The year was running 1903. Carlo Ponzi, a young man of only 21 years old, He arrived at Ellis Island, crammed in with so many other immigrants fleeing Europe, escaping hunger. This young Italian, with only $2.50 in his pocket, was convinced he could achieve success.
During his early days in the country, he found work as a waiter and dishwasher in several East Coast cities, until he finally joined a bank in Montreal, Canada. There he had his first setback. In 1912, He forges a check and is sentenced to 20 months in prison. But in prison, he's assigned to work in the internal mail office, which ultimately opens his eyes to a fabulous "business."
The Ponzi Scheme
Back then, in 1919, in the midst of the post-war period, there were currencies that had become extremely devalued. He discovered that, If you bought postage stamps in Italy with the Italian lira, you could sell them in the United States or other countries with stronger currencies at a higher price. The rumor spread, and many supported the project, allowing him to create the Security Exchanges Company. Thus began the Ponzi scheme.
What he promised was extremely tempting: a 50% profit in just three months! That's why more and more people started investing with him: By February 1920, he had about $5,800 (in today's money, it would be 10 times that amount). By March, this figure was $30,000, and he even began expanding to new cities. By May, he had $420,000. By July, it was several million dollars!
With such growth, suspicions began to arise. Authorities were suspicious that an investor could receive so much money in such a short period of time and generate so much interest. This shook the “company,” but the big scammer had several tricks up his sleeve.When he was summoned to testify, he explained that the profits were due to the difference in stamp prices, that the cycle lasted about 45 days, and that he could offer returns of up to 400%. He explained that he would have no problem returning the money since he had a fortune of $8 million and a debt to his investors of only $3.5 million. Was the Ponzi scheme still active?
Meanwhile, distrustful people stood in long lines to get their money back. But he, very astute and with great charisma, appeared offering sausages and coffee to everyone waiting. He also told them to beware of those who bought their deposit slips with a 50% discount, as they were scammers. He invited everyone to collect their money, even those who hadn't yet waited the 90 days. These gestures helped the rush dissipate and made people see him as a hero.
“After a week of investigation into Ponzi, public interest in the man and his actions remains undiminished. Followed by hundreds of people when he appears on the street, he is hailed as a hero. Although the federal audit of his accounting records has barely begun, his admirers view him as already vindicated and are impatient for his funding to return. Employees of department stores, factories, and large plants have pooled their money and are waiting for the opportunity to invest it with Ponzi in his 50% scheme within 45 days.” This was stated in The New York Times on August 1, 1920.
But a few weeks later, the lie ended: Authorities discovered he actually owed $7 million, and that he only had $3 million in his possession. He declared bankruptcy and ended up in jail. Meanwhile, people were furious, demanding their money. Even so, he continued writing to many people, promising to return the money when he was released…the saddest thing is that many people continued to see him as a hero.
How does the Ponzi scheme work?
We might wonder, how could someone have raised so much money in such a short time? It was a combination of factors: a very charismatic person, lacking moral values, and the right connections to spread his system. He eventually admitted that he didn't invest in the stamps...he simply hoarded the money, which didn't generate any returns. How could he pay such exorbitant interest? Simply with other people's money.
He was the founder of what is known as the pyramid scheme, or Ponzi scheme in his “honor.” There are no real profits, it's all an illusion.
This Ponzi scheme is like a house of cards: it lasts as long as new people enter and invest their capital. As can be seen in the graph, These scammers get their first “customers” by offering high guaranteed returns…but always with a referral system. Sometimes they force you to get them directly, other times they make the returns much higher, so those on the second level are tempted to get more people, forming a third level.
As this pyramid, or Ponzi scheme, grows, the first to join receive their dividends, along with commissions for everyone below. Those at the bottom, on the other hand, find it difficult to recruit new members, as there are so many people involved, and logically, many people would never get involved in something like this. Since no new followers are added, this pyramid collapses completely. The final result? Money from those at the bottom was transferred to those at the top... it's robbery, plain and simple.
How to identify a Ponzi scheme?
On the one hand, there are those who offer us something and then, after we pay them, they disappear; they don't answer messages or calls... we lose track of them. Using identifiable payment methods and secure platforms, it's difficult to have this problem. On the other hand, There are a lot of scammers, or con artists, looking for us to buy their foolproof trading method or their alert service, or many other “investment proposals.”
They use social media, post a lot of things, and we might be tempted to learn from them. It's not so blatantly a scam, since they give us what they promised, but it ends up being something expensive that isn't really worth it, or it's useless. Which is practically the same as in the first case. Many of these people don't make big profits from their own method... but rather from how expensive they sell it, and from the large number of "pigeons" they manage to "catch." These scammers have 6 features:
- Appearance of success
What image comes to mind when someone shows you they're driving a Ferrari, a Porsche, or a Lamborghini? Or that this week they're having dinner on the Seine River in Paris, with the Eiffel Tower in the background, two weeks later they're on spectacular beaches in Bora Bora, in Polynesia... and then they're back in their mansion in Miami Beach? That's someone very successful.
Appearance is very important to these people, as one inevitably desires those things. So, who better than themselves to teach us?
How do they do it? Do they use the popular Adobe Photoshop software to doctor the images? Maybe. But in many cases, this ends up being noticeable, so they resort to real photos. You don't need to have all these ostentatious possessions...just rent them. And if several scammers work together, they can rent a car one day, another day, then the mansion...and have a whole spectacular photo album of ostentatious people.
Sometimes they organize events…dinners at expensive hotels, parties, sometimes they even recruit celebrities. All of this works because as humans, we have the unfortunate but inevitable tendency to focus on appearances. If someone invests a lot of money in impressing us, they'll probably succeed…and once someone impresses us, we're even more likely to trust them more than our own knowledge. And that's where, like a fish, we take the bait, and we cease to be a fish and become a fish on the Ponzi scheme's grill.
- They offer spectacular, guaranteed returns
The systems they offer are guaranteed; they never fail. They're safe. There may even be testimonials from people holding bills or showing their checks, wanting to prove it's possible to win... How could we be so foolish as to not accept?
Plus, the profits are very tempting. Imagine, as the Ponzi scheme offered, a 50% in three months. Even in a country with inflation like ours, it sounds tempting…back then, there was almost no inflation in the United States, so it was impressive…many people mortgaged their houses and sold everything they owned in the greed of earning more.
Now, let's face the harsh reality. Suppose you, dear reader, find an extremely fabulous business that promises to make a lot of money in a short time... Would you share it with me, knowing I might copy it? Probably not. I would make as much money as I could and at most I would share it with someone close to me… but if everyone knew about it, the profit would be reduced to a minimum.
On the other hand, big profits come hand in hand with uncertainty. Did early investors in Microsoft, Apple, Amazon, Facebook, or Google know their businesses would be successful? Of course not; they did so at their own risk. They were extremely profitable businesses, but fraught with uncertainty. Perhaps, and very likely, they invested in other companies that offered similar promise but ultimately failed.
On the other hand, There are a few “businesses” that do offer certainty. For example, a fixed-term deposit. You deposit money for 30 days, the bank tells you the rate will be a certain percentage, and probably tells you how much you'll get at the end of the term. Simply put, you have a tool that gives you absolute certainty: you know when and how much. But, of course, the returns on these deposits are usually very poor.
For reference, if we recall the earnings of the most successful investor in history, Warren Buffett, which were 20.31% compound annualized. Can anyone consistently achieve higher earnings than his? We should know them all and find them listed in Forbes magazine as the richest, don't you think?
So, if you're offered high, guaranteed returns, be wary! It could be a Ponzi scheme.
- Own methods
It's very common to read phrases like, "Traders' 95% fail unless they apply this foolproof method." Therefore, one should buy their method as soon as possible. The problem with these methods is that not only do they not work, but when we buy them, we try them, and they don't work for us...It's our fault! And then the scammer comes back, telling us that, of course, the basic course isn't enough, or that we've applied it incorrectly...to become more skilled, we have to buy the intermediate or advanced plan, or their alert service...and by the time we'd spent a mountain of money, we realized that nothing we bought was worth anything... Another variation of the Ponzi scheme.
- Complex speech, difficult to understand.
This is the easiest sign to detect. These are charlatans who seek to entangle us with meaningless words. If you get into an argument with them, they'll write so long that you'll feel overwhelmed even reading them. And they're always geniuses, the best in the universe... since they have nothing to back them up, they rely on their own egos, which is why everyone who criticizes them is envious. And besides, they seem to enjoy arguing on social media... as if there's any point in wasting time on that.
As human beings, we sometimes seem to like to play it tough. We prefer complex methods, having a method as simple as fundamental analysis, which tells us, "If company A is worth 10 and costs 5, buy it. If it's the other way around, sell it." If we start from that basis, we'll realize there can't be any great mystery sciences. It's true, it takes work to understand it, but it's not impossible.
Follow people who write from a place of humility, who talk about their mistakes more than their successes. If someone sells an image of absolute wisdom, there's probably uncertainty within them.
- To win, you have to recruit
When we sign up for this kind of service, a hidden Ponzi scheme, we may realize that we do make a profit, but that it's simply negligible; it doesn't justify the time we dedicate to it. So, Our “investor” tells us that to make a real profit, we have to recruit, so we get profits from them. Many times, it's not actually a scam, as there are companies that use these systems instead of so much advertising to promote their products.
And the profits are real, as these products are sold. But you have to be careful. They often have extremely high prices, making them very difficult to sell. Or, on the other hand, they demand what the next point mentions.
- To work, you have to pay
We often turn to a job offer supposedly to work as a salesperson for a certain company. But when we look at what they're offering, we realize it's not true. Aside from having to recruit or add people, we have to buy our sales equipment, or kit, whatever it may be. Therefore, the company already makes a profit from us, since we have to buy the product from them. And then try to resell it to someone else. You may see testimonials from people who made money by buying and then reselling, but many times it's others who fell into the trap and are looking for money to reverse their losses.
In conclusion, you have to be very careful when paying for a course, service, or sales system, whether online or in person. Keep in mind that they are educated people, and they won't be afraid to make you feel like a fool if you quickly decline.
On the other hand, keep in mind that not all training services are scams. Not at all. Just do your research on why you're paying for a service and what it offers. If it promises to impart knowledge on a specific topic, it's logical that they'll charge a reasonable fee if they provide good service. But When they start promising us things like quick, secure profits and a lavish lifestyle, don't forget: "Past profits do not guarantee future profits."
See the full article at https://dolarhoy.com/finanzas-personales/parecen-inversiones-pero-no-lo-son-202221517540
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