How To Spot Online Ponzi Schemes
As the internet continues to affect every aspect of our lives, its influence can be felt in how we interact with our friends and social circle. Social networks like Facebook and social media like Twitter have completely revolutionized how we communicate with our friends.
These two online services have automated word of mouth among friends. Before social networks, recommendations for restaurants, shampoo and other products, or financial products were random hit or miss affairs over the phone or through letters. Since the communication is only between two people, spreading the word over the phone relied on the memory of one of the two for it to spread. Now, with social media, all you need to do is share a link on Facebook or Twitter and not only can your friends check it out but their friends too. If enough of their friends share your link, your message can reach potentially millions. Talk about viral marketing.
How A Ponzi Scheme Works
As awesome as social networks may be for spreading the word about good products you’ve tried and recommend, it is also fast becoming the medium of choice for shady promoters pushing Ponzi schemes. A Ponzi scheme is a scam investment where investors are promised huge returns on their money. Earlier waves of investors are given the money of later waves of investors. The scheme implodes when the later wave of victims can’t pony enough cash to cover the promised return to previous waves of investors.
Keep An Eye Out For Ponzi Scheme Features
Here are the red flags you should look for when trying to spot an online Ponzi scheme:
- It offers fantastic rates of return. Scam scheme claims of 100% to 300% returns are quite common.
- It asks you to recruit your friends. Recruiting friends is a requirement of many Ponzi schemes since this ensures there is a constant supply of new victims to fleece.
- The investment’s promotional materials show off wads of cash or fancy cars. Pay careful to the images and wording of the investment’s recruitment materials. Be suspicious of investment schemes that try to sell you on a ‘millionaire lifestyle.’
- The scheme revolves around a non-existent product.
Watch Out For Variations
There are newer versions of Ponzi schemes where people are supposed to sell ‘memberships’ to their friends and family. Take a close look at the membership package. If the membership involves merely your membership in the scheme, chances are higher that the scheme is a scam. The bottom line is simple-you worked hard for your money. Don’t waste it by blowing it on online ponzi schemes.