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A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are coming from legitimate business activity, and they remain unaware that other investors are the source of funds. A Ponzi scheme can maintain the illusion of a sustainable business as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own.
A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.
Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements (pump), in order to sell the cheaply purchased stock at a higher price (dump). Once the operators of the scheme "dump" (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small-cap cryptocurrencies and very small corporations/companies, i.e. "microcaps".
Holiday Magic was a multi-level marketing organization, founded in 1964, by William Penn Patrick (1930–1973) in the United States. Originally the organization distributed goods such as home-care products and cosmetics. Company distributors were encouraged to recruit other distributors in a multilevel marketing structure, which was later characterized as a pyramid scheme.
A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors.
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information. The setups are generally made to result in monetary gain for the deceivers, and generally result in unfair monetary losses for the investors. They are generally violating securities laws.
Employment fraud is the attempt to defraud people seeking employment by giving them false hope of better employment, offering better working hours, more respectable tasks, future opportunities, or higher wages. They often advertise at the same locations as genuine employers and may ask for money in exchange for the opportunity to apply for a job.
Multi-level marketing (MLM), also called network marketing or pyramid selling, is a controversial marketing strategy for the sale of products or services in which the revenue of the MLM company is derived from a non-salaried workforce selling the company's products or services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.
Lars Johan Magnus Staël von Holstein is a Swedish entrepreneur, venture capitalist and author who co-founded dot-com companies such as Icon Medialab and LetsBuyIt during the early dot-com boom in Sweden. He has been the CEO of the multi-level marketing company Crowd1, which has been identified as an illegal pyramid scheme in a number of countries. As of December 2020 he claims to have left Crowd1.
Sunshine Empire was a Multi Level Marketing (MLM) company, set up in 2006, based in Singapore. It is now defunct, with assets frozen by the Singapore Court. The company is listed by the Singapore Government's Monetary Authority in its Investor's Alert List, for possibly running investment schemes without authority. After investigation by the Commercial Affairs Department (CAD) of the Singapore Police and a court trial, Sunshine Empire's Directors were charged with and found guilty of fraud, criminal breach of trust and falsifying accounts.
Crime rates in Singapore are some of the lowest in the world, with petty crimes such as pickpocketing and street theft rarely occurring, and violent crime being extremely rare. Penalties for drug offences such as trafficking in Singapore are severe, and include the death penalty.
Bernard Lawrence Madoff was an American fraudster and financier who was the admitted mastermind of the largest known Ponzi scheme in history, worth about $64.8 billion. He was at one time chairman of the Nasdaq stock exchange. Madoff's firm had two basic units: a stock brokerage and an asset management business; the Ponzi scheme was centered in the asset management business.
The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008. In December of that year, Bernie Madoff, the former Nasdaq chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth management arm of his business was an elaborate multi-billion-dollar Ponzi scheme.
Qnet Ltd, formerly known as QuestNet and GoldQuest, is a Hong Kong-based multi-level marketing (MLM) company owned by the QI Group. QNet was founded in 1998 by Vijay Eswaran and Joseph Bismark. The company's products include energy, weight management, nutrition, personal care, home care and fashion accessories on an e-commerce platform.
Telexfree, a trade name owned by Telexfree Inc., was a multibillion-dollar Ponzi scheme disguised as an internet phone service company. Prosecutors have described it as the largest fraud of all time in terms of the number of people affected - more than 1 million, with victims in various countries. The brand became best known for its operations in Brazil held by Ympactus Comercial Ltda after it was involved in an ongoing investigation and trial for operating a Ponzi scheme, and later for having its operations suspended in the US by SEC under the charges of operating a multibillion-dollar Ponzi and pyramid scheme.
OneCoin is a fraudulent cryptocurrency scheme conducted by offshore companies OneCoin Ltd, based in Bulgaria and registered in Dubai, and OneLife Network Ltd, both founded by Ruja Ignatova in concert with Sebastian Greenwood. OneCoin is considered a Ponzi scheme due to its organisational structure of paying early investors using money obtained from newer ones. It was also a pyramid scheme due to the recruiting of investors without providing any actual product. The company secretly conducted database entry scam simulating transactions not registered by an actual blockchain, and with no mining behind the apparent cryptocurrency release and circulation. Many of those characters central to OneCoin had been previously involved in similar and different other schemes and business malpractices separate from each other. OneCoin was described by The Times as "one of the biggest scams in history".
Amit K. Bhardwaj was an Indian who was involved in big scam who founded Amaze Mining and Blockchain Research Limited which ran GB [Gainbitcoin] Miners among other bitcoin-related businesses and projects, these have been described as various types of Ponzi schemes.
Ruja Plamenova Ignatova is a Bulgarian-born German citizen and convicted fraudster. She is best known as the founder of a fraudulent cryptocurrency scheme known as OneCoin, which The Times has described as "one of the biggest scams in history". She is the subject of the 2019 BBC podcast series The Missing Cryptoqueen and the 2022 book of the same name.
References
- 1 2 "Fraud Library - Pyramid & Ponzi Schemes Fraud". Fraud Squad TV . Retrieved 2009-11-26.
- 1 2 "ABC News - Multimillion Dollar Scam Exploits Women". ABC World News Archive. Archived from the original on 2004-08-03. Retrieved 2009-11-26.
- ↑ Robert FitzPatrick | Pyramid Scheme Alert
- ↑ "Multi-Level Marketing Critic: Beware 'Main Street Bubble'". CNBC . 9 January 2013.
- ↑ "False Profits - Robert L FitzPatrick - Book - Barnes & Noble". Barnes & Noble . Retrieved 2009-11-26.
- ↑ Pyramidschemealert website
- ↑ "WTTW Chicago Matters - Money Talks - Is It a Pyramid Scheme". WTTW Archive. Archived from the original on 2009-11-06. Retrieved 2009-11-26.
- ↑ "Easy Money - Buying Into the Pitch to Become Rich - CBC News Marketplace". CBC Marketplace . Retrieved 2009-11-26.
- ↑ Stecklow, Steve (28 January 2009). "In Echoes Of Madoff, Ponzi Cases Proliferate (1-28-2009)". The Wall Street Journal. Archived from the original on 2015-09-19. Retrieved 2009-11-26.
- ↑ Maremont, Mark (2006-03-01). "Online 'Autosurf' Scams Use Legal Businesses to Flourish - Partial Article (3-1-2006)". The Wall Street Journal. Retrieved 2009-11-26.
- ↑ Zimmerman, Eilene (2009-03-15). "Direct Sales as a Recession Fallback - NY Times". The New York Times. Retrieved 2009-11-26.