Nov 30, 2017 • 14:42
A Ponzi scheme pays returns to its early investors from new capital paid by new investors. Ponzi schemes attract new investors by offering higher returns than other investments. The returns are generally abnormally high or unusually consistent.
The company sells shares to investors by taking advantage of a lack of investor knowledge or competence. By doing this, the company can claim the investment strategy must be kept secret to ensure a competitive edge.
Initially, the promoting company will pay out high returns to attract reinvestments and more investors. When other investors begin to deposit it will lead to a cascade effect. The returns to the early investors are paid out by the investments of the new investors and not out of profits.
Early investors often reinvest their money because of the high returns.The result of that means the promoting company does not have to pay out much to the investors. This maintains the deception that the scheme is a legit company with high returns.
The promoting companies also try to minimize withdrawals by offering new plans to investors. Typically, the promoter asks for more money and the money is frozen for a longer time in exchange for higher returns. The withdrawal request is usually promptly solved to give the investors an illusion that the funds are solvent.
Usually, the companies ask for long term investments to secure the capital from sudden withdrawals.
Fluctuations in the return on the investments raise questions from investors. Since Ponzi schemes and fraudulent companies would like to have as few questions as possible from investors payouts are usually abnormally consistency.
A Ponzi scheme sooner or later falls for on of the following reasons.
Why is cryptocurrency cloud mining perfect business for Ponzi schemes? We will go through the typical characteristics of a classic Ponzi scheme and explain why it´s perfect for cloud mining.
Cloud mining is a new investment opportunity and the general knowledge about cryptocurrency mining is relatively low.
The initial investments are not very high in cloud mining. However, almost all companies have a minimal investment of a few dollars which could theoretically be lower with Bitcoin deposits.
With cloud mining, you can offer returns on investment in any range from 8%- 300%. Because it´s a new investment opportunity and the public have little knowledge about a realistic return it´s possible to offer unrealistic high returns without being suspect.
It´s very easy to send new offers to current investors by email and online advertisement.
Usually, the contracts are bought for a lifetime and therefore it´s easy for a scam to also offer lifetime contracts to investors.
Payments could be consistent. However, in cryptocurrency, the payouts shouldn´t be since the price changes a lot. Also, the mining difficulty also changes all the time dependant on competitors and bitcoin inflation.
© Copyright Allcloudminers | Cookies | VAT No. SE556910434101 | Legal Cookies