Coinonomy.com Reviews Coinonomy, Another Ponzi Scam! Not Legit

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Coinonomy.com Reviews: Coinonomy, Another Ponzi Scam! Not Legit

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A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. But in many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier and may keep some for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.

Ponzi schemes are named after Charles Ponzi, who duped investors in the 1920s with a postage stamp speculation scheme.

Ponzi scheme “red flags”

Many Ponzi schemes share common characteristics. Look for these warning signs:

  • High returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.
  • Overly consistent returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
  • Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators. Registration is important because it provides investors with access to information about the company’s management, products, services, and finances.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
  • Secretive, complex strategies. Avoid investments if you don’t understand them or can’t get complete information about them.
  • Issues with paperwork. Account statement errors may be a sign that funds are not being invested as promised.
  • Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying put.

Ponzi Scheme, What It Is and How It Works with Examples

How a Ponzi Scheme Differs from a Pyramid Scheme

Illustration by Feodora Chiosea / Getty Images

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Ponzi schemes are fraudulent investments, never legitimate ones. They promise above-average returns but always fail in the long run.

At first, they make good on these returns. They use the principal investment from new investors to make the above-average returns to the old investors. After paying these returns, they use all their resources to get new investors. Eventually, these schemes fall apart. They cannot keep recruiting enough new people to continue paying returns to the old investors.

Key Takeaways

Although the original Ponzi scheme fell apart in the 1920s, it continued to morph into many forms. A recent example was Madoff’s 2008 investment scheme.

A Ponzi scheme has the following characteristics:

  1. The proposal promises the surety of high returns at very low risks.
  2. The investments aren’t registered with the Securities and Exchange Commission.
  3. The deal guarantees consistent profits, regardless of economic conditions.
  4. The workings of the business opportunity are too complicated to explain.
  5. No legal paperwork is available for the investor to examine.
  6. Investors find it difficult to get their money back.

Charles Ponzi

Charles Ponzi lured thousands of investors in the 1920s. He promised a 50% return in 90 days on profits made from international reply coupons. These coupons were slightly less in value in foreign countries. They could be redeemed for real stamps higher in value in the home country.

The profits seemed plausible to gullible investors, but it would require millions of coupons to make any profit at all. Instead, Ponzi used the funds he acquired to pay off a few early investors in 45 days. This made his proposal believable. In a few months, he collected $20 million. He once received $1 million during a three-hour period.

The Ponzi scheme crumbled when he was unable to pay off later investors. By then, he had lost between $7 million and $15 million and ruined six banks. The government charged him with mail fraud under the state and federal law.

He received a prison sentence of five to nine years. He jumped bail and proceeded to launch the Charpon Land Syndicate in Florida where he sold real estate that was underwater. Texas authorities kidnapped him and returned him to Boston. He was released in 1934.

Examples

Bernie Madoff operated the longest-running Ponzi scheme. For 20 years, investors poured $17.5 billion into his “investment firm”. He paid above-average returns using funds from new investors. The 2008 financial crisis brought his fraud into the light when investors tried to withdraw $7 billion. With a net worth of only $300 million, Madoff was unable to reimburse them. He pled guilty and is currently serving a 150-year sentence. His son, Mark Madoff, committed suicide only two years after the arrest of his father. He hung himself in his New York City home. His 2-year-old son was asleep in the next room. Andrew Madoff died of cancer in September 2020.

Prior to his arrest, Madoff enjoyed a stellar reputation with the foundation of the NASDAQ as one of his accomplishments.

The charges for the fraud did not extend to the other members of the Madoff family. His wife and two sons worked for related businesses in separate buildings. The courts allowed Ruth Madoff to keep $2.5 million. She now lives in a 989-square foot apartment in Connecticut.

Chinese authorities announced the most recent example of a Ponzi scheme in February 2020 where 1 million investors lost $7.6 billion to Ezubao. This online lending company promised 15% returns, which never happened. Instead, the 21 owners spent money from investors to run their company and buy luxury cars and houses. Ezubao operated from July 2020 to December 2020.

Why Social Security Is Not a Ponzi Scheme

Social Security looks like a Ponzi scheme. Workers pay into the Social Security Trust fund. Despite the name, there is no trust holding these funds for them. Instead, the funds pay benefits to existing retirees. Once the paying workers are ready to retire, new funds will come from new workers.

People call social security a Ponzi scheme because the people who got in early are receiving more than they paid in. Baby boomers paid more payroll taxes than the contributions received by their parents. This is not the case for retiring boomers.

There will not be enough workers in the future to pay benefits to them when they retire. By 2030, Social Security will need to draw from the general fund to pay out benefits. That will create a budget deficit or a need for new taxes. That means the government will force the next generation to pay for benefits. Unlike a Ponzi scheme, the “new investors” have no choice. That’s the difference between Social Security and a Ponzi scheme.

The Difference Between Ponzi and Pyramid Schemes

Ponzi schemes are fraudulent investments. The participants believe they are putting their money to work in a real investment.

Pyramid schemes are fraudulent multi-level marketing businesses. Participants understand that they must recruit new members to make money. Those at the top levels of the pyramid make money from the new recruits at lower levels. Sadly, those at the lower pyramid levels never find enough new recruits to make money. They find they have wasted much time and money once the pyramid collapses.

Most well-known MLM companies are not pyramid schemes.

Examples include Amway, Melaleuca, and PrePaid Legal. They get most of their revenue from products or services, not new customers. Furthermore, most of their customers are also not representatives of the company. This is the main difference between an MLM business and a pyramid scheme.

Legitimate MLM businesses are good opportunities for people who want to learn how to run their own ventures. Learn to ask people the six important questions when they invite you to join an MLM business. The answers may help you discern a scam from a legitimate business offer.

Evaluate an MLM proposal with these questions:

Coinonomy.com Reviews: Coinonomy, Another Ponzi Scam! Not Legit

Cryptocurrency scammers raked in $4.3 billion worth of digital money in 2020, more than triple 2020’s haul. That’s according to the latest in a series of recent data drops by blockchain analytics firm Chainalysis, all of which it has included in a lengthy report it published Wednesday entitled “ The 2020 State of Crypto Crime .”

You’ve got scams: Scammers exploit the fact that so many people are still fairly unfamiliar with cryptocurrency aside from its supposed “get rich quick” potential, according to Chainalysis. The various types of scams include fake token sales, blackmail scams, and fake services that promise to “mix” a user’s coins with those of others in order to make transactions harder to trace—only to run off with the money instead.

Predation by Ponzi: But according to the new report, Ponzi schemes are the elephant in the room. These scams, which entice unwitting people to invest in a phony enterprise and then dole out profits to earlier investors using the money that more recent investors have contributed, accounted for 92% of the stolen funds. Millions of people were defrauded.

The PlusToken fiasco: Chainalysis reports that a single Ponzi scheme based in China by itself brought in at least $2 billion last year, which would make it one of the biggest ever. PlusToken was a supposed cryptocurrency wallet service that promised users high returns if they used Bitcoin or Ethereum to buy the fake company’s own token, called Plus. An elaborate marketing campaign convinced more than three million people—the majority of whom were in China, Korea, and Japan—to invest by reaching them through the popular messaging platform WeChat, holding in-person meetups, and posting ads in supermarkets.

In June, Chinese authorities arrested six people alleged to have been behind the scam, but it appears that at least one still hasn’t been caught, since someone has continued to launder the funds and even cash some of them out.

Dirty laundry: Chainalysis says the PlusToken scammers have managed to cash out at least $185 million of stolen Bitcoin, but first they tried to cover their tracks by making 24,000 transfers and using 71,000 different Bitcoin addresses. Many of those transactions were executed via a special kind of wallet that uses a Bitcoin-compatible privacy technology called CoinJoin to combine the user’s transactions with others in a way that makes it difficult to tell who sent which payment to which recipient. Much of this money eventually found its way to so-called over-the-counter (OTC) brokers, independent entities that facilitate trades between individuals who don’t want to interact with a regulated exchange.

The PlusToken scammers weren’t the only criminals who took this route. Chainalysis concludes that the activity of a small subset of “rogue” OTC brokers providing crypto-money-laundering services “skyrocketed” in 2020. The authors warn: “Regulators need to be aware of how these scams function and how players like OTC brokers fit in so that they can craft more effective consumer protection laws.” In the meantime, keep your guard up.

Keep up with the fast-moving and sometimes baffling world of cryptocurrencies and blockchains with our weekly newsletter Chain Letter. Subscribe here . It’s free!

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