Ponzi Schemes: The “Easy Money” Scam (Investor Newsletter #5)

A jebka kibaru, pillar! Miremba, be wise! In the name of JESUS, may everything that prevents you from being productive be exposed and removed. GOD does not use illegal methods to enrich people. May your name be associated with what is worthy of praise.

** A jebka kibaru = Good morning in Koromfé (Burkina Faso)

** Miremba = Good morning in Lango (Uganda, Sudan)

❖ " Listen to counsel and receive instruction,

That you may be wise in your latter days." (Proverbs 19:20, NKJV)

❖ " Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase." (Proverbs 13: 11, KJV)

❖ (1 Timothy 6:9-10, AMP) :  " 9 But those who [are not financially ethical and] crave to get rich [with a compulsive, greedy longing for wealth] fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction [leading to personal misery]. 10 For the love of money [ philarguria, Strong n° 5365, Greek]  [that is, the greedy desire for it and the willingness to gain it unethically] is a root of all sorts of evil, and some by longing for it have wandered away from the faith and pierced themselves [through and through] with many sorrows.

Honesty and integrity are valuable qualities. Honesty means telling the truth without any intention to deceive or mislead (sincerity). Integrity means being true to one’s moral values (in words and deeds), regardless of the circumstances, both in private and in public. A person of integrity is not content merely to be honest or sincere. They strive to be fair in their actions, decisions, and words. The world would be a better place if all human beings were honest and had integrity. Unfortunately, this is not the case and never will be. There will always be dishonest people, ready to resort to all sorts of deception and scams (fraudulent schemes) to enrich themselves.

Fraud is the act of, through the use of a false identity, a false title, fraudulent schemes, or the misuse of a title (qualifications, degrees, positions), to deceive a person (individual or entity) in order to cause that person or a third party material or financial harm, resulting from the transfer of funds or property in exchange for goods or services. There are several types of fraud.

Rollover is a financial process in which new loans or fundraising efforts are continuously used to repay previous loans or fundraising efforts. The system collapses when the borrower is unable to secure yet another loan or raise yet another round of funds.

Derived from rollover, one of the most common scams is the pyramid sales system, commonly known as the Ponzi scheme, also referred to as a Ponzi chain, Ponzi fraud, or Ponzi pyramid. Ponzi is the name of the Italian swindler (Charles Ponzi, 1882–1949), known for having devised the first and largest chain of fraud in the United States in the years 1919–1920. The technique existed before him; he did not invent it. His scheme had such a negative impact that people named it after him.

The creator of the scheme solicits money from an initial group of investors, promising astronomical, abnormally high returns. Then, he convinces a second group of investors or asks the first group to recruit new investors or members in exchange for commissions, increased returns, or the provision of a special service. The money from the second group is used to pay the interest, commissions, and/or dividends of the first group, and so on.

The alleged investment may involve various areas: the sale of raw materials, the purchase and resale of products, the sale of vintage wines or works of art, stock market speculation, the purchase of cryptocurrencies, investment in solar energy, the discovery of mining sites in poor countries, etc. The scammer creates an appearance of credibility through:

• Attention to detail (luxury cars, photos in popular locations with well-known people).

• The provision of services (investment training, personalized customer service).

• A partnership or membership—whether fictitious or real—in a group, company, or organization.

• The growing number of clients, their testimonials, and the fame of certain individuals (celebrity clients or influencers paid to promote the scam).

Profits do not come from sales, but from recruiting new members. The scheme collapses when the scammer runs out of cash: they can no longer find new investors, they spend too much of the money they’ve collected, investors want their initial investment back, and authorities or banks freeze transactions and bank accounts. When new participants become scarce, the scammer flees with the remaining money. Investors or customers who have not withdrawn their money lose it. Even when authorities put an end to the scam or manage to arrest the scammers, the money is never fully reimbursed. In some countries, if the early investors (those who received the large returns) are identified, they are required to return all or part of their gains. But that is not enough to compensate for the losses.

One of the biggest scams is the Bernard Madoff case, which came to light in 2008, resulting in losses of over $65 billion. There is also the OneCoin case, which came to light in 2017, resulting in losses of over $4 billion and affecting more than 3 million victims across four continents. Not all Ponzi schemes steal billions of US dollars, but significant sums are stolen every year, including in poor countries. Recently in Cameroon, scammers stole more than 20 billion CFA francs. Their company, presented as a subsidiary of an American firm, offered investments in solar energy with returns of 95% per day.

Apart from the accomplices of the scammer, there are two types of people in a Ponzi scheme: those who know it’s a scam and those who don’t. The first are opportunists with no ethics or moral values. They want to be the first to sign up so they can make as much money as possible. They don’t care about the curses they are exposing themselves and their descendants to.

The second group consists of those who have been deceived. I wrote this article to help us avoid falling into the second category. Here are some tips: There is no such thing as zero risk. But deception can certainly be avoided.

• Ask GOD to help you and listen to your inner voice.  Greed and the lure of quick profits lead many to their downfall. GOD enriches gradually. GOD is neither slow nor fast. The speed at which you acquire knowledge, wisdom, character, and vision is the speed at which He will enrich you. God does not need to steal from others to enrich you. He does not need dishonest methods to enrich you. Just because you have received a prophecy saying you will become a multimillionaire does not mean you should rush into the first offer and invest all your savings.

  
  

• Ask yourself on what the offer or promise of profit is based. Is there a real product or service capable of legally generating that much money? If you need new investors to generate or withdraw profits, that’s not normal.

  
  

• Do the training sessions offered really add value? Do you actually learn anything, or is it just a sales pitch to convince you to invest? If the presentations, discussions, and training sessions are only there to attract new clients or investors, it’s not worth it.

  
  

• Is the company legitimate? Is it possible to verify its information? Have you checked the email address and the physical addresses listed on the contract?

  
  

• Do not engage in what you do not understand. The majority is not always right.

  
  

• Any offer that asks you to pay fees or purchase insurance in order to withdraw your money or your earnings is a scam. Banks and investment firms deduct fees from the amounts they receive.

  
  

• Be aware that not every opportunity is right for you. Don’t take excessive risks for fear of missing out on an opportunity. GOD will guide you towards what is right for you. Some people excel in property, others in fish farming, cryptocurrencies, stock market investments, and so on.