So many people have been swindled out millions or thousands of naira by a platform known as a Ponzi scheme. Ponzi schemes are rising in popularity every day. From small-time scammers to billion naira frauds as they are everywhere and affect everyone. But what exactly is a Ponzi Scheme? How do they work? And most importantly, how can you avoid being scammed?
What is a Ponzi Scheme
A Ponzi scheme is a fraudulent investment business operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.
Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
What you need to know about Ponzi Schemes
Imagine if a family member walks up to you to sweet talk you into an investment that promises a high return rate. She gives you little information about the kind of business investment you are putting your money into.
Most times you do not even verify, but give up a few thousand naira. Then wait for a specific time and watch your money double or triple. Please, I advise you to walk away. It is probably a Ponzi scheme business in disguise.
Ponzi scheme has existed way back in the 1920s, and it has continued to be an illegitimate form of the business venture. Unfortunately, not all Ponzi schemes look or sound the same. Their structures differ, which makes it quite hard to spot the fraud in them until you become a victim.
7 Proven Ways on How Ponzi Schemes Work?
Ponzi scheme work in such a way that it doesn’t have a specific formula or method. There are many avenues to deploy it. They come up every other time with a different level of operation, system, and strategy, so you don’t get to see them all in headlines. Before you fall a victim, look out if they:
- They revolve around the central process of paying old investors with the money you get from new investors. This original system remains the same.
- Hook a few people to invest early on in business investment. The details of the business ventures are never available or open to them and go ahead to say that it doesn’t matter so much.
- They entice you with promises of multiple returns on investments. This is their main hook on the net which people hear and join the business without asking questions. They Brainwash individuals willing to stake their money with these promises.
- They tell you that after the first round of business investors for startups; they pay the money to everyone. This is a big lie as they use the money to pay out some and use the rest of the money to create a professional persona for themselves. They do this by setting up an office and maybe property for themselves. They show off these offices and property to scam the next line of startups or business investors.
- With the office and property in place, the third round of investors joins and the second round of the business investors will need its payout. This is a simple emotional and financial process of washing, rinsing, and repeating. The money from the third round of investors can pay off the second round and deliver more returns to the first people.
- The more the Ponzi scheme works, the more the complications also increase. So does the pressure on the schemer because people will be demanding a payout, and they will need to be appeased with prompt higher returns.
- Finally, as the pressure for payout increases, too many investors will be cashing out with very few investors coming in, and at this point, things start to get messy and the foundation starts to shake seriously. The scheme will eventually become unsustainable, and the ugly side of the scheme built will be shown to the people and it will finally collapse.
Why you should be careful about Ponzi schemes
Everybody in Nigeria needs to be careful about any business ventures that look or sound like a Ponzi scheme. Some of the reasons you need to be on the lookout or very careful about Ponzi schemes include:
- Only greedy people rush into Ponzi scheme. Do not prove to be one of them or allow yourself to be pressured into any form of the business venture.
- It can give you an instant high blood pressure: When the business collapses and you were taken unawares, your money will be gone and you can start to develop all kinds of sickness which first surfaces as high blood pressure. As an individual or a startup, take your time in making investment decisions. The more pressure you are under, the more suspicious you should get about the business venture.
- Any investment or business venture with unrealistic returns should also be of significant concern because it can put you into great debt. Investments or business ventures are not money doubler machines or money robot automation doublers. There are processes and elements of risk with any form of the business venture.
Note: Steady investment returns are not promised anywhere. Anything can happen and things can fall out of place in business. There is always an element of risk with any business venture. How can someone be promising you a steady rate of return?
Please examine and investigate further to make sure it is not just a ploy for another Ponzi scheme. Also, carefully examine what information the company provides or the structure they claim to run their business. A suspicious lack of details or information about the investment should be a red flag.
Conclusion
Many people in Nigeria have lost money and are still losing money to Ponzi scheme daily. Operators of this Ponzi scheme promise a daily high return to the investors, which makes them invest immediately.
Therefore, you should be careful and stay off from an investment that offers high returns within a very short time. Most often, these platforms are usually Ponzi schemes looking to play on the ignorance of individuals and other struggling citizens in the country.
