How to Identify a Ponzi Scheme – Part 2

This is continuation of earlier post “How to Identify Ponzi Scheme Part 1

In earlier post I gave you some basic outline of how Ponzi schemes are designed. Core of such fraud schemes are –

(1) It give a very high rate of interest or reward – which excites people to take part in to the flow.

(2) Use money from new investors to pay interest for whole pool of customers.

Ponzi Scheme

Ponzi Schemes

There are several outcomes of such Ponzi schemes:

Situation 1) The whole movement fails when things go bad. For Example:  Ireland as a country is filing Bankruptcy. Stock market all over the world has started diving south. Indian markets are down. Media and newspaper are full of negative news. In such situation people become part of herd and flow what everyone else does. “Even though people are getting 10% per month – I want to withdraw all money and stay on the side”.Out of panic people withdraw money. One who get their money out first will be in good position. Most of them who run late will loose money. Most of the Ponzi schemes go bust when Economy faces some severe crisis.

Situation 2) One fine day owner of the company disappears.  News are out that scheme was a big scam. In short no one really knows where money went.

Does everyone taking part in Ponzi scheme loose money?


Owner of company definitely makes fortune unless he gets caught by Government Investigators at right time.  Investors who made money and walked  out of the scheme while things were good also stay safe. But most of the people get greedy and stay until market takes them out in bad way.

If you ever come across such company – one important thing you want to check is – what is the source of income. If company says that source is stock trading (like Ahmedabad company mentioned in Earlier post) – than ask for Trading records – which stock were bought and sold – ask for daily records on same day – do not accept 3 -4 days old record. In past one Ponzi scheme use to create records after markets have closed – this way it was able to show that it always made profit.

After reading all this if you still decide to take part in such schemes than – here are two most important suggestions:

1) People take part in such Ponzi schemes and then start referring friends and relatives. If you loose your personal money – it’s your personal pain. If your friends and relatives loose money because of you – it will spoil relations for rest of your life.

2) If at all you find yourself already in middle of such Ponzi situation – Exit out when things are good. Usually people tend to get greedy. After seeing a good interest rate earned on money – people tend to stay with the scheme – infact they decide to put in more money in to it.

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