Ponzi scheme is defined as Investment Fraud

To Study How the Ponzi Scheme is Defined

Getting the Ponzi scheme defined is something that has been done lately in many places. The Ponzi scheme is defined and named many different ways. You may have heard the Ponzi scheme defined as: Ponzi scam, Ponzy Scheme, Madoff Ponzi scheme, Ponzi scheme fraud, Ponzi investment, Ponzi pyramid scheme, Ponzi game, Charles Ponzi Scheme, Ponzi schemes and Ponzi system. Thanks to Madoff being ever present in the news, a good Ponzi scheme definition is not hard to come by. I have gathered what I can from all of the Ponzi Scheme definitions to get you the most up-to-date and conclusive definition of a Ponzi scheme.

The Ponzi Scheme Defined by All

The Ponzi Scheme is defined as an investment scheme where a scammer or frauder takes your money to invest it but then pays you and other investors back with the same money after taking lot of it to put it in their own pockets first. A Ponzi scheme defined by the U.S Securities and Exchange Commission call it the “rob Peter to pay back Paul” principle where early investors are paid off by new investors until the whole Ponzi Scheme collapses. A Ponzi scheme defined by Wikipedia is a fraudulent investment operation where other separate investors are paid returns from their own investments or from other subsequent investors, but not from actual and realized profits. A Ponzi scheme defined by the New York Times is when potential investors are wooed by unusually large returns only to be repaid by there own investments and can continue as long as new investors are found. A Ponzi Scheme is defined by Investopedia as an investing scam promising high returns with little risk operating by generating returns for initial investors by paying them with the money of new investors. These are only a few of the many ways a Ponzi scheme is defined online.

The Very First Ponzi Scheme Defined

Charles Ponzi created what is now defined as the Ponzi Scheme in the 1920’s. Charles Ponzi saw how the differences between U.S. and foreign currencies could be exploited through buying and selling mail coupons. The first Ponzi scheme has been defined as getting $1 million dollars in just 3 hours (but in 1921!). Charles Ponzi was able to generate this kind of money by telling investors he would get them a 40% return in 90 days. Charles Ponzi Only made $30 dollars worth of actual purchases of the international mail coupons. The only other money he parted with was paying off a few early investors.

Charles Ponzi in one of many arrests before the Ponzi Scheme

Charles Ponzi – The man behind all the defined Ponzi schemes

How can we define a Ponzi scheme without talking about Charles Ponzi? Charles Ponzi born in Lugo, Italy in 1882, came to America in 1903. Charles Ponzi arrived in Boston with only $2.50 in his pocket since he gambled all of his savings away on the voyage to America. He moved to Montreal and became a bank manager at a bank that went bankrupt with the owner fleeing to Mexico with the investors money. After a couple of stints in prison for various offenses, Charles Ponzi found himself back in Boston where he soon after got married.

Charles Ponzi then tried starting a business listing service (a catalog or directory equivalent) which soon after failed. Shortly after, an Italian company had sent a request for the catalog with a International Reply Coupon (IRC). This is the moment that defined the Ponzi Scheme. He would be able to take these IRCs and exchange them for U.S equivalent of the stamps and sell them. Since the stamps from Italy were much cheaper, the ability to buy them there and then exchange them would be very profitable.

The Madoff Ponzi Scheme

The Madoff Ponzi Scheme

Recently, the Madoff Ponzi Scheme has been all over the news. The Madoff Ponzi Scheme involved the biggest investment scheme known about in American history. The Madoff Ponzi Scheme cost investors and estimated 18 Billion dollars.

Here is an example of what a Madoff Ponzi schemeis or how a Ponzi Scheme is defined in an example.

          

Oil or Gas Fraud scammers are cooking with...well you know!

The Oil and Gas Fraud Scam

Though it’s currently a little known scam, gas fraud is on the rise. If you ever receive unsolicited sales calls regarding an oil drilling investment, tread with caution. Established oil drilling firms have no need to solicit new investors; they have a specific protocol in place that prospective investors must follow in order to get in on the deal. On the other hand, gas fraud operations need to solicit investors because they don’t have an effective business model in place (because they’re a gas fraud operation, not a business!)

A common tactic gas fraud operations use to trick their potential “investors” into dumping their hard-earned cash into this fruitless gas fraud scheme is the hard-sell method. The salesmen behind the gas fraud will insist that it’s a limited time offer or even offer to cut you a deal under the table if you agree to send the cash immediately.

Identifying a Gas Fraud Operation

But, be wary of these tricks; it’s just the pressure of the hard-sell tactic. The price to opt in will be the same tomorrow as it is today. If they were in fact running a promotional price, why would such a reputable company give you all of 10-minutes to decide whether you’d like to invest or not? By putting pressure on you to make a decision immediately they know you’ll be more likely to jump into this investment opportunity (which is indeed a gas fraud) in order to minimize the startup investment.

Do your due diligence to make sure you aren’t being taken in an oil or gas fraud. Take your time in asking the tough questions. Ask where the company’s physical office is located and for the address of the oil drilling site. Ask about the legalities of business: Is their company registered with the SEC? Where can you see legal documentation of the current registration? How was the drilling site acquired? Will there be any taxes involved and if so, who pays?

You can be sure that it’s a gas fraud operation if the salesperson hangs up on you or tightens up about the questions. Gas fraud operators become uncomfortable when asked these questions because they can’t answer them honestly! If you’re given answers, don’t immediately assume that it isn’t a gas fraud. Ask for the proper information so you can call up officials (preferably within the government) and confirm that they are indeed legitimate.

          

Identifying Crimes of Persuasion

Encountering crimes of persuasion is inevitable for those looking for work at home jobs. Many innocent moms looking for work at home opportunities and many of the “get rich quick” folk tend to fall into crimes of persuasion. A crime of persuasion is fittingly named because all the money is made by persuading people into buying into things they don’t need.

A crime of persuasion is also known as a pyramid scheme. A pyramid scheme runs off of the basis that you invest in a business opportunity that promises to make you tons of money for little to no effort. You’ll make your money by marketing the business opportunity itself to other hopefuls. Very rarely, will crimes of persuasion involve selling an actual product.

Don’t fall into Crimes of persuasion

Unfortunately, crimes of persuasion are inundating the internet and target those who are strapped for cash and looking for an online job. If it seems like a crime of persuasion, it probable is. Any opportunity that promises that you’ll make tons of money for little to no work is indeed one of the many crimes of persuasion. Also, you should never, ever, ever have to pay anyone for a job opportunity. Employers and clients are supposed to pay you for your work, not the other way around.

Remember, crimes of persuasion require constant recruitment to make money. Do you really want to take part in a crime of persuasion and put other innocent people into the terrible situation you’ll be in too? Instead, find a real job opportunity, not a crime of persuasion. If you’re hoping to work from home, consider selling on eBay or becoming a freelancer. There’s always a way around taking part in a crime of persuasion.

          

What do you know about a Ponzi Scam?

Charles Ponzi was an Italian-born swindler who eventually made his way into the states in November of 1903. Charles Ponzi is one of the biggest scam artists to have ever touched American soil. Not surprisingly, the Ponzi scam is named after Charles Ponzi. A Ponzi scam is based on the premise of gathering money from several investors and promising them a large profit in an unrealistically short amount of time. To gain their trust, the conman behind the Ponzi scam will pony up the promised amount and the investor will reinvest because of the initial favorable results.

A Ponzi scam can continue for years without detection and grows each time a new investor jumps on the unknown Ponzi scam band wagon. Eventually, the conman behind the Ponzi scam will run with all of the money or the entire Ponzi scam will unravel and the conman behind the Ponzi scam will be thrown in jail for fraud.

Example of a Ponzi Scam…

Jim decides to run a Ponzi scam to gain millions of dollars and then run with the money after a few years. Jim promises his clients a 55% profit on their initial investment within 30 days. Clearly, this will be nearly impossible to accomplish, but it’s the premise of a Ponzi scam. Jim pays his clients the promised amount. His clients are pleased, yet unsuspecting of the underlying Ponzi scam that they reinvest with triple the initial investment. Over time, Jim’s client base grows. He continues to pay his clients the promised payout with money from new investors. Eventually, Jim gets caught in his Ponzi scam because his colleagues grew suspicious. Jim goes to jail and his clients are out of money all because of his reckless Ponzi scam.

          

Ponzi Scheme Defined

With rich man Madoff being all over the news lately, many have been asking “what is a Ponzi Scheme “. A Ponzi scheme involves using new investors’ money to pay off promised money to the older investors (or the first investors). Usually done with investments that go bad when dividends and payouts are promised, are not made and are still paid.

So if I want to start a Ponzi Scheme up I would start by finding an investor, let’s call him Scammee. So I would get Scammee really interested in  investing money into something that sounds promising, lets say they are dingle berries. If the investment goes well, then Scammee can get the money that was expected. Unfortunately, I had to guarantee such high payouts on my dingle berry investment that hitting my mark is going to be impossible.  This doesn’t bother me since I had the intention of spending the money on myself anyway. So I tell Scammee how my dingle berries are really doing well and pay him out. Too bad I am using his invested money to do so.

So over time, Scammee is getting paid and still thinks he has his original money invested and would be able to get it back once he sells his shares of dingle berries.  This is where a Ponzi Scam gets interesting. Either through the happiness of Scammee or me  being able to brag about his payouts, I attract new investors. Now I have picked up two new people interested in my dingle berries, Scammed and Frauded. Since I am almost out of money from Scammee and my luxurious spending habits on wine and arugula, I have to use the money from Scammed and Frauded to now pay off Scammee. This goes on and on until I either catch a plane and escape with my dingle berries intact never to be seen again, or the market tanks, everyone wants their money back and finds out how my dingle berries are a big sham.

          

We are trying to make the world a little safer from all those scammers out there trying to get our cash in underhanded, fraudulent and scammy ways. We will try and list all the scams here but if you have any scams you would like to let us know about then please write a post or comment and add to already written posts.