{"id":11632,"date":"2021-04-30T09:00:07","date_gmt":"2021-04-30T16:00:07","guid":{"rendered":"https:\/\/socialcatfish.com\/blog\/?p=11632"},"modified":"2026-01-23T11:01:01","modified_gmt":"2026-01-23T19:01:01","slug":"ponzi-schemes-this-type-of-investment-fraud-will-drain-your-bank-account","status":"publish","type":"post","link":"https:\/\/wp.socialcatfish.cloud\/scamfish\/ponzi-schemes-this-type-of-investment-fraud-will-drain-your-bank-account\/","title":{"rendered":"Ponzi Schemes: This Type of Investment Fraud Will Drain Your Bank Account"},"content":{"rendered":"

Social media can be an entertaining thing to do when you’re bored, scrolling endlessly at the interesting content people post. However, scammers also use social media as a means to trick their victims out of money. They come up with fake Ponzi schemes and advertise them on their Facebook pages<\/a>. These scams dupe victims out of thousands of dollars on a daily basis, fooling more people than you might think. This is why it is important to know what Ponzi schemes are, the history of Ponzi schemes, and how to avoid them.<\/p>\n

What Are Ponzi Schemes?<\/h2>\n[aesop_image img=”https:\/\/socialcatfish.com\/scamfish\/wp-content\/uploads\/2021\/04\/Financial-manager-wrapped-up-in-529733-scaled.jpg” panorama=”off” imgwidth=”100%” align=”center” lightbox=”off” captionsrc=”custom” captionposition=”center” revealfx=”off” overlay_revealfx=”off”]\n

Ponzi schemes are a type of investment fraud<\/a> that distributes money from new investors to existing investors. The organizers of these schemes promise that you will get your money back with little risk in return. However, the organizer of these schemes never invests their own money into the scam. Instead, they take money out of what the new investors invest into the scheme and give the rest to the existing investors.<\/p>\n

The reason why these types of investments are considered schemes is because it requires constant investments<\/a> to keep it up. Once new investors stop joining the scheme, the money stops coming in and the scheme completely falls apart. The existing investors stop getting cashback like they were promised, and the organizer flees before anyone can notice.<\/p>\n

The History of Ponzi Schemes<\/h2>\n\n[aesop_image img=”https:\/\/socialcatfish.com\/scamfish\/wp-content\/uploads\/2021\/04\/Glass-jar-with-coins-745577-scaled.jpg” panorama=”off” imgwidth=”100%” align=”center” lightbox=”off” captionsrc=”custom” captionposition=”center” revealfx=”off” overlay_revealfx=”off”]\n

In 1920, Charles Ponzi told investors that he was able to take advantage of fluctuating values in currency to purchase postal reply coupons at a discount. An international postal reply coupon was something that a sender of a letter could include in order to get a reply from someone in another country. Ponzi tried convincing his victims that he could purchase these coupons at a discount and sell them in the United States for what they were worth.<\/p>\n

This would generate a generous profit that he promised to split among investors. He promised them half of the profit within 45 days of investing and 100% of the profit within 90 days of investing. Investors believed Ponzi’s word since he had a reputation of giving generous profits to other investors. Investors were begging him<\/a> left and right to take their money, wanting to generate a generous income for themselves.<\/p>\n

However, the scheme started crumbling down when Ponzi could only give profits from new investors to his existing investors. He was not actually generating an income from this scheme, but instead relied on new-coming investors to invest in these coupons. The Boston Post Newspaper started creating investigative reports on Ponzi’s scheme, which eventually led to a criminal investigation due to suspicions of mail fraud. On August 12, 1920, Charles Ponzi was eventually arrested.<\/p>\n

Signs That You Are Dealing with a Ponzi Scheme<\/h2>\n[aesop_image img=”https:\/\/socialcatfish.com\/scamfish\/wp-content\/uploads\/2021\/04\/Dollars-with-blue-lighting-955248-scaled.jpg” panorama=”off” imgwidth=”100%” align=”center” lightbox=”off” captionsrc=”custom” captionposition=”center” revealfx=”off” overlay_revealfx=”off”]\n