Investment Scams - Ponzi Schemes
Ponzi schemes promise high investment returns and use funds from new investors to pay off earlier investors. The scammer creates an illusion of successful investments, but in reality, there is no legitimate business or investment activity generating profits. Ponzi schemes collapse when there is a lack of new investors to sustain the payouts, leading to substantial financial losses for participants.
Modus Operandi
- Building trust: Appear credible and trustworthy.
- Promising high returns: Offer unusually high and consistent profits.
- Paying initial investors: Use new investors' money to pay earlier investors.
- Encouraging reinvestment: Persuade investors to put in more money or profits.
- Limiting access to funds: Delay or restrict withdrawals to avoid exposure.
- Recruiting new investors: Rely on existing investors to bring in more victims.
- Collapse and disappearance: Scheme collapses, and the operator disappears with the remaining funds.