans and offers from time to time to minimize the withdrawal of the money invested.

Ponzi Scheme is one of the most popular and most discussed forms of investment fraud. It is named after the notorious Charles Ponzi, who bamboozled thousands with his scheme in the early 1900s.