Home » Understanding Ponzi scheme: Do not fall in the trap

Understanding Ponzi scheme: Do not fall in the trap

by Rinku Khumukcham
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There is a saying – Where money is involved, you can be sure there’s a scam around the corner. The rise and popularity of options trading drove millions of traders to try a hand at it. The majority of traders lost their money in this seemingly easy way to make profits.
This led to the rise of a new breed of scammers. They preyed on unsuspecting traders who lost their money but were still willing to invest in options trading. These scammers are ponzi schemes that claim to be options trading investment funds.
Note that investment funds are a legitimate business model. Ponzi schemes on the other hand aren’t. This article will show you how this scam operates and how to avoid it.
A Ponzi scheme usually has a leader at the top. Under the leader are two or more people. Each of these has two or more people under them and so on.
What happens is that every new member is “sponsored” to join the group. The new member is expected to pay a fee. But in this case, the fee is your investment. The scheme leadership claims to use this investment to provide high returns from their options trading activities.
In truth, this investment is actually shared out to higher members of the group. The only way you can get your money back is by sponsoring new members and ensuring that they sponsor other new members. As soon as the scheme stops attracting new members, it collapses and tons of money is lost.
You can clearly see that this isn’t an investment fund in any way. Investment funds enable you to make money from your investment. Ponzi schemes on the other hand require you to work for the group in order to make money – after they take your investment.
One thing about these Ponzi schemes is that they’ve devised easy ways to hide their underlying intent. First, they won’t advertise themselves as Ponzi schemes but rather as investment funds. Their sleek advertising also includes huge amounts to be made each day or month.
Making money as an options trader involves risk. So why would any person want to transfer this risk to a complete stranger?
A simple request is that those who join Ponzi scheme, get out fast. Besides Ponzi schemes, there may be traders claiming that they can help make someone’s money trading options.
Many traders are losing money to third parties claiming to make hundreds of thousands for their “clients”. Do not fall for this trap.

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