Ponzi & Pyramid Schemes

Ponzi schemes are a type of pyramid scheme which operate on a “steal from Peter to pay Paul” foundation.

With the promise of big returns on an investment as a lure, the scammer takes money from new investors and uses it to pay off previous investors until no more new recruits can be found and the whole dodgy scheme falls apart, with the newest investors being left with nothing.

The scam is named after Charles Ponzi, a 1920’s con man who sold investors in New England a 40% return on their investment, promising to deliver in 90 days, compared with an average rate of around 5% in a savings account. Ponzi plotted to make money by taking advantage of the difference in exchange rates between the dollar and other currencies to buy and sell international mail coupons at a profit. His scheme was a great success initially, and during one afternoon in 1921, he made $1,000,000. But when the scheme began to fail, it became evident that he had only ever actually bought around $30 worth of the mail coupons on which the scheme was based.

Beware of any new scheme that promises that the investment will achieve an above average rate of return. The rate of return is usually stated in the sales pitch. The promised rate of return has to be high enough to be of interest to the investor but not so extraordinary as to be totally unbelievable.

A quite believable explanation of how the investment can achieve the above usual rate of return is always given. An explanation that is occasionally used is that the investor is highly skilled with years of experience and/or has some kind of insider information.

For it to work, the first few investors will make at least the promised rate of return, if not more

Other investors will then hear about the payoffs.( Paying a few forum posters to give rave reviews is enough incentive for sales to sky rocket) Just because a product has over 100 favourable reviews in a Forum is no excuse not to do more thorough homework, especially if handing out cash to a stranger!

Ponzi Schemes are quite basic but can be amazingly influential, especially in these difficult times when people are getting desperate just to keep a roof over their heads.

There are 3 steps to a good Ponzi scam:

1. Convince enough initial investors to put some cash into the investment.

2. After the agreed timeframe return the invested money back to the first investors plus the promised interest amount.

3. Now it becomes so much easier to convince more investors to place their money into the system. Usually the majority of the first investors will also return. Why wouldn’t they?  After all, the system has already proved itself!

Rinse and repeat the above a few times. During step 2 at some point, the pattern is broken. Instead of paying off the investors, the scammer makes a quick exit with the raised cash!

With little or no real earnings, the scheme will need a consistent flow of investment in order to continue. Ponzi schemes tend to fail when it becomes harder to recruit new investors or when a large number of investors ask to cash out at the same time.

Bernard L. Madoff is currently serving a 150-year sentence in federal prison for initiating such a scheme.

A high-yield investment program, also known as HYIP, is a type of Ponzi scheme, an example of which is:

www.1-million-usd.com they promise to invest your money in Forex, and then pay you a guaranteed percentage.

A simple Google search of the owner Henry Liu +Scam will reveal he is the master of defrauding people with Forex signals and managed accounts.

It is possible to make fortunes with Forex, but learn to do it yourself or thoroughly research the person you hire on your behalf. A word of warning on this one – it’s also all too easy to lose a fortune with Forex too.

If it seems too good to be true – walk away, far away!

Be very wary of sites such as Just been paid, just because there aren’t any negative reviews (yet) does not mean that the pyramid is sustainable. there won’t be a negative review until there is no site to write negative reviews about. That’s why it’s quite difficult to spot the scams; they will function exactly like they say they will until one day they’re gone. There’s no way they can sustain that kind of growth, so it’s only a matter of time till they walk away with all of the investments.

The way Just Been Paid (or JSS Trippler) works is: You buy a position for $10, This 1 position will earn you $16 in 80 days. The more positions you buy the more you earn. You just have to keep re investing and earn automatically…

 How it REALLY works: When you buy a position for $10 they use that money to pay out  another account who is due to be paid for positions bought 80 days ago, So then that person thinks its legit and invests more + tells all his friends, they all join and buy positions and their money might pay you some day, OR once the scam is big enough the owner takes all the money and disappears off into the sunset.

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