Ponzi Scheme explained (Examples, red flags)
Ponzi Scheme explained (Examples, red flags)
📫𝐎𝐮𝐫 𝐅𝐁 𝐏𝐚𝐠𝐞:
/ scienceworld-106933907791981
🎬𝐈𝐦𝐚𝐠𝐞𝐬, 𝐚𝐧𝐢𝐦𝐚𝐭𝐢𝐨𝐧𝐬 𝐚𝐧𝐝 𝐯𝐢𝐝𝐞𝐨𝐬 𝐜𝐫𝐞𝐝𝐢𝐭𝐬:
Pixabay
Pexel
📚𝐃𝐚𝐯𝐢𝐝'𝐬 𝐁𝐨𝐨𝐤𝐬
📕 𝗪𝗲𝗶𝗿𝗱 𝗠𝗮𝘁𝗵𝘀: 𝗔𝘁 𝘁𝗵𝗲 𝗘𝗱𝗴𝗲 𝗼𝗳 𝗜𝗻𝗳𝗶𝗻𝗶𝘁𝘆 𝗮𝗻𝗱 𝗕𝗲𝘆𝗼𝗻𝗱
(https://www.amazon.com/Weird-Maths-Ag...)
📙 𝗪𝗲𝗶𝗿𝗱𝗲𝗿 𝗠𝗮𝘁𝗵𝘀: 𝗔𝘁 𝘁𝗵𝗲 𝗘𝗱𝗴𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗣𝗼𝘀𝘀𝗶𝗯𝗹𝗲
(https://www.amazon.com/Weirder-Maths-...)
📗 𝗪𝗲𝗶𝗿𝗱𝗲𝘀𝘁 𝗠𝗮𝘁𝗵𝘀: 𝗔𝘁 𝘁𝗵𝗲 𝗙𝗿𝗼𝗻𝘁𝗶𝗲𝗿𝘀 𝗼𝗳 𝗥𝗲𝗮𝘀𝗼𝗻
(https://www.amazon.com/Weirdest-Maths...)
** The kindle versions are available
*** For more details : http://weirdmaths.com/
📄𝗧𝗿𝗮𝗻𝘀𝗰𝗿𝗶𝗽𝘁𝗶𝗼𝗻:
A Ponzi scheme is an investment fraud that supposedly offers investors low risk and high profit. Although investors believe that their profits come from successful business activities, in reality there aren’t any business activities or profit. New investors are the source of the funds and the “profit” is just a redistribution of money that’s collected from investors.
Suppose that you have $1,000 and my offer is 20% pay back every month. That means you’ll get $200 at the end of the 1st month, $200 at the end of the 2nd month, $200 end at the end of the 3rd month, so on. After just 5 months, your money has doubled ($1,000 profit plus $1,000 your capital). It sounds like magic, but it isn't sustainable. Let’s see why it’s a dead end.
Although Ponzi schemes can be very complex, let’s keep ours simple and say that every month 10 people join the scheme and each of them invests $10,000. They’ll get 20% payback every month.
In the 1st month 10 people join and 10×10,000$= $100,000 is collected.
In the 2nd month 10 people join, $100,000 is collected, and 2,000x10= $20,000 is paid back to people who joined in the 1st month. The total money will be $180,000.
In the 3rd month 10 people join, $100,000 is collected, and 2,000x20= $40,000 is paid back to people who joined in the 1st and 2nd months. The total money will be $240,000.
In the 4th month 10 people join, $100,000 is collected, and 30x2,000= $60,000 is paid back to people who joined in 1st, 2nd, and 3rd months. The total money will be $280,000.
In the 5th month 10 people join, $100,000 is collected, and 40x2,000= $80,000 is paid back to people who joined in the 1st, 2nd, 3rd, and 4th months. The total money will be $300,000.
In the 6th month 10 people join, $100,000 is collected and 50x2,000= $100,000 is paid back to people who joined in the 1st, 2nd, 3rd, 4th and 5th months. The total money will be $300,000.
In the 7th month 10 people join, $100,000 is collected and 60x2,000= $120,000 is paid back to people who joined in the 1st, 2nd, 3rd, 4th, 5th, and 6th months. The total money will be $280,000.
If you take a look, the total money at the end of the 6th month stops increasing. After 6th months the total amount of money begins to drop.
and in the 11th month the total money will be zero. In reality, the total money never drops to zero because the creator of the scheme either disappears or declares bankruptcy when the total money begins to drop.
In order for the scheme to survive, the number of new investors each month must be higher than in the previous month and that’s impossible to keep up. Eventually the scheme will collapse.
You might think it would be very profitable if you joined the scheme early on. But the problem is, you can’t know when the scheme has started or when it’ll stop. Even if you join at the starting point there are many uncertainties. When you want to quit, will you be able to get your capital? In our example in order to earn your capital, the scheme must continue for at least five months. But will it?
Finally let’s look at how we can identify a Ponzi scheme. Many Ponzi schemes share common characteristics.
Every investment carries some degree of risk. If someone offers no or low risk with high earnings it’s a warning sign that it could be a Ponzi scheme. Also, investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
#ponzischeme #fraud #scam