6 signs crypto deal is a classic Ponzi scheme
WASHINGTON — The recent cryptocurrency crash won’t deter investors looking to get rich fast in a new technology they barely understand. It also won’t stop the many crypto-scammers who understand the psychology behind the bitcoin bubble, the mind-set that leads investors to willfully ignore the blood-red flags that warn they are being conned.
The criminal activity surrounding cryptocurrency is a growing concern to law enforcement. The FBI has formed a new specialized team — the Virtual Asset Exploitation Unit — dedicated to cryptocurrency crimes. The Securities and Exchange Commission announced it’s nearly doubling the number of staffers in its unit responsible for protecting investors in crypto markets.
Investors by the thousands are being duped into investing in cryptocurrency-related fraud schemes. The scams range from bogus cryptocurrencies to people who lost money believing they would profit from crypto mining ventures.
... Victims clearly find the scams believable. So then: What’s the recipe for the trickery?
To find that answer, it helps to dissect the deceit . ...
1: Promises returns that seem plausible.
Many people may recall Bernie Madoff, mastermind of one of the largest Wall Street Ponzi schemes, consistently paid out an annual return of about 12%, which seemed reasonable at that time. That should have tipped folks off. Market returns are unpredictable . ... If you are presented with a moneymaking opportunity promising easy earnings or extraordinarily consistent investment returns, I can assure you it’s very likely a scam.
2: Promoters display ostentatious wealth.
Con artists want you to want what they have . ... They wear expensive clothes or drive luxury vehicles. They host parties and hold regular conference calls bragging about their wealth . ...
Ordinary millionaires don’t have a need to prove their net worth; scammers do.
3: Proprietary secrets prevent full disclosure.
Madoff was very secretive about how he achieved returns for his investors.
On its website, (cryptocurrency and foreign exchange trading sceme) EminiFX says investors earned relatively high returns through automated investments in cryptocurrency and foreign exchange trading. But when asked to explain the technology behind the business model, the FBI alleges investors were told it was a “trade secret.”
When it comes to investing full, verifiable disclosure is your safety net.
4: Recruiting is key.
A successful Ponzi scheme needs new money. Who better to build trust for their scheme than the people investors know personally?
5: Participants brag about their payouts.
What keeps a Ponzi scheme going is people bragging about how much money they’ve made.
I found several videos on YouTube of individuals sharing how they made money from EminiFX. One thing stood out. They didn’t talk about how the money was made. They just boasted about their returns.
6: Cashing out becomes difficult.
At some point, the Ponzi scheme collapses or law enforcement shuts it down.
To protect what may be left of investors’ money, EminiFX has been placed in receivership. So far about 1,000 investors have reached out to the law firm handling the receivership . ...