After bitconnects success in the ponzi area i decided to have a look at ponzi schemes to understand and hopefully be able to recognize one a little faster in the future. I found this on investopedia (direct link below) and thought it might be interesting and informative to others to help spot another potential scheme in the future. Hopefully we can all start to invest in areas unlike these.
Im now thinking that coins like Davor, hextra,lendconnect,ethconnect,falconcoin,usitech,ucoin and eigencoin are all the same. Everyone of these has some form of red flag to them (1-6 at the bottom of the post). Please correct me if i am wrong and show some form of support how these coins are not going to end the same way bitconnect did.
https://www.investopedia.com/terms/p/ponzischeme.asp
Ponzi Scheme: Origins
The first notorious Ponzi scheme was orchestrated by a man named Charles Ponzi in 1919. The postal service, at that time, had developed international reply coupons that allowed a sender to pre-purchase postage and include it in their correspondence. The receiver would take the coupon to a local post office and exchange it for the priority airmail postage stamps needed to send a reply.
With the constant fluctuation of postage prices, it was common for stamps to be more expensive in one country than another. Ponzi hired agents to purchase cheap international reply coupons in other countries and send them to him. He would then exchange those coupons for stamps that were more expensive than the coupon was originally purchased for. The stamps were then sold as a profit.
This type of exchange is known as an arbitrage, which is not an illegal practice. Ponzi became greedy and expanded his efforts. Under the heading of his company, Securities Exchange Company, he promised returns of 50% in 45 days or 100% in 90 days. Due to his success in the postage stamp scheme, investors were immediately attracted. Instead of actually investing the money, Ponzi just redistributed it and told the investors they made a profit. The scheme lasted until 1920, when an investigation into the Securities Exchange Company was conducted.
Ponzi Scheme Red Flags
The concept of the Ponzi scheme did not end in 1920. As technology changed, so did the Ponzi scheme. In 2008, Bernard Madoff was convicted of running a Ponzi scheme that falsified trading reports to show a client was earning a profit.
Regardless of the technology used in the Ponzi scheme, most share similar characteristics:
A guaranteed promise of high returns with little risk
Consistent flow of returns regardless of market conditions
Investments that have not been registered with the Securities and Exchange Commission (SEC)
Investment strategies that are a secret or described as too complex
Clients not allowed to view official paperwork for their investment
Clients facing difficulties removing their money
Read more: Ponzi Scheme https://www.investopedia.com/terms/p/ponzischeme.asp#ixzz55QFspJ1O
Hi! I am a robot. I just upvoted you! I found similar content that readers might be interested in:
https://www.investopedia.com/terms/p/ponzischeme.asp
why would you need to find the same comment as me on the link ive posted, then post. Im new to this would you explain. Thanks
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