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- 1 The Ponzi Scheme and Pyramid Scheme have been widely used by scammers to swindle people
- 2 The masterminds of these schemes use profitable prospects and impressive presentations to make their pitch credible.
- 3 People need more information on these ploys to save themselves from falling into traps.
The irrational belief in miracles makes humans vulnerable to many traps. Since time immemorial, vile fraudsters have been taking advantage of that. They allure naive people with the prospects of massive gains and run away with their money. This continues to happen even today with so many types of fraud. Among them, two are extensively used- the Ponzi Scheme and the Pyramid Scheme.
An Overview of Ponzi Scheme and Pyramid Scheme
While both of them work in the same way, there could be some differences. Ponzi and Pyramid both focus on creating a network of investors. They encourage every new member to bring more candidates. The members get incentives by adding new members to the system. Although it sounds easy, the schemers allure investors with so many things.
Mostly, the entities promise consistent growth, promotions, monetary rewards, and even expensive gifts. Many of them advertise these scams as a vocation or a side hustle. They portray it as a source of passive income that rewards them according to their performance. They exaggerate the returns and make it look like a steal. Unfortunately, many people fall into this trap and end up losing their hard-earned money.
Here’s How Pyramid Scheme Works
Ponzi schemes are mostly hatched with the aim of making money fraudulently. In the case of the Pyramid scheme, however, this may not be necessary. The latter adopts Multi-Level Marketing which has been the base of many businesses. FMCG companies, insurance firms, and even education startups have used this model to succeed. It may look like a cost-effective method of making sales. However, it doesn’t happen in most cases due to its flawed structure.
MLM focuses on expanding its network rather than enhancing sales using other ways. For example, company “A” wants to sell soaps. Instead of the traditional distribution channels, it opts for MLM. Whenever it adds one member to its network, it sells the product once. To make things worse, it pays the members incentives on sales. In the past, many companies adopted this model and failed.
Here’s How Ponzi Scheme Works
Ponzi scheme may or may not adopt the pyramid model. They may ask investors to bring more people or may just promise to double their invested sum. Recently, scammers have hatched many nefarious schemes around cryptocurrency. They promised that they would invest their money in Bitcoin and other precious assets. Eventually, they vanish in thin air after collecting the money.
More often than not, they promise unusual gains and even show some real-life examples. Some may even make it more elaborate and believable. The scammers start with a small amount and even distribute returns on a regular basis. After gaining investors’s trust, they convince their victims to invest a bigger amount. Once they receive them, they conveniently become unavailable and inaccessible in quite a customary fashion.
Somehow, the scammers always find gullible people whom they can fool. Lack of awareness and the blind belief system are widely responsible for instances. Thus, people need to be very careful while dealing with such offers. If anything sounds too good to be true, they need to stay away from it. Most of all, they need to believe in themselves to achieve success in life rather than relying on shortcuts.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
