Types of scams on the internet

Internet fraud – Ponzi scheme

A Ponzi scheme is a fraudulent system in which criminals pay out money to customers not through real income, but by recruiting more and more new players into the Ponzi scheme. 

The system works as long as the inflow of new customers continues. All pyramid schemes in the cryptocurrency world are now called Ponzi schemes. The system is based on the promises of great and fast profits from the investments of its members. The pyramid scheme's founders do not actually do any work At best, they pay out money to a few depositors, and only by recruiting new participants. A fraudulent enterprise is successful as long as it can maintain a semblance of stability. When customers stop investing, the scammers take the money invested in the platform and register the next new project. The old business closes and it becomes virtually impossible to get the money back. As a result the system organisers take all the money, the pyramid collapses and people are left with nothing. 

The pyramid scheme companies may be perfectly legal, licensed and paying their clients fairly. But in most cases pyramid schemesare used by crooks for illicit enrichment. Their aim is to raise the maximum amount of money and then close the business. Websites often publish information that is misleading, but this can be easily cross-checked. For example, if a scammer claims that a company has been around for 10 years but there are no reviews on the internet, this is not true. It means thatthe company is new. And if the company provides misleading information, it means they are scammers. 

The Ponzi scheme first emerged in the 1920s thanks to Charles Ponzi, who created a company that conducted legitimate arbitration deals.  Over time, however, he began to use the money he received from new clients to pay off his previous financial obligations. After the fraud was uncovered, the case madeheadlines in the United States. The press gave this method of fraud the name "Ponzi scheme". The principles of a Ponzi scheme: 

  • Fraudsters register a trading platform and convince their first clients to invest in the company. 

  • They then seek out the next potential investors and induce them to invest, promising extremely high returns. With the funds collected, they pay out profits to those clientswho invested earlier. - Once again, the organisers convince investors that it is worth reinvesting the profits. Many agree, believing that the company is legitimate because it pays out the promised profits. 

  • Once the inflow of new investment dries up, the scammers have nothing left to pay.  As a result, companies using Ponzi schemes disappear. Fraudulent Ponzi schemes have several features: 

  • They promise an unreasonably high return on capital. They often talk about hundreds of cents a year. Their main aim is to cause a stir and a desire to get a lot of money the easy way. 

  • Doesn't disclose information about returns. Traders cannot see managers' portfolios and have no access to information about the assets in which the manager invests. 

  • Makes cold calls. A pyramidscheme is characterised by the use of aggressive marketing. Scammers search open sources for the right contacts and call them with investment offers. Calls and social media can be very persistent. 

  • Apply pressure to convince these people not to withdraw their money. To maintain their image as an "honest company", they pay out money to clients over a period of time. But withdrawal is a problem for most clients. So they reassure traders of the need to reinvest the money. They usually don't have a license because they don't want to spend the time and money to get one. They use offshore licences, compliance certificates from private companies or work without any permits. They obtain offshore licenses, compliance certificates from private companies oroperate without any permits.

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