Why BitConnect is probably a Ponzi Scheme Scam ? Part 1 : what is a ponzi scheme ?

We all have heard this term once in our lives and, unfortunately, this is a term that is prevalent in the online world. What is a Ponzi scheme you may ask? By definition, this is a specific form of fraud that is utilized by having other people believe in the quick success of investing their money, only to have that money invested by others.

Sounds confusing doesn’t it? Well, don’t worry. I will simplify it more for you in this post. Today I want to talk about, how these schemes work, how you can spot them online, as well as what you should do to avoid becoming their next victim.

The Truth About These Type Of Schemes

Who was charles ponziThe Ponzi Scheme originated, thanks to one man: Charles Ponzi, hence where the scheme got its name. It all started when he convinced a couple of people that if they invested into an opportunity RIGHT NOW, they could get huge returns on their investment in no time. Of course, many people fell victim to this scheme and lost out on thousands and thousands of dollars. Charles Ponzi was sentenced to hard jail time and after that many people assumed that this was the end of it.

Unfortunately, these type of schemes still exist today and what’s even worse is that many people don’t even know they are falling for them until it’s too late. There’s a vast amount of make money online programs that are set up in this same fashion and I have thoroughly reviewed many of them on this very website.

The Basic Framework Of A Ponzi Scheme And How It Works

Also referred to as a pyramid scheme, most of the time this works by promising those who invest high returns on their money with little or no risk involved. The way a person can “make money” with this scheme is if they acquire new investors to invest in this scheme as well, thus returning some of the money they invested in the first place.

However, most of these schemes end up collapsing the moment new investors stop coming into the opportunity and the only person who usually walks away with money in the end is the person who started it.

Ever since Charles Ponzi’s first scheme back in 1920, there have been many imitators that have popped up since that time. This “get-rich” quick scheme typically targets people that are currently going through financial troubles and they make it seem like an opportunity that’s hard to pass up or “an opportunity of a lifetime”.

The basic framework of this kind of scheme is practically the same, regardless of the name of the opportunity. It all starts with paying older investors with the money that is gained by newer investors. Once you have the new investors sucked into the opportunity, you then pay off the older investors and walk away with a nice chunk of change in your pocket.
This is an endless cycle of pay and get paid. The more new investors you can rope into the scheme, the longer you can keep the scheme running.

Take a look at the infographic below to get a better idea of how this works

What Is A Ponzi Scheme

Ponzi vs. Pyramid Schemes: How to Spot the Difference

While both of these schemes tend to have many similarities, they are in fact NOT the same thing. When you first think of a Ponzi scheme, you automatically think of a Pyramid scheme because the structure is in the shape of a triangle: the mastermind sits on top of the pyramid, while the 2 lower levels are constantly changing with the addition of new investors.

What’s the difference between these two you might ask? Well, for starters with a Ponzi scheme you are only ever asked to hand over money. That’s it. The person who’s running the scheme is responsible for handling all of the work involved in getting new investors and all you have to do is sit back and wait for the money to come in.

A pyramid scheme, on the other hand, offers you the opportunity where you can make lots of money and they entice you with a low buy in price, then tell you in order to make money you need to invest in a high ticket package. This type of scheme requires much more work on your part, as you will have to hustle to get more people to sign up under you. Pyramid schemes also rely heavily on you pushing this onto your close friends and family also known as your warm market.

Not only will you need to invest money into it but you’ll also be responsible for training these people on how recruit other people into the scheme.
There is one other thing that sets these two schemes apart. Unlike pyramid schemes, Ponzi schemes are completely illegal!! How do pyramid schemes stay on the legal side you may ask?

They usually have a product or service that they offer to disguise it and make their program seem legit. As long as they have a product or service they aren’t considered illegal.

How to Spot a Ponzi Scheme Online

Now that you understand what this is and how it works, it’s time to protect yourself from becoming the next victim of one of these online.

There are many signs that you need to know about schemes set up in this fashion and here are just a few of them:

You will never receive anything for the investment you have made. You will only be given a statement and promissory notes for your investment.
The return on your investment sounds too good to be true. Usually, these schemes promise between a 50%-100% return on the investments you have made. Remember, if it sounds too good to be true, it probably is.
You are promised that you will earn a consistent return on your investments with no risk of loss ever. This is one sign that should send up a huge red flag because even valuable and long standing companies can’t promise this kind of return especially when the market can behave erratically from day to day.
You are bombarded with many different and compelling stories of why your return of investment is so strong
If you ever hear the words “Exclusive Private Placement.” or “Licensing Agreement” This is a major red flag to be weary of.
Steps To Take Before Investing A Single Cent Of Your Money

If You Think You Are About To Fall Prey To A Scheme Like This, Here Are A Few Precautions That You Should Take To Protect Yourself!

Always thoroughly research the company before investing any money. This is where search engines can really help you out. Look for reviews, payment problems, or a rating on the Better Business Bureau website.
Always ask for referrals of references of the company so you can find out who is really backing this company. Are these people potential victims of this scam but aren’t even aware of it yet?
Use your best judgement. Never let your greed for money overcome your better judgement.
Protecting yourself from schemes like this is just as important as learning what one is and how to spot one online. Hopefully, you can now protect yourself from these types of schemes and actually find a real opportunity out there that can make you money without investing large amounts of cash.

If you are looking for a true way to make money online there are places that will teach you how to get started for very minimal costs. In most cases, you’ll have the opportunity to test drive their service for free, without requiring you to invest any money.

This way you can get an idea of what you are getting involved with beforehand, and see if it’s something you would be interested in doing before you spend any of your hard earned money. The place that has taught me everything I know and has helped me create a thriving online business is Wealthy Affiliate.

In just 10 short months, I was able to quit my full time job where I was working 60 hours a week (Sometimes more)and helped me live a more comfortable lifestyle. Their training is super easy to follow and it comes with step by step instructions where you simply need to check off each task before moving on to the next lesson.

I really hope this post has helped everyone out today and has given you a better understanding of this and how to avoid falling for these type of shady programs. Have you been a victim of either of these schemes or have you invested money thinking you’ll get a high return on your investment?

How was your experience and how much money did you lose? Tell me about it in the comments below!!